Early Retirement Vs. Late Retirement: Meaning and Differences

early retirement vs late retirement

source: newatlas

The decision of an individual to retire depends majorly on factors like lifestyle goals, financial capability and unfulfilled hobbies. Although the average age to retire is around 60, people nowadays are planning either for early retirement or late retirement, depending on their financial liabilities. 

So, let us see how they are different from each other!

What Is Early Retirement?

Early retirement is a situation in which a person disassociates themselves from the complexities of work pressure before the prescribed retirement age set by the industry they are in. 

It is usually planned for the achievement of specific other goals or due to someone's inclination to not work any further. However, in some instances, early retirement might not be planned due to some financial emergencies or medical emergencies. 

For example, retirement in someone’s late 40s can be considered an early retirement age.

What Is Late Retirement?

Late retirement is a situation in which a person works in their job for some extra years even after they have crossed their ideal retirement age. Hence, retirement in someone’s early 70s or working after retirement is considered late retirement age. 

There are plenty of reasons why an individual might choose late retirement, which may include financial insecurity, no medical corpus, being debt-ridden, etc. However, some people choose late retirement due to their love for work or to get rid of boredom.

What Are the Differences Between Early and Late Retirement?

The main differences between early retirement and late retirement are in the table below:

Point of Comparison

Early Retirement

Late Retirement

Meaning

Retiring before the normal retirement age.

Working after the normal retirement age and retiring much later.

Minimum Age Limit

The minimum age limit is approximately within the late 40s.

The minimum age limit is atleast your early 70s.

Risk Factor

Early retirement is usually risky.

Late retirement is not risky.

Reason of Choice

To fulfil any other life goal and maintain a stress-free life post retirement.

Due to insufficiency of corpus or to get rid of boredom that may come with retirement.

Corporate Benefits

Here, the benefits are quite restricted.

Here, you can be open to many benefits

Work Atmosphere

Usually an unhealthy and strenuous working atmosphere, which creates mental pressure.

Healthy work atmosphere with proper utilisation of knowledge and competence of the employees.

work Motivation

Here the work motivation is usually low.

Here the work motivation is very high.

What Are the Things to Keep in Mind While Planning a Retirement?

The 4 essential things to keep in mind while retiring are as follows:

1. Calculate Your Post-Retirement Expenses and Prepare a Retirement Budget

You must make a budget for the daily expenses you will have post-retirement. This financial planning will help you estimate your expenses and plan your investments accordingly.

2. Determine Healthcare Costs and Review Health Insurance Options

An individual is likely to encounter more health problems as they grow older. Hence, it is essential to have a health insurance policy for yourself and your family to be protected from critical illnesses and medical emergencies.

3. Try to Pay Off Any Existing Debts

Plan your debt repayments effectively and avoid falling into a recurring debt trap prior to your retirement. Clearing off debts early in life will help to ensure an easy retirement planning process.

4. Settle for a Budget-Friendly Lifestyle

Settle for a lifestyle which is simple and budget-friendly. You will have access to limited income post-retirement; hence, it is ideal to spend wisely on what is necessary and what is not. 

Now that you know about both early retirement and late retirement, you can decide the ideal option for you based on your lifestyle choices and financial capabilities. If you make small sacrifices in your lifestyle now, you will be able to enjoy a stress-free life post-retirement.

FAQs About Early Retirement and Late Retirement

What are the benefits of late retirement?

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The primary benefits of late retirement are as follows:

  • Earn more than sufficient retirement corpus.
  • More time to pay off debts.
  • Continue getting employment benefits.
  • Eligibility for a more significant amount of pension.

Is it better to take early retirement or wait?

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If you opt to retire early, your benefits will get reduced by a small percentage, but you will also get the opportunity to explore new opportunities in life. On the other hand, if you choose late retirement, your post-retirement benefit amount will increase. Hence, the choice depends on you and your requirements, which will finally define your results.

What are the consequences if you do not plan your retirement properly?

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 If you take your retirement decisions without planning it properly then you may face problems in managing your financial requirements after so. It can also happen that you are burdened in debts for certain unavoidable situations, especially medical issues. Moreover, settling for retirement after planning it properly will let you enjoy a peaceful old age.

Disclaimer

  • This is an informative article provided on 'as is' basis for awareness purpose only and not intended as a professional advice. The content of the article is derived from various open sources across the Internet. Digit Life Insurance is not promoting or recommending any aspect in the article or its correctness. Please verify the information and your requirement before taking any decisions.
  • All the figures reflected in the article are for illustrative purposes. The premium for Coverage that one buys depends on various factors including customer requirements, eligibility, age, demography, insurance provider, product, coverage amount, term and other factors
  • Tax Benefits, if applicable depend on the Tax Regime opted by the individual and the applicable tax provision. Please consult your Tax consultant before making any decision.