Dreaming of an early retirement
“When you quit the rat race, will you really have the time of your life?”
We all know that we need to save money for our retirement, but knowing it and doing something about it are very different things! Younger generations may be bracing themselves to work well into their 70s – but the early retirement dream lives on for many people retiring this year. New research from Prudential has found six in ten (60%) of those giving up work this year – the Class of 2017 – are doing so earlier than their projected State Pension age or company pension scheme retirement date.
Dreaming of an early retirement is what keeps many of us going through the daily grind, whether it’s looking forward to a round-the-world cruise, having the time to write a best-selling novel or simply doing the things we want to do when we want to do them. But then we reach age 50 and have a reality check. Looking at our pension pots, we wonder if we will ever be able to afford to retire at all – let alone in any sort of luxury.
With smart retirement planning, you can make your dreams come true and still be young enough to enjoy them to the full. The annual Prudential study – which for the past ten years has tracked the finances, future plans and aspirations of people planning to retire in the year ahead – shows that those members of the Class of 2017 who are planning to retire early this year are even willing to take a reduction on their expected retirement income – to the tune of £1,250 a year – in exchange for giving up the daily grind. Those who are planning to work until their retirement date expect to retire on an income worth £18,900 each year, compared to the £17,650 expected by people retiring early.
However, this year’s retirees who are planning to quit the rate race early feel better prepared when it comes to their retirement than those who are not stopping early, with 60% of those who are not stopping early, with 60% of those taking early retirement saying they are financially well prepared, compared with 46% of those working towards their retirement date.
The early retirees are also more relaxed and confident about retirement than those who plan to work for longer, with more than half (56%) expecting to have enough income for a comfortable retirement, compared with just two out of five (38%) of those who are not retiring early.
This confidence can be explained, in part, by their focus on pension saving. Those who are retiring early are more likely to have saved into a pension scheme – 86% compared with just 71% who are not stopping work have no pension savings, compared to 21% of those who aren’t planning to retire early.
This article does not constitute specific advice and investors should bear in mind capital invested is not guaranteed. Investment Quorum is authorised and regulated by the Financial Conduct Authority.