Early retirement pension fund, taking early retirement

EARLY RETIREMENT PENSION FUND, TAKING EARLY RETIREMENT

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Early retirement pension fund, taking early retirement and the pressure it will put on your pension fund if you have not made other financial arrangements

How can you possibly believe that you can somehow accumulate enough money in a pension fund in order to comfortably retire and live for another forty years? I ask this question for a number of reasons. If you are thinking of taking early retirement you need to have done your maths and planned well for the future. If you think you are going to live comfortably on the proceeds of your pension and a few savings; think again.

Start of article about retirement and pensions.

Previous page about taking early retirement.

Let's get one thing straight. I am great believer in the social system and that no old age pensioner should suffer financial deprivation in any way; and that it is the responsibility of society to make it so. However, it is also the responsibility of every individual to do whatever it takes to try and ensure they provide for themselves in retirement.

Anyone who does not take whatever steps they need, that are within their capabilities and that are necessary for a comfortable retirement should not bemoan the fact that once they reach retirement age they find they cannot cope financially. It is not the responsibility of society to help those who won't and didn't help themselves, it is our responsibility to help those who can't and couldn't help themselves; and the responsibility of governments to ensure that those who won't help themselves do not burden others.

You may think that because you pay National Insurance contributions that you are paying into a large pot that will provide you with your old age pension. You would be wrong on a number of counts. First of all, there is no big pot where your money is being invested to pay for future pension rights. Every penny you pay in National insurance contributions gets spent on anything the government sees fit at the time including old age pensions for those who are already retired. The money they paid in during their working lives was spent long ago and was never going to be enough to fund a decent retirement pension for them anyway.

The money you pay to the government is never, ever going to be enough to keep you comfortably off in your old age. The burden of looking after you is going to fall on the shoulders of your children and their children. Do the maths.

If you wanted an income of Ł20,000 per annum to ensure a half reasonable pension when you retire and you wanted it to at least keep in line with inflation; and you expect or hope to live for another twenty five years after retirement; you would have needed to have been contributing something in the region of Ł8,000 per annum for forty years from the age of 25.

The reality is, if you are earning Ł30,000 per annum now and want to retire on two thirds of your equivalent income at sixty five, you couldn't possibly fund it. Furthermore, if you want to take early retirement, this figure can be multiplied many times over.

The fact is, most of us are going to become a burden for our children and as we are living longer on average, we are going to a burden for much longer. In fact, over the next twenty years, there are going to be more people in retirement and living off pensions than there will be people working.

The sums just don't add up. We should all, male and female, be looking to work until we are at least seventy and those of us who opt to defer our pensions and retire after the age of seventy should be rewarded when and if we live long enough to take our pensions. (Gordon Brown take note - you read it here first. He does tend to steal a lot of my ideas as he is a regular visitor to this site.)

Many of us, except those that are obese tend to be healthier and fitter nowadays and more than capable of working long past the current retirement age. This should apply to women as well who believe they should get equal rights and live on longer than men on average. Same pension rights for all; why should women be allowed to retire and take the state pension earlier than men?

Many of us who are either approaching or passed retirement age still have enormous energy and the experience that workers younger than ourselves lack and many of us are unwilling and not ready to be thrown on the scrap heap just yet. Those people who are only too ready to jump ship should take a serious look at their finances both now and for the long term before deciding to take early retirement. Unless you have made some serious financial plans and are really in a position to retire, you should remember that you could be retired for thirty odd years. What were you earning thirty years ago compared to day and how is inflation and the overall cost of living going to affect your pension income over the next thirty years.

The world does not owe you a pension any more than it owes you a living. Just because you have worked and paid your taxes and NICs does not mean it should fall on the shoulders of future tax payers because you failed to plan properly for your retirement and fully think things through.

It's no good stamping your feet and spitting your dummy out; we all have to face up to the fact that because we are living longer, we can not expect future taxpayers to shoulder the whole burden of taking care of the retired; especially if they have done nothing to help themselves.

If someone takes early retirement at fifty five and lives for another 40 years which is not inconceivable; unless they have made adequate pension arrangements and built in safety factors to take care of inflation and other economic downturns, they are going to cost the taxpayer a fortune. This frankly is an impossible situation and governments, no matter how unpopular the decision, have to act now rather than leave it to future generations to sort out.

I was speaking to a chap the other day who works offshore for a large oil company. Hates the fact that he has to work away from home but likes the money. He told me he is going to retire when he reaches fifty five and start to enjoy his life. All very well, but if he has just spent the last thirty five years hating his life; hasn't he got his priorities a little muddled. Shouldn't he have been doing something he liked and enjoyed the first half of his life and made plans to enjoy the second half just as equally?

I enjoy what I do, I don't work because I have to; the point where I need to work passed some years ago and now I do it because I enjoy the challenge and the buzz. Take that away from me and I am frightened that I will become like my father in law. I hope to have at least another twenty years of gainful and meaningful employment in front of me. I might slow down, I might take more time off and I will most likely hand the reigns of the company over to someone else; but I would still like to be able to contribute.

The alternative is to retire, take a pension and vegetate. Now I know that lots of people will say that retiring doesn't mean that you have to vegetate and that there are plenty of things that you can do to keep busy; golf, gardening; fishing and the like. However, these are hobbies that help you relax and take away the stresses of life; they do not make you think in the same way as work or doing business.

Early retirement pension rights