Retirement at 55
Retiring early is the easy part, but making your money last is hard. If the average male life expectancy around 75 and we retire at 55, then our savings and investments will need to last for 20 years. That's without any extra problems like long term care or other unexpected events.
Start a pension
It might seem obvious but start a pension as soon as can, which is even more important if you're thinking of retiring early. Did you know that when you put money in a personal pension the taxman contributes too?
Pensions are a tax-efficient form of saving. You receive tax relief on contributions that you pay into your pension.
If you pay 40% or 45% rate tax, you get an even better deal.
How to retire early; what will you need?
Basic to comfortable : £11,362 to £17,500
According to minimumincome.org.uk The basic standard of living for a couple is projected at £11,362 per year.
Whereas a report from Barclays says people need £17,500 a year in retirement to enjoy a comfortable lifestyle (August 2015 Telegraph).
To be able to achieve an income of £17,500 a year, an employee would need to save a pension pot of approximately £350,000, based on current annuity rates.
Barclay's study was based on 2,000 employees and suggested that the key requirements for a happy lifestyle in retirement are to be debt-free, run a car and enjoy a two-week holiday abroad each year.
Weekly Budget for a basic standard of living - minimumincome.org.uk
How can you retire early?
Know your “figures”
The annual income you'll need to live on
The size of retirement portfolio needed to generate that income
Use the free Money Advice Service pension calculator to estimate your retirement income; including income from workplace schemes, private pension contributions, plus state pension entitlement age and more.
Make savings in your living costs
The less you can manage to live on, then the more you'll be able to save, and the sooner you can retire.
Keeping your basic cost of living lower will provide you with extra cash that you can then save for retirement. At the same time, it will also condition you to living on less, which will be good practice once you reach retirement itself.
You could consider down sizing your property to reduce your outgoings and free up some cash or phasing your retirement so you still have some income and draw less from your pension.
Cut back, start saving NOW
Increase your income (add any extra income to your pot).
You can work to get a better paying position, or you can take on a part-time job. You can also set a side business (where you can set up that Solo 401(k) plan), or simply take side work based on any special skills that you have.
Top tips to retire early
Increase your income - you always need more than you think and you don't want to be the position where you can't enjoy your retirement and have the holidays and trips you'd like.
Make your income work for you - Get advice on how to make the most of your savings, If you can invest additional income wisely then it'll pay in the long run.
Live below your means - Make some cut backs now and live on a little less.
If your goal is early retirement, and you increase your income to reach that goal, it's important to save and invest that income instead of spending it on things that aren't going to provide you money during your retirement.
Retirement is no longer a fixed time in your life - you can take early retirement or carry on working beyond state pension age. If you decide you want to retire early, you can start claiming your workplace or private pension from age 55, but your state pension won't be available until you reach state pension age.