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Want to retire at 60? Then do these five things

Yahoo Finance Staff
Active couple with bikes. Photo: Getty
The key to an early retirement is to start saving as early as you can and plan ahead. Photo: Getty

Retirement feels a long way off for many people, even those already a couple of decades into their working lives, but especially for younger generations.

With the state pension age pushed further back, the stagnation of incomes, and the high cost of living such as housing, retirement is just a pipe dream to many people.

But that’s why it’s more important than ever to get thinking about your pension—and taking action too.

With the right mindset, retiring at 60 should not be out of the question for many people. But as the old scout saying goes: failing to prepare is preparing to fail.

A 2018 survey by insurer Aviva of 2,100 employed people aged 22-65 found that just 32% were prioritising saving for retirement.

For the 22-30 age group, only 19% were saving money into a pension—yet these are people who may have to wait until their 70s before they can receive a state pension, if they even get one at all.

If you harbour dreams of retiring early, you need to get your act together quickly. Here are five things to do if you want to retire at 60.

Plan ahead

It is essential that you plan your path to early retirement fully and in detail.

You need to establish exactly how much you need to have saved by the time you hit 60, bearing in mind that you’ve got a good chance of living well into your 80s, if not longer.

That means figuring out what your annual spending will be.

What type of lifestyle do you want? Are you happy to live frugally if it means retiring sooner? Or do you want a life of luxury, jetting off to holiday and driving around in a brand new car?

Understand your retirement goals so you know what needs to be done to achieve them, even if it means making some sacrifices, such as foregoing the odd luxury.

Central to that is the target size of your pension pot on retirement day.

Start saving early—and lots

The earlier you start saving, the larger your pension pot will likely be.

It’s generally never too late to start saving, but you’re at a huge advantage if you begin early—and as close to the beginning of your working life as possible.

In truth, unless you have sizeable savings or assets already, you probably won’t be able to retire at 60 unless you began saving early on in your career.

So save into a pension early, put away as much as you can afford—every little helps—and let compound interest work its magic.

Use a pension calculator to estimate how much you must put aside each month from this point onwards to reach your target pension size at 60.

It might also make sense to consolidate your savings into one pension pot. This could save you money, generate larger returns, and make monitoring its performance easier.

Watch your pension closely

Retiring at 60 will require your pension to perform strongly over time. If your investments are not yielding the returns you need, it’s time to rethink.

You should always stay focused on the long-term and try not to be spooked by short-term turbulence in the market.

But be vigilant about your pension. If performance over a certain time is poor, then consider taking action.

Your investment decisions could mean the difference between retiring at 60 and retiring at 70.

Pay off your mortgage and downsize your home

Retiring without debt is important. Many people have a mortgage hanging over them as they head into retirement so it’s best to try to pay it off beforehand.

Don’t overstretch yourself to buy a bigger or more expensive home while you’re working. Focus on clearing the mortgage.

Then, when the time comes, sell up and downsize if you’ve got more space than you need.

This could help you to clear any outstanding mortgage debt and unlock equity to use in your pension pot.

That cash injection could make up the difference and get you out onto the golf course.

Seek professional advice

Most important of all, seek professional financial advice.

These people know the ins and outs of investing, tax, retirement options, and saving plans.

They will help you to map out your retirement plan and to keep your goals realistic without you taking unnecessary risks.

And they’ll also help you to avoid falling into any traps or making poor decisions.

If you want to retire at 60, you’ll need a helping hand to guide you there—and that helping hand should be a financial adviser.