Early retirement: is it final?01 February 2023
You may well have read in recent press and economic commentary about the number of workers aged over 50 who have left employment since the start of the coronavirus pandemic. Each individual will have a different reason for leaving the labour market, such as their own wellbeing, or to focus on their family, and this decision may have been sparked for a range of good reasons, for example redundancy or a period of illness.
For some people, an early exit from the world of work has been absolutely the right decision – and, crucially, has been affordable. For others who have made this momentous decision, though, the outcome has not been as rosy as expected.
The Office for National Statistics released at the end of September 2022 the latest figures for workers over the age of 50 who have left employment since March 2020. This publication details the main findings from the second wave of the Over 50s Lifestyle Study, which looks at the motivations of those aged between 50-65 for leaving work, including why they left and whether or not they intend to return to work. The publications and data are certainly worth a look and may be found here:
A key point to note from the interview responses is that almost nine in 10 (86%) of early retirees between the ages of 50 and 54 would consider returning to work as the current cost-of-living crisis squeezes household budgets. 65% of those aged 55-59 and 44% of the age group 60-65 said that they would consider working again. In this second wave of interviews, a much higher overall proportion of adults aged 50 to 59 years said they would consider returning to work (72% - August 2022) than in the first wave of interviews (58% - February 2022).
55% of 60–65-year-olds were somewhat or very confident that the provisions they had made for their retirement would be sufficient for their needs. This is concerning in itself – however, only 38% of those aged between 50-54 were somewhat or very confident in this point.
Financial resilience varied by age, with those aged 50 to 54 significantly less likely to be debt-free than those aged 60 to 65, and more likely to have credit card debt. Nearly half (49%) of those who have left work and not returned reported that their household savings had decreased since the start of the coronavirus pandemic. Just under a quarter (23%) adults in the ONS sample said that they could not afford an unexpected expense of £850. Unforeseen circumstances and costs in life can and do occur!
Early retirement is not a decision to be taken lightly, as you will appreciate, and of course sometimes it is more of a necessity than a choice. However, in many cases, there will be time to plan for retirement and to ensure as far as possible that provision has been made for your financial needs once work stops. The notes above give a pretty stark illustration of how temporary an early retirement could be without adequate preparation. You don't want to be heading back into the labour market in your seventies – or if you do, it should be a choice and not a necessity.
If you want to know more about the options available to draw pension benefits, you can find details on our Pension and Retirement Planning page here: https://www.chaptersfinancial.com/private-clients/pension-retirement-planning
If you want to know more about the lead up to and process of what needs to be considered for retirement, you can see details of our new book here: Coming in to Land: Runway to Retirement
If you are thinking about early retirement or winding down work, talk to the team at Chapters Financial well in advance for a clear understanding of your options.
No individual advice is provided during the course of this blog.
Keith Churchouse FPFS
CFP Chartered FCSI
Chartered Financial Planner
Chapters Financial Limited is authorised and regulated by the Financial Conduct Authority, number 402899