Sep 23, 2020
When Can You Afford To Retire?
This is a great discussion to have and its one I regularly have with clients who are in their 50’s and have started to think about when they can retire.
Its normal to think that you have to wait until State Pension age of 67 before you can retire. However quite often this is not the case and in fact in many instances I have been able to tell clients they can retire much earlier than they first thought.
You see, there is no set amount you need to retire on. It is based totally on your personal needs and desires. Where one person can live very comfortably on £1,000 per month, another will need £4,000 per month.
The way to understand when you can afford to retire is to first look at what your expenditure is. Now I know this can be painful to do at times, but in this case it really will provide you with some clarity.
Also plot out when there are big changes to that expenditure (such as when a mortgage is paid off, so the monthly repayments stop).
Once you know this you now need to see what your retirement income will be and when it is available. You see many pensions are flexible, so they don’t have a specific age you have to wait for.
This is the point you may wish to pull in an adviser to help you figure things out. Understanding pensions is an art as there are many different types and they can be quite complicated under the skin.
However in reality what you want to know is how much will the pension give you! So I do spend a fair amount of my time demystifying pensions for clients, so they can understand things with clarity.
By doing these two things, it creates a retirement timeline for you.
It shows you want income would be available from your pensions and when. Also what income is needed. You will then understand when retirement is possible and what it would look like.