When it comes to investing, there are numerous questions that need to be asked, and lots of things which need to be properly understood before committing your hard-earned money
Pre-tirement is the new retirement
For many, the prospect of retirement evokes images of rocking chairs, time spent in the garden, playing golf, and deservedly bearing the fruits of relaxation for 40-odd years' labour. For others, it might be a source of trepidation, given that securing one’s financial future will never be an exact science. Either way, it’s fair to say that retirement has generally been viewed as an event; a milestone marking a new chapter in life.
The doctrine of the “retirement age” is instilled into many of us, as we consider ourselves “permitted” to retire only at 65, and perhaps feel aggrieved that Government is set to move the goalposts to 67 by the 2020s. However, it is important to remember that such a legislation change only affects eligibility for claiming state pension, and that the age at which one can retire is almost entirely subjective.
One trend which demonstrates that this penny has begun to drop is that of pre-tirement. The idea of going from 40-hour weeks to suddenly putting the tools down when the 65th candle is lit has fast become outdated. Instead, people are increasingly choosing to stagger the process of retirement by working fewer hours from a younger age, and compensating for this by working later into life.
What’s inspired this shift?
The most significant catalyst for change has been the increase in life expectancy in the UK, which, according to World Bank, soared from 70.93 in 1962 to 81.5 in 2012. In fact, the biggest surge of all was from 2008 to 2012 - when expectancy rose by 1.9 years – and according to estimates published by the Office for National Statistics, baby girls born today can expect to live until 94, while for boys this number is 91.5.
What it all means is that with the advancement in medical science, people are generally fit and healthy enough to continue working well beyond the age of 65. In addition, legislation was passed in 2011 banning employers from imposing a retirement age on their staff.
So why keep working when you’re older?
For those in their 50s and 60s (and even 70s) in particular, the consequence of a better life expectancy is the stress that comes with trying to ensure financial security for a longer period after giving up work. Working later into life provides the comfort of a longer-term income, even if it is a reduced one through working fewer hours.
A recent survey by Prudential of more than 7,700 people near retirement age found that 21% of those planning to retire this year were not ready to give up work entirely. A total of 51% said they would consider working past state pension age, while 24% have already delayed their plans. Of those looking to continue work, 31% said they would wish to reduce their hours and 12% would prefer a part-time job.
Aside from receiving an income, continuing in a job also provides over 65s in good health the chance to remain physically and mentally active. Some 39% said they enjoy working, while 23% said they would miss their daily routine. Of those hoping to retire at state pension age, 29% plan to undertake voluntary work and 30% said they would enrol in a course or formal education. It underlines the notion that most people have an innate desire to retain a purpose in life; be it income generating or otherwise.
Is pre-tirement here to stay?
Recent studies suggest the answer is an overwhelming yes, and that the trend will only intensify. For some, working beyond the age of 65 is an economic necessity. But for an increasing majority, pre-tirement represents an opportunity to make retiring an easier and more fluid process. Provided the individual has looked after their financial portfolio well, it also allows them the time to indulge passions such as travel, spending time with family, hobbies, studying or even starting a new business prior to their golden years.
In a recent interview with Mail Online, Ros Altmann, the Government’s older workers’ champion, said: “In the past people might have been unable to work, but now they are fitter and healthier into later life so why stop working?”
She continued: “Many want to keep working to improve their lifetime income, but most actually want to work longer. It is much healthier for people to cut down gradually rather than suddenly stopping work altogether, and the social norms are starting to change.”
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