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Early dawning

Although I am only 30, I would like to plan for early retirement. I do not want to be working when I am 65. Have you got any tips to help me make this happen?

I don’t know what your current employer pension arrangements are but I will assume that you do not have access to a final-salary pension scheme. As you are 30, it is very unlikely that you will currently be a member of one of these, working in the private sector. It is a shame that such pensions seem to be a thing of the past in the private sector as they are a financial lifeline for so many people.

If we are all living longer than previous generations, are much more materialistic, start work later in life because of higher education, yet want to retire earlier, one does not have to be a rocket scientist to realise that, for most people, the numbers simply will not add up. If you want a financially secure retirement, you need to fund this yourself as the state pension will not stretch far – and in your case will not be much use if you want to retire early.

You need to think about what retirement might mean for you. The concept of stopping work and playing golf all day might appeal to some but others need more structure to their lives, particularly in the early years of retirement when they are fit and healthy. This is why many people take on part-time or charity work.

Rather than use the word retirement, we prefer to consider “financial independence”. What this really means is having enough money to be able to do all the things you want to and make choices about whether you want to work or not.

It may be, for example, that you would like to put enough money aside to be able to move to a three-day week at 50.None of us has any idea what our circumstances (health, family, etc) will be like in 20 years time and so it is important to keep your planning flexible and try to take advantage of as many opportunities as possible along the way.

Most people do not spend enough time thinking about what they want out of life. Try to add a bit more substance to your goal of retiring early and what you want the journey to look like.

If you decide to have children, for example, you are going to need significantly more money than if you don’t. If you want to educate them privately, playing golf all day at 50 seems unlikely.

If you want a big house in the country, this is going to take a huge chunk out of your future earnings so think carefully about how important this is to you.

To help with this process, have a look at the George Kinder website (www.kinderinstitute.com), in particular, his three questions’ exercise.

So, in answer to your question, my main tips are for you to explore that goal of early retirement a bit more carefully, keep your planning as flexible as possible and to start now.

At 30, your parents may have had 14 years’ membership of a final-salary pension under their belts.

Jason Witcombe is a director of Evolve Financial Planning

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