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Retire at 60 – What is the amount needed?

What is a good size pension pot on which to retire at 60? It’s time to review your retirement strategy to see how your pensions and other investments are performing, and this Moneyfarm blog has been published to help you with that task.

Is 60 a good age to retire in the UK??There is no retirement age restriction
Can I retire at 60 and claim State Pension?No, because the current state pension age in the UK is 66 for men and women
Is retiring at 60 too early?No
How much do I need for retirement?It will depend on the lifestyle you want in retirement.

How much do I need to retire at 60?

A lot of people want to know how to retire at 55. It’s a great age to retire, but it’s a little too early for many. Retiring this young means relying on having earned a well above-average salary in the run-up and having developed a sound investment strategy. It also means opening a good private pension with excellent growth prospects at an early age.

If you retire early and your pension and other investments have yet to perform as well as predicted, you run the risk of running out of money later in your retirement years.

The combination of these factors may lead many to remain at work a little longer and, instead, retire at 60.

In terms of answering the big question – “what is the amount needed to retire at 60?” – it all depends on what standard of living you hope to have after you’ve stopped working. If we use the figures shown on retirementlivingstandards.org.uk, the required amount of income in retirement for the three different levels of lifestyle looks like this:

  • A minimum or basic retirement lifestyle – £10,800 per annum.
  • A moderate retirement lifestyle – £20,800 per annum.
  • A comfortable retirement lifestyle – £33,600 per annum

These figures are for a single person. You’ll need even more if you’re talking about a couple.

How do I withdraw from my retirement accounts efficiently?

“I want to retire at 60. What’s the best way of withdrawing money from my pension?” It’s a question that many people ask.

The best way of accessing the funds in your pension in your golden years is to go down the pension drawdown route, providing you use it sensibly.

Pension drawdown allows you to withdraw as much as you want from your pension pot. You can do this from the age of 55 onwards. The problem is the tax man. You are allowed to withdraw 25% of your pension pot free from income tax. Anything above that amount, and there are significant tax penalties.

It would be best if you also remembered that the less you leave in your pension, the less interest you will earn. It could leave you short if you decide to retire at 60.

How much retirement income can I receive at 60?

You can receive as much retirement income as your pension pot invested funds allow. However, as mentioned above, you should consider the possibility of your retirement income being susceptible to income tax.

Whether we are discussing retirement age 60, or any other age, pension income is taxable according to current income thresholds. So you should review your 50s retirement savings, and if you haven’t got any investments in tax wrappers, like stocks and shares ISAs, you should change things.

Talking about tax wrappers, you might be interested in the best ISAs rate for over 60s.

How much do I need to retire at 60? Use a calculator

You could retire at 60 with 500k, but it depends on what sort of retirement lifestyle you hope to enjoy. If you are happy to spend frugally throughout your retirement years, a £500K pot will go a fair way towards securing a reasonably comfortable retirement.

You’ll find a “how much do I need to retire calculator” on the Moneyfarm website. It’s a valuable tool for answering the “how much do I need for retirement” inquiry. It will tell you helpful information, including the size of the pension pot you need and the ideal monthly contributions you need to make depending on age.

What are the best retirement options for someone age 60?

Just because you retire at 60 doesn’t mean your investment days are over – far from it. However, if you know the best savings account for over 60s, you’ll know there is still money to be made, even though you took the decision to retire early.

If you invest wisely, you can grow your investment income even further. However, it’s essential to understand that investing carries a certain amount of risk. Invested funds can go down in value as well as up.

Can I retire at 60?

Yes, if you’ve got the money needed to retire at 60, you can do so and have been able to since April 2010, when the minimum retirement age was reset at 55. However, please note that it will be reset again, this time to 57, in 2028.

I want to retire at 60, but I am self-employed

If you are self-employed, it is still possible to retire at 60, but you must invest in a good self-employed pension. If you don’t have a workplace pension to fall back on, you could end up with no pension at 60 other than your state pension – and only then if you’ve made enough NI contributions.

