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Should you really plan to retire early?

There’s early retirement and then there’s very early retirement. For some, early retirement means forgoing the last couple of years of contributions to their occupational or private pension scheme. They retire in their early to mid-60s and wait for their state pension to kick in.

Radically early retirement

Others take a far more radical view. There have been several stories lately of thrifty and focused types who, despite ordinary salaries, are ready to retire in their 30s or 40s at the latest. One particularly determined type went from Topshop assistant to Chartered Accountant in 10 years and is now ready for retirement. His top tips are to ditch red meat, shop at Aldi and move somewhere cheaper. He lives in the UK, but like many in the US, he follows the FIRE formula, an acronym for Financial Independence Retire Early which also involves investing in property and low-risk, long-term growth stocks.

Extreme frugality pays off

What most of these people also have in common is that they have chosen to live at a level far below their salary in order to become mortgage-free and financially independent at a very early age. Is such significantly early retirement always a good idea? Not according to some financial advisers.

It appears that very early retirement can cause physical and emotional problems. Although people did not want to continue working, their working activities may have been beneficial to them in ways they did not recognise at the time. Other advisers point out the difficult of funding 40 or 50 years of retirement. Software for IFAs https://www.intelliflo.com is now able to model this kind of outcome and demonstrate the potential problems.

Other financial advisers point out that better investment strategies could achieve results that are more practically achievable without such drastic sacrifices as never going on holiday.

Another problem is that it’s very difficult to predict how the financial world will change over such a long time frame. As the world becomes more uncertain, it’s probably not wise to put all of one’s eggs in the retirement basket.

Instead, many people are switching from highly paid, high-stress jobs to less stressful employment in their 50s. They can gradually begin to enjoy some aspects of retirement without burning their financial boats.


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