Wanting to retire early?

Retiring early is a dream for many. Whether you’re looking forward to putting your feet up or going on an adventure, it’s a huge milestone and it’s important to be financially prepared. Yet, research suggests that many people retiring earlier than expected don’t have their finances in order.

According to research from LV=, 47% of retirees said they retired earlier than expected. Around a quarter said they retired at least five years earlier than they had planned.

For 31%, the decision to retire early was because they could afford to do so. Worryingly, a similar proportion admitted they were not in a good financial position to retire when they did. Instead, many were pushed to retire because of circumstances outside of their control, such as:

  • Poor health or injury (25%)
  • Stress or mental health (17%)
  • Redundancy (15%)
  • Care responsibilities (6%)

Having confidence about your financial position means you can get the most out of your retirement and feel in control of the future.

Clive Bolton, managing director of protection, savings, and retirement at LV=, said: “Retiring early is a dream for millions of people and it is achievable for people who have been able to plan, save into a pension over a long period, and take financial advice to help them plan their finances.

“However, it can become a financial problem if retirement is forced upon people before they have had time to prepare.”

Taking stock financially if you’ve been forced to retire early is vital.

If you’ve unexpectedly been forced into retirement, you may not have reviewed your pension or even thought about what retirement lifestyle you would like.

While it can be tempting to simply start taking the income you need from your pension or other assets, a financial review is essential.

You may find that you’re in a better position than you first thought.

If you find there is a shortfall in your pension, knowing this at the start of retirement means you can take control.

There may be steps you can take to boost your income and still secure the retirement you want. For example, could you deplete other assets to supplement your pension? In other cases, you may choose to continue to earn an income by phasing into retirement or reducing your expenses.

What’s important is that you understand your financial position and have confidence that you’ll be secure for the rest of your life.

5 practical steps to take if you want to retire early

1. Set a retirement date

While you don’t need to set a retirement date in stone now, having a goal makes sense. It can help ensure you remain on track and that your plans are realistic.

The date you want to retire is also important for calculating how much you need to save. So, setting a retirement date is worthwhile.

2. Think about your dream retirement lifestyle

Again, you don’t need to decide exactly what your retirement will look like now, but thinking about how you’d like to spend your time can help you understand your income needs.

It’s becoming more common for workers to choose a phased retirement. It can help some retirees strike the balance they want by still working in some way, such as working part-time, starting a business, or becoming self-employed. So, it’s something you may want to consider.

In addition, how will you spend your days in retirement? Or are there any one-off experiences you need to include in your retirement budget?

A clear picture of the type of retirement that will make your life fulfilling can help mean you’re on track to deliver the income needed to turn it into a reality.

3. Understand how much you need to save

One of the challenges of retirement planning is that most people will need to use assets to create an income for decades. By setting out lifestyle expectations, you can start to understand how much you’ll need to save for retirement. You should also consider:

  • Life expectancy
  • Inflation
  • Expected investment performance
  • Unexpected events

This can help you have a goal in mind for your pension’s value and other assets you plan to use for retirement. With a target, you can create an effective plan to start building up the assets you’ll need to achieve financial security when you give up work.

4. Prioritise paying off debt

While you can retire with debt remaining, paying off as much as possible before you retire could provide you with greater financial freedom.

If you have debt, whether credit cards or a mortgage, a long-term plan to pay this off before you reach your retirement date can be useful. Increasing the minimum repayments could also mean you pay less interest overall – leaving you more money to add to your retirement savings.

5. Start working with a financial planner now

If you want to retire early, it’s never too soon to start planning. If you’re ready to start working with a financial planner, whether you want to review if you’re in a position to retire now or it’s a goal that’s still decades away, please contact us.

We’ll help you understand your finances and the steps you need to take to retire early and still be confident about your future.

Please note: This blog is for general information only and does not constitute advice. The information is aimed at retail clients only.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future results. Your eventual income may depend upon the size of the fund at retirement, future interest rates and tax legislation. The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates and tax legislation may change in subsequent Finance Acts. Not all mortgage contracts are regulated by the Financial Conduct Authority. Think carefully before securing other debts against your home. Your home may be repossessed if you do not keep up repayments on your mortgage.