Can you afford to retire early?

Ever dreamt of throwing in your job and retiring early? I think we all have! Yet without winning X-Lotto or inheriting a fortune from a long lost relative, just how possible is it to structure your finances so you never have to work again?

Many Australians caught in the daily grind of working for a living, dream of the possibility of taking early retirement, spending their days travelling or playing golf or doing nothing much at all.

There’s even a name for it these days.

The Financial Independence, Retire Early (FIRE) movement is prompting more and more Australians to question exactly what it takes to retire early.

Yet without winning Xlotto or suddenly inheriting a fortune from a long, lost relative, how possible is it to structure your finances so you never have to work again?

According to the Australian Bureau of Statistics, the average Australian retirement age is just 55.4 years, which makes it seem that early retirement is somewhat the norm for Australians.

However, this number is dragged down by partners who stop work while their spouses support them financially, and people forced into early retirement by redundancy or medical issues.

So, how plausible is it to stop working sooner rather than later?

The answer depends on the type of retirement you dream of, where you are hoping to live, and whether you have children or other dependents you need to support.

It’s also more achievable if you can structure your life so you are still earning at least some money, albeit from a transition retirement plan, or from hobby or something you love doing and would do anyway.

The Association of Superannuation Funds of Australia (ASFA) suggests a couple requires $69,691 a year ($690,000 in savings), in addition to owning their own home, to live a comfortable retirement in Australia.

Against this, industry analysts estimate that for an individual to be truly financially independent, they need to be earning $50,000 a year from invested funds, in addition to owning their own home, requiring millions in retirement savings.

The key, however, to decide whether you can retire early depends on just how determined you are to achieve it.

You need to think through your lifestyle requirements and determine if you need a simple caravan and campsite, or whether you require a five-bedroom home in leafy suburbia.

You’ll also need to ensure your retirement savings are invested in quality assets that will continue to generate a strong, consistent level of income, as well as capital growth. A financial adviser who specialises in retirement planning can help you with this.

A good tip maybe to live on a retirement income for 12 months, before retiring, test the waters so to speak, and see how you go managing your expenses on what you would need to live on if retired.

Another option may be to transition into retirement instead of going cold turkey, reduce to 4 days week for a year and then 3 and so on, this will stretch out the time, or amount you need to draw from super.

While being permanently retired and free to live each day as you choose does sound wonderful, you will need to ensure you retire with adequate funds to support the remainder of your days without worrying if you will run out of money at some stage.

Retirement should be a time to live with the peace of mind, understanding that your nest egg will last the distance, not a time to be in a constant state of stress over money worries!

Having a financial strategy in place that will achieve your financial objectives is key to longer term financial security and peace of mind.

Christine Swanson is a trusted financial adviser, who specialises in retirement planning, many of her retired clients state that they never worry about money!

If you would rather be retired than working, contact Christine Swanson.

Christine Swanson is qualified professional adviser so you can ensure all your decisions are well-informed and that your personal needs and goals are considered.

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