Six tips to help retire at 55.
1. Start early
Once you’ve paid off expensive debt and saved up three months of your outgoing in a rainy-day cash fund, it’s time to make your money work harder for you by saving and investing. How to retire at 55 invariably means starting to save early – the earlier, the better. Not only do you put more money aside, but you also benefit from compounding – one of the most powerful forces of investing.
2. Set a target and invest as much as possible
If you’re asking yourself, “How much do I need to retire at 55?” the first thing you’ll need to do is take the time to set a budget. Then, it’s time to put as much as possible aside each month into your pension to enjoy maximum tax relief. Of course, you won’t be able to get this money back in an emergency, so make sure you can afford it. Alternatively, invest in a Stocks & Shares ISA or general investment account to enjoy more flexibility in terms of withdrawals.
3. Keep more of your money
Don’t let expensive management fees eat into your retirement savings. There are low-cost opportunities for investors who want to protect their money and grow it for the future.
4. Don’t sacrifice your pension savings
As you go through life, you’re going to come up against competing priorities, whether it’s getting on the housing ladder, spending on your children, or house renovations. Try not to sacrifice the amount you put into your pension – it may be challenging at times, but it will be worth it in the long run.
5. Ease yourself into retirement
You might want to slowly reduce your working hours before giving up work for good. That way, you can enjoy some more free time but still benefit from regular income. You won’t be using your pension savings as quickly as if you gave up work straight away.
6. Decide what to do with your pension pot carefully
Your pension savings can help you achieve financial security in retirement, regardless of whether you have a workplace pension or a self-employed pension. The choices you make about how to disburse your pension savings can have a significant impact on your retirement lifestyle. You can swap your savings for an annuity when you retire at 55 and want regular income, although the annuity rates are often low. If you want more flexibility in retirement, you can keep your money invested in the market and withdraw as you like. Take a look at the Moneyfarm Pension Drawdown Service, which offers just this. It is important to plan well, though; once your savings are gone, they’re gone.
It can be difficult to plan for retirement in the best way for you and your family. If you need any help, talk to an independent financial adviser and read our pension guide.
