Retiring early is an attractive proposition, but it’s not one to be taken lightly. Here at Ascent Financial Planning, we’ve put together this guide to take you through the details.
What early retirement really means
Early retirement means stopping work before you reach UK state pension age at 66 (67 from 2028). Most UK pension schemes will let you retire at 55, although this is increasing to 57 from 2028. Ultimately, it means having enough money to be financially independent.
Sounds good? Before you hand in your resignation, there are a few things to consider. Have you:
- Paid off your mortgage (or are close to achieving this)?
- Paid off your debts?
- Checked that you have enough money for day-to-day needs?
- Checked if you have enough money for more fun needs?
- Accumulated savings (for unforeseen expenses)?
If you’ve answered yes to these questions, you may be a candidate for early retirement.
How much money do I need to retire early?
According to the Pensions and Lifetime Savings Association, a ‘moderate’ middle-of-the-road retirement, would be £31,700 a year. That means to retire at 50 on that level of income, you would need a pot of £530,000, (£790,000 after inflation). Whatever your financial situation, you need to work out what you can afford, and that’s where our experts can help.
Investment for early retirees
Saving cash isn’t the most effective way to achieve your desired pension pot. Instead, consider investments. Strategies to help you achieve financial independence could include investment trusts, index funds or stocks and shares ISAs. It’s all about making your money work and managing risk carefully.
The role of ISAs
Individual Savings Accounts (ISAs) can have a key role in early retirement planning due to their tax-free growth and withdrawal features. Unlike pensions, which can’t usually be accessed until age 55 (57 by 2028), ISAs offer the flexibility early retirees need.
Mistakes to avoid when planning for early retirement
- Stopping work completely
Jumping straight into retirement can be financially risky and a huge step mentally and emotionally. Consider gradually scaling back your hours for a smooth transition and financial stability.
- Underestimating living
costs A common pitfall is underestimating how much you’ll actually need to maintain your desired lifestyle throughout retirement.
- Neglecting tax implications and withdrawal rules
The rules around gaining early pension access are complex, and making uninformed decisions may leave you with tax bills or a diminished pension pot.
How Ascent Financial Planning can create a personalised early retirement plan
There’s no one-size-fits-all when it comes to early retirement. At Ascent Financial Planning, we’ll draw up a plan that’s unique to you and based on your early retirement savings.
Taking the next step
At Ascent Financial Planning, we work with clients across North Wales to create clear, personalised early retirement plans. If you would like expert guidance on how to retire early in the UK, speaking to one of our advisers could be the first step towards long-term financial independence.
