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Many of us dream of leaving behind the responsibilities and demands of working life and retiring early to pursue all our unfulfilled ambitions during our extended golden years. However statistics from the Department of Work and Pensions show that increasing numbers of over 50s are in work. More than a third of the workforce will be over 50 by 2020 and the age at which Brits retire is creeping up. The average man retired at 63.1 years of age in 1993 compared to 64.8 today while the average age of retirement for women is up from 60.9 to 62.6 over the same period.
This is hardly surprising given that life expectancy continues on an upwards trajectory leaving governments with an ever-increasing pension burden and no choice but to raise the age at which the state pension is paid. This has been a bone of great contention, although perhaps longer working lives are not a bad thing. In its ‘Fuller Working Lives’ report, the UK government points out that there are disadvantages to both individuals and the economy in general to individuals taking early retirement. It claims that the British economy missed out on £18billion from individuals leaving the workforce early in 2013. On a more personal level, retiring early, especially enforced retirement due to being made unemployed or ill health, can adversely affect an individual’s mental health with boredom and loneliness taking their toll. For many, stopping work early can also lead to poverty, with the lost years obviously having a significant impact on their pension pot.
The report gives the example of David who earns £28,900 a year and saves 8% of his salary into a defined contribution private pension. If he worked from age 25 to the official retirement age of 65, he would accumulate a private pension pot of £128,000. Retiring at 55 will see this cut by over a third to around £81,000 – a much smaller amount which will will need to last him ten extra years of retirement.
In an ideal world, we would all have the choice to work as long as is necessary to create the retirement future that we want. For many, that is not an option but perhaps it is for you? Whether your dream is to retire at 55 and travel the world or to continue your career until you are 70, you need to ensure that your pension planning reflects that, taking into account your future financial requirements. Only by setting specific goals and making investments that can make them achievable will you be able to take control over when you retire. If you want to talk your options over and see how you can make your retirement dreams become reality get in touch today.
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