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Retirement Planning:
If a modern-day Aladdin found a lamp housing a genie, there is a good chance one of his wishes would be for early retirement. For most of us, early retirement is just wishful thinking unless we save regularly and have a plan of action for how we are going to accumulate sufficient assets to provide an income 10 or 15 years ahead of schedule.

There is, of course, no shortcut to saving enough money for early retirement bar winning the lottery or finding an antique watch like the Trotters in Only Fools & Horses. Indeed, there is speculation that the government may raise the official retirement age for men to 70 or 75. And planning for retirement has not been helped by the closure of 60 per cent of final salary pension funds to new members.

Mind the savings gap

The so-called savings gap has also been well publicised in recent years. Estimates of how much extra the adult population needs to save to produce an adequate income in retirement range from 27 billion to 66 billion a year. IFA Promotion, an organisation representing independent financial advisers, estimates that six in every ten people need to save a staggering 2,000 more each year to fund their retirement adequately.

These figures demonstrate just how difficult it is for many people to save for an early retirement. It has been estimated that annual income for men in final salary pension schemes falls by 40 per cent if they retire at 60 instead of 65. If they retire at 55, the decline in annual income is closer to 60 per cent. For every year you retire early, income from pension schemes falls by between 6 and 8 per cent.

To retire early, therefore, not only do you need to build up more assets but you have less time in which to do it. Financial advisers say that a man needs a pension pot 30 per cent larger to buy a 10,000 inflation-linked annuity aged 50 than when aged 60.

IFA Promotion says people should save at least 10 to 15 per cent of their income as early as possible. This suggests that to retire five years early, you need to save between 13 and 20 per cent of your pay from your 20s. Financial advisers say you should assume a 5 per cent income from your

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