Early retirement could be Britons’ ‘worst money mistake’ – six alternatives

The Retirement Podcast Cafe gives expert advice

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In fact, retiring early is one of the biggest money mistakes people make according to a Harvard-trained economist. This is what you should do instead.

After graduating with a PHD from Harvard University he’s gone on to write books including Money Magic: An Economist’s Secrets to More Money, Less Risk, and a Better Life. 

In a recent article for CNBC he claimed that people should give up on the dream of retiring early and retire later instead, especially if they are reliant on the state pension.

He said: “The reason is simple: We are, as a group, lousy savers, making early retirement unaffordable.”

He continued: “Financially speaking, it’s generally far safer and far smarter to retire later.

“According to a Boston College Center for Retirement Research report, half of today’s working families risk a major living standard decline in retirement.

“ The share would drop by roughly 50 percent if all workers were to retire two years later.

“Of course, there are situations where retiring early is a great option.”

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He explained that early retirement is fine if people have carefully planned for it.

While he understands that others have no option because their job has been automated or outsourced.

Mr Kotlikoff added: “Still, almost two-thirds of people — between ages 57 and 66 — choose to retire early out of their own volition, despite having saved next to nothing.

“And most of them are able-bodied, without disabilities that would prevent them from staying on the job.”

Rather than retire early, people should retire later in 85 percent of cases.

He explained: “The age-70 retirement benefit is 76 percent higher, adjusted for inflation, than, for example, the age-62 benefit.”

Meanwhile, retirement expert Anne Lester says there are six money mistakes that people tend to make that hinder their plans for retiring.

She said knowing how to avoid them could help Britons retire early.

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Her top tips for early retirement are:

  • Don’t overstretch the budget when buying property.
  • Start saving in one’s 30s – saving at least enough to secure the employer’s matching contribution.
  • Make maximum payments on high interest debit – the faster people can pay these off, the more money they’ll have to put towards other financial goals.
  • Checking insurance – the consequences of being uninsured are so large that they can wipe someone out financially.
  • Build an emergency fund – it’s wise to put three to six months’ wages into an easy access savings account.
  • Put retirement savings before children.

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