There are many of us that would really like to be able to retire early, perhaps because we have had enough of working, we want to spend more time with our family or because our health isn’t that good. Whatever the reason, we will have to plan carefully to make sure that we are financially prepared for this situation.
Assess current retirement fund
To start with you will need to think about how you will pay for your retirement. You will probably be entitled to some government pension and you will be able to calculate how much this will be using the governments website. If you sign in to your account or set one up, it will look at your National Insurance contributions and calculate how much money you will receive. It will assume that you will be paying in to retirement though and you will need to check to see whether you will have paid in enough by the time that you retire to live off. You may also have other pension funds as well as so you will need to take those into consideration. Of course, you may have other funds that you plan to use for retirement which are not pensions. Things like investments that you might be relying on, for example.
You will then need to calculate how much money you might need in retirement. It might be similar to the amount that you need now. This is because although you may no longer have dependent children, need to pay to travel to work or a mortgage or even little loans to repay, you may want to spend more on holidays, you may need a cleaner or gardener and you may also need to have your heating on for longer at a higher temperature. Once you have worked this out you will need to compare it to the amount that you will have in retirement to see whether it will be enough for you. If you do not think that you will have enough, then you will need to think about how you will get the money and plan this, before you think about early retirement planning. If you think you will have enough, then you will able to start planning for early retirement.
Consider how to fund early retirement
If you are happy that you will have enough money to be able to afford to retire at your proper retirement age, then it is time to work out whether you will be able to retire early. It will not be possible to take your government pension early, although it could be possible to take a private pension early. If you do take a pension early, you will find that the payments will be significantly lower and you will have to decide whether that will be enough for you to manage on.
It is more likely that you will need to find another income to manage on. There are lots of possible options for this. If you have money that you can invest then this could be a good solution for you or if you have money you could just spend that, but many people do not have a big chunk of money available for them to spend.
It could be that you will need to concentrate hard on saving up a chunk of money by spending less, saving more and potentially earning more as well. However, you might want to do something when you retire which could earn you money.
Just because we give up work does not mean we want to give up earning. If you wish you could start up a business, do some online work or freelance jobs or things like that. This will not be so full on as your current work and could allow you to earn enough money when you need it. It is good to think about whether you have skills, time and enthusiasm for doing this sort of thing.
It is worth thinking of all sorts of ideas, perhaps by yourself or with family members and work out what might be a good option for you. You could try several things or just one, but be confident in what you choose. Make sure that you do enough research to be sure that it will work out for you. It could even be wise to have a back up plan, just in case it does not work.
Another possibility is to cut your working hours and try this out on those days, then you will get used to doing something different but will not be taking such a big gamble than if you just left and tried something new all in one go. It will give you the freedom to try out a few things and still be getting in some income before you give up your job entirely.