However, young people dream of it and save a lot to achieve it
News of an impending pension increase amid an uncertain business environment due to the pandemic is likely to make many people think about early retirement. Something that has never seemed tempting because of the low old-age benefits in our country. It is also shown by the data of the National Social Security Institute, according to which last year only 5,317 people chose early retirement, and over 200,000 continued to work after receiving a pension – men mainly as security guards and women as saleswomen. All professions involving communication with many other people, which in a pandemic is considered risky, especially if you are not vaccinated. So it will not be surprising if the number of working pensioners decreases and the number of people wishing to stop working early increases, as is already happening in other countries.
A study in the UK, for example, found that one in three people would agree to receive a reduced state pension if they could take it at age 55, rather than waiting until age 67. In Germany, such a trend is also observed, since in 2017 legislation was adopted that allows for more flexible retirement.
Oliver Notling, 32, is preparing to retire at the age of 40. He told Deutsche Welle that this is not just a financial transaction, but a principle of behavior that his family strives to follow. Although he and his girlfriend have a young daughter, they have managed to reduce their monthly expenses to 870 euros last year, and have even managed to cope with 630 euros, which is not much above the minimum state pension of 517 euros in Germany. I don’t feel like I’m losing anything, my way of life is like that, explains Notling. He keeps a book on household expenses, which allows him to see where the money goes and what is wasted due to laziness or bad habits.
He changed the shower head several times to find out which wasted less water. He has installed energy-saving light bulbs everywhere in the house. It itself is 46 square meters and is located near his work, so there are no costs for a car or public transport. “Our principle is for the home to be as big as necessary and as small as possible. We use the area as efficiently as possible and we often repeat to ourselves: What I have is enough for me, and in a compact home the overhead costs are less ”, he also shares. Adherence to minimum expenses allows him to reduce his working hours and spend longer with his family. In addition, to save for the time in which he will soon retire.
Notling defines himself as a frugalist – a person who strives to accumulate capital as quickly as possible in order to stop working and living healthily. This is an ideology shared by more and more young people who want to free themselves from the dictates of consumer society and not rely on a state pension. Their principle is to earn as much as possible at the beginning of your career, spend as little as possible and invest with as much profit as possible. One of the brightest representatives of this peculiar movement is a Canadian software engineer and blogger, who managed to retire at the age of 30.
Sounds tempting, doesn’t it? Especially if you are currently struggling for a job promotion, you are competing with the galloping real estate prices in search of your own home and you are going from loan to loan. Probably all this can be avoided if the life goals are reformulated from wanting to have many and good things to providing only what is necessary.
But there is a “but”. A number of studies show that early retirement does not go hand in hand with good mental and physical health. Without daily obligation, people often lose activity, mental resilience and become ill. A study by the German Max Planck Society for the Promotion of Science found that longer work slowed cognitive decline in adults and could help fight diseases such as dementia and Alzheimer’s. Researchers analyzed data on more than 20,000 Americans between the ages of 55 and 75 who worked at different times between 1996 and 2014. They found that those who worked until age 67, which is the most common retirement age in the United States , has more cognitive benefits than those who choose to retire at age 62.
“Regardless of ethnicity and gender, work history has had a major impact on cognitive functioning. It starts with social and economic status in early childhood, continues with educational and professional achievements and reaches even closer factors such as partner status and mental and physical health. They all accumulate and interact throughout life to influence both cognitive function and retirement age, ”explains Angelo Lorenti of the research team. It has been found that people with more complex occupations see a relatively slower decline in their brain activity. The probability of developing dementia is 4.8 per 10,000 for those who work mentally, compared with 7.3 per 10,000 for those who perform physical activity. In addition, the risk is 30% higher in those who have had a sedentary lifestyle.
A study by Georgetown University found that some mental skills, including setting priorities, improved after the age of 50, and the French Research Agency estimated that each additional year of work reduced the risk of dementia by 3.2%.
That’s why scientists believe that governments around the world should allow adults to work as hard as they want. Moreover, their research rejects the myth that as people age, they lose some of their abilities.Young, however dream of him and save heavily, to achieve it.
If you set aside 20% of your income, there is a chance that you will not work after 20 years.
“It is never too late to take action to retire, no matter when you decide to stop working. It is important to define the goals that usually fall into 4 categories: basic living expenses such as food and clothing, contingency reserves such as home renovations, additional funds for holidays and leisure activities, and whether you want to leave a legacy to your family, ”he says. in front of the Daily Express James Norton from the investment company Vanguard. According to him, it is key to distinguish desires from needs, as you may have to give up some. Also calculate unforeseen risks such as longer life expectancy, health problems and those related to investing the money you save.
“Costs are another key consideration. Since we cannot control what happens in the stock market, we will have to do it with our own expenses. If they are large, your investment needs to work harder to achieve balance, ”says Norton.
Financial analysts advise saving to start at the beginning of a career, and it is best to set aside about 20% of income and invest so as to bring at least 8 percent profit per year. So in 20 years you will be able to count on funds equal to about 80 percent of your income when you worked.
“If at some point you realize that you need more resources, your options are really to either save more or work longer – there is no other recipe,” explains Norton. In addition, it is good to remember that the demand for a high return on investment is not always the key to early retirement, as they have a higher risk. It is best to divide your money into different investment portfolios such as real estate, stocks and funds, which will ensure that you will still have some income in the event of a crisis.
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