A good way around this problem is to invest in a SIPP (Self-Invested Pension Plan). Don’t be worried about the term “self-invested.” Sure, you can manage your own account if you so desire, but if you don’t have the time, a financial adviser or retirement specialist adviser will be able to help.

How to retire at 60 comfortably

I want to retire at 60, but I am still determining whether I will have enough retirement income to allow me to live a comfortable lifestyle. What should I do? It’s another frequently asked question, and one answer is to take a part-time job.

To make the difference you are looking for, you can defer your state pension because of any part-time work income. However, to start receiving your state pension, you must request it. You usually receive a letter from the DWP about two months before reaching state pension age. Your pension is automatically deferred until you apply if you don’t reply. When you do, the payments you receive will be increased accordingly.

Another thing you can think about is taking a lodger. Of course, you must ensure that anyone you allow into your home is trustworthy. You can read an informative article on saga.co.uk discussing the pros and cons of taking this option.

Your primary target would be to get rental income, which could be tax-free under the government’s rent-a-room scheme. The other possible benefit of renting is that if you live alone, you will have company.

Things to plan for when retiring at 60

The first and most crucial thing to plan for, whatever your targeted retirement age, is setting your financial goals and reviewing them regularly. Remember that when planning for retirement, you are talking about having enough funds for the rest of your life.

The chances are that you will have more than one workplace pension. Therefore, it’s not only more challenging to track lots of pensions but also likely that some are performing better than others. If that is the case, a pension transfer exercise may be necessary.

Widow’s pension at age 60

It is possible to get a widow’s pension at age 60, although it is now called “bereavement support.” The current rules state it’s impossible if you’re over 65 or under 45. So, you’re safe at 60. The proviso is that your deceased partner or spouse must have expired on or after the 6th of April 2017, and they must have either died from a work-related incident or have made a minimum of 25 weeks’ worth of NI contributions.

You can learn more about bereavement support on the gov.uk website.

Understanding Investment Risk Tolerance and Asset Allocation for a Secure Future

When planning for retirement, one of the most crucial aspects to consider is your investment risk tolerance and asset allocation. These factors will significantly influence how your retirement savings grow over time and how comfortably you can live in your golden years.

Understanding your risk tolerance involves assessing your willingness and ability to withstand fluctuations in your investment portfolio. Are you someone who can sleep well at night even if the market takes a downturn, or do you prefer more stable, less volatile investments? Your answers to these questions will guide your asset allocation strategy, which is essentially how you divide your investments among different asset classes like stocks, bonds, and cash equivalents.

If you aim to Retire at 60, it’s essential to start this assessment early. The closer you are to retirement, the less risk you may want to take, as you’ll have less time to recover from any potential losses. However, being too conservative can also be a pitfall, as inflation could erode the purchasing power of your savings.

A balanced approach often involves a diversified portfolio that includes a mix of high-risk, high-reward assets and low-risk, stable assets. Financial advisors often recommend a shift towards more conservative investments as you age. However, the ‘right’ asset allocation varies from person to person and may require periodic adjustments based on life changes, economic conditions, and financial goals. Consulting a financial advisor can provide tailored advice to help you navigate the complexities of investment risk tolerance and asset allocation as you plan for a fulfilling retirement.

Final thoughts

The last thing you need is to reach the state pension age and find you don’t have enough money in your pot. So, it’s important to save for retirement as diligently as you can, no matter what age you hope to retire.

FAQ

Can I work after I retire at 60?

Yes, you can retire at 60 and continue to work. You can work for as long as you want, and the number of hours you can work in retirement is not restricted.

What is the disadvantage of retirement at 60?

If you retire at 60, you will not be able to claim your state pension until you hit the state pension age. So you need to have saved an adequate retirement income for the several years you will not receive an income from the state.

How can I retire at 60 and not run out of money?

One of the ways to retire at 60 without running out of money is to purchase an annuity. With annuities, you are guaranteed a steady income for life. The downside is that you need a large pension pot to get the desired annuity income you may want.

 

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