Published: 29 Oct at 7 PM
The first and most important step in planning for an early retirement is to really think about and decide how much money you will need to spend both when you are retired and then when you have actually. Spend some time working out what your expenses will be in retirement, such as what taxes you will be required to pay, recreational activities, holidays, mortgage/rent costs, food, insurance, medical costs and anything else you can think of. When you have this figure, it is then always advisable to add 10%. You may find some months that this additional 10% was not necessary but you’d rather have a bit more each month than find yourself short due to an unexpected expense. You can then work out how much money you need to save up in order to retire at your desired age.
Recent legislative changes have already led to a change in the age at which individuals can start accessing their private pensions, increasing from 50 years old to 55, meaning that even though this is your own personal savings account you can’t access it for an additional five years. Many people think that the reason behind this was to ensure that individuals will not spend their pension as early making them less reliant on the national state pension when they reach 65 which given that there was 15 years between the private pension age and state pension age, it’s an understandable concern.
If you want to retire early the most important thing is that regardless of how you are, you need to start planning and saving now. Putting money aside is a great start, but if you are able to invest your money wisely then you will be able to reach your target much earlier or in a much more financially positive position. That doesn’t mean you need to be a master investor, just choose the right investment and pension schemes for your circumstances. For example, if you are looking to retire in 20 years, consult a financial advisor and ask him what would give the best return over that period that you could continue to add money to each month or year. Even if you can only invest a small amount do it and continue doing it because with the tax savings and investment returns that small amount now can end up being a really significant amount 20 years down the line.