When you are creating a retirement plan [1], the longer you can let your investments grow, the more options you have. This is because delaying your retirement gives compound interest [2] more time to work its magic.
By playing with various retirement calculators [3], you can see how postponing the happy day can ratchet up your eventual pension.
Planning to retire later is very handy if you’re saving all the money you can and yet you’re still falling short of your target.
The question you really need to ask then is not “when can I retire?” but rather “at what age should I retire?”
Don’t regret not spending more time at the office
I’d love to retire early [4] (tomorrow would be nice) but I’m a late starter when it comes to saving for retirement [5], so to establish a realistic finishing post, I initially plumped for retirement at 65.
Triangulating your retirement age, target income, and savings rate on a retirement calculator [6] gives you an initial hand to play. You can then stick or twist from there:
- If you want to retire earlier, how much more do you need to save?
- Alternatively, how much bigger could your income be in retirement if you stay on the hamster wheel for longer?
Few people need to hear reasons to retire early [7], but to avoid a long, impoverished post-work existence, make sure you consider both sides of the equation.
Who wants to live forever?
Finally, remember that your time horizon isn’t entirely within your gift.
You might want to work for longer, but catch a corporate bullet and find it impossible to get another position at your previous level. You may get ill or become a full-time carer.
The list of things that can go wrong is as long as your imagination.
Equally, many of us don’t appreciate just how long we might live for, which can also be a bleak outcome if you don’t have sufficient money in your very old age [8] to keep you in Zimmerframes and bribes for the great-grandchildren.
Playing with a longevity prediction tool [9] could surprise you with forecasts of your future as a nonagenarian.
‘What if’ scenarios are hard to compute, so you need to leave room for error [10], as with the other key elements of creating a retirement plan [1].