There are a few pros and cons to early retirement. It may be your dream or even your nightmare to retire early but if you just aren’t sure then I’d like to run through the arguments for and against to help you decide if it’s right for you.
And since (almost) everyone starts with the pros I’m going to start with –
The cons of early retirement
No more wages
Loss of status
Well It seems obvious that you won’t be bringing in a wage once you retire. And that certainly used to be the case. But with State pensions coming into play later and later, for many retirement no longer means managing on a pension alone.
if you’re lucky enough to have the option of flex i retirement then that might be Right for you. It basically means that rather than giving up work altogether, you claim your works pension but stay employed by them on a part-time basis, allowing you to bring in a wage until you reach state pension age.
ive spoke to several colleagues who have taken this route and it’s a very popular one. Your tax and National Insurance contributions will be drastically reduced. You will still have to pay into the pension scheme to help top up your pension when you do leave permanently. But overall you shouldn’t be much worse off than you were working full time plus you’ll only have to work half the week!
You will still have fixed costs to manage. While that’s a worry remember that you can take steps to minimise those now, while you’re making your mind up. And while you have the safety net of a wage coming in. Pay down your mortgage so you won’t have to worry about it later; stat chipping away at electricity, gas, phone and insurance bills so that, if and when the time comes, you’ll be better placed to take the leap into early retirement. You can alway put the difference into a savings pot or debt reduction while you’re at it. It’s all about giving yourself the option to retire early if you want to, rather than being forced to stay on for years longer than you’d like.
If you’re not sure whether you can maintain your current lifestyle then I have a – possibly controversial – suggestion. Don.t even try. Life can be full of simple free or cheap pleasures when you have the time to try them. Why not try simplifying now? It’ll save you money in the long run and, who knows, you might even enjoy it!
For many people, the idea of employment is tied into that of status. If you’re worried about that then this is the time to decide if early retirement is right for you. Remember that while retirement brings its own challenges, that said, a less stressful life might be a good alternative. No more deadlines, reports to write, bosses to placate or meetings to endure?. Perhaps it’s less of a negative than you’d imagine?
The pros of early retirement
No more work related costs
No more early rising
While having less money coming in can be a concern, remember that your work related costs will also come down. And they can add up. Quick trips to the local sandwich place because you’re too tired or busy to make your lunch – no longer a problem. Parking charges, petrol co and wear and tear to your car? Gone. No more rail or bus passes to buy. And no more money spent on work clothes. All positives.
A big plus for me here. While I’m naturally an early riser, I still grudge getting up when the alarm tells me to. No more rushing around getting ready. No scraping the car winter mornIngs. No more running for the bus. Just think – you can take your time and ease into the day!
Another major positive of early retirement. While stress levels var from individual to individual, I think we’d all agree that work can be stressful. Whatever you do for a living, spend just a few minutes noting down your work related stressors and you’ll surely have a list as long as your arm. Whatever stresses work brings your way, early retirement will see them off. Don’t get me wrong, there will be other stresses in retirement but surely not so many and not to the same degree?
What’s right for you
In the end only you know what’s right for you. But to make that right decision you need the right information. Now is the time to get that information. Contact your pension provider to see what you might get so that you have a better idea whether you’ll be able to live on it until your State Pension kicks in. If not then – assuming you want to go ahead with early retirement – what can you do to redress the balance? Whether it’s taking out (or adding to) an AVC; cutting down on your living expenses now to find out what your minimum living standard truly is; or paying up missed NI contributions to make sure your State Pension is as high as it can be; NOW is the time. Whatever your age – make early retirement a real possibility!