What would YOU sacrifice to retire 5 years early? Three quarters would reduce spending now to cease work sooner
Three out of four workers are willing to cut back spending now if it means they can afford to retire five years sooner, new research reveals.
Nearly a third say they would give up luxury purchases, while around a quarter would either order fewer takeaways, eat out less frequently or make fewer trips to the pub.
But only around one in six working adults would downsize their home to free up cash for early retirement, according to Aegon which carried out the survey.
The pension firm believes this shows people are more inclined to make easier and smaller everyday economies than larger, structural changes to their finances that could have a greater impact on retirement plans.
It also found early retirement is usually most closely associated with having more time for hobbies, interests and travel, or spending more time with family and friends.
But it also found around a third felt what early retirement means is reaching the point where work becomes a choice rather than a necessity.
Dreaming of retirement? What would you cut back on so you could stop work much sooner
Aegon says this suggests retirement is increasingly being viewed as a state of financial freedom rather than a fixed end to working life.
It also asked people what aspect of modern life they would like to ‘retire’ from tomorrow.
Some 29 per cent said household chores, and 26 per cent commuting – but 20 per cent said social media, something that is typically optional and that most people pursue in leisure hours.
Aegon surveyed 2,000 adults who are still working and otherwise weighted to be representative of the UK population as part of its Money:Mindshift initiative, which explores how people think and feel about money.
Dr Tom Mathar, head of Money:Mindshift, says: ‘Ultimately, retirement planning isn’t just a calculation about money. People are balancing multiple currencies at once, including their time, health, relationships, sense of purpose and financial security.
‘Why give up holidays, meals out or trips to the pub now to create a future where you hope to have more opportunities to enjoy life?
‘It may sound like a contradiction, but many of us make choices like this when we’re weighing up today’s spending against tomorrow’s goals.’
He adds: ‘What people appear to want to escape from is the friction that comes with modern living. Chores, commuting, admin and endless demands on our attention all feature prominently in these results.’
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What if your pension is falling short?
If you are worried about whether you will have saved enough, investigate your existing pensions. Broadly speaking, you need to ask schemes the following questions.
– The current fund value.
– The current transfer value – because there might be a penalty to move.
– Whether the pension is in a final salary or defined contribution scheme. Defined contribution pensions take contributions from both employer and employee and invest them to provide a pot of money at retirement.
Non-public sector employers have now mostly replaced more generous gold-plated defined benefit – career average or final salary – pensions, which provide a guaranteed income after retirement until you die.
Defined contribution pensions are stingier and savers bear the investment risk, rather than employers.
– If there are any guarantees – for instance, a guaranteed annuity rate – and if you would lose them if you moved the fund.
– The pension projection at retirement age. You can use a pension calculator to see if you will have enough – these are widely available online.
You should add the forecast figures to what you anticipate getting in state pension, which is currently £241.30 a week or nearly £12,550 a year if you qualify for the full new rate. The headline state pension is expected to top £13,000 from next April. Get a state pension forecast here.
Consider whether you can afford to pay more into your pension, especially if your employer matches higher contributions, or if you receive bonuses and pay rises.
If you are tempted to merge your old pensions, read our guide first to ensure you won’t be penalised.
If you have lost track of old pots, the Government’s free pension tracing service is here.
Take care if you do an online search for the Pension Tracing Service as many companies using similar names will pop up in the results.
These will also offer to look for your pension, but try to charge or flog you other services, and could be fraudulent.
