How do I know what age is best for me to retire?

I’m 55 and I’ve started seriously thinking about retirement, but I’ve got no idea when I’ll actually be able to afford to do it. I’ve got a decent pension pot and the mortgage is nearly paid off, but I don’t know if I’m on track or if I’d be cutting things a bit fine by stopping work at 60. How do I work out what the right retirement age is for me?

When can I retire is the biggest question I get asked. Here’s a list of the steps I work through with my clients:

1. Work out what you’ll need to spend in retirement

• What will your essentials cost? Housing, food, utilities...
• Now add in the fun stuff, such as holidays, hobbies, and eating out. Most people spend more in the first 10 years of retirement, so be realistic!

2. Calculate your income in retirement

• Check your State Pension forecast at on the HMRC website.
• Tally up everything you've got in workplace and/or personal pensions.
• Find out if you have any defined benefit/final salary pensions.
• Will you have rental income, investments, or perhaps do some part-time work as well?

3. Decide how you'll access your pension (and other savings)

• Do you want to take your 25% tax-free lump sum?
• Annuity vs drawdown - Do you withdraw at your own discretion or book in a guaranteed income for a set amount of time?
• What steps can you take to make sure your retirement savings last?

4. Other things to think about...

• If you stop working at 60, you’ll need to fund the 7-year gap to 67 entirely from your pensions and savings!
• Retiring earlier means your money has to stretch further, so be cautious with early withdrawals and don’t be too risk-adverse with your investments - you don't want to stifle too much growth and end up falling victim to inflation.
• Even a couple of days of part-time work per week can make a big difference and help your savings last longer.

You can map all this out yourself, or a financial adviser or planner can help you plan for retirement and model different scenarios (retiring at 60 vs 65, downsizing, leaving an inheritance).

Hope this helps!