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Early Retirement Pros and Cons

August 5, 2021



What is considered early retirement in New Zealand?

New Zealand doesn’t have a mandated retirement age, but retirement is usually guided by access to New Zealand Superannuation funds and when you can start making withdrawals from KiwiSaver. In New Zealand, that age is currently 65 years.

Statistics NZ reports that “the proportion of the population aged 65+ employed has steadily risen from 11.4% in 2001 to 16.8% in 2006 and 22.1% in 2013”. Most jobs don’t have a retirement age, so some Kiwi choose to continue to work (for financial and social reasons). There are a few exceptions, where your employer may be able to enforce your retirement, but these are limited.

If you’re thinking about retiring, there are several things to consider - both positive and negative. Many people just consider the financial reasons, but retirement is a much broader decision to make, and it can be difficult to re-enter the workforce if you exit too early.

Recent uncertainty caused by the Covid-19 pandemic may have resulted in some Kiwi delaying their retirement, and others focusing more on how much they need to retire comfortably, especially if their priorities start to change. Retirement planning and financial planning for your retirement has never been so important.

Thinking about when to retire or if you should retire early to focus on other life adventures? We’ve pulled together some pros and cons to consider.

retired couple eating lunch outdoors on table

What to consider before retiring early

If you’re thinking about retiring early, chances are you can afford to do so. People in a financially secure position are in the enviable position of being able to choose whether they retire early, or not.

People who can afford to retire early have often done so with careful planning by:

  • Working out how much money they’ll need
  • Creating a budget that consistently puts aside income to fund retirement
  • Deciding the smartest way to save and/or invest their money
  • Being strategic about which investments to keep active
  • Keeping up with their investment contributions

Remember, you won’t be able to access NZ Superannuation until you’re 65 and generally won’t be able to access your KiwiSaver funds until then either, so you’ll need another form of income in the interim. Do you have other investments or savings to bridge this gap, or will you need these after you’re 65 to make up any shortfall from your NZ Superannuation or KiwiSaver funds? A key for building long-term wealth is to not put all of your eggs (investments) into one basket.

Another consideration is whether your calculations are simply covering your living costs or if they allow for the extras as well. To help you calculate what you’ll need for your retirement, if you already have your KiwiSaver account with Kiwi Wealth, you can get detailed advice and guidance via our retirement goal calculator in myKiwiWealth. Otherwise you can use Sorted’s retirement calculator, as a more general tool.

Once you get your calculation back, think through any contingency plans you need to make, say for ill-health, unexpected overseas travel etc. You’ll need to consider inflation as well, as your day to day living costs will increase over time.

Some pros of early retirement  


1. More time on your hands  

For people who have worked full-time for decades, the ability to have more time available in their week is incredibly important. Whether that time is spent with family and friends, looking after grandchildren or caring for a sick family member, everyone has different reasons for needing to free up their time. It could just be to have more time spent doing the things you love with your partner. For others, retirement is the opportunity to take up a new hobby, spend more time exercising or gardening, or tackle that list of jobs around the home. Reasons certainly vary from the practical to helping manage your long-term health and wellbeing.   

2. Enjoy a more active retirement

For many, retirement will be about remaining as active as possible, for as long as possible. Whether this means tackling the great walks of New Zealand, daily beach strolls or gardening, leaving your desk job or manual labour career behind could make all the difference to living these dreams.

For others, a recent medical result or doctor's appointment may have you reassessing your overall health and wellness. It could be just the push you need to consider a more active, early retirement.

If travel or spending time with your grandchildren are your key focus of retirement, then retiring early while you have good physical health can be a high priority.

retired couple doing yoga

3. You don’t have to stay in a job you dislike  

Over a long period of time, staying employed in a job you don’t like, work colleagues you don’t connect with or an industry that leaves you with feelings of frustration can wear you down. If your mental health and wellbeing is impacted by work stressors, it can start to impact your quality of life outside work hours.  

For people with a physically demanding job, continuing your employment in a full-time capacity can be physically too much as you get older.

Consider cutting down your hours, or biting the bullet and retiring early.  

