|>>|| No. 12207
It's difficult to make the numbers stack up. Most people are barely saving enough to retire at 67.
The most prudent way of funding retirement is through an annuity, which is like the opposite of life insurance - you pay a lump sum up front and get a guaranteed annual payment for life. A sensible annuity includes an escalator, meaning that the payment amount is increased annually to offset the effects of inflation.
If you want to retire at 55, you'll need to pay ~£38,500 to get an annuity paying £1,000 a year with a 3% escalator. If you want a retirement income of £16,000, you'll need a pension pot of £616,000. To accrue that amount, you'll need to consistently save at least £550 a month for 35 years. Not many people are able or willing to put away that amount of money. You'll probably have to save a lot more than that, because annuity rates are tied to life expectancy. They have more than halved over the past 20 years and that trend seems to be continuing.
The numbers get exponentially worse if a) you're starting late or b) you want to retire even earlier. If you're 35 and you want to retire at 55, you'll need to save at least £1,400 a month to have a comfortable income.
A lot of people who aspire to retire early are pinning their hopes on various "passive income" schemes, but that's a very risky strategy. It's perfectly possible to make a couple of grand a month through affiliate marketing, self-publishing or all manner of other relatively low-effort business ventures. If you're smart, confident and resourceful, it's not necessarily very difficult. The problem is that those income streams are really rather fickle. You might have two dozen books selling well on the Kindle store, but those sales will inevitably dwindle over time unless you're continually putting out new content. You might have a few blogs bringing in a few hundred quid a month each through advertising or affiliate links, but a change in Google's algorithm could kill your traffic overnight. If your business goes to shit when you're young and healthy, it's a massive pain in the arse. You might have to work like a dog to turn things around, do a bit of Uber driving to keep the wolf from the door or go back to working full-time. If your income collapses when you're elderly, then you're up shit creek.
I strongly encourage people to give serious thought to their retirement options and start planning early, but I wouldn't get carried away with ideas about retiring to a Caribbean island at the age of 40.