Things to think about in advance

So recently you might have been hearing the same rumbles about workforce change and retirement as I have. GenY and GenZ have been taking part in the great resignation – which recently I’ve also seen referred to as silent resignations. But Gen X and younger Boomers are talking about early retirement more than I’ve heard for a while.

And sure, at some point, everyone will retire – either by choice or necessity. But the conversations I’m hearing, are from people not yet 60, sometimes early 50s talking about leaving the workforce – either entirely or in very much a transition to retirement way – ie: they’re leaving full time work or taking a long sabbatical and thinking that when they get bored they’ll consult, start a business or change down to two days a week.

The thing with not being 60 yet, is that these people can’t access their super at all and the pension, if that’s what they were thinking is still a long way off – available, means/asset test allowing, once you’re 67. And they’re likely to then have to fund an even longer retirement of 25-30years plus (average life expectancy these days being mid 80s and rising). Plus they’re missing out on around 8-15 years of super contributions generally at the top of their pay scale.

Look, I get it. The last couple of years have been brutal for a lot of people. And probably harder for those who’ve already done decades of hard yards in their careers and businesses – more so because they’ve probably also had to guide the work/careers of others also going through brutal times. But, part of me wonders if they’ve really, really, thought about their decision enough.

It’s easy enough to assume when things are going okay and things have traditionally gone okay economically speaking for a decade or more, that things will continue on the same path forever.

Financial challenges of early retirement

However, we are already in an inflationary environment that most of us, currently in the workforce, haven’t really seen before. Jokes about lettuce aside, the cost of goods is going up at quite the rate. Pundits are talking about a rise of 10% on a range of regular goods, electricity and gas rates are jumping significantly and let’s not forget, fuel is currently about 10-12% under where it will head back to when the Federal Govt reintroduce the fuel excise – which they most likely will have to at some point. And let’s not forget mortgages – although they have a way to go to get back to their ‘natural’ midpoint of 6-8%.

Other countries are starting to talk recession, which let’s be honest, gives all the global markets the speed wobbles and we know that once that happens, the jobs market that’s very much a job seeker’s market currently, will tighten, most likely considerably. 1990’s anyone, where unemployment was above 10%. So the likelihood of being able to swan into another well paid job in a couple of years time, let’s just say, that timing might be a bit off.

So if you’re thinking maybe now’s a good time to jump from the work ship (or your business), check your financial thinking by assuming that your dollar today will likely buy you 10% less in the shorter term (next year) and maybe even 15-20% less in the medium term (3-5 years).

Oh, and you’ll want to have paid off your mortgage before even beginning to consider an early retirement. Remember you won’t likely be able to refinance anything, if you’re not working. Or at the very least, it will be really hard yakka for your mortgage broker to pull off.

But let’s assume that the financials all work out. And please you’d want to seek some really, REALLY, good financial advice before making the move to early retirement. So, what else do you need to think about?

Non-monetary challenges of early retirement

As with all major life transitions, it’s often the little things that derail plans and experiences the most and cause the greatest struggles. Why? Because these are the things that no-one considers upfront.

Things like how your current identity will cope. My what? Your current identity (or the role everyone associates with you and that you probably associate yourself with). If everyone thinks of you as the type A workaholic, who just loves to work, you’re likely to struggle with your new non-working identity. Likewise, if you love being the person who’s quick to solve others’ problems in your current work environment and that brings you joy or you love growing the people on your team, you’ll need to find another way to continue on doing that, that’s not associated with working. If your identity is strongly aligned to what you do when you’re working, chances are you’ll need to find a hobby, a volunteering gig or a part-time role that lets you still exercise the skills you love. Otherwise, early retirement could do your head in.

What will you do with all of your newfound time? At the top of many people’s list is travel. Travel is awesome, don’t get me wrong. And remember, we’re not talking about the financials here, but a lot of people don’t consider the exhaustion factor of travelling. A couple of weeks is great – wonderful and relaxing or renewing and inspiring. The same with a couple of times a year. But let’s face it, you’re probably unlikely to travel for many months or years at a time.

So what else will you do? What will the new or rather next you do or be? Do you have a desperate desire for further study? Have you always wanted to write a book? Best investigate these before jumping ship and have a plan ready to go or better yet, ease yourself in before you stop working – just in case you truly hate what you thought you’d love and need to buy yourself (literally) some more time to consider things.

Who will you hang out with? There’s quite a bit of research around that shows one of the key predictors of an early demise is loneliness. And as stressful as work-life can be, it can also provide some of our most frequent relational interactions and often friendships. And as much as your spouse, if you have one, will be a part of your life, they can’t (and probably shouldn’t be) your everything. There’s a reason divorce rates boom on retirement – and given you’re going to need to conserve as much of your finances to fund a likely longer early retirement, this is really something worth thinking about. As part of your transition to early retirement plan, think about how you’ll replace all your current work social interactions and relationships.

As you can see, there’s a lot to consider if you’re contemplating or preparing for an early retirement.

Of course, if we can help you better manage your early retirement planning or you’re considering jumping ship from your working life, even temporarily or your business, thats where we can help. You can call us on 6023 1700 or connect with us via Facebook or LinkedIn.

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