We all dream about what life will be like during retirement. Is it possible that you could get there earlier than you previously thought? Retiring early can be a breath of fresh air and actually lead to improving your health, but it’s not feasible for everyone.
This does not constitute advice and advice should be sought in all instances before acting on it.
Usually, people retire in their 60s, but pension pots are available once you hit 55. If you want to retire early, it will require careful planning and a full review of your financial situation to ensure you can make it work. Understanding your current finances will help you to plan for what you need to do to be able to leave work early.
Here are a few things to consider if you want to retire early…
What kind of retirement do you want?
Think about the type of lifestyle you want to enjoy during retirement and what exactly you’ll be saving for. Do you want to travel? Move closer to family? Explore new hobbies? Different lifestyles will require different amount of money to support them.
How many years of retirement will you need to plan for?
There is no guarantee how long you will live, but there have also been technological and medical advancements that have helped increase our lifespans, so when planning how many years of retirement you’ll need to save for, it’s a bit of a guessing game.
If you want to retire at 55, but expect to live well past 85, that’s over 30 years you need to budget for. And if you’re planning on leaving something for future generations, that’s additional work to do.
Confirm how much your state pension will be
Once you have considered the first two questions, you need to figure out how much your State Pension is likely to be.
Currently, the State Pension age is under review and routinely gets pushed back to align with life expectancy, but other factors such as gender will mean your state pension age will vary. Don’t forget that you’ll need to contribute (or be credited with) 35 years of National Insurance contributions to qualify for the full amount.
How much is your private pension worth?
No matter what your State Pension pay out is, chances are you won’t be able to live off that alone. This is where private pensions come in. You might have a few different pensions from various places – workplace or private – so you’ll have to track down all of your plans to get an accurate forecast of exactly how much money you’re working with. You can take your money as a regular income through an annuity or you could ‘drawdown’ what you need and only take what you need when you need it.
Everyone’s retirement plan will be different.
Your plan will depend on your specific circumstances and expectations. If you’re in any doubt about the financial impact of early retirement, you should seek out professional financial advice.
If you’re determined to retire early, a professionally endorsed plan will help ensure you get there. To get started on your journey to an early retirement, get in touch with us today.
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