Early Retirement ...Pie in the sky?
Thousands of baby boomers are now approaching their sixties. Having worked for around forty years, many are ‘tired and worn out’. They want to take life easier, work less hours or even retire altogether. Many clients tell us that they think they will have to ‘work until I drop’ and believe that taking early, semi or full retirement is only possible for the mega wealthy or those lucky enough to win the lottery.
In our experience and although everyone’s circumstances are different, this is not necessarily the case! Once the mortgage has been paid off and the children have flown the nest, the amount needed to live on in retirement is typically substantially less than what was needed earlier on.
Previous membership of a Final Salary Scheme means that a guaranteed income and usually a tax free lump sum will become available from the scheme’s ‘Normal Retirement Date’. This is often age 65, but can sometimes be as early as age 55, 60 or maybe 62. This income, when added to the State Pension, can mean that the guaranteed amount of income available from State Pension Age onwards is enough or more than enough to get by on.
The introduction of the Government’s Pensions Freedoms legislation in April 2015 has meant that Money Pot plans such as Personal Pensions can be ‘flexibly’ accessed from age 55 onwards. 25% of the fund is usually available tax free with the remainder being able to be taken, subject to income tax, on the basis of ‘what you want when you want’.
The new freedoms mean that higher levels of personal pension income can be taken to live on prior to Final Salary and/or State Pension benefits coming into payment. With no other income, the first £11,000 (2016/2017 Personal Allowance) of pension income is tax free. It is therefore easier than you might think to ‘bridge the gap’ financially between the date of early, semi or full retirement and State Pension Age.
With our advice, a number of ‘baby boomer’ clients have made the decision to take life easier, work less hours or pack up work completely. If you would like to see if you could join them, why not get in touch?
To discuss further or to arrange a face to face meeting please contact us.