There is no more significant milestone in your life than retirement. Of course, as you get older, you start to anticipate and plan for this milestone more.
For many people, bringing your retirement forward is their main priority. After all, who wouldn’t want to maximise the time they have to enjoy a comfortable retirement doing things they enjoy.
Regardless of your retirement aspirations, you can enjoy early retirement benefits. However, it needs careful planning. This article aims to inform you on how to bring your retirement date forward.
Can you afford early retirement?
The most significant factor in deciding whether you can retire early is whether you can afford it. The answer to this question depends on what you want to achieve or experience in retirement and the lifestyle you want to live. Getting professional and regulated financial advice will help you with planning for your retirement, check out Portafina.
The consumer magazine ‘Which?’ analysed the costs of three retirement lifestyles ranging from essential to comfortable and luxury. This study indicates the income required in retirement to achieve each lifestyle.
To be comfortable in retirement, a single person’s annual income must be around £19,000. For a two-person household, this amount rises to £26,000. The report also details how large a pension pot must be to provide such income. Understanding this will inform you how much you have to save each month to achieve it.
Assessing your retirement income.
Your next step is to assess your retirement income. This money will come from various sources, including your state pension, personal pensions, savings, investments, and other assets. Let’s take a look at each.
1. Personal pensions.
With many personal or workplace pensions, you have the option of accessing your funds from age 55. This feature makes them ideal if you want to retire early.
Of course, the earlier you retire, the further these funds will have to stretch. Taking too much money from your pension pot too soon could leave you short of income later in your retirement.
2. Savings and other assets
You should also consider any savings and other assets you own. For instance, you may have money in an ISA or invested in property and receive an income from this. Other forms of income are essential to bridge the gap between your early retirement and receiving the State Pension.
3. State Pension
When calculating whether you can retire early or not, the state pension does not apply. That’s because it is a government benefit you will not receive until you are at least 66. Therefore, if you need this money for your retirement, you will need to bridge the gap with other forms of income in the meantime.
How to boost your retirement pot.
There are various ways you can boost your retirement pot, including the following:
- Explore your pension options.
- Make additional pension contributions.
- Join a workplace pension scheme.
- Work a bit longer.
Explore your pension options.
Pensions can vary quite drastically. For instance, the amount you pay in management charges and how your pension performs is not the same across all pension schemes.
By exploring your pension options, you may decide to switch to a better-performing plan or one that charges lower fees. An independent financial advisor can help you decide if switching is a good option.
Make additional pension contributions.
Making additional pension contributions increases the money you have for your retirement. Remember, your pension contributions qualify for tax relief. Therefore, putting any spare cash into your retirement fund is a good idea.
The earlier you can make additional payments, the better. That’s because your pension pot benefits from compound interest. Therefore, the longer it’s invested, the more compound interest growth you can receive.
Join a workplace pension scheme.
You may well have already been enrolled into a workplace pension scheme automatically. If you have not and qualify, you should opt in as soon as possible. You will pay a small amount of your gross salary into a pension pot.
These payments happen automatically, and you have no other administration to do regarding a workplace pension. You will also benefit from receiving money from your employer and tax relief on your contributions.
Work a bit longer.
This article is about early retirement, so this point may seem a bit off track. However, you can make a significant difference to your retirement funds by working just a few additional years, even beyond your early retirement date.
As you continue working, you will continue contributing to your workplace pension, as will your employer. Even if you don’t want to work full-time, you could postpone your retirement and work part-time.
Many enjoy an early retirement, living a comfortable lifestyle, and doing the things they want. The good news is, with some careful planning, you too can enjoy an early retirement.
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