Is there a right time to retire?

Gone are the days of carriage clocks, uncomfortable presentations and a pat on the back as you clear out your desk at age 60 or 65. Retirement at a certain age is no longer a foregone conclusion (if it ever was). These days, people can retire at any age, but many keep working into their 70s and even beyond.

Is there really a right time to retire? Let’s take a look at retirement through the ages and some of the factors you may want to consider before you hang up your work boots and put up your feet (or if sitting around isn’t your thing, go on an adventure). As well as planning financially for retirement, there are many other considerations, such as what you are going to do with all that free time.

A potted history of retirement

Around the world, the idea of retirement is a relatively new phenomenon. Previously, low life expectancy didn’t give people the chance to worry about retirement. You literally worked until you dropped dead.

In the late 19th century, Otto von Bismarck, the conservative minister for Prussia, came up with the idea of government funded support for the older members of society. Eight years later the German government created a retirement system to provide for its people over the age of 70.

Military pensions have long existed for service men in developed countries. In the UK, the first organised pension scheme began in the 1670s for Royal Navy Officers. In 1908, the British government legislated with the Old Age Pensions Act to provide a non-contributory but means-tested pension of between 10p and 25p a week from age 70. The life expectancy then was averaged at 50 for men and 53 for women.

After the First World War, the National Insurance Act introduced a contributory state pension for all. Various pieces of legislation have tweaked the detail since. Nowadays the state pension is based purely on your National Insurance record. The most you can currently get is £159.55 per week. You can find out more about current eligibility from the Gov.UK website.

Pension scandals dominated the 1990s, just as pension mis-sells dominated the 1980s. After Robert Maxwell died at sea it was discovered he had plundered £440 million from the company’s pension fund. Pensions mis-selling is still a problem. While watchdogs are tightening up, it’s still possible to get bad advice. The point is, many people just can’t afford to retire.

Preparing for retirement

While some look forward to retirement, for many it can be an emotionally difficult event. It’s not just our finances we have to get in order ready for retirement, we need to be prepared for the emotional aspect of finishing work too. No longer being part of a working community can leave some feeling lost and of no value.

One of the biggest things people forget to plan for is what to do with their time once they retire. Talking to Age UK, recently retired Jay Cassie shares her 3-point plan for emotionally preparing for retirement. She recommends starting a hobby, finding new friends through social clubs, staying positive and getting to grips with technology.

Video from retirement planning specialists Reeves Financial

Financial planning is obviously important too. The Money Advice Service recommends you start thinking about your retirement options at least two years before you want to stop working (and much longer before in terms of paying into a pension). They also recommend getting professional financial advice on retirement planning, largely because the decisions you make regarding your finances will shape the income you receive for the rest of your life.

How do you know when it’s time to retire?

Recent changes to the state pension age mean that between October 2018 and October 2020, the age at which both men and women can retire to qualify for the state pension (there are other eligibility factors) will increases to 66.

Between 2026 and 2028 the state pension age will rise to 67. Following recommendations from the ex-boss of the Confederation of British Industry, John Cridland, it is likely that those in their 20s today may be forced to wait until at least 70 to receive their state pension.

For most of us, the overwhelming factors when it comes to retirement are money and health. Those with nest eggs and those with private pensions will have the financial security to retire early. Those with financial obligations and no private pension will have to keep working for longer. Those with health problems may be forced into retirement, even if this means financial crisis.

For those of you who live to work, the idea of staring at four walls in retirement just doesn’t come into the equation, so you’ll likely keep going regardless of your financial situation.

There’s no right or wrong time to retire. The decision to retire is a personal one. What we do know is that we are living for longer and the cost of living is rising. Without proper financial planning, many will have no choice but to keep working late in life, even if only part-time.

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