60 is the most popular age to retire early, according to new research from Aviva which reveals the key steps people have taken to embrace early retirement and examines the costs and benefits of doing so.
With the state pension age currently standing at 66, the findings show 17% of people who have taken early retirement did so when they were 60, making it the most common age to make an early exit from working life. This is also the most popular target age for people who intend to retire early in the years ahead, with 25% planning to celebrate their 60th birthday by leaving work behind.
The desire to retire early is primarily driven by “wanting to enjoy more freedom while still being physically fit and well enough to enjoy it”. 32% who have retired early or plan to do so gave this reason for embracing a new lifestyle.
Financial security is the second most common factor prompting people to embrace retirement. 26% of early retirees say their decision was a result of “being in a financially stable position” so they can afford not to work.The influence of money matters is also visible in people’s choice of early retirement age. 20% of people targeting early retirement have set their sights on 55 to make the transition from working life. This is likely to be influenced by their ability to access their pension savings from this age.
Other key factors encouraging people to seek early retirement include reassessing their priorities and what’s important to them in life (23%), wishing to spend more time with family (20%) or finding they are either “tired and bored” of working (19%) or find it “too taxing and stressful” (19%).
Aviva’s research suggests the impacts of early retirement are wide-ranging and broadly positive in many areas of life. Most notably, more than two in three (68%) people who have retired early say their happiness improved as a result.
In terms of the world around them, 44% of early retirees say their family relationships improved and 34% reported improvements in their friendships.
When it comes to their health and wellbeing, more than half report that early retirement has delivered a boost to their mental wellbeing (57%) and half (50%) say their physical wellbeing improved. .
However, the findings suggest these benefits come at a cost, with nearly half of early retirees finding their finances worsening as a result (47%). Women are the most likely to have felt a negative financial impact from retiring early (50% vs. 44% of men). Across both genders, only 22% feel they have benefitted financially from their decision to retire early.
Among those people who have retired early, one in three (32%) identify having a defined benefit (final salary) pension among the main measures that enabled them to take retirement into their own hands. This suggests the concept of early retirement may get harder for younger generations to achieve, with the majority of the private sector workforce now saving into defined contribution pension schemes.
However, Aviva’s findings suggest that people can still take positive steps to make an early retirement possible. Paying off your mortgage (30%) is identified as the second most common stepping stone to retiring early, while almost three in 10 early retirees (29%) say saving little and often was one of their main strategies. Nearly one in five (19%) say they also saved extra whenever they received a pay rise or a bonus during their working life.
Among those who take early retirement, the research also reveals there is a small contingent who have returned to work (17%) or envisage themselves doing so in the future (15%).
27% cite the reason for returning to work is because they “wanted a new sense of purpose”, making this the most frequent driver, followed by “missing the company and social interactions with colleagues” (26%). However, a similar number (24%) of early retirees find themselves heading back to work having experienced financial issues.
Alistair McQueen, head of savings & retirement at Aviva, said: “The turbulent times we’re living through have given many people pause for thought to consider their work-life balance and think more seriously about what makes them happy. Our findings suggest the dream of an early retirement is very much alive and kicking, but there are many factors to consider along the way and the current uncertainty about the future does not make this an easy decision.
“The experiences of people who’ve already reached early retirement show that small savings habits, which add up over time, are every bit as important as big gestures such as putting aside any year-end bonus.
“It’s also important to learn from the lesson that, while happiness soars in retirement, many people find their finances take the strain when they retire early and money worries are one of the biggest factors resulting in people returning to work.”
