Early Retirement: A Luxury Only The Rich Can Afford?

As dreams of sipping tea in the countryside and ticking off bucket-list holidays dance in our heads, a recent report pours cold water on the retirement plans of many. It seems that early retirement in England is now largely a perk for the well-heeled, leaving the less affluent either struggling in the workforce or sidelined due to health issues.

A Growing Wealth Gap

According to a study by the Institute for Fiscal Studies (IFS), there’s been a striking shift in work trends for those aged 50 to 60. Today, your financial standing is a huge determinant in whether you get to hang up your boots early.

Cast your mind back to 2002-03, and the landscape was different. Wealth wasn’t a significant factor in the decision for 55- to 64-year-olds to retire early. In fact, 20% of the least affluent within this bracket took early retirement willingly. In comparison, 28% of the wealthiest fifth did the same. But fast-forward to 2018-19, and the disparity is glaring. A mere 7% of the financially challenged retired early, versus 24% of the more fortunate.

Health and Wealth

The harsh reality for many of the less well-off is that they’re not actively choosing to work longer. Instead, health challenges push them out of the workforce. A staggering 39% of the least wealthy didn’t work or retire in 2018-19. The majority of them reported being permanently sick or disabled, while others took care of family members.

Average Wealth, Increased Employment

Interestingly, the surge in employment for this age group was most prominent amongst those with average wealth. The IFS highlighted that the employment rate for this middle wealth bracket leapt from 59% in 2002-03 to 76% by 2018-19. In stark contrast, the employment growth rate was modest for both the least wealthy (40% to 46%) and the wealthiest (60% to 65%).

To paint a clearer picture, here’s a breakdown:

  • Poorest 20%: Less than £65,000 in housing and financial wealth
  • Middle 20%: Between £205,000 and £385,000 in wealth
  • Richest 20%: Over £650,000 in wealth

Jonathan Cribb, an associate director at the IFS, observed, “The most affluent in their late 50s and early 60s are seizing the opportunity to retire early, powered by their accumulated wealth. On the flip side, health issues, more than choice, dictate retirement for the least wealthy. They often rely on state benefits for extended periods.”

Working Beyond The Golden Years

It’s worth noting that more people today work into their twilight years compared to two decades ago. However, the nature of this work differs from younger age groups. Among the 70-74 age group, 15% of the wealthiest still work, compared to 11% of the middle wealth group and just 6% of the least wealthy. This aligns with research suggesting that many older workers continue out of passion or to remain active, not financial need.

In conclusion, as the retirement age inches upwards, the landscape is clear: wealth, more than ever, determines who gets to enjoy their golden years early. The middle class is increasingly pushing back retirement, while health, not choice, is dictating outcomes for the least wealthy. Whether this trend continues or sees a reversal will be a space to watch.