Surveys reveal, that the number of older Australians holding on to their employment longer or come out of retirement to go back to work increase each year.
With so many things that are needed to prepare a person’s exit from employment only for them to return to the workforce, it’s a wonder why retirement is necessary at all. So why do people have to retire, especially at a time when Aussie life expectancy is also increasing?
Let’s go back to the basics and discuss why people retire and their usual reasons for doing so.
Why do people retire?
The government has set the age pension and superannuation preservation age at 65 years old, although Australian will retire at 67 after 2023.
Retirement is ideally a voluntary process that employed individuals choose to take, when they feel financially secure enough to enjoy life without a steady pay cheque.
It’s also a way for people to exercise control over their lifestyles without being dependent on income from regular work, especially after achieving a sizeable nest egg through years of investment.
In many cases, however, employees may be forced to retire earlier due to personal circumstances or their employer’s actions.
Reasons why people retire
Ask any retired individual and they will say that they planned to exit the workforce on their own terms. However, certain circumstances could throw careful plans out the window and leave early retirement as their only option.
Some of these reasons are:
- Pursuing other interests
- Forced out of employment
The effect of one’s job on their health can be a huge factor for retirement.
In some cases, workers voluntarily retire when a job becomes too demanding and negatively affects their physical, mental or psychological health.
For instance, soldiers may retire from their work earlier due to post-traumatic stress disorder (PTSD) from a previous mission or when their capability to carry out complex missions decreases.
Some people retire to change their lifestyle once they are financially independent.
It’s a given that some job sectors are more stressful than others, and this is especially true for fast-paced and competitive markets. Stress can often lead to health issues or, at the very least, put a lot of pressure on the individual.
As a way to regain control over their life, those who manage their finances well enough decide to begin enjoying the fruits of their labour and decompress from a stressful work environment earlier than their peers through retirement.
Families can be just as demanding as work, so some people who achieve financial independence early on retire simply to start a family or focus on their growing one.
Most of these retirees, however, generate consistent passive income through their investments to support their family’s needs.
On the other hand, there are also some employees who choose to retire in order to care for family members with disabilities or respond to other family related responsibilities, such as running a family business.
Pursuing other interests
Whether an individual is burnt out from their employment or not, they may choose to pursue other interests once they reach a certain stage of financial security.
These may be income producing activities, like high-income earners who retired and now write for their self-managed blog, or not-for-profit endeavours, such as volunteer or missionary work.
Forced out of employment
There are also people who were unfortunately forced to retire when they failed to land another job after being made redundant or dismissed.
The numbers speak for retirees
According to an Australian Bureau of Statistics (ABS) report, which included retirement and retirement intention of 3.6 million Australians aged 45 and older, only 36 per cent of men and 22 per cent of women retired voluntarily upon reaching retirement age.
The second most common reason for retirement is due to a decline in their own health, which the survey found was 21 per cent and 12 per cent of the surveyed men and women, respectively.
This means 43 per cent of the men and 66 per cent of the women retired from the workforce due to other circumstances, regardless of their intention to stay.
Retirement is not necessary
People do not really have to retire if they don’t want to and they can still manage to work. In fact, many of the renowned rich people continue to work in their companies and have expressed their desire to do so as long as they are capable. One notable figure is the renowned value investor and chairman and chief executive officer of Berkshire Hathaway, Warren Buffett.
In the end, however, each individual has to consider their personal circumstances and goals before retiring.
This information has been sourced from the Australian Bureau of Statistics, South Australian Equal Opportunity Commission and ASIC’s Moneysmart.