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Do you want to retire at 60? 3 reasons why a Lifetime ISA can help

Retiring at 60 may sound like a pipe dream for many people. After all, the State Pension is on the rise, wage growth has been lacklustre in the last decade, and high property prices mean that it is difficult to save money each month.

However, a Lifetime ISA could help you to improve your prospects of retiring early. It offers a government bonus, tax efficiency, and the flexibility to adapt to life events such as buying a first home.

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With the process of setting-up and managing a Lifetime ISA being simple and cost-effective, opening one today could be a sound move for anyone under the age of 40.

Government bonus

The best bit about a Lifetime ISA is the government bonus. For every £1 you contribute to one, the government pays you a bonus of £0.25. This means that you could potentially earn up to £1,000 per year in bonuses. This could add up to £33,000 if you open a Lifetime ISA aged 18 and continue to contribute to it until the age of 50 – after which no further contributions are allowed.

While £1,000 per annum in bonuses may be appealing, the potential for it to grow over the long run could make it even more enticing. For example, £1,000 each year invested in the stock market and generating 7% returns annually could be worth £120,000 over the 33-year bonus period. This could provide an annual income of over £5,000 by the end of the period if invested in the FTSE 100 at its current income return of 4.3%.

Tax efficiency

As well as a government bonus, a Lifetime ISA also provides tax efficiency. This means that there is no capital gains, dividend or income tax charged on any amounts invested through the product.

Although tax may not be at the forefront of many people’s minds in the short run, over the long run it can have a detrimental impact on your retirement plans. As such, taking advantage of tax-fee products, such as a Lifetime ISA, may be a simple means of increasing your overall returns.


As well as being relatively cheap to open a Lifetime ISA, it is a simple product to administer. This could mean that it is accessible to novice and experienced investors alike, as well as small and large investors.

Furthermore, the fact that funds invested through a Lifetime ISA can be withdrawn without penalty for the purchase of your first home means that it is a more flexible product than a pension or a SIPP. This could make it especially appealing for individuals who do not wish to tie up their capital, and for whom buying a first home may require significant financial resources.

As such, with a mix of simplicity, adaptability, tax efficiency and a government bonus, a Lifetime ISA could be a worthwhile means of building a nest egg in order to retire early.

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Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.