You've Been Warned: Think Twice About Retiring Early, Says CFP

There's a LOT to consider when it comes to retirement. From how early you should start saving for retirement to how much you should plan to save, there are many factors that could change depending on the retirement lifestyle you would like to have once you leave the workforce. It also doesn't help that the amount Americans think they need to retire comfortably goes up every year. This can make knowing when, how, and even where to save feel overwhelming and complicated. 

We recently spoke with Lawrence Sprung, CFP, author of "Financial Planning Made Personal," and founder at Mitlin Financial, about the potential benefits and downfalls of early retirement. To start, he told us, "I believe that retirement as we know it, what we saw our parents and grandparents strive for is antiquated. Retirement was established when people's life expectancy was much younger and the expectation of reaching it was low."

In addition to the financial strain of living on retirement savings for more years than ever before, Sprung also emphasized the emotional toll retirement can take. He explained that retirement "also creates a situation where people need to fill a great deal of time with meaningful things to do for longer. Most people do not want to stop working and sit on the couch watching TV for an additional 30, 40, 50 hours per week." Sprung argues that, in addition to financially planning for retirement, more people should prioritize emotionally preparing as well.

As previously mentioned, the financial challenges of a prolonged retirement (due to retiring early) might not be possible for many. Early retirement can be especially problematic when you consider just how many Americans are behind on their retirement savings. In fact, an CNBC survey found that 21% of retirees have no retirement savings at all. Add to this the fact that many early retirements are due to unplanned health episodes, which can come with additional health care expenses, and early retirement can lead to serious financial challenges.

Another consideration to bear in mind is what age, exactly, you retire early. As Lawrence Sprung explained, "Depending on the age at which you retire, it may require additional planning if you are under the age of 59 1/2, as without it you may incur penalties if you need to start withdrawing funds from your retirement accounts." Early-withdrawal fees can leave you with even less savings than you might have already had, making the financial prospect of a prolonged retirement feel impossible.

Another important con to consider? According to Sprung, "Not being prepared for all the free time you will have by retiring early, causing boredom or losing mental acuity." While less objective than financial concerns, having additional years away from work could lead to earlier cognitive decline as well as a sense of loneliness for retirees who don't properly prepare. Sprung said, "Workers will need to make sure they have hobbies, interests, and community to fill the time that will come without having their career."

Despite the potential financial and emotional toll, there can be many benefits to early retirement for some people. Namely, having the time to live your life and pursue your interests. Lawrence Sprung said that early retirement can offer "the ability to explore other opportunities, business and personal, that you may not have had the time to focus on while working full time." He noted that retiring early can mean "being able to enjoy life while you are physically able and have the health to do so." Yet, he added, "This is something you should also be doing pre-retirement." While your work often can be a time and emotional draw away from things like family and hobbies, finding ways to enjoy life while still working can be incredibly important.

Sprung also told us he supports the idea of taking a mini-retirement for those who are burnt out. "I think this could present a great opportunity for people," he said. "I tend to be in favor of the phased retirement, which presents a win-win for the worker and the employer." Doing so can allow you to refresh your interests after enjoying a pause from the stressful elements of work life. Not only does this assist you in potentially waiting longer to formally retire (thereby ensuring you avoid the added fees of early withdrawal and the potential loss of Social Security benefits) but it can also allow you to "... find joy in the things you have not had the time to enjoy, and find the inspiration to continue working after the pause."