SOME workers can’t wait to retire. Some feel burnout from years of hard work, while others can’t wait to enjoy the benefits of a retirement package.

But is early retirement ideal for everyone? The normal retirement age is 65. Early retirement refers to ending one’s working years before the age of 65. Early retirement may also result from an individual being permanently incapacitated due to accident or ill health.

The novel coronavirus pandemic has seen some pre-retirees contemplating early retirement due to job losses and salary cuts.

I had a conversation with an early retiree a few months ago. When asked why she opted for early retirement instead of waiting a few more years, at which time she would have attained the normal retirement age, her response was most revealing. She didn’t want to take the COVID-19 vaccine and, therefore, she opted for early retirement as, according to her, there is the risk of losing her job should she remain in the workforce. The challenge she now faces is a longer time in retirement with a loss of income and a reduced pension. She is now concerned about her future. How long will her resources last in retirement? Investing her lump sum for the long term is now a key factor in providing income for the future. But getting professional advice is very important in planning for retirement.

Let’s examine a contrast. A few years ago I had an encounter with a retiree who chose normal retirement. He recounted how there was a time when the Government was offering an early retirement package to civil servants and he was very excited with the offer and applied. At that time, had he taken up the offer, his monthly pension income would be $80,000. Acting upon the advice of his then financial advisor he cancelled his application for early retirement. His advisor showed him that, if he waited until normal retirement, which was seven years later, his monthly pension income would be far more. In addition, his financial advisor calculated how much income he would have given up over the seven years, including travel allowances and concessions. Because this retiree waited, at the time of retirement his pension more than doubled. Today he has no regrets and is enjoying his years in retirement. As his financial advisor, I am able to help him with investing for the long term. He has no fears of outliving his money.

Choosing early retirement requires careful consideration. What will you do with your time in retirement? The decision needs proper planning. If you choose to retire early, you may spend more years in retirement than you spent being employed. Decide on the retirement lifestyle you desire to have and put a plan in place to achieve the retirement goals. Also, examine your retirement needs. How much debt do you have? Seek to clear your debts, including credit card debts prior to retirement. How much is your retirement nest egg? Are you running the risk of outliving your money? Ideally, you should retire at 80 per cent of your pre-retirement income at normal retirement age of 65 years. Retiring earlier than age 65 and earning 80 per cent of your previous income as pension means you are at an income disadvantage if there are no plans in place to create ongoing income while retired.

Retirement experts recommend making contributions to a pension plan as soon as the first pay cheque and making the maximum contribution required. This strategy will certainly assist contributors who plan to retire early. Another strategy is to start long-term investing early. Ensure that an emergency fund is in place to assist with large and unexpected expenses that may arise during the working years. Upon retiring early, the emergency fund should have at least one to two year’s income and is necessary during retirement. It’s important to not just plan to retire early but to be financially prepared for it. People who plan to retire early should note that National Insurance Scheme pension benefits won’t be available until age 65.

From the above, you will realise that retiring at normal retirement age has numerous benefits. The longer you are able to work and contribute to a pension plan, the greater the pension nest egg upon retirement. There is a longer time to invest for a comfortable life in retirement that can create streams of income resulting in less stress, especially during times of economic hardship. If you love your job or business endeavour and are in good health, you can work long past the normal retirement age.

A recent study by the US life insurance company Northwestern Mutual, showed that, due to the financial impact of the pandemic, 24 per cent of Americans planned to delay retirement and 11 per cent intend to retire early. With the increasing cost of health care as society ages, a comprehensive retirement plan is needed. It’s not “a one-size-fits-all” strategy, but ongoing review of retirement plans must be enforced in order to achieve financial freedom and peace of mind during the twilight years.

Grace G McLean is financial advisor at BPM Financial Limited. Contact her at gmclean@bpmfinancial, and visit the website www.bpmfinancial.com. She is also a podcaster for Living Above Self. E-mail her at livingaboveself@gmail.com