Early retirement
There are many reasons why you might want to retire early. Perhaps your work is becoming too physically and/or mentally demanding? Or you want to spend more time with your grandchildren or by pursuing your hobby? There are various options for retiring early . In this blog you can read more about the options for (early) retiring, how much money you need and what you need to take into account.
Early retirement: all options listed
To begin with, there are a number of ways to retire early. Below is a list of the common possibilities:
- Bringing forward pension
- Using your own money (saving and/or investing)
- Recording of logs
- Partially stop working
1. Bringing forward pension
In the Netherlands, there are several pension providers that offer the possibility to have your pension paid out earlier than the retirement age. This is also called bringing your pension forward. You can often calculate how much pension you will receive if you decide to stop working earlier via the website of your pension provider.
2. Using your own money
In addition to having your pension paid out earlier, you could also choose to use your own money in the last years until your retirement age. You could also think of a portion of your annuity, saving or investing. The examples below show how this could look roughly.
Example 1: 63 years old and stop working
Suppose you are 63 years old and you want to retire early . Start by calculating the amount you need each month to live normally. In this example we take €2,000. The number of years until retirement age is 4. In total you need 4 years x 12 months x €2,000 = €96,000.
Example 2: Retired 3 years earlier
To make the subject a bit clearer, another example. Suppose you want to retire 3 years earlier , so stop at 64 and you need to have at least €2,000 per month to be able to live. To be able to retire 3 years earlier, you need to have saved 3 years x 12 months x €2,000 = €72,000. This shows that stopping work 1 year earlier can have a big impact on the amount you will need.
Saving this money can be done in different ways. One of these ways is investing . Investing can be done in many different ways and in many different products. Do you want to know more about how investing works exactly, in which ways you can invest and in which products? Then take a look at our knowledge base about investing .
3. Taking leave
It is possible that your employer has promised you extra leave. This can be because you work shifts or have worked a lot of overtime. You may have these overtime hours or shifts (partly) paid out in leave hours. Since 2021, it has been possible to save up leave for 100 weeks without paying tax on it. You could use these extra leave hours to retire earlier. You can therefore stop working earlier in consultation with your employer.
4. Partial cessation of work
Of course, it is also possible that you do not want to stop working completely. Some pension providers allow you to have your pension paid out only in part. Check with your pension provider what the possibilities are.
Early retirement: what should you pay attention to?
If you want to retire early, there are a number of things you need to take into account.
1. Consequences for your income
If you decide to stop working earlier, this will affect your income. Since you (partly) stop working, you will also build up less or no pension. In addition, your accrued pension will be spread over a longer period, which means that the monthly pension payment will be lower.
2. Early retirement and mortgage interest deduction
Earlier you read about using your own money to retire early. If you choose to do this, you can no longer count on the mortgage interest deduction. This is because you no longer receive any income. The mortgage interest deduction applies to this. From the moment you start using your own money, it is no longer possible to enjoy this tax benefit.
3. Tax benefit from AOW retirement age
When you reach the AOW age, you will pay less income tax. This is because the percentages in box 1 will then go down. Do you start your pension before you reach the AOW age? Then nothing will change with regard to income tax until your AOW age. Only when you have actually reached the AOW age, you will pay less tax.
Early retirement: Investing as a means
Investing can be a good way to build more money and therefore retire earlier. Investing has the eighth wonder of the world: compound interest. You can put your money to work to make more money. However, this does come with risks and is therefore not for everyone.
Would you like to invest part of your assets for an early retirement? Then you need a broker to carry out your investments yourself. Through our broker comparison tool, you can easily find a suitable broker.
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