I am fed up with my job – can I retire?

by Peter Harrison FPFS, Independent Financial Adviser.

This is a question I get asked a lot: “I’ve been at work since I left college – now I want to live a little! Can I afford to?”

The first step in answering this question is to understand what capital and income you may need if you stop full time work – bearing in mind that you may need cash for a long holiday, buy a camper-van and travel the world, carry out some home improvements, help out the children a little.

After that, you need to remember that your resources will now have to last you for the rest of your life – and inflation will erode their value over time.

Most people’s needs are lower in retirement – you may only need one car, or perhaps no car at all. You can stop putting money into your pension plan. You may take up cooking or gardening and save on food bills – or generally, be a little more economical. You may qualify for free bus travel!

So, having put a figure on what you need coming in every month, the next step is to calculate what provision you have in place. What is the value of your existing pension arrangements? When can you access this? What income will be produced? Are you getting best value?

Major changes are being made to pension rules and it is vital to take all factors into account – for example: is the income protected against inflation; how much tax would be due; what would happen to the money if you died?

Changes are also being made to the state pension – the age at which you can claim it and the amount you will receive. A forecast is easy to get, and is a vital part of the jigsaw since it could form a large part of your retirement income and it is index-linked. You may consider putting off claiming state pension for a year or two in return for a lump sum or a larger amount, but the rules are changing soon and this option will be less attractive than it once was. Don’t forget that the state pension is taxable!

With time on your hands, you may feel like taking on a part-time job to top up your income before the state pension arrives.

So, before you hand in your notice, take a little time out to think about what really matters to you, what it might cost, and if you can really afford to take this step.

With all the changes taking place to pensions and tax, professional advice can be very worthwhile. A discussion with an independent adviser will help to guide you through the maze of options and choices before you make that life-changing decision.