Want to retire early? Here are a few important things to consider

Retiring early is a common goal for many of our clients, with the idea of finishing work earlier than the standard age being an attractive prospect.

However, there are also some key considerations to make, both financial and emotional, before you can down tools sooner than you initially planned.

Read on to find out what you need to consider before you retire, a few simple changes you can make that could help you towards your goals, and how working with us at Britannic Place allows you to retire early with confidence.

Your savings will need to support you for longer

First and foremost, you need to factor in the financial impact of retiring early.

According to research by insurance provider Aviva, 60 is the most popular age for those who aspire to retire early.

While there’s no set “retirement age” in the UK, the State Pension Age is currently 66 and set to rise to 67 by 2028.

So, using the State Pension Age as a benchmark, retiring at 60 means you need six years of additional savings and investments to support yourself before you can start drawing your State Pension.

How much you need in retirement will obviously depend on what you plan on doing, but figures from consumer group Which? make a good illustration for this.

They suggest that you’d need £45,000 a year for you and your spouse or partner to live a lifestyle in which you manage to go on long-haul trips abroad and buy a new car every five years.

By retiring at 60 rather than 66, that means you’d need an additional £270,000 across your savings, investments, and pensions to fund your lifestyle, not taking inflation or taxation into account.

Obviously, this figure becomes larger the earlier you look to retire. Indeed, by retiring aged 55, these additional 11 years will require a further £495,000, assuming the annual expenditure above and not considering inflation or taxation.

You’ll need to be confident that you have enough saved and invested to support you for longer in retirement.

Include the emotional impact of early retirement in your decision

One other aspect that can often be left by the wayside when deciding to retire early is that it’s also a large emotional decision, as well as a financial one.

Going to work every day for around 40 years means it becomes a key part of your routine. It also gives many people purpose, occupying a great deal of brain space as you strive to progress your career and continuously do your best work.

So, if you decide to stop working at 60 without a plan for later life, you might suddenly find yourself with a great deal of extra free time, entirely unsure what to do with it.

If you own your own business, this effect can be even more pronounced. You may have spent the best part of half a century building your company every day, and so it may be quite a shock to the system to abruptly stop.

Make sure you factor in this emotional side, as it’s an equally important consideration.

4 simple ways to ensure you can retire early

Whether it’s been a long-term ambition of yours or it has just cropped up as a goal that you now desperately want to achieve, here are four things you can do that could help you to retire early.

1. Increase your savings and pension contributions

Firstly, you may want to consider increasing how much you put in savings and contribute to your pension.

As you saw earlier, retiring at 60 may require you to have significant additional sums to support your longer retirement.

So, increasing how much you save and invest while you’re working is an obvious solution to providing you with the funds you need.

Your pension can be an especially useful tool for doing this, with the combination of tax relief and potential investment returns on offer helping to give your money a boost.

1. Pay off any outstanding mortgages you have

As well as saving more, you should also consider paying off any outstanding mortgages you have.

Otherwise, your repayments could put a strain on your savings and pensions, potentially preventing you from living the lifestyle you want.

For example, consider what would happen if you had a mortgage that you’re set to fully repay at age 66, when you initially planned to retire. Let’s assume your repayments are £900 a month.

By retiring at 60, that means you would have to make your repayments from your pensions and other savings for six years, a total of £64,800.

So, it may be worth looking to overpay on your mortgage while you’re still working so that you don’t have this additional financial burden in retirement.

Be sure to check whether your mortgage lender requires you to pay early repayment charges (ERCs) before you make overpayments.

1. Consider flexi-retirement

Another option is to consider “flexi-retirement”, in which you transition slowly into retirement while still working in some capacity.

You might choose to reduce your hours, perhaps only working part-time or even in a consultancy role. Meanwhile, if you’re a business owner, you could begin the succession process, handing over the reins to the next in line while still remaining involved at the executive level in some way.

Flexi-retirement can give you a few extra years to build up the funds you need to fully retire, while also giving you the space to start travelling or doing whatever else it is that you want to do in your retirement.

In particular, it can also help with the emotional side of things. Rather than giving up work entirely, you can gently reduce your workload until the impact of stopping work is almost unnoticeable.

1. Build your plans around your goals

Above all else, the lesson to learn is that you should build your plans for your future around what you want to achieve. That way, if you want to retire early, you’ll have a concrete, personal figure of what you need to do this.

It’s important to do this sooner rather than later as, if the numbers don’t initially quite add up, you’ll give yourself more time to put measures in place that let you achieve your goals.

When you work with us at Britannic Place, we always start with your life goals. We build a financial plan that focuses on your targets for the future, using your money as a method of reaching them.

So, if your goal is early retirement, we can help you achieve it.

Speak to us

Whether you’ve decided that you want to retire early, or you just want to check on the progress of your financial plan, please do get in touch with us at Britannic Place.

Email info@britannicplace.co.uk or call 01905 419890 to speak to us today.

Please note

The value of your investment can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance. Levels, bases of and reliefs from taxation may be subject to change and their value depends on the individual circumstances of the investor.

Workplace pensions are regulated by The Pension Regulator.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.