Early retirement is a dream for many, and new research has discovered that 60 is the most popular age for achieving this ambition.
The research from insurer Aviva identified the key steps people have taken to realise early retirement while assessing the costs and benefits of doing so.
A commonly held definition of early retirement is earlier than the state pension age, which currently stands at 66.
The research found that 17% of people who have taken early retirement did so at age 60, making it the most popular age for early retirement from work.
Age 60 is also the most popular target for early retirement among those who plan to step down from the workforce early, with 25% saying they want to retire at age 60.
The ambition to retire early is primarily driven by “wanting to enjoy more freedom while still being physically fit and well enough to enjoy it.”
According to the research, 32% of people who have retired early or plan to retire early gave this reason as their primary motivation.
Another common factor driving early retirement ambitions is financial security.
26% of early retirees said that their decision to stop work early was due to “being in a financially stable position” so they could afford to retire.
Money is a clear driving force when it comes to choosing an early retirement age, with 20% of people aiming for early retirement wanting to stop working at 55 because they can access their pension pot from this age onwards.
Other drivers behind an early retirement include:
-reassessing priorities and what’s important in life,
-wanting to spend more time with family,
-and finding themselves either “tired or bored” of working, or “too taxing and stressful”.
While early retirement is broadly a positive experience, a notable finding in the research was that 68% of people say their happiness improved.
44% of respondents said their family relationships have improved due to their early retirement, with 34% reporting improved friendships since stopping work.
There were also health and well-being benefits, with 57% reporting an improvement in their mental well-being and 50% saying their physical well-being has improved.
However, there are some downsides associated with early retirement too.
47% of respondents said their finances have worsened due to leaving work, with women most likely to have felt a negative financial impact from early retirement.
For men and women, only 22% reported a financial benefit from early retirement.
From a financial perspective, 32% of respondents said that having a defined benefit (final salary) pension enabled them to stop work early. This finding suggests that the dream of early retirement could become harder to achieve in the future, with fewer people in younger generations having access to these gold-plated pensions.
However, Aviva’s findings suggest that you can take positive steps to realise early retirement.
Suggested actions, based on the research findings, including paying off your mortgage, and saving little and often.
19% said that saving extra whenever they received a pay rise or bonus during their working life enabled an early retirement.
The research also identified that 17% of early retirees have returned to work, and 15% think they may return to work in the future.
27% of these respondents said the main reason for returning to work after retiring early was because they “wanted a new sense of purpose”, followed by 26% saying they are “missing the company and social interactions with colleagues”.
A similar number of early retirees who have returned to work say they experienced financial issues, so they needed to start earning money again.
Alistair McQueen, Head of Savings & Retirement at Aviva, said:
The turbulent times we’re living through have given many people pause for thought to consider their work-life balance and think more seriously about what makes them happy. Our findings suggest the dream of an early retirement is very much alive and kicking, but there are many factors to consider along the way and the current uncertainty about the future does not make this an easy decision.
The experiences of people who’ve already reached early retirement show that small savings habits, which add up over time, are every bit as important as big gestures such as putting aside any year-end bonus.
It’s also important to learn from the lesson that, while happiness soars in retirement, many people find their finances take the strain when they retire early and money worries are one of the biggest factors resulting in people returning to work.
Addressing these money worries before you decide to retire early can be achieved by working with a Financial Planner.