Can I retire early? 5 golden nuggets of Pensions Advice
We’ve all sat and thought about it. Could I retire at 55 or 60. If you’re a baby boomer with a big fat final salary pension then this is a common reality. But for the rest of us it means significantly less money. If you worked longer you would earn more money and build more retirement savings rather than erode that pot of money. These are the things I think you need to think about:
1) Spend less.
No one wants to hear this, but it’s inevitable. Minimising your outgoings is vital to a longer retirement. Map out your budget and really look at all expenditure to decide if it’s worth working longer for. Having no mortgage feels important in making a budget for the long term.
2) Bridge the gap to state pension
At your state retirement age, you’ll get a nice piece of guaranteed retirement income, which will cover a lot of your essential expenditure. If you retire before then you need a good plan for how your going to cover this if you’re not working. You could buy a fixed term annuity, drawdown from your pension or use savings. It’s important to consider the tax implications of each as well as the effect on your long term investments
3) Investing for the long term
If you’re 60 you’ve got more chance of living till your 80 than not, and a reasonable chance of living past 90. So to be safe your money needs to last 30 years! If you leave your savings in cash they will be ruined by inflation, and if you pick the wrong investments you could ruin your retirement. Pick sensible portfolios designed to produce income and protect your capital.
4) Semi retirement
This is becoming a very popular approach. Perhaps you could do the job you’ve always wanted to, or just 2/3 days a week. 5 years of part time employment will make a huge difference to your pension pot. You can also look at something scarily called ‘phased drawdown’ which lets you draw the tax free part of your pension first, which helps top up your income when you’re still earning.
5) Have a different attitude to Inheritance
Equity Release is an important consideration if you want to retire early. The majority of most peoples wealth is contained in their home. You can unlock this to give you the retirement you dream of, but for most people they have to change their expectations for their legacy. Consider this though; your kids probably need the money now rather than in 20-30 years. Equity Release can make this happen.
I’m a Pensions and retirement nerd and would love to talk you through your options if your interested. Parker Financial Advice are independent (IFAs) based in Cheltenham, who choose products from the whole of the market. We want to be your trusted advisers for 20, 30, 40 years… for life. Get in touch with us if you’ve got something on your mind or want to get a plan in place, or read about our at retirement reviews: https://www.parkerfa.com/at-retirement-recommendation