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Early retirement does not need to be pie in the sky and can be a legitimate option for some people. Retiring early is a goal for many so that you can enjoy life whilst still young and healthy. It does require some early investment, however, and isn’t always for everyone but here are the basics to remember:

There are currently no age restrictions in the UK as far as retirement is concerned. Ensuring you have the funds to do so, however, does depend on your circumstances – as a general rule of thumb, you’ll need 20x your unfunded retirement expenses in savings/pensions. For example, if your retirement expenses are £30,000 per year, you will need £600,000 in savings/pensions.

For the average person, retiring early may simply be a theory, but even just working five years longer could make a huge difference to your projected retirement income and how long your investments last thanks to extra contributions and compounded investment growth. A professional advisor will be able to sketch a better picture for you based upon your individual circumstances and financial health.

At Waverton Wealth, we use sophisticated cashflow modelling software to help clients map out their financial future.

In this fictional example, we have Mr Client, aged 50, who:

  • Earns £100,000 per year, contributing 5% of his salary into his pension, his employer also contributing 5%
  • His pension is currently valued at £500,000
  • He has an ISA worth £100,000
  • He predicts he will need £50,000 per year for expenses in his retirement

In this situation, we have looked at two different retirement dates: one at age 55, and one at 60.

In this example, when Mr Client retires at 60, he has enough money to see him through to he’s aged 90 and spending £50,000 per year (rising every year with inflation).
When he retires at 55, however, his money will run out aged 77, leaving him to rely on the state pension for the entirety of his expenditure.
The above example is overly simplistic to represent the power that being able to model your finances into the future can have. Cash flow modelling becomes more valuable – and complex – as there are more individuals involved and differing savings and investment vehicles used by the client(s).
Planning out a timeline is key to successfully retiring early. Taking into consideration your pensions, state pension entitlement, defined benefit pensions or other investments will form the foundation of your retirement. Consult a Waverton Wealth financial planner and we can help you form the timeline and start planning for your future retirement – whether that comes sooner or later.

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