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Saving for early retirement

Moneymagpie Team 23rd Dec 2022 No Comments

Reading Time: 3 minutes

In the United Kingdom it is possible to get the State pension after reaching 66 years of age only if one has at least ten years of contributions. However, the minimum pensionable age is about to be raised to 68, and it is crucial to underline that the monthly amount received strictly depends on the number of years of contributions: to get the maximum amount it is necessary to have at least thirty-five years of contributions.
Nevertheless, if a considerable amount of money is set aside, it is possible to get an early retirement.

Understanding you needs

Therefore, we are talking about getting ahead of the curve, retiring well before the statutory retirement age to get the State pension. As mentioned above, it is possible only in the case you have paid contributions for at least ten years, having on hand an amount of money which may cover all the expenses one faces throughout the time – and evaluating with attention the sum of the actual pension income, too. If you want to retire at 55, read this blog post which explains all the aspects to take into consideration when thinking about an early retirement. It is, however, a reasoning that is always good to do, because the retirement benefit itself is not always enough to spend a peaceful retirement.

How much is State Pension?

Every UK citizen who has paid contributions for at least ten years is entitled to get the State pension as he or she turns 66. It is also true, however, that the amount is dependent on the number of years for which contributions have been paid: a taxpayer who has paid them for only 10 years gets a small check; on the other hand, to get the full amount – around £110 per week paid every 4 week – 35 qualifying years are needed.

A sum nowadays does not allow one to spend a comfortable retirement. For this reason, a great number of people set up a supplementary pension scheme at a young age, which is necessary in order to have a larger sum of money at disposal to enable them to lead the lifestyle they want to carry out.

How much will you spend in retirement?

Whether you decide to retire earlier than retirement age or to wait for the pensionable age, it is important to highlight that during the retirement period you will not receive income derived from work. In order to be able to retire, it is necessary to have enough money available to pay off all the expenses. Those who retire after age 66, usually do not have to pay off mortgages or to spend large sums on their children’s education or other similar expenses, and it is usually the same for those who anticipate retirement.

When assessing your assets for retirement, however, it is important to consider that one still has to manage the house, pay utility bills, go grocery shopping; and perhaps you will also have to consider some vacations, more or less brief, or the desire to engage in sports or other activities. Generally speaking, a sufficient amount for retirement is considered to be about £26,000 to £30,000 per year.

How to save

Keeping you own capital in a bank account is no longer enough to guarantee its availability in the future. This current year, inflation in the United Kingdom has exceeded 10 percent on an annual basis, which is worrisome especially considering that the forecast for the future is anything but rosy. Those who want to set up a small nest egg that they can use to retire early should therefore consider setting up an investment portfolio, which may enable them to have enough capital available in the future to live comfortably, without having to rely on the help of others or on retirement.

DisclaimerMoneyMagpie is not a licensed financial advisor and therefore information found here including opinions, commentary, suggestions or strategies are for informational, entertainment or educational purposes only. This should not be considered as financial advice. Anyone thinking of investing should conduct their own due diligence.

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Jasmine Birtles

Your money-making expert. Financial journalist, TV and radio personality.

Jasmine Birtles

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