Early retirement may seem as elusive as the fountain of youth, but it is one of the biggest trends for 2021. 

 

Here is a quick guideline on what early retirement means and how you can jump onto this financial freedom bandwagon. 

Retirement planning is one of those boring yet essential financial planning tasks we regularly need to discuss with our clients. It is essentially seen as a long-term investment and often we find that clients forget to annually assess their retirement strategy. 

YES! It may seem excessive to review it annually; however, things change, and if this pandemic stricken past year has proven anything, is that it can shift on a paradigm. We have found client’s scrambling to try and re-strategize their investments and many new clients approaching us to frantically diversify their existing portfolios. 

So, when it comes to retirement and those wanting early retirement, how can this be achieved even in our current position? 

Here are a few tips on how you can set yourself up for early retirement without risking your entire savings on a get rich quick scheme or DIY Trading Platform. 

1) UNDERSTAND RETIREMENT PLATFORMS AND HOW THEY WORK 

  •  Pension Fund 
  • Provident Fund 
  • Retirement Annuity 

Chances are that you have heard all three of these terms before and just lump them all into the same sentence as Retirement Plan without realizing that they are different and each have their own benefit. 

1) Pension and provident funds are workplace-based plans that are offered as a company benefit; if your company offers a Pension / Provident Fund it is compulsory for you as an employee to join.  

  • The benefit is that you are forced to save and it is tax-deductible up to a certain level. 

 2) Retirement Annuity (RA)  or SIPP (Self Invested Pension Plan) , these are the biggest trends when it comes to retirement planning and those strategizing to maximize their retirement income or boost their existing company-based pension or provident fund.  Anyone can buy an RA or SIPP. 

  • The benefits are vast compared to its counterpart. They are flexible when it comes to contributions; offer a wider range of funds, thus maximising returns; highly effective estate planning tool as proceeds are exempt from Estate duty; executor fees and CGT.  
  • The main benefit being the Tax Exemption one gains by contributing to an RA or SIPP. 

 

2) PUT YOUR RETIREMENT SAVINGS INTO OVERDRIVE 

If you already have all of the above Retirement plans set in place (you should be able to hear all of us @IIMG applauding you!), however, your retirement age may still be set at 65 years of age. 

If you are in your early 30s-40s, that number seems like an unbearably long way off, especially if your job currently just satisfies your financial needs, but misses the mark on sparking your soul.  

EARLY RETIREMENT can be achieved through some clever re-allocation of funds and unfortunately, may involve less spending on non-essential items. For example, by simply paying approximately 10% more on your bond each month you can reduce your bond term from 20yrs to 15/16yrs (the next 5yrs you can boost your pension savings with the amount you would have been paying on your bond!). If you were to pay double your bond repayment you would reduce, your 20yr bond term to 6yrs!! 

We understand that not everyone can comfortably pay double on their monthly bond repayment; but what we have seen when doing a Financial Analysis (CashCalc) with our clients is that they have a lot more expendable cash than they realize. Or we find that they have over-invested in certain areas and need to diversify their investment portfolio in order to maximise their returns. 

What it basically boils down to, is in order to jump onto the trendy early retirement bandwagon; you have to put your savings into overdrive and maximise your returns whilst negating serious tax implications……..time to get some expert financial advice 

Every accomplishment starts with a decision to try” – IIMG 

Author: Angelina Angileri @IIMG Marketing