Dreaming of retiring early might be on some people’s wish list but, unless you are one of the lucky lottery winners, it may just be a pipedream for many — or could it be a reality?
There’s nothing like the long summer days to have people thinking about a workless life.
Mark Reilly, of Royal London Ireland Financial Planning, says that retiring sooner rather than later requires careful financial planning, disciplined saving measures, and ongoing monitoring of your progress.
“Setting clear retirement goals is the first place to start,” Mr Reilly says.
“Determine the age at which you want to retire and calculate the income you’ll need for retirement — factoring in living expenses, healthcare costs, and potential leisure activities such as travel or taking up new hobbies.
“Use this as a base to develop a detailed financial plan. It goes without saying that the earlier in your career that you start saving into a pension, the more time your investments have to grow.”
A survey from Royal London Ireland found that three in 10 workers in Ireland said that, based on their current financial situation, they are likely to retire at the current State retirement age of 66 — while a similar number expect to retire at 70.
“Early retirement often brings opportunities to travel and spend more time with family, as well as to explore new hobbies. There can also be health benefits to retiring early, particularly if you have a very stressful job.”
“However, there can be a lot of hours to fill when you retire. For many people, work gives them a sense of purpose and identity, as well as a daily routine, all of which can be lost at retirement unless adequate preparation is put in.
“Be careful to plan your early retirement well and to have a positive attitude too,” he adds.
“People often underestimate the amount of money they need to have saved up for retirement, as well as the amount they will spend at that stage of their lives.”
Mr Reilly says that, when thinking about how much you will need to fund a comfortable retirement, plan your retirement spending carefully so that you don’t run out of money too quickly.
He says that weekly budgets can be hugely helpful in this regard.
“In addition, prepare for the expenses that you might face in the latter part of your retirement — such as healthcare or nursing homecare.
“If you have any other debts, such as credit cards, overdrafts, or credit union or car loans, it is important to aim to clear these before you retire.
“You might need to have a contingency plan in place if your financial circumstances were to unexpectedly change,” he adds.
The director of Quest Retirement Solutions, Paul Murray, points to your pension plan as key in any early retirement dreams.
“If you’re amongst the two in three workers that have some form of private pension coverage over and above the State pension, you’re certainly in a better boat than the one in three that don’t,” he says.
“You need to check in on your pension regularly and be more hands-on to ensure your pension will deliver for you in retirement, particularly if you are considering early retirement.”
Mr Murray says that two key things people need to check regularly are the performance of their pension funds and the projected retirement income they can expect from it.
He says this will be detailed in annual pension statements sent to you by your pension provider.
“It’s important to be honest with yourself about whether this projected income will be sufficient to give you the standard of living you would like.
“If you feel your expected retirement income is insufficient, you could consider increasing your pension contributions.
“Be careful to ensure that you contribute in a manner that maximises the tax relief you are entitled to.”
The head of business development at the Independent Trustee Company, Glenn Gaughran, says that people should contribute to their pensions early in their careers.
“Even contributing smaller amounts in the early days can help build a significant pot at retirement. With investment growth and compounding, the more and earlier you’ve contributed, the better chance you have of reaching your aspired pension size.
“Usually, the sooner you start saving, the more prepared you will be for your retirement and the more benefit you can gain from the pension tax reliefs that are available.”
Mr Gaughran says that it’s not just pension plans that can get you on the road to early retirement, adding that the biggest debt which most have is their mortgage. He says to try and avoid drawing out your mortgage to the age of 70 because, unless you clear it early, you’ll need to work until you’re 70 to pay it off.
“Avoid taking on a large amount of debt over your working life, as the more debt you have, the longer it will take to clear it.”
