If you can live on between \u00a312K-\u00a316K per year. Great. But if your income needs are greater, you might struggle. For instance, if you plan to take 50K per year, your pension pot will be gone in around 8 years. So you need to do your homework before you make a decision.<\/p>\n\n\n\n It depends. The short answer is, Yes. <\/em>It is possible <\/em>to retire at 55 with 400K in the UK. But will you want to? That\u2019s a different matter.<\/p>\n\n\n\n Simon Garber, a Pensions and Retirement Specialist says,<\/p>\n\n\n\n \u2018It can be done. We have clients who do it [retire at 55 with 400K]. But they are not really living off just that. They have other assets. And moderate means.\u2019<\/em><\/p>\n<\/blockquote>\n\n\n\n If you are considering retirement at 55 with 400K in your pension pot, there are 4 important questions worth asking yourself.<\/p>\n\n\n\n Have you sat down and calculated the cost of your retirement<\/a> and the lifestyle you want to maintain? What are your financial commitments and outgoings? Now, and in the future?<\/p>\n\n\n\n You generally need more money when you retire younger and are more active (mortgages, dependent kids, hobbies and sports, etc.) Costs then reduce (mortgage free 60\u2019s. Kids flown the nest). Then rise again later (due to costs such as increased insurance, medical and medical care costs). In short, your retirement outgoings aren\u2019t static.<\/p>\n\n\n\n Which? estimates that a comfortable retirement for a single person costs around\u00a0\u00a320,000<\/strong>\u00a0per year<\/strong>.\u00a0 This includes such things as European travel\/holidays, buying new clothes and recreation\/leisure.\u00a0 But this is based on a lot of assumptions.<\/p>\n\n\n\n If you are not sure how much you need in retirement, we\u2019ve created\u00a0the world\u2019s easiest retirement calculator<\/a>\u00a0to help you work out how much you\u2019ll need.<\/p>\n\n\n\n If a 400K pension pot is your sole source of retirement income, then how you plan to use it will be wildly different to someone who, for example, is simply using their \u00a3400K as a \u2018top up\u2019 to their Fun Fund.<\/p>\n\n\n\n \u00a3400K can work if you retire at 55. But it\u2019s really important to look at all other possible assets and income you may have available. This could include money from downsizing, investments & savings, income from earnings, inheritance etc. This could also include any tax breaks that might be available to you that could save you thousands in the long term.<\/p>\n\n\n\n It\u2019s important you do your homework. But, ideally, speak to a retirement specialist. It\u2019s their job to make your assets work hard for you.<\/p>\n\n\n\n Lifestyle is really<\/em> important when considering your retirement and its cost. In fact, lifestyle should be your starting point.<\/p>\n\n\n\n Retirement planning is not as simple as picking an arbitrary figure out of thin air and thinking,\u00a0\u2018Yeah, I could live on that\u2019.<\/em>\u00a0It should be about precise calculations and an in-depth look at the life you lead now, and the one you want to lead in the future.<\/p>\n\n\n\n Read More: Lifestyle Planning: Creating your dream retirement<\/a><\/p>\n\n\n\n The Two-thirds rule<\/strong><\/p>\n\n\n\n The \u2154\u2019s rule is a very crude measure for estimating the cost of your retirement that comes from Target Replacement Rate. But it states that you\u2019ll need between half and two-thirds of your pre-retirement income to maintain a similar lifestyle standard in retirement.<\/p>\n\n\n\n But this is based on quite a few assumptions. Such as being mortgage and dependent free.<\/p>\n\n\n\n If you want help planning your ideal retirement and how much it will cost, you can read our retirement blog<\/a>.<\/p>\n\n\n\n That is the golden question. Worthy of its own section (see below). Because no one knows how long they are going to live. And no one knows what life is going to throw at them. So it\u2019s important you cover ALL your bases.