For many years we’ve been having better conversations about retirement. It’s no longer a matter of finding a job, staying in it for 40 years, and then retiring for fifteen years under the assumption that the company pension scheme will finance that entire period for us.
It simply doesn’t work that way anymore.
Finding a job can take considerably longer; the chances of us staying in one position for more than ten years, saving early (and long) enough and the span of our retirement years have all changed and created new challenges for how we plan our lives and our money.
In a recent article by Dinash Pillay, National Business Development Manager at Glacier, he also highlighted the impact of global lockdowns that have forced thousands of businesses to close or downscale. This has led to an increase in employees, who are a few years away from retirement, being offered early retirement without the usual penalties for cashing in prematurely.
As the article says, this may be an attractive option if you are an employee in your mid-50s.
However, before you grab the opportunity, make sure you have a robust plan in place. In this blog, we look at the first part of Pillay’s commentary; the next blog post will have a handy to-do list to help with the decision-making process around early retirement.
Retirement needs a plan.
Most people don’t think about their retirement before they are already in it. Planning is of paramount importance, and financial planning is central to the big decision that you’re facing.
Here are some questions to answer long before you exit your workplace for good:
- Have I saved enough during my working years?
- Is my employee retirement fund the only retirement savings that I have accumulated?
- What monthly income will my retirement savings provide after I retire?
- Who depends on my income now?
- Who will depend on me financially into the future?
- Is the home I own fully paid for?
- Am I debt-free?
- I’m healthy now, but what if I get ill or develop a chronic illness or I’m disabled – what do I do then?
- At work, I have purpose, focus and tasks that fill my day. Will I have a new purpose as a retiree?
It’s important to remember that the basic principle around investing is that the longer we can stay in the market, the more time our money has to grow from the benefits of compounding interest. For most retirement investment plans, the most growth happens in the final few years. Often, but not always, it’s wiser to try and push back your first date of drawing down on your retirement savings.
Everyone is different and it’s best to check with your personal financial adviser when considering these profound life changes. Take a look at the next blog for the checklist of five to-dos before taking early retirement.