4. You can still work after you’ve retired  

Retiring early doesn’t need to mean retiring completely. Some people cut down their hours part-time, continue working after the age of 65 years, and explore opportunities in a different field. For many, work can provide much needed social and mental stimulation that may be missing in a home or community environment. Maintaining some level of work or volunteering can help continue those social connections that are so important for us as we age. 

For those contemplating a career change, passion project or starting their own business, why not? Making your work fit your lifestyle is an admirable thing to do, and being semi-retired could be just the right balance for you. If you are continuing with work after the age of 65, don’t forget to continue growing your wealth - people over the age of 65 can still make regular payments into their KiwiSaver accounts, and have the flexibility of making withdrawals at any time. This makes KiwiSaver a useful ongoing retirement investment.  

Some cons of early retirement  


1. You’ll be spending your nest egg  

By retiring early, you may find yourself needing to dip into your retirement savings or nest egg earlier than you intended. You should have a plan for managing your savings so they stretch for the entirety of your retirement - a difficult concept to plan for as it is unknown how long your retirement will be! Having a diverse range of retirement savings or investment options can be helpful. Be sure to have some money set aside for emergencies too - think unplanned medical costs, or urgent trips overseas to support relatives.  

If you’ve spent your working life providing financial support to others (your dependents or extended family), you may need to rethink this as you enter retirement.  

2. Early retirement might be bad for your health 

The jury is out on whether early retirement is good or bad for physical and mental health. Some studies have shown that early retirement can be stressful whilst others reported improvements in retirees’ health. A lot has to do with how physically or mentally challenging your employment is, and whether you have a plan for your retirement to remain socially connected, physically active and mentally challenged.  

Unexpected early retirement can be financially stressful, leading to increased anxiety which isn’t great for our mental health and overall wellbeing.  

man in workshop measuring wood

3. You may get bored and miss working  

Boredom in retirement is often due to people not feeling like they have a purpose, or they don’t find enough social or mentally stimulating activities to occupy themselves. Social connections are important as we age - humans are social creatures but we may also need support as we age to navigate our world. For example, chores around the home can get beyond our capabilities, and navigating the latest digital technology can feel overwhelming. 

Our working lives often provide us with a sense of accomplishment, so it’s important to find tasks, hobbies or activities like volunteering that allow us to continue getting this dopamine hit into our 60s, 70s and beyond. We may find that by retiring early, our friends are continuing to work, so there may not be a ready social group to support your day to day retirement plans.  

Ensuring our brains are kept active and engaged is also important in retirement. Stay involved in what’s happening in the world and keep up the reading, crossword or brain teaser puzzles to prolong your mental agility. 

4. You could have less to spend in your retirement years

The earlier you access your KiwiSaver funds, the less benefit you’ll receive. If you’re receiving other employment benefits such as gym memberships, discounted health insurance or a company car, you’ll also need to factor this into your early retirement budget. 

If you’re able to live off other investments and savings in the short to medium term and continue to contribute to your KiwiSaver account if you’re still working, this may help you to maximise your KiwiSaver investment.  

Choosing a managed fund, with differing levels of risk based on when you intend to access them can also be a good way forward. Learning to manage your money throughout your retirement and access better returns in times of low-interest rates on savings accounts and term deposits can be a huge bonus.   

5. Unexpected costs may bring you out of early retirement  

Retirement planning is key to successful early retirement. Talk to friends, family and professional financial advisers about how you intend to spend your retirement, and how much money you may need. 

You’ll also need a plan for the unexpected. What if a family member dies, you needed to move or sell your house, you suddenly had an adult dependent, or you end up divorcing and starting a new relationship? How might scenarios such as these impact your ability to maintain your anticipated retirement income?    

Get started with Kiwi Wealth  

Early retirement may be a wonderful possibility for you if you’ve got a plan in place. 

Keen to know more about growing your nest egg and planning for your future? Sign-up to the Kiwi Wealth KiwiSaver Scheme and you can access our powerful retirement planning tools and digital financial advice so you can start making plans for your retirement today. 

Tags: KiwiSaver, Retirement

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