How to retire safely at 55

(Shutterstock)
(Shutterstock)

A Fin24 user wants to retire when he reaches 55 years of age. He writes:

Please advise as far as retirement in general is concerned. Is 55 years regarded as early retirement?

Carol Axten, managing director at Mazars in Cape Town, responds:

It is difficult to address your question in any detail as it is not clear how old you are currently, how many years you have remaining to age 55 or how much you have set aside towards your retirement savings.

The majority of employers prescribe the retirement age for their employees to be between the ages of 60 and 65. Comparitively, retiring at 55 would be considered by most, to be an early retirement age.
 
In addition, men and women are expected to live longer due to the advancement of modern medicine and increased awareness of the importance of living a heathy lifestyle. The experts say that by 2030 men are expected to live until they are 85.7 and women to 87.6.

Assuming a person started working at the age of 23, the question is: How can you save enough money during 32 years of work, to enable you to live the lifestyle you are accustomed to for another 30-plus years of retirement?  

That is the challenge, and the biggest factors that will determine success in achieving this goal are:

- Your earning potential;
 
- Your discipline to save and spend;

- The investment returns on your savings;

Engaging with a financial planner will ensure that the last two points above are dealt with. This provides the peace of mind to focus on your earning potential and in so doing to maximise your earning potential over your working career.

A financial plan will provide a framework to keep you disciplined about saving regularly, and ensure that you take full advantage of investment vehicles that maximise any tax benefits available, such as retirement funds, retirement annuities and tax free savings accounts.

A good financial plan will also ensure that your investments are able to provide inflation beating returns which is essential to achieving your retirement goals.

Finally, a good financial adviser will be able to travel with you through the road to retirement and keep you updated as to where you are and how close you are to achieving your goals.

The powers of compound interest means that the earlier you are able to start the savings process for retirement the less onerous the process with be and your potential for an earlier retirement will be a lot greater than someone without a financial coach and a set goal.

Disclaimer: Fin24 cannot be held liable for any investment decisions made based on the advice given by independent financial service providers. Under the ECT Act and to the fullest extent possible under the applicable law, Fin24 disclaims all responsibility or liability for any damages whatsoever resulting from the use of this site in any manner.

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