While early retirement used to be a distant dream for many of us, times are changing. Fresh research from Aegon shows that half of the UK’s current retirees stopped working earlier than they had planned to, often out of necessity rather than choice.

Personal health issues and providing family members with care have been, and continue to be, two of the primary reasons why workers retire earlier than planned.

Ageism is also a factor while phased retirement is also growing in popularity. The study shows that around half of workers would prefer to phase down their hours from the age of 63 until they reach full retirement age.

Regardless of the reason why you might retire earlier than the standard age, this research highlights the need for anyone who is currently working to make retirement plans early on and prepare for the unexpected.

Coupled with the financial impact and ripple effect of our ageing population, we need now more than ever to be savvy with our savings plans. So, what are the best ways to approach your retirement financial planning?

Crunch the Numbers

Studies suggest that we need to replace 70-80% of our pre-retirement income in order to maintain our standard of living during the later years. But early retirement means more years without an income and more time during which our funds will gradually get depleted.

But we cannot prepare if we don’t know what we are preparing for, which is why working out your ideal retirement scenario is essential.

This means considering questions such as whether you wish to retire at home or abroad, if you plan to take up any expensive hobbies during these years (such as skiing or golfing) and whether you might consider pursuing other ventures to make a bit of extra money on the side.

Start Early

For the younger generations who have the benefit of time, the best way to prep for an early retirement is to start saving early. This means creating a long-term game plan whereby any savings are invested in a financially savvy way to take advantage of the highest possible returns.

At any age, a significant portion of our retirement fund should come from our pension, and the success of auto-enrolment has helped millions of savers take advantage of a structured savings vehicle.

It’s well worth having a chat with your employer, or the person who manages your workplace auto-enrolment scheme, to work out whether it makes financial sense for you to make higher contributions and gain even more from the scheme.

You may also want to discuss your pension with a financial planner to see if there are any other options that would enhance your retirement savings plans.

A Self Invested Personal Pension (SIPP) is a type of personal pension where you can choose your own investments and is a popular option for many who appreciate its flexible nature.

Consider Annuities and Bonds

Annuities are essentially a type of insurance. They are designed to produce income and can, therefore, represent a key component of a retirement portfolio.

An immediate annuity can secure future income where you exchange a lump sum payment in exchange for guaranteed income for a set time frame (this can be for the rest of your life or for a shorter period).

This is a flexible investment vehicle and you can also choose from fixed or variable immediate options as well as a range of terms. The joint life pay-out can work very effectively for a married couple and annuities in general can be a good option for those who struggle to save effectively.

Bonds are also well worth considering. As a type of collective investment, bonds offer a way for relatively small investors to benefit from the economies of scale made available to institutional fund managers.

They can also act as an effective tax planning tool and may fit around a range of retirement plans for those with different budgets.

For example, unit-linked bonds see investments made directly into asset classes whereas offshore bond-related options can cover UK expats intending to return only on retirement who wish to keep their investments offshore.

The Emotional Transition

Regardless of your age and individual circumstances, the transition from working life to retirement can be a challenging one. Many people struggle without the clear sense of purpose that working life brings; others need to make a concerted effort to adjust to spending much more of their time with their partner.

Putting all of your financial plans in place will do a great deal to ease the pressure, and to help you (and your partner) bring your retirement dreams to fruition.

For more advice and support with retirement planning, or if you’re concerned about early retirement and would like some informed guidance, call our advisers today.