12/07/17Majority of class of 2017 retiring early
There are two schools of thought on retiring early.
For some people, the question isn’t at what age they wish to retire, it’s at what income. Working past retirement age has obvious financial benefits, and continuing to earn an income, even part-time can be the right decision for them.
For others, however, early retirement is the ultimate dream.
New research from Prudential shows that the majority of people planning to stop working this year will be retiring early; a stark contrast to the 20% of young workers who believe that they will never be able to stop working completely.
Will those retiring early be financially worse off?
On average, yes.
The predicted annual income for somebody retiring at the current State Pension age is £18,900. Those giving work up early see a predicted income of £17,650; a difference of £1,250.
Whilst this would mean losing out on £25,000 over a 20-year retirement, the research showed that the majority of those retiring early felt more positive about their future overall, with:
- 60% felt financially well prepared
- 56% felt relaxed and confident
Retiring at State Pension Age
- 46% felt financially well prepared
- 38% felt relaxed and confident
The confidence and optimism from those retiring early could be explained by the increased focus necessary to retire before the State Pension age. For example:
- 86% have money saved into a pension scheme
- 10% have no retirement savings at all
Retiring at State Pension Age
- 71% have money saved into a pension scheme
- 21% have no retirement savings at all
Vince Smith-Hughes, Retirement Expert at Prudential, commented: “It is encouraging that so many of this year’s retirees are able to give up working early, in order to enjoy an even longer retirement. The fact that many of these early retirees claim to be more financially well-prepared than their counterparts who have had to work on is hardly surprising. However, many of this year’s retirees will have also benefited from some generous final salary schemes – something which only a handful of those in future generations will benefit from. As a result, the retirees of the future who are hoping to retire early will need to start preparing well in advance, setting aside as much as they can afford as early as they can. Using the really useful free guidance on offer, notably from The Pensions Advisory Service and the Government’s Pension Wise service, can help people understand their options. Additionally, for many people, advice from a professional financial adviser can be extremely beneficial when it comes to helping plan their retirement at any stage of their working lives, and to find out what steps to take to achieve important financial goals.”
The regional breakdown of the percentage of people giving up work early this year shows that:
- Wales has the highest (71%)
- London followed closely behind (70%)
- The South East has the lowest (53%)
How do I know if I can retire early?
Making the decision to stop working early depends entirely on your personal circumstances, taking into account:
- Your current financial position
- Health status
- The lifestyle you wish to lead in your retirement
Ultimately, the first step you should take is to get a State Pension forecast. This tells you what your State Pension Age is, how much you should expect to receive each year, plus any gaps you may have in your National Insurance Contributions (NICs).
You can get a forecast online by using the online tool here, or by requesting a BR19 form from The Pension Service. The next step is to then start thinking about the income and capital you need in retirement and then comparing that to what is available from your existing pension savings and investments. Only then will you know if early retirement is a possibility. As highly experienced and knowledgeable financial advisers, helping people plan for their retirement is something we do every day. If you would like to discuss early retirement, you can get in touch by phone or email.