What’s the ideal age to retire? We came across some intriguing research recently that shows that people’s ideal retirement age changes as they get closer to actually retiring. And, perhaps surprisingly, the closer we get to leaving work, the more we want to keep working!

Vanguard Australia recently released a report entitled ‘How Australia Retires,’ based on qualitative research that they conducted. There were lots of interesting findings, but one that stood out for us was the responses the question ‘what is the ideal retirement age.’ This question was asked to people of all working ages. Respondents were then divided into three groups, based on age. The first group was aged 18-34. The second group was aged 35-54. The third group was aged 55 and over.

The results were very clear: the younger you are, the earlier you think the ideal retirement age is. Here is how Vanguard showed the results in a graph:

The difference between these ideal ages is large: more than five years. The difference was also the same regardless of wealth or gender. Younger people think an ideal retirement happens before you leave your 50s. Older people want to work halfway through their 60s.

So, what causes this change? Why do people extend their ideal retirement age as retirement approaches? In our experience, there are two reasons.

The first is lifestyle related. By the time you have turned 55, work can take on a different meaning for you. Earlier in life, you are working for income to help buy a home, raise a family, set yourself up, etc. There are lots of demands on you and work is needed to help you meet those demands. You are probably spending at least some of your time dreaming of the day that you can give all this away and play golf. And if that dream is going to get you through the hard times, it makes sense to have your dream come true sooner rather than later.

However, things change. You pay off your mortgage, you see your kids leave home, etc. This lets work take on a different meaning. Work is not now just about earning an income. It becomes one part of a healthy and well-rounded lifestyle.

The happiest retirees often talk about ‘retiring to’ something you like, rather than ‘retiring from’ something you don’t like. If you don’t yet have something to retire to, then continuing to work can make really good sense. Especially when that work is relatively unpressured.

The second reason that the ideal retirement age grows over time may be a little more prosaic. As we get closer to retirement, we may realise that we are not quite ready financially to stop working! A 20-year-old aims to retire before they turn 60. But they really have no idea whether that will be affordable to – it’s more of a hope than a plan.

55-year-olds have much better information! They can make a very good estimate as to whether they will have enough to retire within the next five years. And, often, they realise that they are not quite there yet. They then prefer to keep working, probably looking to save as much tax as possible by increasing the amount that goes into super. This has two obvious benefits: it means they end up with more retirement savings. But it also means that those savings don’t have to last as long. Staying in work can have a positive ‘double-whammy.’

For a 20 year old, plotting their ideal retirement age is mostly wishful thinking. By the time we turn 55, our thinking is less wishful and much more pragmatic. We may wish to continue working because we need the money. Or (and this is our hope for our clients), we may simply enjoy work and not want it to end.