There’s no reason why you shouldn’t enjoy the retirement you’ve always wanted, but this takes careful thought and planning. It’s essential to consider not only the sum of your financial assets, but also how you’d like to spend your time.

Effective financial planning encompasses your expectations and lifestyle considerations. Indeed these are just as important as money in the bank.

When can I afford to stop working?

1. State and personal pensions

The age at which you can receive your State Pension is creeping up. By 2020, it will have increased to 66 years for both men and women.

This is set to rise even further by 2026. Fortunately many people also have personal pensions and these can be accessed from age 55, although if you don’t need the funds at this point it’s best to leave them untouched.

As annuities are no longer obligatory you’re free to invest your personal pension pot as you see fit. This opens up a world of investment possibilities, which helps you to make the very best of your funds.

2. Savings, investments and other income

Although interest rates vary, in the long term careful investments should provide satisfactory yields, especially if you take expert advice on a regular basis.

Alternatively you may plan to sell your existing property and downsize, leaving you with a substantial profit to re-invest. You may own rental property, which should provide a steady return over the years with good management.

Clearly income derived from investments will fluctuate. However it’s useful to consider some general figures, particularly as the amount you actually need is always more than you realise. As a rough rule of thumb and assuming you live into your 80s, to achieve a retirement income of £25,000 per annum (the average national wage) you would need the following in savings:

• £684,00 to retire at 50
• £488,000 to retire at 65

3. New possibilities

If funds allow, you may prefer to move to part-time work, perhaps in your 50s or 60s, and supplement your income through savings. The flexible working conditions offered by the internet can provide an extra source of funds and keep the old brain ticking over.

Indeed in times of economic ups and downs it’s good to have an alternative approach, and many people are enjoying the benefits of a regular income in their senior years.

4. Consider your budget

Don’t forget that retirement planning isn’t just for the obvious essentials such as accommodation, food and bills. It also depends on how you wish to spend your free time. Will you be taking it easy around the home or in the garden?

Perhaps you’ll finally do all the travelling you’ve been looking forward to for years, or you’ll focus on your hobbies. Obviously some pastimes are more costly than others and all this must be taken into account.

By looking at this before you retire, you’ll get a clearer idea of exactly what’s need to fund your future lifestyle.

5. Don’t wait to pay off debts

In an ideal world you’ll have paid off all debts before you retire. This includes your mortgage, credit cards and loans. Even if you’re lucky to enjoy a substantial income at retirement, debt means money down the drain in the form of interest.

Rates will always fluctuate and you don’t want to be at their mercy, even if you’re confident about your investments.

Plan for the unexpected

Don’t forget to take into account that your spending habits are likely to change in time. It’s very likely you’ll spend more time at home, which will increase utility bills. Healthcare and home help may seem a distant prospect now, but careful preparation will save a lot of time and anxiety in the future.

Many people underestimate the time they’ll need to live on their retirement funds. Although none of us have a crystal ball it’s now quite common for a 65-year-old man to live to 87, whilst a 65-year-old woman has a good chance of hitting 90.

In response to “When can I afford to stop working?”, this time will be different for everyone, but by carefully considering your future income, together with your lifestyle goals, you’ll have a much clearer picture. Don’t be tempted to delay this process. It’s crucial to consider your long-term situation to prevent funds from running out before you do.

By seeking expert guidance now you’ll avoid the pitfalls and ensure you’ve got everything covered when the time comes to put your feet up.

To talk to Expert Wealth Management about your financial concerns, call us on 01993 772467 or email us here today.