Early retirement sounds good, but is it for you?

April 7, 2022

Many people may have the goal to exit their busy work lives as soon as possible, and embark on a long retirement journey. After all, what’s better than being able to do all the things you’ve wanted to, whenever you want to?

From afar, early retirement may look like ‘the dream’, but may come with a catch: it usually entails a fair share of advance planning. Plus, it’s a very subjective decision (you may enjoy it, or not). So, as you plan for the future, here are some key things to consider.

It’s about your unique self

Do you enjoy working? Do you feel better with a daily routine to follow? Or, perhaps you’d enjoy more time to yourself, pursue some hobbies you’ve long wanted to.

Generally, being able to retire early depends on your unique financial situation, and needs. But there can be additional key factors to consider too, like: is it something you’d truly enjoy? Can you afford it? And do you have a plan in place?

More and more younger people are thinking of retiring early – about 33 per cent of Kiwis under 35 say they want to retire before age 65, and 38 per cent are aiming at retiring at 65. But there are also those who would rather not lose touch with their work.

Plus, an early retirement may not be easy to achieve financially, without NZ Super payments and access to KiwiSaver funds – both of which currently become available when you turn 65.

At the end of the day, it’s your life and time, so it’s key to think through what’s more appropriate for you in the long term. to help you along your journey, here are some key pros and cons of early retirement to know:

The positives of early retirement

When you think of retirement, you probably picture a life without a job, with the freedom to live life on your own terms. And if you are healthy enough and financially prepared for the years to come – that’s exactly what retirement means.

It’s a stage of life where you get to spend time as you like. Depending on your circumstances, that could mean being with your loved ones, travelling, pursuing your goals, and yes, even working if you enjoy it. Some people choose to work part-time, for example, to keep themselves busy, and most importantly, to make their retirement funds stretch further.

In other words, retiring isn’t just necessarily about ‘no longer working’, but rather not needing to work to sustain yourself. And with this freedom often comes improved mental wellbeing.

According to several studies, there’s a link between early retirement and mental health. Retiring early can be good for your family life, reduced stress levels, and better sleep. And of course, it can be an opportunity to follow your dreams and hobbies like never before.

Some common ‘negatives’ of early retirement

A life without a job may sound good on paper, but it’s also not for everyone. Some retirees quickly realise that they’re not comfortable with a lack of routine, daily work goals, or a regular income. And it may take time to create new habits and routines.

The financial side of things is also crucial. With many retirement years ahead of you, you’ll likely need to stretch your savings for longer, which means a bigger nest egg coupled with a solid, long-term financial plan.

Remember, you can’t retire early without a fairly detailed plan. Also, you may need to start early enough in your career, and save enough money to fund your golden years, which may not be easy to do.

And even though an early retirement may benefit your mental health, some research shows that retiring early might lead to cognitive decline, due to less time spent on challenging your mind and fewer social activities.

The bottom line?

An early retirement can give you the opportunity to focus on the things that matter most to you. But it can also come with some downsides, so it’s important to understand if it’s the right option for you.

Whatever the retirement lifestyle you’re envisioning, we can help you put a strategy in place to get there. Get in touch if you’d like to talk.

Disclaimer: Please note that the content provided in this article is intended as an overview and as general information only. While care is taken to ensure accuracy and reliability, the information provided is subject to continuous change and may not reflect current development or address your situation. Before making any decisions based on the information provided in this article, please use your discretion and seek independent guidance.