There are several times in your life when you need to make a really big decision and one of those times is when you decide to retire. It is a life-changing moment which ranks alongside the decisions about your choice of career, who to marry, when to have children and which house to buy. As such, it requires a lot of thought and analysis of the consequences of your choice – unless, of course, you live your life spontaneously.

Making a decision about when to retire can be quite stressful. There is a balance to be had between retiring too early and retiring too late. So when is the right time? More importantly, when is the right time for YOU. Your individual circumstances will impact on the timing of your retirement.

The thought of retiring early (before the age of 65) is appealing, however it has consequences. Early retirement cuts short the time you have left to save for retirement and also lengthens your retirement, putting extra strain on your financial resources. The difference between retiring at 60 and retiring at 65 will add an extra few hundred thousand to the amount you need to retire. For example, you would need an extra $250,000 to provide an income of somewhere around $50,000 a year for five years, given that you would not be receiving NZ Superannuation for that period. Adjusting to a new identity of being a retiree can be difficult at a younger age. It’s not easy to find yourself at age 60 amongst a cohort of people with an average age of 75 or more. There is a trend for people to retire later than 65, so finding other retirees of a similar age is challenging. Retiring early requires some forethought about how you want to spend your time and with whom, especially as many of your friends will still be working.

Retiring after the age of 65 is an increasing trend for several reasons. Many people find themselves with insufficient funds to retire at 65 while others want to continue leading an active life and are just not ready to slow down at 65. Longevity is increasing with the life expectancy rising to 90 or more for people who reach the age of 65 and some people feel that a retirement of 25 to 30 years is too long. Living longer means more money is required to fund retirement. However leaving it too long carries the risk that your ability to enjoy retirement might be curtailed by health problems or even premature death.

The answer is to decide on a time when you will have the choice to retire or not. Planning ahead gives you the ability to work out how much money you will need should you choose to retire at that time and to start building friendships and pastimes that fill your days with enjoyment. Once you reach the time you have planned for, you can choose to keep working, which will allow you to have a higher level of retirement income than planned as you won’t need to start drawing on your savings as soon.

The key aspects to consider when planning your retirement are:

1. What your lifespan may be, based on family genetics and your overall state of health.
2. What your healthspan might be – that is, the length of time during which you will enjoy good health so that you can make the most of your retirement.
3. How easy it will be for you to be able to keep working after the age of 65, especially after taking into account the state of your health, the prevalence of age discrimination in the workplace, and your ability to keep up technically and physically with the kind of work you do.
4. The kind of lifestyle you want in retirement. A lavish lifestyle with lots of overseas travel is going to require a considerably bigger nest egg than a frugal lifestyle.
5. Where you plan to live. Living in a city requires a much bigger budget than living in a small town or a rural area
6. The extent to which you are willing to run down your retirement capital. The more willing you are to do this, the less retirement capital you will need.
7. Whether you are single or a couple – retirement costs per person are higher for singles.
8. If you are a couple, how much of a difference there is between you in terms of both lifespan and healthspan. If there are large differences, you may choose to base your retirement plans on the partner with the shortest lifespan or healthspan.

As you can see, the best time to retire is very dependent on your personal circumstances and preferences. Life is uncertain and so it will always be hard to pick the optimum time to retire, however you can increase your chances of getting it right by planning ahead.