<\/p>\n\n\n\n It depends. YOU are the determining factor. 400K could last you 40 years. Or you could blow it all in the first decade. If you stick within a ‘safe withdrawal rate’\/ sustainable income level, you should be able to keep your pension pot invested and grow your pension pot enough to sustain that income for life. <\/p>\n\n\n\n However, if you take too much from your pension, you risk depleting your pension pot before you die.<\/p>\n\n\n\n If you retire at 55, and the average life expectancy is around 87, then 400K will need to last you 30+ years.<\/p>\n\n\n\n If it\u2019s your only source of retirement income, until the state pension kicks in at around 67\/68, then you are going to have to budget hard to make it last.<\/p>\n\n\n\n Use our ONS life expectancy calculator<\/a> to see what your life expectancy is.<\/p>\n\n\n\n The 4% Rule \u2013 safe levels of withdrawal <\/strong><\/p>\n\n\n\n As a general rule of thumb, pension specialists advise that you \u2013 don\u2019t take more than 4% of your pension pot each year<\/em>. This is considered a sustainable amount or a safe level of withdrawal<\/em>.<\/p>\n\n\n\n That\u2019s because you need \u2018wiggle room\u2019 when investing. Markets go up and down. 4% gives you that wiggle room (as long as your pension has been invested properly \u2013 not too much risk, not too little).<\/p>\n\n\n\n You will still be drawing down <\/em>from your pension each year (taking money out). But at a sustainable rate.<\/p>\n\n\n\n So if you take 4% per year from 400k you could still have money in your pension pot at the end of a 25-30 year retirement.<\/p>\n\n\n\n If you retire at 55, that takes you up to 85 years old (close to the current UK average life expectancy<\/a>.)<\/p>\n\n\n\n Taking 4% per year keeps your pension pot at a level that shouldn\u2019t run out. And if there is any remaining after you die, it can be left to your loved ones\u00a0free of inheritance tax,\u00a0ensuring your loved ones are taken care of.<\/p>\n\n\n\n Of course, a 4% withdrawal is just a guideline figure that might not account for prolonged periods of market fluctuations and stock market uncertainty, which may impact your pension pot, especially over a longer retirement.<\/p>\n\n\n\n That\u2019s why our Retirement Specialist Simon Garber prefers to work with 3% for those considering early retirement.<\/p>\n\n\n\n \u201cFrom experience retirement can be \u2018suck it and see\u2019 when it comes to planning how much income you need. You\u2019re moving into a new stage of life, and often there are quite a few unknowns.<\/em><\/p>\n\n\n\n In addition, managing capital for income is a new step that should be eased into.<\/em><\/p>\n\n\n\n Remember, you don\u2019t need to set the income bar high at the start, because drawdown is flexible. You can always adjust your income in the future. Plus, if you\u2019ve underestimated how much you\u2019ll need or need a cash injection to cover a holiday or Christmas etc, you take always take an ad hoc withdrawal.<\/em><\/p>\n\n\n\n Nothing is set in stone at retirement, but remember, it\u2019s important to review regularly.\u201d<\/em><\/p>\n<\/blockquote>\n\n\n\n Not sure how much you could safely draw down from your pension pot each year? Try our Pension Drawdown Calculator<\/a>.<\/p>\n\n\n\n![\"\"](\"https:\/\/www.2020financial.co.uk\/app\/uploads\/2020\/05\/15-1024x512.jpg\")
<\/figure>\n\n\n\nCan you retire at 55 with \u00a3400k?<\/h3>\n\n\n\n
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1. How much money do you need each year?<\/h3>\n\n\n\n
2. Do you have any other income?<\/h3>\n\n\n\n
3. What are your retirement lifestyle goals?<\/h3>\n\n\n\n
4. How long do you need 400K to last?<\/h3>\n\n\n\n
![\"Cashflow](\"https:\/\/www.2020financial.co.uk\/app\/uploads\/2020\/05\/Cashflow-modelling-for-retirement--1024x512.jpg\")
<\/figure>\n\n\n\nHow long will \u00a3400k last in retirement?<\/h2>\n\n\n\n
The basics<\/h3>\n\n\n\n
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