Can I retire early?



Whether you're beginning to think about retirement, or are approaching retirement age and want to know more about this important stage in your life, deciding which age you'd like to hang up your tie is a vital decision. Retirement age is no longer as fixed as it once was, after all, and you may wish to retire earlier than, say, your mid-sixties. So, can you? 

The rules

There are a number of guidelines focused on one's pension withdrawal age that you need to know before making any big financial decisions about your pension pot.

The State Pension

The age at which you can choose to begin receiving the State Pension depends on your date of birth. Currently, you have to be 65 if you're a man, or around age 64 if you're a woman, but the latter is rising in order to reach parity with the male pension age in 2018. The age will then increase every few months until it reaches 66 in 2020. 

To check your particular pension age, click here to use the government's free tool.

Defined contribution schemes

Whatever variety of defined contribution scheme you have in place, you can access your saved cash after you reach your 55th birthday. Some people have retained the right to take benefits before age 55. This is definitely the exception to the rule, however.

Defined benefit schemes

If you're to be a recipient of a defined benefit pension scheme, then the rules are the same as defined contribution schemes – age 55, or earlier, if the plan allows it. 

Do you have enough saved?

The single most important thing to bear in mind when deciding whether or not to retire early is the issue of money, and how much of it you have saved. The earlier you retire, the more years your pension will have to cover, which, in a worst-case scenario, could leave you with a threadbare income or a complete lack of one when you reach an advanced age. 

The commonly accepted income for someone retiring is around 2/3 of their average salary level, so make sure you do your sums via the Money Advice Service's pension calculator before you make any huge financial decisions. 

How to improve your chance of retiring early

If you truly have your heart set on retiring before the normal age, then there are a few things you can do in order to improve your chances of doing so. 

  • Save more – It's quite simple; put more money in your pension pot early on, and you'll shave time off your working life that you'd have otherwise needed to boost your pension to your required level.
  • Assess the risks – If you're able to choose the investments within your pension pot, putting your cash in riskier, yet more potentially rewarding, funds could give you more cash. This could be a dangerous course of action, however, and you might even end up working longer than you otherwise may have done.
  • Start early – Usually, the earlier you begin saving for your pension, the fewer years you'll have to work later in life.
  • Increase contributions regularly – Akin to the first point in this section, if you raise the amount of money you contribute to your pension each month, then after a few years, your pot will be far larger.
  • Top-up with other financial products – ISAs, stocks, shares, savings accounts – there are lots of other possible income streams you can use to supplement your regular pension income, so be sure to factor these into your calculations. 

Retiring early can be a welcome change from the humdrum of the rat race, although like most big financial decisions, it requires a number of years of planning to get right.

We’d always recommend you talk to a skilled and objective financial adviser to discuss your options in retirement.

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