But that has now changed, they say IFS report on pension trends in the UK, published last month, with “pre-state pension age pensions increasingly concentrated among the wealthiest population”.
At the same time, the report showed that those with moderate wealth in their late 50s and early 60s are most likely to be employed and work until retirement age.
In the UK, people can currently become eligible for the state pension at the age of 66.
The main factor in the possibility of early retirement is of course money, said Karjalainen.
“The increase in employment among middle-income people appears to be largely due to financial constraints, with many still having an outstanding mortgage, for example,” she said.
For Gary Smith, financial planning partner and retirement specialist at Evelyn Partners, the key question is whether people can “afford the life they want.”
There are several factors that come into play when answering “yes,” many of which are related to saving. This is particularly important in the UK, where many pension savings cannot be accessed until the age of 55.
Karjalainen pointed out that in some cases it is a good idea to use this money for early retirement, but caution should be exercised.
“It is important for these individuals to consider the impact of using their pension fund to fund immediate needs in the run-up to reaching state pension age, as this may have an impact on their long-term financial security and income in retirement,” she said.
If you want to retire even earlier, “you need to have non-retirement savings that you can use in the years in between,” Smith said. Retiring early also means that the retirement pot needs to be larger to last longer.
He said it’s crucial to save money as quickly as possible if you’re thinking about retiring, even if that means changing your lifestyle, such as giving up vacations abroad and no longer Often has to buy expensive things like new cars. This will also ensure that savings last longer, he added.
Another factor that can affect the ability to retire early is unavoidable costs, such as housing, Smith said.
“A key expense is housing costs, as higher mortgage payments will contribute to retirement savings being quickly depleted,” he explained. Those without a mortgage could consider downsizing their homes to reduce costs and use the extra money to fund early retirement, he said.
Smith noted that, in addition to saving, investing is another important way to position yourself for early retirement.
“A saver can take action with their company pension plan by going under the hood, looking at how the pension is invested and determining whether they can supplement the default fund,” he explained.
Smith noted that taking more risk early could encourage people to use stock market growth to their advantage and recommended people better protect themselves as retirement approaches.
Whether people plan to retire early or not, many are not paying enough attention to their retirement funds, Karjalainen recently told CNBC’s “Squawk Box Europe.”
“I think there is a certain complacency when it comes to saving for retirement, particularly among young people,” she said.
She explained that one of the main reasons for this is that determining how to plan your pension and how much it will pay out is a difficult decision, as there are many variable factors such as future income and the length of the pension.
“Because it’s a complicated decision, people put it off and accept what their employer tells them about the right contribution rate. And I think that’s really the problem,” Karjalainen said.
UK employers are required to enroll their employees in pension schemes, with the standard contribution set by the government being 8% of eligible earnings. People often assume that this is enough – as set by the government – when in reality Karjalainen says it is ideal for people to save between 12% and 15% of their total income.
2023-12-19 14:11:17
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