Want to Retire at 55?
11 May 2015 | COMMENTS: 0 | Author: Ryan Smith | General
In the UK, the official age of retirement stands at 55. At 55 years old you can take your pension fund and, following the reforms that came into effect earlier this year, do with it almost as you wish; whether that be securing a stable income via the purchase of an annuity, or entering income drawdown to manage your own income over your retirement.
But while we are technically able to retire at 55, the state pension age (the date that you are eligible for the state pension) is actually much later: into your 60s, and rising to 68 years and possible further for those in their early-20s. And even despite this, more and more people are working past the state pension age, with 753,000 people working past state pension age in 1993, 1.4million people in 2011, and even more now: that’s more than double the amount of people working past state pension age in just 20 years.
And while many of us aspire to retire at 55, many of us either aren’t willing or able to commit the finances to save so heavily toward their future, and some just aren’t sure of the best ways to go about it.
One person who is on a mission to retire early is Guy, founder of the blog Early Retirement Guy. He has been kind enough to provide us with his three top tips for retiring early, and while he has a long way to go (he’s currently only in his 20s), he’s determined to get there through hard work and financial savviness.
Guy’s Top Tips for Early Retirement
- Start early – The power of compound interest will eventually increase your pension pot faster than your own contributions.
- Accept some risk – Saving in pure cash is going to be eaten away by inflation. Historically equities have returned 7% which beats cash and bonds over the long run.
- Examine your spending/income requirements – Too many people over-estimate their spending in retirement and so continue working long after they could have comfortably retired. It’s also far easier to reduce spending than to increase income.
Another person who is looking to be financially independent in the hopes of an early retirement is Graham Clark.
Graham runs the website MoneyStepper, as well as being a qualified chartered accountant, data specialist, business owner, stock investor, landlord, author, podcast host, iPhone app creator, financial consultant, avid money saver, wealth creator, financial coach and “self-proclaimed personal finance geekazoid”.
Here’s Graham’s three best ideas to help you plan for an early retirement:
Graham’s Early Retirement Advice
- Pension Contributions – Always take advantage of any matching that your employer offers on your pension contribution – ITS FREE MONEY!! For example, even a minute 3% match on the average £28k salary invested at 6% above inflation over 30 years ends up to be a whopping £67,000 when you retire! That is over twice your annual salary in free money.
- Budget! – Yes, it’s boring, but it’s the most important thing you can do to effectively manage your money. Once you set up an accurate written budget (including your net worth position), then everything else follows suit. You’ll cut expenses in areas where you are wasting money, you’ll see areas where you can cut your costs without cutting your lifestyle and you’ll start getting more out of your investments. Just do it – today!!
- Write it down – No one has ever achieved a goal without establishing that goal in the first place. So, if you want to retire by 55, then write down that goal. Then, build a plan, which covers the short, medium and long-term which shows you exactly how you are going to walk along the path to get there. Yes, there will be diversions along the way. But, if you write it down, if you map out your journey and you follow your route, you will get there!
Coming from people who are actively working towards financial independence and early retirement, this is advice worth heeding.
Set a target in mind, start early and, with the help of a financial adviser to mitigate some of the pitfalls around investments you too could be retiring at 55 – just like Guy and Graham!