There are several times in your life when you need to make a really big decision and one of them is when to retire. It’s a life-changing moment which ranks alongside 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.

Deciding when to retire can be quite stressful. There’s a balance to be had between retiring too early and retiring too late. So, when is the best time?

Retiring early (before the age of 65) is appealing, however it has consequences. Early retirement cuts short the time you have left to save 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 around $50,000 a year for five years, given that you would not receive NZ Super for that period.

Adjusting to a new identity as a retiree can be difficult at a younger age. It’s not easy to find yourself amongst a cohort of people with an average age of 75 or more when you’re only 60. These days it’s more common 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 becoming more popular for several reasons. Many people find themselves with insufficient funds to retire at 65, while others are just not ready to slow down at that age. As life expectancy rises to 90 or more for people who reach 65, some people feel that a retirement of 25 to 30 years is too long. Living longer means more money is required to fund retirement. On the other hand, leaving it too long carries the risk that your ability to enjoy retirement might be curtailed by health problems or even premature death.

What’s the answer? Decide on a time when you will have the choice to retire or not. Planning ahead allows you to work out how much money you’ll need if you retire at that time and to start building friendships and pastimes that fill your days with enjoyment. Once you reach your planned retirement date, you can always 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: