Retiring early

 If asked at what age do you want to retire, the most common answer is sixty. One in four (25 percent) people planning to celebrate this milestone by leaving work behind, according to research from Aviva. This is a great goal, but it is one that is different from reality.

The effective age of retirement is well below the normal for receiving a full old-age pension in most countries. Japan and Korea are notable exceptions where the effective age of retirement is close to 70 for men despite a normal retirement age of 60. In other countries, men on average are still in the workforce at age 65 in Denmark, Iceland, Ireland, Portugal and Switzerland, but have left work by their 60th birthday in Austria, Belgium, France, Hungary, Luxembourg and the Slovak Republic. Women retire around one to two years earlier than men.

We define the average effective age of retirement as the average age of exit from the labour force during a 5-year period. The normal retirement age is the age at which an individual can retire with no reduction to their pension, having had a full career from age 22.          

In almost all OECD countries, the effective retirement age has declined substantially since 1970. But this trend has changed recently. Over the past decade, most countries have either experienced a flattening out of the trend or a small upturn. But apart from Japan and Korea, the effective retirement age remains well below the levels of the 1960s and 1970s. These changes over time in the effective retirement age have mostly occurred in parallel fashion for both men and women, despite the trend increase in female participation rates.

According to https://tradingeconomics.com/, the age of retirement for women and men has moved from 66 to 66.17 years in the US. The OECD reports that even though the normal retirement age is 66 in the USA, the effective age of retirement is 70. This means that although people retire at 66.17 years, they actually quit working four years later. This trend appears to be moving up rather than down.

In Canada, our normal age of retirement for both men and women according to the OECD is 65 and the effective age of retirement is 65, so although our American friends appear to work four years past retirement, most Canadians do not.

 The turbulent times we’re living through have given many people pause for thought to consider their work-life balance and think more seriously about what makes them happy, so more are thinking of retiring. If you aspire to retire early, it’s vital you plan your finances to be sustainable for the long term, and remember that if you retire early, you are in a minority.

Women were especially likely to feel the negative financial impact of retiring early, with 50 percent feeling a financial strain compared to 44 percent of men, although only 22 percent of savers across all genders felt they benefitted financially from their decision.o retire early.