Retire early? Live longer

22 April 2022

Some studies have found that people enjoy a longer lifespan if they finish working early, but it might depend on your circumstances.
Retiring allows you to invest more time in your health by sleeping longer, exercising more, or simply being able to visit a doctor as soon as a health problem appears
Tens of thousands of people in the UK have decided to retire since the start of the pandemic to reduce the risk of coming into contact with Covid-19. In the US, The New York Times reported that the pandemic had encouraged people as young as 30 to join FIRE (financial independence, retire early), where participants save 50% or more of their income to accelerate their retirement date.

The idea of taking early retirement for health reasons is not new: several research studies in recent years have found that stopping work early can have health benefits and help to increase the length of your life.
Economists from the University of Amsterdam found that male civil servants over the age of 54 who had retired early were 2.6 percentage points less likely to die over the subsequent five years compared to those who continued working. Researchers involved in the study drew two conclusions from the findings. Firstly, retiring allows you to invest more time in your health by sleeping longer, exercising more, or simply being able to visit a doctor as soon as a health problem appears. Secondly, work can be stressful, potentially causing high blood pressure, a risk factor for several potentially fatal conditions. People retiring early in this study were significantly less likely to die from a stroke or cardiovascular diseases.

An analysis in the US in 2018 found that seven years of retirement can result in as much as a 20% reduction in the chance of getting a serious condition such as diabetes or heart disease. An English study found that retirement increases an individual’s sense of wellbeing and mental health, while German research concluded that retirement improved health and reduced the use of healthcare.

Job for life

Other studies have produced contradictory results, finding that early retirement has a negative impact on health. Jobs offer many benefits that we possibly take for granted – daily routine, physical and mental activity, a sense of identity and purpose and social interaction with others – all of which can help support mental and physical health.

As many people found during lockdown, staying out of the workplace can result in social isolation and, over the longer term, lead to poor mental and physical health.

An Italian study linked the length of retirement with dementia, saying “retirement duration plays a role in the evolution of cognitive decline at older ages, over and above the pure age effect… An implication of our analysis is that early retirement increases the risk of cognitive decline at older ages.” Scientists in the US found that the mortality rate of former staff at the oil company Shell was significantly higher if they retired at age 55 than for those who continued working until 65.

However, researchers agree that results can vary dramatically depending on the circumstances of those taking early retirement. People who are in good health, white collar workers, well off and, importantly, actively choosing to stop work are likely to enjoy a very different retirement from those who are in poor health, manual workers, financially ill-prepared or having retirement forced upon them.

Researchers involved in the Shell study agreed that some of those retiring at age 55 were likely to have done so because of poor health, while a majority of those who retired early but survived beyond age 65 were in a higher socio-economic group – that is, wealthier.

Thriving in retirement

Although scientific studies on the pros and cons of taking early retirement have not yet produced a firm answer, it is clear that much depends on your own individual circumstances. The earlier you start preparing for retirement, the better your financial situation is likely to be, enabling you to make the most of your greater freedom.

Downshifting or going part time can help retirees become accustomed to – and enjoy – having extra free time. It’s a win-win situation providing greater freedom to do what you want with continued earnings to fund your new pastimes plus a social framework and routine to fall back on for part of your week.

Those who opt to stop work completely can make sure they lead a fulfilled life by joining a class or club, volunteering, or starting a new exercise regime. Jacquelyn James, an expert on ageing and work, told news channel CNBC: “We used to think that doing crossword puzzles was the best way to keep cognitive ability alive and developing and I think we’re seeing that it takes more than that. It’s much more important to do things that challenge the mind, like learning a new language, or a new technology.”

How to prepare financially for retirement

 Your chances of having a fulfilling and enjoyable retirement increase dramatically if your finances are ready to retire too.

Michael Angus, Wealth Planning Director with Sanlam, says he starts preparing clients for retirement right from the very first meeting. “It is usually one of the top three, if not the most important thing that clients want to discuss,” he says.

Initial steps involve identifying what the client would like to achieve during their lifetime – and when. Then Angus asks what pensions arrangements and any other investments and assets the client already has in place. He uses this information to help the client work out a plan to achieve their goals. Pensions are an excellent way to save for retirement, providing tax relief on contributions, tax-free growth within the pension wrapper and a tax-free lump sum when drawing the proceeds. But Angus says clients should still consider investing some of their money in tax-efficient ISAs as well. “Money invested in pensions cannot, in most cases, be withdrawn before the minimum pension withdrawal age of 55, due to rise to 57 in 2028,” he says. “If you want the option of retiring at a younger age, you need to be able to access money from another tax-efficient source such as an ISA.”

Very few people get through life without encountering a few curveballs, so it’s important to reassess that plan at least once a year to make any necessary adjustments to ensure you are still on track. This doesn’t just mean looking at the amount you save: you might need life and health insurance to protect your family, inheritance tax planning or a Power of Attorney to ensure you have help with financial decisions in later life. It is vital to be realistic about your retirement plans, he says. “There is no point in aiming for retirement at 55 if you are going to run out of money at 65. You want to have enough money to be financially comfortable when you are in your 80s and 90s.”

Michael Angus
Wealth Planning Director

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