Picture the scene… you’re lying on a beach, it’s hot, sunny and you’re thoroughly relaxed. This is your third getaway of the year. Your mortgage is fully paid and your children have all graduated from university. The car in your garage at home is a sleek little two-seater. You’re comfortably retired and your finances are as healthy as your tan. With a little help from a financial adviser, all this could be yours earlier than you think, as Acumen explains.
How old do you see yourself in that daydream? Sixty five? Sixty? How about 57 – the government’s revised minimum age for early retirement due to take effect in 2028? If that idyllic vision sounds like the stuff of fantasy, think again. Early retirement is a very real possibility if you know how to make your money work for you. Time and a magical thing called ‘compound interest’ are your biggest allies in this respect.
What is compound interest?
The term ‘interest’ can conjure up negative connotations nowadays. Perhaps it triggers thoughts of debt repayments or woeful returns on savings for you. But compound interest is a force for good that’s guaranteed to pique your interest. So what is it? Well, compound interest is interest calculated on your initial investment and the accumulated interest from previous periods. Think of it as ‘interest on interest’ effectively.
So you earn interest on your savings and on the interest itself. For every year the money is in your account you earn interest on each preceding year’s interest. Even if you don’t add to your savings regularly, they will continue to grow. Given enough time, this can generate a snowball effect, which is exactly why so much financial planning advice regarding early retirement advocates starting as early as possible.
Financial planning advice to make the most of your savings
Now that we’ve covered the general principles of compound interest, you will no doubt grasp the urgency of acting now, rather than delaying if you want to begin planning for early retirement in earnest. If early retirement is on your radar, you’ll need to get organised. But no matter what your age, taking swift and decisive action now can have a profoundly positive impact on your future retirement funds.
Here’s some actionable financial planning advice to get your saving on track:
- Invest your time wisely – The sooner you start investing, the harder your money will work for you.
- Compound your interest – Seek compounding investment opportunities for exponential growth.
- Check your frequency – The greater the frequency of compounding, the more your earnings will grow.
- Stick to the plan – Set a savings plan and stick to it with discipline, especially if you start later in life.
- Don’t go it alone – A financial adviser can support you with every one of these steps and more.
Contact Acumen today
If you harbour dreams of early retirement, seek the guidance of an independent financial adviser today. For investment advice in the UK, Acumen Financial Partnership’s expert team provides a holistic approach to your investments. If you’re planning for early retirement, we offer expert financial planning advice based on decades of industry experience that can keep you on course to achieve your goals.