When we think of retirement, we commonly think about the State Pension age – being the age at which people are eligible to begin receiving pension payments funded through National Insurance payments. But the State Pension age is not necessarily the age at which people retire – nor are people necessarily forced to retire when they reach said age.
What is Early Retirement?
Instead, retirement is a decision made entirely by the worker in question. You may choose to retire when you are eligible for State Pension, you may choose to retire later in order to shore up more savings, or you may choose to retire earlier.
Early retirement has gone from a possibility to a movement in recent decades, as more and more people subscribe to a long-term savings strategy known as FIRE – or Financial Independence Retire Early. The idea is to chart the most efficient and effective route to saving money for the long term. But what are the pros and cons of attempting such an endeavor?
The Pros:
More Energy
One of the biggest advantages of early retirement is the ability to make the most of your free time. Many people retire at a point where they are less physically able, and hence less likely to engage in high-energy activities. Early retirement enables you to enjoy things at your physical peak, before making accommodations for yourself later.
More Time With Family
Another key benefit is the time you gain to spend with your family. More time is always a good thing to have, and early retirement ensures you get to control what you do with your time for the rest of your days.
Less Stress
Leaving work early can also work wonders for your mental health, saving you from exposure to the various stresses presented by a career. You can build back to a confident, stress-free person, and stay healthy in your retirement.
The Cons:
Strict Savings
The path to early retirement is not an easy one for the vast majority of people. Retirement requires the saving of a serious amount of money to maintain or improve your standard of living – and the longer your retirement, the more money you will need. Your FIRE goal may require you to live a frugal life up until retirement, which can have its own toll on your health.
If you are over 55, an equity release mortgage could lighten the load by giving you an advance on the equity stored in your property. This would give you more spending money to play with in retirement, but may not impact your savings goals.
Smaller Pension
In leaving work early, it is also important to remember that your pension payments will be lower than if you continue to work. This could have long-term implications for later life care and may require you to lower your take-home pay to counteract.
Featured photo by Marc Najera on Unsplash.
