For some people, early retirement is something they always dreamed of, planned for and worked to achieve. But the financial impact of Covid-19 has changed the way many of us view work and made early retirement an unexpected possibility or even a necessity for a whole new group of workers.
Being furloughed may have given some an insight into a life they've not yet experienced and they've found that they enjoy having more time at home.
Unfortunately for others the lack of job security and rising redundancies caused by Covid-19 means they have to change plans and seek some financial security elsewhere.
Whatever your reasons, if you're finding that you need to plan for your retirement earlier than expected, here are some things to consider.
First things first - don't let this decision overwhelm you
Choosing when to retire is one of the biggest decisions you'll make emotionally and financially. It's a huge milestone in your life and, depending on your circumstances right now, it could be a moment of uncertainty or opportunity.
Getting professional advice can help put your mind at ease by answering the big questions you'll undoubtedly have. For example, will I have enough to live on? How can I take my money? What about tax? Could I afford to work part time? Will I still be able to support my family and lifestyle?
Think about how much you'll actually need in retirement
Ultimately, this will depend on the kind of lifestyle you want to have. Do you have expensive hobbies and interests? Do you want to travel? Do you have other family members to support?
The Pensions and Lifetime Savings Association's Retirement Living Standards aim to make it simpler for people to understand how much they'll actually need in retirement, as they take into account things like how much you might need for essentials such as household expenses, food and transport, as well as for leisure activities and holidays.
The standards cover minimum, moderate and comfortable lifestyles, and vary depending on where you live and whether you're planning retirement individually or as a couple.
If you want to see how your projected retirement income compares against the relevant benchmarks, you can get your own personalised retirement income report in five minutes.
One thing to remember is that with many people living longer these days, you might need that level of income for longer than you expect - particularly if you retire earlier than you'd planned to.
If you choose to get professional advice, this is one of the areas that your adviser will help you with.
Work out what you currently have
By the end of October 2020, the State Pension age for everyone will be 66. So, depending on your age, you might need to rely solely on your own pensions and savings for a while. Even when you do qualify to receive the State Pension, at only £175.20 a week just now, it's probably not enough for you to live on - especially if you're aiming for a "moderate" or "comfortable" lifestyle.
If you're employed, your current workplace pension plan may well be your main source of income in retirement. But you might also have other savings or investments which you could use to supplement that, such as Individual Savings Accounts (ISAs), or rental income from any properties you let out.
Adding up everything you've got can make it a lot easier to keep track of things. It only takes five minutes to see how all your life savings come together, including your State Pension, by using our handy income report.
How Standard Life can help
We understand how much there is to consider, both emotionally and financially, so our Retirement Advice team is here to support you and help you make the right choices for your future. When our new clients Chris and Zoe reached out to our specialist retirement advisers, they had both initially been furloughed and then, more recently, made redundant as a result of Covid-19.
They wanted to know what their options were. Were they in a position to retire early, rather than find new jobs? Chris said "Well, it was making me feel ill when I was looking at it on my own. When I contacted you and you started to go through it, I felt a lot better afterwards."
After speaking to Chris and Zoe, our retirement advisers talked them through the choices they had, the decisions they needed to make and put together a plan which could help them maximise tax relief on their redundancy packages.
With a much clearer picture of what their retirement is going to look like, and knowing where the money is coming from to help them achieve it, Chris and Zoe have now decided to retire. Zoe said, "You have made it easier and we feel a lot better so thank you."
So, if furlough has given you an exciting glimpse of what early retirement could be like, and you want to know where to begin, or if the prospect of redundancy means you're considering it, but you aren't really sure what your options are, why not let us help you. You can use our retirement income report to get you started or book a free, no-obligation consultation with one of our retirement advisers to find out if retirement advice could be right for you.
The information in this article should not be regarded as financial advice. Please remember that the value of investments can go down as well as up and may be worth less than was paid in.
Laws and tax rules may change in the future. Your own circumstances also have an impact on tax treatment.