About 6 million people have chosen to leave their professional careers behind earlier than they initially planned to, according to a study done by the financial services giant, Liverpool Victoria situated in the United Kingdom. This figure represents a hefty 47% of respondents in the survey, highlighting a significant shift in retirement ideals. Different circumstances articulate different narratives of early retirement; let’s pontificate upon an investor’s story that is approaching his fifties.
This gentleman, once embedded in a remunerative career, decided to embark on the entrepreneurial path, creating a successful enterprise. With an aggressive stance towards investment, he’s built several sources of revenue that can keep him afloat without the need for continuous active involvement in his business. Although his entrepreneurial journey has proven fruitful, the encumbrance of day-to-day operations has nudged him towards early retirement, allowing his business to operate even in his absence.
The choice of an early exit from his professional life isn’t just about his business obligations; it’s also a personal decision. His aging parents, no longer physically capable of handling their everyday tasks due to failing health, depend on him for help. This early retirement provides him with the bandwidth necessary to ensure their welfare while also de-stressing his life and dedicating quality time to his family.
Prior preparation allows his transition into retirement to be seamless. His decisions, both prior and subsequent to his retirement, oscillate around a balanced life equation. His children, for instance, have a future secured by long-term investments he has made into the stock market. He believed that early retirement could provide him with the work-life equipoise he was seeking.
Early retirement, as appealing as it may be, prompts us to question whether the motivations behind such decisions are justified. Are individuals financially capable to sustain a longer retirement span? To further understand this, consider a tale from Australia where Frank Noble, an early retiree, unveils his experience.
Frank who decided to retire at the age of 55 managed to enter his retirement phase debt-free owning a house without any mortgage. His sagacious financial planning and diligent investments played a key role. Besides receiving a pension, he reinvested the dividends received from his shares, thereby building a consistent financial backup.
Leisure activities like hitting the gym at least three times a week and daily gardening chores keep Frank active and fulfilled. Upon retrospection, he feels satisfied with his decision to retire early and ascribes his successful stride into retirement to robust physical health, homeownership and a rewarding marital life.
The takeaway from these narratives is that early retirement needs meticulous planning. The underlying principle should be to retire debt-free and to keep healthily active, along with securing long-term investments in the stock market. Additionally, it’s essential to keep oneself engaged with fulfilling hobbies and passions.
Liverpool Victoria’s survey highlights an intriguing early retirement trend, providing further insight into people’s reasons for prematurely leaving the workforce. Of the surveyed retirees, a quarter mentioned they retired at least five years sooner than originally planned. Interestingly, almost one-third claimed financial stability as the cause for their premature retirement, contrary to the common belief that such an early exit could strain one’s financial stability.
Despite that, a significant 30% admitted they were financially unprepared when they chose to retire early. This statistic raises concerns about the thought process and consideration that goes into early retirement, pointing toward a potential lack of financial literacy amongst otherwise self-assured retirees.
In an interesting turn, a socio-economic shift is being observed in the form of the Financial Independence Retire Early (FIRE) philosophy. A frugality-focused movement, FIRE promotes saving up to 70% of one’s income with the end goal of achieving financial freedom and the ability to retire prematurely. Advocates of FIRE live humbly, save, and invest most of their earned incomes with a primary focus on long-term capital gain.
Emphasizing the benefits of long-term investments, adopting the FIRE philosophy means individuals can possibly secure an early retirement. Therefore, it’s vital to plan ahead and set tangible timelines for retirement, tailoring investment strategies to fulfill these time-bound goals. For the retirees who opt for an earlier retirement sans-delving into their pensions, the 4% rule is often brought into play, offering a strategic approach to manage their funds post-retirement.
There’s also a growing trend called ‘micro retirement’ common mainly amongst Gen-Z individuals. This retirement model supports taking mini-career breaks, stressing work-life balance over unending hustles from 9-to-5 jobs. These career-switching young adults are more eager to travel, explore their passions, and seek alignment with their personal goals before stepping into the conventional retirement period.
This trend seems to stem from the lack of engagement at work, as evidenced by a study that found only 15% of global employees felt engaged at work. There’s an increasing emphasis on personal well-being among younger employees who, having observed their parent’s stressful lives, are now consciously avoiding a similar fate.
Finally, it’s necessary to remind ourselves that retirement planning, early or otherwise, is of the utmost importance at every stage of life. No one hopes to outlive their funds in retirement. As such, employers too should be proactive in fostering a healthy work-life balance while employees should assiduously be striving to achieve financial independence.