Sometimes, you may be left with the decision: Be made redundant or decide to go for an early retirement. In this chapter, we discuss the pros and cons of an early retirement and how to know if it’s right for you.
Lost Your Job? What Can You Do? – Chapter Four
It can be a difficult time when work comes to an end. If you have been made redundant, it is doubly stressful, especially if you still have a mortgage to pay and a family to raise. However, sometimes the opportunity arises to go for early retirement, and while this may seem to be the perfect opportunity to fulfil your dreams, it can come at some financial cost.
So, is the dream of endless spare time worth the financial costs that could occur if you choose this path?
How to Retire Early
Thinking about retiring early? Retiring early begins with looking at your finances to see if you can afford to retire early. Aim to have all your debts paid off before you retire, including any bad credit online loans and your mortgage if possible. Begin living below your means and focus on reducing your big expenses. Think of a backup plan which could work for you – what if you hate the unstructured days of early retirement, can you return to work?
Before you retire early, here are some points to think about;
- How much money do you need before retiring?
- Do you have debts which are not paid off?
- Have you maxed out your retirement accounts?
- Have you gotten serious about lifestyle changes?
- Do you have a retirement budget in place?
Early retirement due to ill health
First, let us look at considering early retirement due to ill health or disability. It is important to get expert advice on this matter and to consider all the available options before going down this route. All employees have various rights. If a chronic illness, such as diabetes, is making it hard for you to work your regular hours, then an employer must take reasonable steps to assist you at work. One option may involve working part-time or taking on flexible hours. An employer who has been requested to help in this way is obligated to assist as long as the request is reasonable.
If you suffer from long term ill health, some benefits can be claimed if you take early retirement. One of these is the Personal Independence Payment, and there are others for housing. If you cannot claim a full pension due to lack of contributions, the Employment And Support Allowance may be applicable.
Early Retirement – The Pros and Cons
Early retirement may be an option, but it can depend upon several factors whether or not this a good choice. If you own your home outright, have no debt and have a healthy savings account, then you can anticipate a decent retirement. However, some trade-offs will have an impact on your decision. So, looking at the advantages and disadvantages of early retirement is a worthwhile exercise before you take the plunge.
One of the most important factors to consider before taking early retirement is to think about how you are going to fill your days. If you do not have an interest in a particular hobby, you could find yourself with time on your hands and nothing with which to fill it except TV or gardening. Before going for your early retirement, you might want to get some advice from the pension advisory service who offer free, independant guidance on pension matters and can help resolve any problems you may have with your pension.
Additionally, taking early retirement is sometimes a trigger for adult children to use you as an unpaid babysitter. As our life expectancy is continually going up, the government has seen fit to raise the pension age – this is for a good reason. Unless you have a life plan in place that allows for early retirement, it is probably a better option to reduce your hours gradually at work until you are ready for final retirement.