Kevin O'Leary: Why Early Retirement Could Cost You More Than You Think
“Shark Tank” personality Kevin O’Leary continues to work into his 70s and doesn’t plan to stop anytime soon. It runs contrary to the conventional advice of saving enough money for the primary purpose of retiring early.
While it’s still good to save money, you shouldn’t rush to get out of work. Not only can it cost you money, but retiring early can also reduce the quality of your life.
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“Working is not just about money,” O’Leary said in an interview with CNBC. “Work defines who you are. It provides a place where you’re social with people; it gives you interaction with people all day long in an interesting way. It even helps you live longer and is very, very good for brain health.”
The Financial Cost of Early Retirement
When most people think about the costs of retiring early, they think about money. An early retirement means you have to stretch your nest egg across more years. People who wait until their 60s to retire had more opportunities to build wealth, let their investments grow and secure higher Social Security benefits.
Someone who retires in their 40s may run out of money in their retirement portfolio at an inconvenient time, such as in their late 60s or early 70s. Social Security benefits won’t be as high for people who retire early, and it is harder to get a job in your 60s or 70s after a long hiatus.
Retiring early may mean living a penny-pinched lifestyle and making unnecessary sacrifices. That type of lifestyle gets more difficult to manage each year due to inflation, and many early retirees are extra vulnerable to stock market corrections and prolonged downturns.
The Social Cost of Early Retirement
O’Leary didn’t talk about the financial constraints of an early retirement because that didn’t apply to him. He attempted to retire early at 36 after selling The Learning Company with nine other co-founders for $4.2 billion in 1999.
O’Leary focused more on how an early retirement saps you of your purpose and can make you lose your mind. That type of situation can also increase the likelihood of health issues, which can result in more expensive medical bills that drain your savings.
Having enough money to retire early doesn’t mean you should retire early. O’Leary touts entrepreneurship as the path to personal freedom and control over your life. You can decide what work you do, who you work with and how long you work.
Some retirees opt for part-time jobs that give them travel flexibility since they don’t have to work full-time anymore. This semi-retirement lifestyle also helps people keep up with expenses and preserve more of their portfolios.
What Are You Saving Toward?
Most people save money with the hope of retiring someday. However, you don’t have to save money just for the sake of retiring. A large portfolio can reduce your financial stress. If you don’t have to worry about money, then it’s easier to have a healthy lifestyle and check off important items on your bucket list.
Saving money also helps you take care of your children and give them a head start as they pursue major milestones. You can also save money for goals, hobbies and occasional gifts for your loved ones.
A significant amount of savings can also serve as a blanket of financial protection in the event you have to retire or incur medical bills. Money gives you more options, but there’s more to saving and investing than hoping that you can retire someday. If you are focused on retirement, you may want to seek other career opportunities.
This article was provided by MoneyLion.com for informational purposes only and should not be construed as financial, legal, or tax advice.
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