Will retirement be enough for you?

In the 70s retirement planning was fairly uncomplicated. Men retired at 65, women at 60, and because of a relatively generous state pension, even the less well-off didn’t need to worry too much about running out of money in old age.

It’s a very different picture today.

For a start, we can no longer rely on a state pension, nor (at least not most of us) on the luxury of a defined-benefit pension scheme.

But perhaps the most important thing is that people are living longer. In Britain the average life span is now around 81, with the number of centenarians quadrupling since the 80s.

This poses a number of challenges from a retirement point of view. Some worry they’ll outlast their money, or that they won’t be able to maintain the lifestyle they once enjoyed.

But there’s another consideration:

Will you really want to spend 20 years or more without doing any form of paid work? Retire in your 50s, and you could have another 40 years of living to do! Yes, right now you might like the idea of a couple of decades of holiday; playing golf and enjoying your hobbies.

But who’s to say you’ll always feel that way?

Recent research by the University of Manchester and King’s College London showed that around one in four retirees return to work, usually within five years of retirement.

Men were 26% more likely to “un-retire” than women. And people whose partner worked were 31% more likely to return to work than those whose partners didn’t. As were those with higher levels of education or good health.

Though researchers didn’t ask why people returned to work, it’s clear that, in most cases, the motives weren’t financial. Yes, those with mortgages still to pay were 50% more likely to un-retire than those who owned their homes outright; but the study found people who reported having financial problems before retiring were no more likely to unretire than those without, nor were those with lower incomes.

The trend of ‘un-retiring’

Last year an article in The Economist highlighted this trend. “In the rich world at least, many of the old are still young… They want to work, but more flexibly. They want to spend money, too. In western Europe the over-60s will account for 59% of consumption growth in cities between now and 2030.”

So, if you’ve not yet retired, what should you make to all of this?

Keep your options open

Don’t to be too rigidly focused on retiring at a particular age. Of course, it’s perfectly okay to aim for early retirement and to have a financial plan in place to achieve that goal. But none of us knows how our personal and professional lives are going to pan out, and when the time comes, we might not be ready to give up work altogether.

One of the most important things a financial planner can do is to help you identify when you want to stop working – not just when you can stop. It may be that you can afford to retire much sooner than you were expecting. If you want to, that’s great; if you don’t, it means you’ll have more money to spend on enjoying your downtime than you thought you did.

But the important thing is to do what’s best for you. And remember, what feels right for you now might not be right in five, ten or twenty years’ time.