One of the biggest decisions that needs to be made when it comes to retirement is simply when we want to retire. ‘When’ plays a fairly vital role in how your golden years are going to play out. Both early and late retirement brandish some hefty pros and cons, so having the good points weighed against the bad all in one place can make things a lot easier for those of us that want to start planning a future tailored to our wants and needs. So why not take a look at the list below, and finally decide which retirement plan is best suited to you.
- Time – The likelihood is that, when you think about it, you have a whole host of things you want to get done in your retirement. Some of them – like travelling across the US, or spending a year abroad on the shores of the Mediterranean Sea – might take longer than others. Early retirement provides you with the time you need to tick the boxes of your bucket list.
- Vitality – Generally, we deteriorate with age. If you’re planning to spend your retirement doing anything physically or mentally demanding, you may find yourself too tired or disheartened to do it by the time you’re seventy, so it’s best to do it as early as possible.
- National Insurance – The earlier you stop working, the earlier you stop paying national insurance contributions, freeing up more money for you to put aside for a rainy day.
- State Pension Age – You cannot take out your state pension in the UK until you have reached the state pension age of 65, meaning that if you’re relying on the government for a wage after your working life, early retirement may put you in something of a tough spot financially.
- Funding – In order to accommodate for your extended golden years, you’ll need an extended budget. Early retirement means you have less time to save, in which you’ll actually have to save more. Yikes.
- Discontent – You may run the psychological risk of feeling redundant if you leave your career too early. Also, if you haven’t thoroughly planned out your extended retirement, things could get dull very quickly.
- Quality of Life – Even though more of your life will be spent working, you’re far more likely to have the resources to pamper yourself when all the hard work is finally done. You have more time to save and less time to fund, making for a very comfortable – if short – retirement.
- State Pension Returns – On a state pension, you get a 10.4% increase on your pension for each year it is deferred. This means that if you deferred your pension by five years, you’d be seeing an increase of over 50%.
- Mental Health – Depending on your occupation, your job could actually be a good way to keep your brain and body active, keeping you healthy in your old age.
- Time – Perhaps the most obvious disadvantage of a late retirement is that you have less retirement to enjoy.
- Reaching Retirement – It might sound morbid, but by deferring your pension, you are actually making it less likely that you’ll reach it before you die. No one knows how long they are actually going to live.
- Weariness – You might have fantastic plans for your retired life, but if work has sucked all of the energy out of you by the time you get around to them, you run the risk of being too weary to see them through.
The general impression is that potential retirees need to consider what they are looking for. If it is financial stability, late pensions are the way to go, but to escape the stress of work in favour of a frugal, contemplative retirement, then it might be worth taking out a pension early.