Why You Should Think Twice About Early Retirement-William J. Bernstein

The Experts Say the Financial and Lifestyle Challenges Can Be Daunting

For many, retiring early is the Holy Grail of a career. But should it be? There are lots of reasons to reconsider, according to The Experts, an exclusive online group of industry and thought leaders who comment on topics raised in Encore and other Wall Street Journal Reports. Edited excerpts follow. For more, go to WSJ.com/Reports.

What Advice Would You Give People Retiring Early—Say Before 55 or 60?

The Case Against Early Retirement

Don’t do it! The few exceptions might be those fortunate individuals whose early retirement is facilitated by a major financial success. But even in those circumstances, there are nonfinancial pitfalls to consider.
For example, the best-laid postretirement plans to travel, relax or pursue a beloved hobby can go awry when interest wanes over time, illness intervenes or resources wither. Relationships that once were on autopilot, nestled within the daily routine of work, may now take a lot more time and energy to sustain. And finally, it can be challenging to rechannel the purpose provided by one’s job or career into equally meaningful pursuits for the 30 to 40 post-early-retirement years, given current life-span projections.
—Marc Agronin, geriatric psychiatrist, author, medical director for mental health and clinical research at Miami Jewish Health Systems

First, Ask Yourself This Question

Have you really put aside enough money to support yourself for 35 or 40 years?
If so, go ahead: Play golf, go fishing, do whatever you want. But my suspicion is that most people would say, “No, I haven’t saved that much,” in which case retiring early is a foolish thing to do. And the notion that they may start a business or do something entrepreneurial is excessively optimistic given that so many small-business efforts fail.
— Alicia Munnell, director, Center for Retirement Research, Boston College, professor of management sciences, Carroll School of Management

Why Early Retirement Often Backfires

Research suggests that in two years, most people begin to run out of activities that give them meaning, a sense of purpose, continuous engagement and support their overall well-being.
So, before you retire, do some careful planning that goes well beyond financial security. Ask yourself what will you be doing in between the vacations, fixing the house, visiting grandchildren and occasional community activity? Those activities are highlights, not life.
— Joseph Coughlin, director, Massachusetts Institute of Technology AgeLab

The Real Math on Retiring Early

Planning to retire at 50, eh? Well, young man, you have a tough row to hoe. Two rows, in fact.
First, you’re going to have a very long retirement. The Social Security Administration projects today’s 50-year-old male living, on average, to 82, while a female should live, on average, to age 86.
The second row: Expected portfolio returns ain’t what they used to be. At the moment, a 60/40 portfolio can be expected to provide a five-decade safe 2% stream of inflation-adjusted retirement income.
So if you can live on, say, 1.5% of your nest egg ($15,000 a year of a million dollar portfolio), you’re all set. If you need more, you’re going to have to choose among part-time retirement work.

Culled from wall street journal