For some individuals, an early retirement offer provides a financial boost that enables them to fulfill some other dream:
- Pursue a creative project (writing a book, doing art work on commission),
- start a business they've dreamed of,
- scale back to a less-demanding job,
If you decide to use this opportunity in one of these ways, you'll need to work through the financial projections carefully. If the income you'll be earning in your new venture will be lower than your current income, you may need to adjust your standard of living.
Sometimes people take early retirement with this plan in mind:
- they'll delay dipping into any retirement savings until they reach the retirement age they'd originally planned on; and
- They'll find other employment that will provide enough income to cover their basic living expenses during the years between now and that retirement age.
If this is your plan, be realistic about what kind of job you can get, how much you can earn, and how much it will cost to live. Be sure to account for the cost of health insurance.
In addition, recognize that if you are not contributing to your retirement savings during these intervening years, your ultimate retirement nest egg will be smaller, perhaps significantly smaller, than it would otherwise have been. The opportunity cost in lost retirement savings may be greater than you think. Realistic financial projections are essential.