The UK government have just announced that the retirement age will rise to 68. Now admittedly this is not going to happen until 2044 but it’s already concerning people.

What does this really mean though? The Government retirement age is the age at which you can start drawing a state pension. This means that if the state pension is the only thing you are relying upon to provide your income when you stop working then you’ll have to keep working until you are 68.

However, you can retire at any age you want. It’s just that you need to have enough saved to provide you with an income you can live on. The new rules on private pensions will allow you to start drawing an income from your pension from the age of 55 (after 2010) even if you’re still working.

This means that if you’ve saved enough in your pension fund to provide an income to live on at 55 then you can stop working then. If you’ve saved enough money outside of your pension then you can stop working whenever you have enough to live on.

The key thing to remember is that whatever you choose to live on, it has to last you for the rest of your life. So the earlier you start to take it, the longer it has to last. And if you’re using it to buy an income plan, such as an annuity, then the rate of income you’ll get will be lower if you’re younger.

How do you figure out how much is enough to live on and how much you need to retire.

An easy rule of thumb is to assume that you could generate an income of 5% on any overall fund that you’d saved. This means that if you want an income of £20,000 a year then you would have to save a fund of at least £400,000. And with inflation at 2.5% that’s going to need to be more like £800,000 in 30 years time to get the equivalent of £20,000 in today’s money.

If you want to compare these figures to the State pension, which is currently at £84.25 a week, then to get an equivalent income of £4,381 per year, you’d need a fund of around £87,620. Once you have that much you’d be about as well off as you would depending on the State system. You could save that much in 30 years if you put away £87 a month at a 6% interest rate. That’s just over 3% of the average income for the UK.

So you don’t have to work until you’re 68 if you don’t want to but you’ll have to put in the time and effort now to make sure you can support yourself when you want to retire. It’s up to you, and now’s the time to make the decision, because the longer you wait the harder it gets.

You can find out more about how to reach your retirement goals at http://www.financialdetox.com and request a Free 21 Day Financial Detox Program.

Andy Warren is a qualified chartered accountant, entrepreneur and coach with business experience at director levels in blue chip companies, SMEs and start-ups.

He is also a Master Practitioner of Neuro-Linguistic Programming (NLP) and has trained with Anthony Robbins in the US in behavioural sciences and life skills. He has extensive knowledge, skills and experience in the field of coaching and developing human behaviour.