When is the best time to retire

After years of working, you finally have the opportunity to enjoy your freedom, pursue your passions, and spend quality time with your loved ones. However, the decision of when to retire can be a daunting task, especially when you factor in the many variables that come into play.

With so many factors to consider, it is important to take the time to develop a customised retirement plan that meets your unique needs. From health considerations to financial and practical ones, there are several things to consider before deciding when to retire. 

State retirement age

For some, the idea of retiring as soon as they start receiving their state pension is an attractive one. In the UK, the current state pension age for both men and women is 66, but it's important to note that this is increasing gradually. So, what are the options available for those who want to retire before they reach this age?

Firstly, it's worth noting that the average retirement age in the UK is 64 for women and 65 for men. This suggests that many people do choose to retire before they reach state pension age, although the reasons for doing so may vary. 

One option for those who want to retire early is to start taking money from their workplace or personal pension pot from the age of 55. This can be a great opportunity to stop working early and enjoy the benefits of retirement. However, it's important to remember that taking money from your pension pot before you reach state pension age can have an impact on the amount of state pension you will receive in the future.

If you don't have a workplace or personal pension, or you don't have enough money in your pension pot to retire early, you may need to have savings or investments in other accounts that allow for withdrawals before the age of 55. This can include ISAs, savings accounts, or investment accounts. It's worth noting, however, that withdrawing money from these accounts before the age of 55 can also have an impact on your retirement plans and should be done with caution.

Financial considerations

Retirement planning is not just about personal preferences and individual goals, but it's also about ensuring that one's financial needs are met throughout their retirement years. Financial goals are a crucial factor that one should consider when deciding when to retire. It's essential to take into account the sources of income that will fund retirement, including pensions, and personal savings.

One of the most important financial considerations for retirement is retirement income. To determine if you have enough retirement income, you need to evaluate your current and future expenses. You should make a list of all your current monthly expenses and factor in any future expenses that you anticipate, such as medical bills or increased travel costs. A good place to start is to make use of AgeUk’s helpful Pension Calculator which will help you to work out how much money you'll need in retirement and how much you'll need to save.

Savings are also a critical factor to consider when planning for retirement. Ideally, you should aim to have enough savings to cover at least 25 years of retirement expenses. If possible your savings should be diversified across various investments such as stocks, bonds, and mutual funds to minimise risk and maximise returns.

Debt is another important consideration in retirement planning. The ideal scenario is to enter retirement debt-free, as debt can significantly impact the amount of retirement income you need. It's crucial to try and make a plan to pay off any outstanding debts before retiring.

It's recommended to work with a financial advisor to develop a retirement plan that meets your financial goals. A financial advisor can provide guidance on how to maximise retirement benefits available to you, such as employer-sponsored retirement plans or individual retirement accounts (IRAs). They can also help you make informed decisions about when to retire based on your current financial situation and future goals. With a well-thought-out retirement plan in place, you'll be better equipped to navigate the financial aspects of retirement and enjoy your retirement years with financial stability and peace of mind.

And don’t forget, as part of Boundless membership you can take advantage of a free, no obligation initial consultation with an expert financial adviser to discuss your circumstances and find out how you could benefit from financial advice through Lighthouse Financial Advice, click here to find out more.

Boundless is a membership club for working and retired public-sector and civil-service employees. They deliver amazing experiences, days out, and savings with over 180 brands, including finance and insurance. Find out more about what you could save through Boundless membership. 

So which is the best month to retire?

The impact of retirement timing on financial outcomes is not limited to the year in which you retire, but also to the month in which you decide to retire. While it may seem like a minor detail, research has shown that the month in which one retires can significantly affect their retirement income.

One study conducted by Hargreaves Lansdown found that those who retire in April receive the highest average annual pension income, while those who retire in December receive the lowest. This is due to the fact that April marks the start of the new tax year in the United Kingdom, which means that retirees can take advantage of higher tax allowances and lower rates of income tax.

Retiring in April also allows for more time to plan for retirement, as it provides a full year to make any necessary adjustments to financial plans, such as increasing savings or reducing debt. Additionally, retiring in April may allow for a smoother transition from employment to retirement, as it coincides with the start of a new fiscal year for many companies.

However, retiring in other months may have advantages as well. For example, retiring in December may allow for the opportunity to take advantage of year-end bonuses or holiday pay, which can boost retirement savings. Furthermore, retiring in a slower month at work could allow for a more leisurely transition and more time to prepare for retirement.

Health and wellbeing

Your general wellbeing is a significant factor when it comes to deciding the right time to retire. Your physical and mental health should be taken into consideration when making this decision. Even if you have reached state retirement age, you may still be in excellent health and feel that you are able to work for a few more years or, on the other hand, you may have experienced health issues or have other medical concerns that require you to retire earlier than expected. 

It's crucial to reflect on your energy levels and the impact of work on your physical health. If your job is physically demanding or causes stress that is impacting your health, you may need to consider retiring earlier to maintain your health. Additionally, retirement can have a significant impact on your mental health, social life, and sense of purpose. 

It is important to consider how retirement will affect your social interactions, sense of purpose, and mental stimulation. Retiring from a job you’ve held for many years may leave you feeling unfulfilled and with a sense of loss. Planning ahead by finding new interests or activities to pursue can help with the transition to retirement.

Personal preferences

When it comes to personal preferences, there are a variety of factors to think about. Perhaps you've always dreamed of travelling the world or pursuing a specific hobby, in which case retiring earlier may be the best choice for you. Alternatively, if you find your work fulfilling and enjoyable, you may wish to continue working part-time or exploring a new career path. It's important to take the time to assess what makes you happy and fulfilled, and determine whether retirement or continued work would better suit your goals. Additionally, keep in mind that personal preferences can shift over time, and what you want now may not be the same as what you want in a few years. By carefully considering your personal preferences and potential changes, you'll be better equipped to make an informed decision about when to retire.

Retirement is a significant transition that not only affects the retiree but also the people closest to them. Partners, friends, and children may have expectations or concerns about how retirement will affect their relationships, schedules, and finances. For example, a partner may have plans to travel or pursue their own interests during retirement, and the retiree's decision to continue working or retire earlier may impact those plans. Children may be financially dependent on the retiree, and retirement may affect their ability to provide support.

Do more with Boundless

Working or retired from the public sector or civil service? Get free entry to top attractions, discounts on restaurants and savings on high-street brands. Plus, dozens of other deals on holidays, experiences and more! Learn more about Boundless membership.

Approver Lighthouse Advisory Services Limited. 17 March 2023.