Society has drilled the traditional age of retirement to us ever since we can remember. It’s as if society itself has conditioned us to work up to a certain point, then stop, whether we want to or not. Some people see it as a limit on how far they can reach within a lifetime. On the other hand, there are people who long for an early retirement. They’d rather free themselves from the shackles of employment long before they’re too old to enjoy the fruits of their labour in full.
It seems that more and more people are among the latter. We don’t want to think about living from paycheck to paycheck in our old age anymore, or struggle with mortgage payments and other debt. No. We’d rather be financially liberated instead, free to explore the world and focus on our passions without the worry of survival expenses looming behind us.
However, we also acknowledge that early retirement is not always a sunny walk in the park. We also don’t claim that it’s a suitable choice for everyone. We all have our own priorities and preferences after all. The most we can do is share with you the pros and cons of choosing early retirement as part of your life plan.
The Downside of Early Retirement
Early retirement is a truly enticing option, especially if you don’t particularly enjoy employment. It gives you something to look forward to. However, as mentioned, there are some consequences to it as well.
“Delayed” Access to State Pension
Your access to state pension won’t literally get delayed, but it might feel like it. Taking early retirement means it will be a few years before you will be able to tap into it. That sense of time will feel significantly prolonged compared to if you had just worked the whole time until you reach State Pension age.
There might be ways to access your state pension earlier, depending on your location and particular circumstances. However, doing so will lower your monthly pension. This leads us to the next downside.
Smaller Monthly Pension
It follows that the more pension payments you make, the higher your monthly pension will be. Early retirement will cut these payments short. So unless you find a way to continue saving for your future pension and augment your finances even during retirement, you must prepare yourself to receive a smaller monthly pension compared to the average amount.
Lower Income
Early retirement requires much frugality and discipline to live within a set monthly budget. You will risk deflating your pension faster otherwise. You can always supplement this budget with active income, but full-time work would defeat the purpose of early retirement, right?
Feelings of Loss of Purpose
Finally, some people enjoy employment. It gives them peace of mind and a sense of purpose. There are those who even dread retirement, viewing it as an ending rather than a beginning. The very concept of retirement is certainly not for them, and we respect that. But even for those who are looking forward to early retirement, this transition may present some challenges.
The Benefits of Early Retirement
With the consequences out of the way, let us move on to discuss the advantages of early retirement.
Follow Your Passion
The first benefit is the opportunity to follow your passions. You can explore a new field of interest, regardless of if it earns a profit or not. Giving up work and retiring offers most people more free time than they’ve had in decades. This can give you a whole new lease on life to pursue your interests and achieve personal goals.
The Pursuit of Higher Education
Early retirement also presents a chance to pursue higher education. After all, it will require time and attention that you won’t be able to provide whilst employed. Perhaps you never went to university and you’re eager to dive back into education? Or maybe you miss your student days and want to expand your existing knowledge with a postgraduate qualification.
Unhindered Adventures
For most people, however, early retirement means being able to travel. Careful planning is imperative if this is your intention. You don’t want to find your savings depleted after just a single journey, right? Be sure to shop around for the best deals on flights, accommodation, and insurance when booking a holiday. Bon voyage!
The Freedom to Enjoy Life
Finally, early retirement frees you from many obligations, giving you the chance to enjoy life however you want. For us, early retirement means being able to spend more time with our family and watching our grandkids grow. How about you?
How to Avoid the Struggle With Mortgage Payments Even With Early Retirement
Are you considering early retirement? There are a few things that you should think about first. For instance, those with outstanding debt should think twice before transitioning to a more unpredictable financial state such as early retirement.
Mortgage payments can be a struggle. While you can always continue repayment long after your retirement, full settlement before that will still prove ideal. Hence, here are some tips on how to pay your mortgage faster:
Shorten the Mortgage Term
Most people opt for a longer repayment term, but the truth is, doing so will only prolong and increase your financial burden. After all, a longer repayment plan would also mean higher interest. In this light, we recommend getting your mortgage refinanced to a shorter term instead. Make it match the personal deadline you have set for your early retirement. If you plan to retire in 15 years, then have your terms computed accordingly. Of course, reducing your mortgage term will lead to higher monthly payments. However, you’ll end up paying less interest overall, so it may be worth considering.
