We all dream of it; no more work. Wouldn’t it be nice to retire early, so you can enjoy it while you’re still young, fit and healthy enough to do so?
What would you do? Maybe you’ll take more holidays and travel to all those places you dreamt about? Perhaps you’ll have more time for your favourite hobbies, spending time with those you love, or maybe you see yourself relaxing in the garden at home, living a stress-free and calm lifestyle, with all the time and freedom to do exactly what you like.
Sounds good, doesn’t it? But of course, to enjoy this type of lifestyle in your retirement, this requires money. In order to receive £20,000 a year from your pension, you’ll need a pot of at least £700,000 (excluding your basic State Pension) and with the Government making plans to make rises to State Pension age due to increased longevity, you’ll need to plan ahead if you want to retreat from the workplace at an early age.
Here are our top 5 tips to help you secure an early retirement:
Start saving young and as much as you can
This might seem obvious, but when you’re young we understand that retirement seems a long way off. Why worry about it now? Trust us, your 50/60 year old self will thank you for it! Pension advisors recommend a minimum of 12% of your salary.
Make sure you take advantage of employer’s contributions too, often the more you contribute, the more they will – think of it as a tax-free pay rise.
Reduce your debts and live simply
Retiring with little or no debt will certainly make your life easier; you’ll have more free cash, after all! Make a plan to clear any loans or credit card bills as early as you can. It’s easy to live in the moment and go on regular spending sprees but consider living just a little more simply. Do you really need new stuff – or could you be saving more for the future? We’re not suggesting you cut down all your luxuries but that you find a good balance between spending and saving.
Get your mortgage paid off as soon as you can
For most people, mortgage repayments are their highest outgoing cost each month. The sooner you can clear your mortgage, the more time you’ll have to save towards your retirement. Consider over-payments and make wise decisions when buying a new home or re-mortgaging. Also consider if you really need to stay in your family home after your children have flown the nest. Perhaps a smaller house, in a less expensive area (a countryside village, for example, or the outskirts of your hometown) could free up a large amount of money that could be better spent in your future retirement.
Phase your retirement
Consider reducing your hours over a period of time – or finding a part-time role. This means you’re still earning money whilst slowly winding down. It’s a great way to give yourself more free time and keep some money coming in for a little longer. Also consider remaining opted in to your workplace pension for as long as possible, as our most recent research has found.
It’s worth thinking about what life in retirement will be like. At first, hopefully you’ll be fit and active and enjoying your extra free time. But keep in mind that as you age, you’ll slow down and your health may decline. Think about whether you’ll want more money to start with and whether your costs (for things like holidays and hobbies) may go down as you get older and slow down a little. Calculate what you might need so you have something to aim for.
Your retirement might seem a long way off but by following our advice and preparing early, you could be on that world cruise, waving goodbye to your job sooner rather than later.