Retirement. It is a desire and dream many Americans work their entire life to achieve. Almost every one of them, though, has a different vision of what retirement will mean for them. For some, it might mean traveling the world. For others, it would enable them to pursue hobbies or spend more time with their grandchildren.

While the official retirement age is 66 years and two months for people born In 1955 and 67 for those born 1960 or later, many Americans plan to retire early. However, many of them are saving far too little to fund their anticipated retirement lifestyles.

With that in mind, there are plenty of pros and cons to keep in mind as you decide whether to retire early or keep on working a few more years.

Advantages of Early Retirement

These are several advantages to early retirement that make it a worthwhile consideration for some people, despite the financial risk it represents.

• Exploring a new career or money-making hobby. Perhaps one of the biggest advantages of retiring early, particularly as people are living longer lives and staying active long after retirement, is that it gives you the opportunity to explore a new career or even transform your hobby into a source of income.
• Enjoying leisure activities or education opportunities. Retiring early allows you an opportunity to enjoy things like traveling the world, returning to school, and other activities that might not be as accessible to you as you age.
• Spending more time with family or friends. Finally, retiring early gives you freedom of time that you can invest spending with family, building friendships, and forging new personal relationships.

Those are some pretty significant advantages to consider. Some of them may even help you fund your retirement in later years (if you operate a successful business venture during your retirement). However, you must also explore the cons as well.

Disadvantages of Early Retirement

The disadvantages of early retirement are primarily financial. Unfortunately, they represent some reasonably substantial sums of money you could be spending or missing out on receiving by retiring early.

• Foregoing employer-sponsored health care costs. Because Medicare coverage does not begin until you reach the age of 66 years and two months, the costs of leaving your employer-sponsored health coverage behind could be greater than you realize.
• Getting hit with penalties and fines for accessing your retirement funds early. Uncle Sam doesn’t want you to have access to your retirement funds early. He believes your time is much better spent contributing to society. Because of that, he imposes stiff financial penalties for accessing those funds before reaching your official retirement age.
• Realizing a loss of benefits. Last, if you begin withdrawing funds from Social Security before you reach full retirement age, you will receive 30 percent fewer benefits than if you wait until your full retirement age to receive them. More importantly, for each year you continue working between the ages of 67 and 70, your monthly benefit will increase by eight percent.

As you can see, the financial considerations can be devastating unless your purpose for retiring is not to cash out your retirement savings but to embark on a new career or income venture until you reach full official retirement age.

Deciding When to Retire

You have a variety of choices to consider when it comes down to retirement. You may elect to retire early, on time, or late. Each one offers its pros and cons according to your stage in life and retirement goals.

As with many things in life, the right time for you comes down to many factors, including the following:

• How long will your retirement funds last?
• How much do you intend to spend vs. save during retirement?
• What’s your financial situation (i.e., housing, vehicles, medical bills, credit cards)?
• Will you tolerate boredom or isolation well (after all, for some people, work is a social engagement)?
• Do you plan to seek supplemental employment during retirement?
• Are you ready to retire?

Early retirement may be the right choice for you. Alternatively, it may not. For many people, it comes down to a matter of dollars and cents. Which option makes the most sense for you?