What to consider before taking the bold step to early retirement

Before taking early retirement, be prepared emotionally and financially. File

What you need to know:

  • Early retirement is not simple. Not only does it have financial implications, but it can also affect one emotionally or psychologically.

Ask a typical Kenyan worker what they would like to do when they retire and you are bound to get pleasant answers like “Resting and enjoy quality time devoid of work-related stress”.

But alter the question slightly: “So, what will you be doing when you attain retirement age?” The responses will likely reveal that the majority of workers are not prepared financially to retire.

While many of us don’t have the option of delaying retirement, there are many that do but have postponed their retirement. The low confidence levels indicate unease among workers in securing a financially secure and comfortable retirement.

This probably explains why the number of workers expecting to retire at 65 has decreased while the number of those who don’t plan to retire has increased. Workers who are not confident about their financial security in retirement generally plan to retire later.

There are many benefits of working beyond the retirement age. You have more time to save money and pay off debts before your income is reduced. But there are plenty of good reasons to retire early as well.

These reasons are often not highlighted because early retirement is not popular. Majority of those who retire early often do so for health problems or because of disability.

Early retirement is not simple. Not only does it have financial implications, but it can also affect one emotionally or psychologically. These two factors have to be considered in tandem. Reasons?

It is certain that you may be financially prepared but not emotionally ready for early retirement. This is stressful as one has to struggle with the transition from a structured lifestyle of reporting to work to days with no strict schedules.

The realisation of not returning to work after early retirement may not sink in for many employees in the first few weeks or months, as they feel to be on leave or vacation.

But as the months progress, the sad thought of not returning to work begins to haunt them and, subsequently, emotional stress sets in as the process of adjusting to the new lifestyle becomes painful and regrettable.

Conversely, you may be emotionally prepared, but not financially ready for early retirement. The challenge with early retirement is that you need to be financially prepared since you will be financing a longer retirement period.

This will ultimately cause you emotional stress as you think of how to safeguard your retirement nest from the longevity risk of outliving your income. But how do you ascertain that you are both financially and emotionally ready to take early retirement?

Regardless of why you opt to retire early, below are some of the things to consider as you deliberate and prepare to take this step.

1. First, the choice for early retirement does not mean that you retire from work. Instead, retire to do something else. This will help you financially and emotionally.

When you retire early, it is certain that you have built up less retirement income compared to someone who has retired after the age of 60. You would need even more cash to last for a longer period.

Therefore, to ensure that you are in good financial shape, retire and go into business to generate additional income to bridge the deficit— that is if you are not financially ready at the point of taking early retirement.

Start a business that will generate income and also keep you busy to help you in the psychological transition into full retirement.

At times, you may retire early, but you still have debts to pay and dependants who still rely on your financial support. Retiring to a venture that generates some income to settle these financial obligations would be advisable.

Since operating a business isn’t a walk in the park, it is advisable that you don’t rush to start one immediately. Before you retire, get something to do on the side.

2.Second, where this idea may not prove viable especially in a job with strict time schedules, instead of asking for early retirement, you can request for semi-retirement. In this case, you can continue working part time or for a few months of the year as you make the psychological transition into full retirement.

During this semi-retirement period, you can share with your friends or spouse as you bring them to terms with your intended early retirement thus saving them from financial and psychological distress.

It is advisable for every employee to prepare for early retirement starting now, regardless of age.

Mr Opiyo is a training manager & coach with Tolerance Employee Financial Advisors Ltd. E-mail: [email protected]

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