Early Retirement Planning

Planning for Early Retirement – Pensionfinder








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    Planning for Early Retirement

    We all want to enjoy our retirement and most want to wind down in their later years. For some retirement does not mean 65 years of agel you could be moving to a warmer climate, travelling the world, or just kicking back to relax much earlier if you prepare well.

    Points to consider with early retirement

    The rules on when and whether you can take early retirement vary, so find out what the rules are for your personal and/or company pension scheme(s).

    Also, the Government has changed the rules governing when you can start to take your pension. After April 6th 2016 you will have to wait until you are aged 55 to start drawing a pension. If you want to retire sooner ,then you will need to act quickly – ideally should have been by March 2016.

    Taking early retirement will mean that you will have fewer years to make pension contributions, so you may have a smaller pension pot. In addition, you will need income for longer, so your pension payments will be smaller as the fund has to last longer. To make up for these shortcomings you will need to increase your pension contributions and possibly National Insurance contributions.

    Ideally you should start increasing your pension savings early (in your early 20s) to give you longer to make up for those years when you (and your employer) are not making pension contributions. This may involve sacrifice on your part – forgoing an expensive lifestyle to save, save, save.

    What about the State Pension?

    To get a full State Pension you usually need between 40 – 44 years of National Insurance Contributions, so you may want to think about boosting your NI contributions. Also, you won’t receive State Pension payments until you are at least 65, so don’t expect to rely on this to supplement your income prior to reaching 65. Moreover, the state pensionable age is due to increase in the coming years and, under current legislation, it will be age 68 by the year 2046.

    Early retirement – is it right for you?

    Of course early retirement is tempting, but you need to prepare or you could set yourself up for years of poverty. It can be much harder to find work when coming back from a false start retirement. Speak to a financial adviser to get the full picture about what you are entitled to. If retirement is still a long way off remember that it is never too early to start planning for retirement