Speak to a Saltus expert...
Please fill in your details to arrange a financial review with one of our financial planning or investment experts.
How it works:
- We will call you back to find out more about your aims and requirements
- We will arrange a meeting with one of our team at a convenient time, either over the phone, on video, at your home or workplace, or at one of our offices
- You will be able to ask any questions you have and find out more about managing your wealth with Saltus
- Your review will be at our cost and there is no obligation to work with us afterwards
Who we work with:
- Individuals with £250,000 or more in investable assets. This includes pensions, ISAs, other tax-wrappers and cash available for investment.
In your mid-40s, with £250,000 in your pension pot? Wondering if you really have to wait until 67 to retire? Well, perhaps not – with a little bit of planning and investing, you could retire early.
Determining your retirement expenses and setting realistic goals
The Pension and Lifetime Savings Association and the University of Loughborough have researched the amount required per annum to provide a ‘comfortable retirement.’ They concluded that, for an individual, it was around £37,300 a year. This sum certainly isn’t a lavish figure: it’s enough to provide £144 a week on food, enjoy three weeks of holiday in Europe, and spend around £1,500 a year on clothes, shoes, and gifts. So, perhaps ‘mildly comfortable’ might be a more accurate description.
Saving strategies for an early retirement
How can you easily save for a more comfortable, early retirement? If your starting point is £250,000 in your pension, to achieve this, you’ll need to save and invest around £1,000 a month. If you are earning £80,000, that’s 15% of your annual salary. Of course, the majority of that could be made up by employer pension contributions, meaning a good chunk of it may not have to come out of your pocket. If you’re 45 today and your pot and monthly contributions are invested well, making a reasonably conservative 4% a year, by the time you arrive at your 60th birthday, you’ll have just under £700,000.
The 4% Rule: A helpful tool for early retirees
William Bengen is an economist famous for creating the 4% rule after analysing 50 years of historical returns across every asset class. He determined that in all circumstances, regardless of when someone retired over the 50 years, they could take annual withdrawals of 4%, and the pot would always last 30 years. By applying this rule, you could take £28,000 a year from your £700,000 retirement pot. Not quite a comfortable retirement but almost. However, you’ve probably done some quick sums – if it did run out in 30 years and you retired on your 60th birthday, your 90th birthday could be a pretty miserable one…
There are some flaws in Bengen’s approach though and it really should just be taken as a rough rule of thumb rather than Gospel. To more accurately determine the required investment amount for your retirement, the best approach is to work with an adviser to create a customised cash flow plan. The plan can account for various factors that will more closely reflect real life such as variable withdrawals, capital expenditures, and the flexibility to accommodate different market returns. You can also stress test some of the plan’s assumptions, which helps ensure a more comprehensive and reliable assessment of what you will personally need for retirement. Of course, even this is based on assumptions so updating the cashflow on an annual basis, and as life changes, is equally as important as creating your initial plan.
An example cashflow plan can be found below:
The importance of the State Pension in early retirement
Fortunately, if you’ve made around 35 years of National Insurance contributions, you should be eligible for a full state pension of just over £10,500.  For the first seven years of retirement, you’ll have to draw entirely from your own assets, but your state pension should be a real game-changer. Due to the additional £10,500 of income (increasing with inflation), your pot should now last well into your late 90s, and you can close in on that comfortable retirement figure of £37,000 per annum.
Optimising investments and minimising tax in retirement
Investing your money across different across different tax wrappers, to reduce the tax you’ll pay in retirement, is paramount as the £37,000 is very much a net figure. The investment strategy you employ will also be of equal importance to ensure your pot is growing at a sufficient rate to reach your early retirement objective. Two areas that are likely most effectively overseen by professionals.
So, if you’re in your 40s and have £250,000 in your pension pot and want to retire early, get planning, get investing, and maybe take some advice!
All authors have considerable industry expertise and specific knowledge on any given topic. All pieces are reviewed by an additional qualified financial specialist to ensure objectivity and accuracy to the best of our ability. All reviewer’s qualifications are from leading industry bodies. Where possible we use primary sources to support our work. These can include white papers, government sources and data, original reports and interviews or articles from other industry experts. We also reference research from other reputable financial planning and investment management firms where appropriate.
Saltus Financial Planning Ltd is authorised and regulated by the Financial Conduct Authority. Information is correct to the best of our understanding as at the date of publication. Nothing within this content is intended as, or can be relied upon, as financial advice. Capital is at risk. You may get back less than you invested. Tax rules may change and the value of tax reliefs depends on your individual circumstances.
Find out more about our award-winning wealth management services…
Financial Advisory Firm of the Year
Client Relationships Award
Financial Services, Banking and Insurance Firm of the Year
Investment Performance Cautious Portfolios
Best Medium Firm
Investment Performance: Cautious Portfolios
Investment Performance: Balanced Portfolios
Financial Planning Firm of the Year: Small to Medium Firm
Financial planning can help you reach your goals in life, whether you want to determine when you can retire comfortably, bring organisation to your financial world or pass on your wealth effectively.
Pensions and retirement planning
Deciding when to retire is a challenging decision and can feel like a leap of faith. At Saltus, we gather information on all of your existing assets and then use our technology and expertise to show you exactly how to achieve the retirement you’re after.
Reducing your tax burden
How to structure your wealth and access income should be approached in a sophisticated way. A detailed financial plan may use pensions, ISAs, general investment accounts, offshore bonds and other tax wrappers to ensure you can draw your money in a tax-efficient manner.
Consolidating your wealth
Holding multiple investment accounts and pensions can mean they’re hard to keep track of and administer. We’ll help you overcome this by consolidating your accounts into a single plan so that you can understand your financial position with ease.
Protecting you and your assets
We protect our cars and houses without much thought yet you might be the most valuable asset in your family. Whatever your situation, we can provide advice to ensure you have the right level of insurance in place to keep your finances protected.
Passing on your wealth
Estate planning is more important than just having a Will. We’ll work closely with you to understand how estate planning, which has emotional as well as financial consequences, can impact your overall financial plan.
Significant life events
Significant life events can present great opportunities but also considerable challenges. Whether you are going through a business sale, divorce or are receiving a lump sum, we’ll help build a financial plan to meet your changing lifestyle.