Early retirement: The considerations laid bare

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It’s one of those periods of life which we all think won’t happen to us. The problem is; it eventually happens to everyone. The R-word is at first feared, but over time people count down the days until they can hang up their work clothes and start proper retirement.

It’s becoming increasingly common for people to take early retirement, particularly with countries all around the world actually increasing the official retirement age. However, before you get too excited and send in your letter of resignation, you should be aware of some considerations before you press ahead. Let’s now take a look at some of these in-detail.

Beware of the unexpected expenses

When you retire, the general consensus is that all of your outgoings remain constant. This is something that couldn’t be further from the truth.

As it turns out, all sorts of other costs enter the equation. As countless studies have shown, parents are becoming one of the biggest lenders for their children when it comes to house buying. Then, there are things like paying for funeral costs in advance, which can save your family thousands.

When costs like these are added to your “normal” ones, you might need to reassess if you are going to have enough money to live on. Let’s not forget that on top of all of this, your salary will have ended as well.

How will you fill up your time?

Let’s now move onto one of the less serious issues, but one that can again affect your bottom line. For the last few decades you have had the world of work available to fill your time. Suddenly, this is gone, and you have gaping holes to fill.

This might sound dream-like to some of you, but for others it is the prime opportunity to spend more money. You are now home for an extra eight hours or so per day, and this is an extra eight hours to spend money. You need to think how you are going to fill your days, and if your new “budget” is going to cover these adventures.

The dreaded pension factor

This is a topic that most of you will have been expecting us to breach. Not only that, it’s also one of the most complicated topics around.

The problem with pensions is that they are different for everyone. If you are going to take the lump sum pension, you have to calculate if this really is going to be enough to cover you for the rest of your life. Let’s not forget that the average lifespan is increasing, all around the world, and the last thing you want is to be left with an empty pot by the time you reach your latter years.

In short, pensions bring a lot of risk anyway. If you have taken the plunge to take early retirement, it could be argued that you are just increasing these risk levels so think very carefully about how your money will look after you in the coming years.

Taking out a home loan during retirement

The prospect of taking out a home loan during retirement may seem daunting to you. If you need money but do not want an extra bill to pay having a mortgage is a frightening thought. Using a reverse mortgage calculator you can get an idea of exactly how much cash will be available to you. You cannot default on a reverse loan in the traditional sense because there are no scheduled payments for you to potentially miss.