Take a moment to imagine your dream retirement.
You’ll have a good, reliable income, and you’ll be free to spend your time however you like. Perhaps you’ll go travelling; perhaps a hobby will take over your life; perhaps you’ll just spend more time with family and friends. Perhaps you’ll do all of that and more.
Whatever it is, we’re sure it’ll be wonderful. It’s just a shame you have to wait until you’re in your late 60s to start enjoying it. But maybe you don’t.
More and more people want to know how to retire early. Most UK early retirees pin down their ideal retirement lifestyle, decide when they want it to begin, work out how much they need to fund it, then start saving to achieve it.
You could be one of them.
Let’s start by defining early retirement.
UK retirees can currently draw the State Pension from when they’re 66. That will go up to 67 in April 2028. So your early retirement age can be in your early 60s. But most people see it as beginning when you reach 55 and can start drawing on your personal or workplace pension savings. That’s going up too, to 57 in April 2028.
Taking early retirement doesn’t have to mean stopping work entirely. Many people move into more flexible, part-time roles or switch to volunteering. That can help you avoid the less attractive parts of working life, like long commutes or stressful workplaces, while still enjoying its benefits.
For some people, early retirement due to ill health takes that choice away. It creates its own, very specific challenges too. You might not have so much time to plan and build your retirement finances, and you’ll probably need to carefully plan your care and support.
Can I retire early?
Taking early retirement is a big decision. To work out if and when you can retire early, you’ll need to think through a lot of things.
First, work out how much money you’ve already saved up. Add up your pension pots and track down any lost ones. Think through any other possible sources of income, or debts to pay off. Next, plan your ideal early retirement lifestyle and work out roughly how much it’ll cost to maintain it.
If you’re not sure how to find all that out, take a look at our early retirement checklist (below). It will help you see where you’re at, where you’d like to get to, and how you can plan for it. You can also listen to the early retirement episode of our podcast Rewirement, and meet our guests Gwen and Jo:
Gwen’s husband is nine years older than her and wants to stop working at 59. She wants to retire with him so they can travel together. But has she saved enough?
Jo’s in her 50s. She’s sold property and has a big lump sum to retire on. But will that last for the 40-plus years she could be retired for?
What do I need to do to retire early?
Our early retirement checklist will help you see what you need to do to retire early.
First of all, work out how much money you have:
Calculate your total pension pots, including:
- Private or workplace pensions
- Any final salary pensions you might have
- Remember, if you’re taking early retirement you won’t have the State Pension to include in this income
Find any pensions you’ve lost track of:
- Trace them – our pension tracing article will tell you how
- See if it makes sense to consolidate them
Check up on your State Pension, to see:
Any other sources of income you will have after you retire:
- Your savings and investments
- Any property you own
- A part-time job or starting your own business
Work out how much you owe:
- Note down any debts or outstanding loans
- See if you can clear them more cheaply and quickly by consolidating them
- Plan to pay them off by a specific date
Estimate your retirement income:
- Use our Retirement Income Calculator.
Then look at what sort of retirement you’d like to have:
Plan your essential retirement spending:
- Map out mortgage repayments, utility bills and other essential expenses
Map out your ideal retirement lifestyle:
- How do you want to live once you’ve retired?
- How much will that add to your essential spending?
- For inspiration:
Take any responsibilities into account:
- If you have children, will they still be dependent on you?
- Might you be caring for older parents or other relatives?
- Are there any other responsibilities you should bear in mind?
Work out where you want to live:
- Do you want to stay in the same house?
- Could you release equity with a lifetime mortgage or similar product
- Do you want to move somewhere new?
- Could you downsize and release some money?
- Could you move to a cheaper region and upsize?
Estimate your retirement spending:
- Add all the above together.
There’s a lot to think about there. As you work through it all, you might realise that you’re all ready to retire early. If so, congratulations! And if not, you might need to revise your retirement plans, or start saving a little more money. Our FIRE movement article has some useful tips for doing that.
Benefits of saving for early retirement
To retire early, you’ll probably need to start saving early. The earlier you start saving, the harder your money can work for you and the more help you’ll get from the government and your employer.
First of all, the sooner you start to save the more potential it has to grow (though of course their value can also go down). Secondly, investing in your pension is a very tax-efficient way of saving money. That’s because it qualifies for tax relief. Your money goes straight into your pension pot, without any of it going to the government.
And finally, if you’ve got a workplace pension, your employer will also help. Depending on how much you save, they’ll match some or all of your contributions. In effect they give you extra money, over and above your normal salary payments.
Of course, if you’re self-employed, you won’t get help from an employer. But you can still make the most of compound interest and government support in the form of tax relief by setting up and saving into a personal pension.
Interested in a Personal Pension?
Whether you're self-employed and looking to save for retirement, or just looking for a place to bring your pensions together, our Personal Pension could be right for you. You can open a new pension online today, with the option to transfer your old pots into one easy-to-manage pension. The value of your investment will go up and down. It isn't guaranteed, so you may get back less than you put in.
Having your own savings to draw on can make a big difference to your retirement lifestyle. The State Pension might only cover the basics. In the 2023/24 tax year, it’s only £203.85 a week. And you’ll probably have to wait until you’re 67 to get it.
But you might need to plan carefully to make sure you retire with the right amount at the right time. One less year of earning could mean one less year of:
- Paying into your pension
- Potential growth
- Getting those valuable employer contributions.
If you retire at 55, you could enjoy a retirement that’s longer than your working life. It’s very important to think through whether and how you can fund it.
When can I get my State Pension?
Currently you can start drawing your State Pension once you’re 66. This is set to increase to age 67 between 2026 and 2028.
When can I take my private pension?
Before April 2028, you can start drawing from workplace and private pensions once you’re 55. After then, you’ll generally have to be 57 or older.
You don’t have to start drawing on your workplace or private pension pots at these ages. You could run out of money if you start drawing on them too early, so it’s important to plan that carefully. You can check out your pension pot options.
We recommend shopping around and drawing on all available guidance and advice before deciding how to access your pension pot. You can do that through Pension Wise, a free service from MoneyHelper.