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More Americans Retired Early Due to Covid—How to Do It Too

“Retirement” doesn’t mean what it used to.

Do you spend your days at work dreaming of an early retirement? Lately, you’re not alone.

More than 3 million Americans retired early during the first 18 months of the pandemic, and a recent study by the wealth-management company Personal Capital found that Covid-19 has made more Americans consider early retirement. Not just because they decided life was short: Nearly half of the respondents said that cutting their spending on nonessential costs such as entertainment, dining out, and travel during the pandemic is what led them to contemplate leaving the workforce before retirement age. Realizing that they could easily spend less, in other words, convinced people they could get by with less income.

But all those early retirees aren’t just playing golf and organizing card games. “Retirement” doesn’t mean what it used to. Many people still want to work a little—they just may not want a boss. In fact, Jason Howell, a family-wealth adviser in Vienna, argues that we should, well, retire the word “retire.” He says he’s seen a “huge uptick in entrepreneurism” among early retirees. Some turn toward part-time consulting. Others may sell handmade knickknacks on Etsy or become Uber drivers. “It gives people that recognition that you can create income for yourself,” Howell says. “If you can create income in a way that is easily accessible to you, you won’t feel like you’re working.”

As demonstrated by the millions who quit their jobs during the “great resignation,” more people today are leaving jobs with low pay or with work hours they don’t like, says Katherine Liola, CEO of Concentric Private Wealth in McLean: “There is a trend towards [people] stopping what they’ve been doing professionally for 20 to 30 years and transitioning to a longer-term role that gives them a much more significant level of flexibility and control.”

Regardless of whether you plan to quit work entirely or to take on a moneymaking passion project, there are some things you need to know before making a move toward retirement—however you define it. We asked a few financial advisers what people should think about.

Consider your health-insurance options. If you’re not at least 65, says Jon Yankee, CEO of FJY Financial in Reston, health insurance can make retiring early a big challenge. People under that age aren’t yet eligible for Medicare, and health insurance is typically obtained through an employer. “Without a company-provided healthcare plan, it is very expensive to get insurance for you and your family on your own,” Yankee says. A recent study by the online health-insurance marketplace eHealth says that in 2020 the average monthly premium was $456 for an individual and $1,152 for a family (of two or more). That’s why many early retirees are just changing how they work—for example, going part-time—rather than leaving the workforce altogether.

Reevaluate your investments. Some early retirees tend to take on either too little or too much risk when investing, says Barry Glassman, a certified financial planner in McLean. How much to assume depends not just on lifestyle but also on the age at which you’re retiring. “A person retiring at age 45 who needs money for a long time faces a significant challenge, so there needs to be some risk in the portfolio,” Glassman says. “But if they take too much risk and spend too much of the principal, they may find themselves having to go back to work five to ten years later.”

Manage your—and other people’s—expectations. Liola says it’s important for retirees to set clear expectations and boundaries with family and friends. Before everyone begins making plans for your newfound free time, she recommends starting as early as possible and working with a therapist or coach to understand how to approach those conversations with loved ones. Two common things that adult children tend to envision for their retiring parents are that they’ll babysit the grandkids regularly and continue to provide financial support for them. But while some retirees do plan to take on a larger role in their children’s and grandchildren’s lives, this isn’t always a fair assumption. “Having open lines of communication is important,” Liola says, “along with making sure you get the right support during any transition, whether it’s professional or personal.”

This article appears in the July 2022 issue of Washingtonian.

Damare Baker
Research Editor

Before becoming Research Editor, Damare Baker was an Editorial Fellow and Assistant Editor for Washingtonian. She has previously written for Voice of America and The Hill. She is a graduate of Georgetown University, where she studied international relations, Korean, and journalism.