Early retirement - what to bear in mind
Thinking of taking early retirement or cutting back on work? What you decide will affect your finances. How much less will you earn? And what do you need to do to make it work? We’ve put together a handy list of things for you to bear in mind.
Why retire early?
There are several reasons why you might want to retire earlier or reduce your working hours. Maybe you just want to have more time for friends and family and to enjoy life. Or maybe you or your partner is older, but you both want to retire at the same time. You might have started working at an early age and ow it's just too physically or mentally demanding. Plus, the state retirement age keeps creeping up; in 2024, it rose to 67 years old and for someone born in 1980, it is expected to reach 69. Not everyone wants to carry on working that long.
Whatever the reason, you need a solid financial plan in place before you retire or start to reduce your working hours.
What do you need to retire earlier?
Retiring earlier or working less means a reduced income. If you have built up enough capital, you may be able to cover this loss of income.
You should ask yourself:
- What is your current income and what capital do you have?
- How much does your current standard of living cost and could you make any cutbacks?
- How much pension do you have built up?
- How much earlier do you want to retire or how much less do you want to work?
- How do you expect your income and capital to develop?
- Do you need to draw on your capital?
Example: how much capital do I need?
Let’s say you’re 50 years old and want to retire early. Your net income is €5,000 a month, of which you spend €4,000 and save €1,000. You will receive the state pension at 68 years and 3 months old. You think you’ll need €5,000 a month in just over 10 years’ time to live comfortably.
How much earlier can you retire? If you have capital worth:
- € 100,000, you can retire five years* earlier at around 63 years old.
- € 300,000, you can retire eight years* earlier at around 60 years old.
*Please note: tax, inflation and a return on your money have not been taken into account.
If you retire early or reduce your working hours, you’ll build up less pension or even stop building it up altogether. This will affect how much your pension is ultimately worth. So be sure to find out what will happen to your pension and whether you’re able to top it up. If you want to find out more about this, read 'Retiring early or cutting back on work.'
A new stage of life
When it comes to early retirement or working less, it’s not just your finances you have to think about. How will you spend the time when you are no longer at work? Are you and your partner ready for this? Do you want to take up a hobby, start studying something new or do some volunteering? A lot of people still want to give something back to society once they retire and use their knowledge, experience and network to help others. There are plenty of opportunities available to you (in Dutch).
Volunteering
Around 40% of people in the Netherlands do volunteer work. Maybe helping out for a good cause has crossed your mind too. Charities operate in a wide range of areas, including environmental conservation, animal welfare and development aid. But organisations such as music and sports clubs and religious institutions are run by volunteers too.Serving as a trustee
Most associations and foundations can only survive thanks to people who are willing to volunteer to run them. A trustee is an official position, meaning you are entrusted with representing and managing the organisation to ensure it functions properly.In summary
It’s essential to be prepared for this new stage of your life, so make sure you have a good plan in place. If you’re thinking of retiring early or cutting back on your working hours, take advantage of a Financial Future Consultation with one of our advisers. It's free of charge for our Preferred Banking client with no strings attached.
