Curious about retiring comfortably at 55 while maintaining your desired lifestyle? Aim for a retirement income between 50% to 67% of your annual salary for this purpose. This strategy not only ensures a mortgage-free life but also covers commuting expenses and adapts to your children’s increasing independence during your career transition.
The amount of money you need to retire at 55 will largely depend on your lifestyle and how much you plan to spend when you retire. The general rule is that you will need to save at least 20x your expenses in savings/pensions to have a comfortable retirement.
The earlier you start building your pension pot the better. Being financially responsible and saving towards your retirement goals will help you retire earlier and have financial security when you stop working.
Do You Want to Retire at 55?
Retiring at 55 is a possibility for lots of people, although it requires good financial planning and spending habits. Retiring early has lots of advantages, but there are some potential drawbacks to be aware of.
Pros of retiring at 55
- More time to spend with your family, friends, and loved ones.
- Pursue your passions e.g. travel or start a new hobby.
- Enjoy life while you’re still young and healthy.
- Plan a lifestyle change e.g. relocate abroad.
Cons of retiring at 55
- Smaller pension pot.
- No state pension until your mid 60’s.
- Risk of underestimating how long you will live for.
You must weigh up these pros and cons and decide if early retirement is the best option for you.
What is a Good Pension Pot at 55?
The amount of money you should have in your pension pot to retire at 55 will depend on your personal circumstances.
Most financial experts recommend following the 50-70 per cent rule, which says you will need between 50-70% of your working income to maintain your lifestyle in retirement. So, if you retire on a salary of £40,000 then you should aim to have an income of around £20,000-£31,500 once you retire.
Keep in mind that a good pension pot is one that provides you with enough income to do everything you want and enjoy a comfortable and financially secure retirement.
What Income is Needed in Retirement?
The amount of money you need in retirement will depend on your lifestyle. Some basic retirement expenses include household costs, transportation, medical care, and entertainment. Make sure that you also take inflation into account.
Start by considering how much you currently spend each money and how this will change in the future. For instance, will you need more money to travel or pursue expensive hobbies when you retire?
Do you Have Multiple Income Sources?
The money you receive in your retirement usually comes from two main sources: income and capital.
Your income is the money that you receive in regular payments each month. This includes final salary pensions, savings interest, dividends, State Pension, and any other guaranteed and fixed income. Capital refers to money being held in accounts or assets such as property or equipment.
Do You Have Enough Money to Retire at 55?
The easiest way to check whether you have enough money to retire at 55 is to create a retirement income plan. You need to calculate your retirement expenses and then deduct this amount from your retirement income and capital.
You can get a cash flow report to check whether you have enough money to retire at 55. If you don’t have enough money saved then you save a few options:
- Retire a few years later.
- Reduce your retirement expenses.
- Save more money each year.
Retiring at 55 without Running out of Money
When you retire younger, there is a greater risk that you will underestimate how long you will live and run out of money. If you want to retire at 55, then you must plan your retirement well and start saving as early as possible.
The 4 per cent rule advises that you can comfortably withdraw 4% of your savings in your first year of retirement and adjust that amount for inflation for every subsequent year without running out of money for at least 30 years.
Can Prosperity Wealth Help you Retire at 55?
There are no age restrictions on retirement in the UK and most people can access their pension from the age of 55. Retiring early will allow you to enjoy life while you’re still young, and retiring at 55 is a possibility for most people.
At Prosperity Wealth, we can help you create a solid financial plan and achieve your retirement goals. We have helped many people build a pension pot and save for a comfortable and financially secure retirement.
Book your Consultation today
Get in touch with our friendly advisors if you would like to discuss your retirement savings options. You can book a consultation with one of our financial experts for free retirement planning advice.