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The phrase “time is money” is often used to emphasize the value of time and encourage its efficient use. It suggests that the more time you spend doing something, the more money it will cost you, either in terms of lost opportunities to do other things or the resources you expend.

Opportunity cost is a related economic concept that refers to the cost of an opportunity forgone to pursue a particular action. It is the value of the next best alternative that must be given up in order to pursue a certain course of action.

In this way, “time is money” and opportunity cost are related in that they both emphasize the value of time and the importance of using it wisely.

So how does this relate to retirement? Here are some specific opportunity costs of retiring early and retiring later.

Opportunity Costs to Consider When Retiring Early

Early retirement may seem like a dream come true for many people, but it can also come with its own set of challenges and drawbacks.

One of the potential opportunity costs when retiring early is financial security. If you retire before you are eligible for full Social Security benefits, you may have to rely on your savings to support yourself. This can be especially risky if you have not saved enough money or if you have not properly planned for the possibility of early retirement. Consider, too, whether you’ll be giving up benefits or perks—like better healthcare coverage, employer-sponsored life insurance, stock options, or profit sharing.

Retiring early will impact your retirement income in other ways, too. Not only will your retirement savings need to last you for more years, but if you begin drawing Social Security before you reach full retirement age, you will receive fewer benefits than if you waited. And, if you need to access your retirement savings before you reach full retirement age, Uncle Sam will hit you with penalties for early withdrawal.

Though early retirement frees up your schedule, you may have to make sacrifices in order to make your savings last. Even if these don’t involve changes to your lifestyle (and they may), you could have to forgo your plans for more expensive activities like travel and certain hobbies.

The opportunity cost of early retirement can also include the value of the non-monetary benefits of work, such as the sense of purpose, social interaction, and structure it provides. Without a job, it can be easy to fall into a routine of leisure and relaxation, which seems enjoyable at first but can become monotonous over time. And many retirees find that they miss the sense of purpose they derived from their careers and social connections. Losing these can leave retirees feeling isolated, lonely, or unfulfilled and even result in a decline in mental and physical health.

Opportunity Costs to Consider When Retiring Later

While it’s true that retiring later will allow you to sock more away in your retirement account, it’s not without its costs. One big downside is that you’ll have less time to enjoy the money you’ve worked so hard to save. By continuing to work, you may miss out on opportunities to travel, take up a new hobby (or continue an existing one), or spend time with friends and family.

As you get older, your risk of developing health problems increases. If you wait too long to retire, you may find that your health prevents you from fully enjoying your retirement. Many people fall victim to “one more year” syndrome, where they repeatedly plan to work “just one more year” until they are eventually forced to retire due to a health issue.

One consideration many don’t take into account is that the older you are, the harder it may be to get or keep a job. Unfortunately, older workers, especially women, have a more difficult time finding meaningful employment and may instead have to take a menial job that doesn’t match their skills or experience. So, though you’re still working, your pay and job satisfaction may be nowhere near what they once were. Even if you stay in your current position, it could be harder to keep your job. Employers looking to cut expenses may lay off their older workers because they are so highly paid.

Evaluating Opportunity Costs in Retirement

Opportunity costs can be applied to a wide range of decisions, including personal choices about how to spend one’s time and money and business and economic decisions. Understanding opportunity cost can help individuals make more efficient and effective decisions and can help to optimize the use of resources.

It is important to carefully consider all factors when deciding to retire and to consult with a financial planner, such as our team, to help you assess the potential costs and benefits so that you can make an informed decision that is right for you. A financial planner can help you optimize your financial resources and make the most of your money by identifying opportunities to help reduce expenses or increase income.


Kevin Stoddard is a LPL Financial Advisor with Stoddard Financial in Medfield, Massachusetts. Stoddard helps clients throughout New England to identify, plan, and execute strategies designed for securing their desired financial future. With their Financial Wellness @ Work program, they engage, educate, and empower employees by helping them to understand and appreciate the value of their benefits package.

The opinions voiced in this material are for general information only and are not intended to provide specific advice or recommendations for any individual.

This material was prepared by Crystal Marketing Solutions, LLC, and does not necessarily represent the views of the presenting party, nor their affiliates. This information has been derived from sources believed to be accurate and is intended merely for educational purposes, not as advice.