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When can you retire? Five questions answered

Like many people, you have probably found yourself daydreaming about what you will do when you finally retire, at least once. If so, you probably have a few questions about leaving work behind and when you will be able to do so.

Research from Scottish Widows shows that 20% of people currently expect that they will continue to work until they are physically unable to do so, while 6% expect to be employed for the rest of their life.

It doesn’t have to be that way, so we’re on a mission to answer the all-important questions about retirement planning and being able to enjoy the next phase in life, without worrying about the demands of work.

If retirement feels out of reach, and leaving work early is a distant dream, we urge you to read on. Hopefully this knowledge will improve your outlook on retirement and give you the confidence boost you need to get in touch with us to start your financial planning journey.

1. What is the State Pension Age and what will I get when I reach it?

For most people, the State Pension will be the bedrock of retirement income.  For married couples, this income can approach £20,000 per year and, because of personal allowance, that’s effectively tax free.

The age at which you will be able to start receiving your State Pension will depend on when you were born. How much you will be eligible to receive each week is calculated based on how many qualifying years you have on your record. For each year that you have paid National Insurance contributions, made voluntary payments or received credits as part of some State Benefits, your entitlement increases.

The Full State Pension is paid to those who have 35 qualifying years on their record.

You can get a State Pension forecast by clicking here.

2. Is it possible to retire before I reach the State Pension Age?

There is no law that states you must work until a specific age. You can stop working whenever it suits you. However, it is important to make sure that you have sufficient capital, investments and savings to support your living costs and lifestyle for the rest of your life.

You can access the money in a private pension from 55, this will rise from 2028, to 10 years prior to your State Pension Age. But it is how you treat it that will dictate how long it lasts.

If you have savings and capital available to support your lifestyle, and you are confident that you will be able to afford it, you can retire earlier than the age at which you can access your pensions, but it will require careful financial planning.

3. What do I need to consider when planning to retire early?

There are three factors:

  • Your life expectancy
  • The value of your pension savings and investments
  • Whether that amount can create a sustainable income to support your desired lifestyle for the rest of your life, after factoring in lump sum expenditure and inflation

These tie in together to determine whether you can afford to retire early and will help you understand what needs to change if you are not currently on track to retire at your desired age.

If the numbers aren’t quite adding up and it looks like you’re going to need to save some more before cutting ties with your boss, now is the time to put a plan in place and increase the money you will have available when you retire.

Conversely, if you do have enough money to retire at your chosen age, and you are sure that you will be able to cover all expenses for the rest of your life, you will need to start thinking about protecting what you have and preparing for the best and worst-case scenarios. This will include insurance and estate planning.

4. How can I boost my retirement income?

There are many options for increasing your retirement income to make sure that you can stop working at an age to suit you. These include:

  • Taking all the help on offer: Make sure that you are enrolled in, and contributing as much as possible to, your Workplace Pension. Pensions benefit from tax relief and your employer contributions mean that you are receiving extra money toward your retirement plans.
  • Putting more away: You may need to cut back on current spending habits, or try to generate more income, but the simplest way to increase your retirement fund is to put more into it now.
  • Extending the deadline: We don’t want you to be working until you drop, but you might have to postpone retirement to give you more time to build up your pension through contributions, growth and tax relief.
  • Go part time: Instead of retiring fully when you reach the age you want to stop working, you could consider reducing your working hours, or setting up as a consultant. That way you have more free time, but you are still generating an income.

5. What should my next steps be?

Talking to a professional.

By engaging with a financial planner, you can find out everything you need to know and put strategies in place which will help you to retire on your own terms, at an age which means you can get the most out of life.

To get started, contact us on 02380 633377 or request a call back by clicking here.