For those seeking an early retirement, whether it’s to travel, spend more time with family or to take up new hobbies, it’s important to work out whether you have built up enough savings to achieve financial independence.
The first step is to estimate your monthly expenses once you retire.
Calculate your retirement expenses
Expenses will include the essentials, such as food, utilities, healthcare, and housing – but it is also important to factor in any outstanding debts you may have. If you are fortunate, you may have already paid off your mortgage or student loans, but these additional debts need to be considered.
Health costs may also increase later in retirement, and it’s important to ensure that you have enough in your savings in case of an emergency.
When you reach the well-earned phase of retirement, what lifestyle do you hope to have? You may take up new hobbies or plan to travel more frequently – both of which will affect your discretionary spending. Determine how much you will need in order to maintain your lifestyle and afford additional luxuries. Once you have calculated a monthly or annual figure, remember that costs will also rise with inflation over time.
Calculate your income needed in retirement
Income may come from a private (i.e. Self-Invested Personal Pension known as a SIPP) or a workplace pension, but you may have additional savings and investment accounts, or assets such as a property holding equity. If this is something you are looking to access, a Mortgage Adviser can help when exploring downsizing or equity release options.
Not everyone will choose to retire completely. More individuals are phasing their retirement by reducing their number of hours worked, volunteering, or choosing a completely new part-time role. An ongoing job can help to keep a routine, whilst continuing to contribute towards a pension pot and building compound interest, rather than using your savings too early.
At EFG Harris Allday our investment managers work with clients to help meet their financial objectives, continuing to grow their investments and manage their money before and throughout retirement. An Investment Manager will review your personal objectives in line with your portfolio, adapting to meet your current and future income requirements.
Retiring early will mean less time to save, and it is important to seek professional advice to plan for your future. We work in partnership with a network of Financial Advisers who support our clients with retirement planning. If this is something of interest, please contact your Investment Manager.
The value of your investment can fall as well as rise in value, and the income derived from it may fluctuate. You might get back less than you invest.
* https://www.gov.uk/government/publications/state-pension-age-review-2023-government-report/state-pension-age-review-2023