Early retirement may seem like an unattainable dream for many, especially if you have to wait longer for the state pension.<\/p>\n
With plenty of planning, dedicated saving and some smart investment moves, however, you might find it much more realistic than you think.<\/p>\n
The earlier you start saving into your pension, the better, according to the new Times Money columnist Bec Wilson, author of How to Have an Epic Retirement. \u201cPlan for the gap years before your pension or state pension kicks in,\u201d she said. \u201cClear your debts and, finally, ask yourself whether you really want to stop working or simply want more flexibility and fulfilment in what you do next.\u201d<\/p>\n
If you\u2019re dreaming of handing in your notice and dipping out of the rat race, here\u2019s what you need to do to make it happen.<\/p>\n
Pay off your debt<\/p>\n
Paying off any short-term debt and your mortgage are the most important things you can do to prepare for retirement, according to Aaron Gibbs from the wealth management firm Charles Stanley.<\/p>\n
With those repayments no longer hanging over you, your monthly outgoings will be reduced, leaving you able to save more towards an early retirement. Pay off debt with the highest interest rate first \u2014 a student loan, for example, can usually be left until last and, depending on your repayment plan, may even have been cancelled out anyway by the time you retire.<\/p>\n
Track down your savings<\/p>\n
The rules around pensions are complex and always changing. The state pension age is rising and pensions are more liable to tax than ever, so the first thing is to figure out what savings you have \u2014 and where they are.<\/p>\n
If you are a public sector worker you will probably have a defined benefit (DB) pension, which means that your employer guarantees you a fixed income in retirement based on your salary and years of service. If you are in the private sector you are more likely to have a defined contribution (DC) pension, where you build up a pot of money that is invested for use in later life. Both types of pension can be accessed from age 55 at the moment, but that is rising to 57 in April 2028.<\/p>\n
\u2022 Why you should (and shouldn\u2019t) take your tax-free pension cash<\/a><\/p>\n You\u2019ll need to contact whichever scheme you are a part of to find out how much you can access and when.<\/p>\n If you are in a private sector scheme you could use your pot of money to buy an annuity, which will give you a guaranteed income, either for life or a set amount of time depending on which you prefer. If you do not want to hand over your entire pot you could leave it invested and take an income from it, through what is known as drawdown, or do a combination of the two options.<\/p>\n If retirement isn\u2019t imminent, then maxing out your pension contributions is one of the biggest steps you can take towards getting there sooner, according to Robert Cochran from the pension firm Scottish Widows. Make sure you are getting the highest contribution possible from your employer (you may need to increase your contribution if the firm will match it) because not only does more money compound for longer but you also get tax relief on your contributions. This also applies to the self-employed. <\/p>\n \u201cThe earlier you do this in your working life, the better because that money will grow and grow while you go about your daily life,\u201d Cochran said.<\/p>\n