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When can I retire?

The age-old question – when can I retire? Understandably, some people want to retire as soon as possible.

Currently the rules are that the earliest someone can draw an income from their pension is age 55. This is due to move to age 57 in 2028.

The important consideration must be whether you have amassed enough wealth to provide you with your necessary income for the remainder of your life. This wealth might be in the form of property, cash savings, ISA investments etc.

 

What if I retire early?

The earlier you retire the less time your pension has to grow and the longer the pension will have to pay out for. Therefore, you must decide if your pension is big enough to last the remainder of your life and whether you have other assets that can help boost your retirement income.

 

How do I know if my pension savings are enough?

Having a robust financial plan in place and undertaking regular reviews with your trusted advisor, you can understand what your retirement might look like and what you need to do now in order to achieve the retirement you long for.

 

How much will I need to retire?

This depends on the lifestyle you aspire to and so it’s different for everyone.

The general rule of thumb is that you’ll need between half and two-thirds of the income you had when you were working to have a comfortable retirement.

Your State Pension will provide a modest income, but probably won’t pay for the retirement you have in mind. If you want to continue enjoying life like you do now, you need to save towards it.

Some people want to live off the income from their pension fund so that they can pass wealth on to beneficiaries while others want to use their whole pension fund for their retirement.

One way to use your pension to provide an income in retirement, is to buy an annuity which is where you exchange your pension for an income stream which can be guaranteed for life.

Alternatively, you can use your pension as an investment to make regular withdrawals from. The problem with this approach is that most of us have no idea about our life expectancy, so if too much is drawn too early, funds might run out.

 

How can I make my pension savings last longer?

Careful planning is essential.  If you only take the natural income from your pension, in theory it would last throughout your retirement, but is the natural income enough?  Having cash savings to fall back on in years of market-poor performance is essential.

If you think your retirement income could fall short of your expected outgoings, there are plenty of ways you can boost your income.

  • Increasing regular savings means you’ll get more tax relief from the government and your employer might contribute more too
  • Add lumps sums – for example should you receive a bonus
  • Combine your pensions – this will make it easier to keep track of your savings and could reduce your charges
  • Retire later – the longer you defer taking your pension the more potential it has to grow

 

Sources of income in retirement

Your retirement income can be derived from a number of sources including but not limited to your pension income, property rental income, ISAs, general investment accounts, bank accounts and offshore and onshore bonds and state benefits.

If you plan to continue working full-time or part-time after you can claim your pension, this will contribute to your retirement income.

Retirement planning can be complicated, so if you are unsure on the approach to take to provide your income in retirement, it is best to seek professional financial advice.

 

And that’s it!

So if you’re asking ‘when can I retire?’ – the answer is, there is no definitive answer! But you can put plans in place to make sure you’re as comfortable as possible.

For tailored advice get in touch with Cowgills Wealth Management Team at enquiries@cowgills.co.uk.

when can i retire
Disclaimer

The information was correct at time of publishing but may now be out of date.

Wealth Management
Posted by Cowgills
7th October, 2021
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