Early Pension – Is it for me?

If you are considering early retirement, you need to ensure that you invest your funds properly and set up a good strategic strategy as early on as possible. You might end up in a situation where you actually cannot afford to survive on your pension and you will have to start working again. When setting up your strategic plan, you need to analyse your current income and your projected after-retirement income to expense ratio.

At this point, consider any withdrawals that you may make in order to pay off debt. Once this is done, study your current financial situation in terms of the assets and liabilities you have and make sure you understand how your money is spent.

The next step is to put down what your assets and liabilities will be after retirement. Take a look here at the projected values and income derived from any assets and investments. Make up a projected budget for after retirement focusing on how your income and expenses will change. This will largely depend on what level of lifestyle you plan to enjoy after retiring.

There will be expenses that will, in all likelihood, increase – for example, medical care expenses – and some that will decrease, for example, your clothing or gas bills. Compare the before and after retirement figures and ensure that you pay special attention to how the expense to income ratios are expected to change. You should now have a better idea of what your finances will look like after retirement. If you find that your income will not be sufficient to meet your lifestyle requirements, you are going to have to do one of three things –

Add more to your retirement savings now; scrap the plan to retire early or be prepared to work again after retirement – this can be part time or full time. Depending on how far off retirement is, adding more money to your retirement planning is a very sound strategy. It is probably the option that is the least risky. You have no guarantee that you will be able to find work again once you have retired and you may even find that you are unable to work. It is best, wherever possible, to implement a debt reduction and investment plan as early as possible.

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