Overpay your Mortgage
Those who don’t want to feel pressured with higher monthly payments may simply pay extra whenever they’re able to. One pro tip is to dedicate your income tax refund every year as a lump sum payment. Some people also strive to make bi-weekly payments whenever their budget permits. Be aware of your lender’s rules about overpayments. Some lenders place a limit on overpayments and will charge you a fee if you break the limit. Make sure you know what’s permitted before you starting pumping extra money into your mortgage payments.
Remortgage
Remortgaging can be a confusing prospect if you don’t fully understand what it means. In short, remortgaging simply means switching from one mortgage deal to another. This could be with your existing lender or a new provider. You might decide to remortgage if your fixed-rate mortgage deal is coming to an end and you’re about to start paying more interest on a standard variable rate. If you decide to remortgage, be sure to shop around for the best mortgage deal, just like you would for a new car or television.
Any of the steps we have shared above can help lighten the struggle with mortgage payments. Please keep in mind, though, that financial institutions vary. Speak to your mortgage provider about what’s possible before you make any concrete plans. It will help to closely work with them and discuss your options. Doing so will assist you in making more informed financial decisions.
We also highly recommend building an emergency fund before making drastic payments towards your mortgage. This will prevent you from falling into more debt in case something unexpected throws your budget off track.
Other Tips to Achieve Financial Freedom Fast
With your mortgage out of the way, here are a few more tips to ensure early retirement success.
Make an Early Retirement Plan
This is probably one of the first (and most important) steps that you should take after deciding to retire early. It is critical to set a target amount of savings you will need to survive after employment as well as a deadline on when to hit that mark. Determine your retirement plans as well. What do you want to do? Do you plan to travel? Continue your education, perhaps? Or just stay at home to make the most of your family life? Each pursuit will require different budget ranges that you should take into account as well.
Establish Passive Income Generators
Early retirement shouldn’t equate to a total loss of income. Life is too unpredictable for that. Hence, we highly recommend establishing passive income streams even before you transition. This will not only help you in saving up for your early retirement faster, but it will also help you enjoy it more by being a stable source of revenue.
Start the Transition Early
Early retirement will require a more frugal way of living. It’s best to start cutting expenses now and ease into this lifestyle little by little. Adopting this lifestyle may also decrease the amount that you need to save since you will require less money to live on as you get more accustomed to it.
Consider Living Abroad
Choose a country where the value of the pound is relatively strong but the living expenses are relatively low. This is also a great option for those who are looking forward to a complete restart of their lives.
Adopt Healthy Habits
Finally, don’t forget to live a healthy lifestyle. Not only will it help prevent significant health expenditures, but it will also promote longevity. After all, your early retirement won’t amount to anything if you don’t live long enough to enjoy it.
Early retirement might seem like a dream, but it also has its fair share of pros and cons. Fortunately, you can easily avoid most of these downsides through proper planning and diligent saving. We just hope that the tips we’ve provided will help you toward this cause. Good luck!
Enjoy Peace of Mind in Retirement
Deciding to retire is a big change – and an exciting one! However, getting older also comes with a few worries. A survey by AgeUK revealed that falling over topped the list of concerns for more than 1 in3 older people. Thankfully, finding peace of mind is easier and more affordable than you may think.
Personal alarms are a simple and affordable way to feel safe and independent. Lifeline alarms come with a comfortable, wearable pendant which you can press at any time to call for assistance. You’ll be connected to our 24-hour Emergency Response Team, based right here in the UK. All alarm base units contain a speaker and microphone, allowing the Response Team to speak with you and assess the situation, before arranging the help that you need.
To find out more about our personal alarm service, read our quick guide. Alternatively, feel free to give us a call on 0800 030 8999, or get in touch online for more information.
Editor’s Note: This article was updated on 14th February 2024 to reflect current information.
Leave A Comment