Family enjoying food around table

04 May 2023

A financial roadmap for early retirement

Dominic Hughes

Dominic Hughes | Senior Investment Director

Dreaming of early retirement and planning for it are two very different things. I’ll explain three of the key elements of proper planning.

Retirement used to be reassuringly predictable. On your 65th birthday, you would switch overnight from full-time employment to having more time on your hands than you knew what to do with, perhaps with a gold watch and bottle of bubbly.

Today, everything is different. The traditional idea of an absolute finish line to our working lives is no longer the default. Most of us can decide when, how, and even if we retire.

For many, the dream is early retirement. However, with life expectancies in the UK growing longer and the cost of living growing ever higher, the obvious obstacle is whether you’ll have enough money to keep you going for 30, 40 or even 50 years.

As local wealth experts at Investec, we help clients to navigate life’s journey, unlock more opportunities, and achieve financial freedom faster. When we discuss having enough money to retire with, here are some of the topics we broach.

Understanding how much income you’ll need

Many of us have no clear plan for the lifestyle we want from our retirement, and even more of us underestimate how much money we’ll need to pay for it. Everyone’s situation is unique, so calculating that necessary income requires a bespoke approach.

The Financial Conduct Authority estimates that there are more than 18 million people in Britain with significant savings and investments who have never taken professional financial advice. Without it, you risk miscalculating and retiring without enough funds.

Making your money work hard enough

Unless you’re a very high earner or receive a windfall, amassing enough cash to quit work and follow your dreams decades before your peers isn’t easy. Even a frugal lifestyle and extreme levels of saving are no guarantee that you’ll reach the level of wealth required.

We believe, to retire early, you will need expert advice to ensure your savings and investments are working as hard as possible for you. Research from the International Longevity Centre in 2019 shows that Brits who took professional advice for five years between 2001 and 2006 enjoyed an average increase in their assets of nearly £48,000 after 10 years, compared to those who took no advice.

Choosing the right time to retire

Those who are lucky enough to retire at the top of a strong market are likely to have sufficient funds to help them weather any future downturns. But, if you retire during a period of stock market volatility, this can change both the reality of your investment returns and your degree of comfort and peace of mind.

In the current economic climate – higher interest rates, increased inflation, and geopolitical uncertainty – making the decision to retire can feel risky. Retirement is a long-term decision and not one that should be unnecessarily influenced by short-term investment challenges. Still, professional advice can help you to manage different market conditions and give you confidence in your decision.

A bespoke approach to your retirement plan

There are many questions to consider when it comes to retiring early and the first step should be taking professional advice from trusted, local experts. With the right planning, it is possible to enjoy a comfortable, well-timed early retirement.

About the author

To contact or read more about Dominic Hughes, visit his biography here.


Important information

The information contained in this article does not constitute a personal recommendation and the investment or investment services referred to may not be suitable for all investors. Any opinion or estimate expressed in this publication is Investec Wealth & Investment’s current opinion as of the date of this article and is subject to change without notice. The value of investments and any income from them is not guaranteed and may go down as well as up; you may get back less than the amount invested. Past performance is not an indication of future performance.

Investec Wealth & Investment (UK) is a trading name of Investec Wealth & Investment Limited which is a subsidiary of Rathbones Group Plc. Investec Wealth & Investment Limited is authorised and regulated by the Financial Conduct Authority and is registered in England. Registered No. 2122340. Registered Office: 30 Gresham Street. London. EC2V 7QN.