Why retiring early could be the best thing you ever do

The rhythm of working life can be a familiar reality for most people. And, even if you love your job, you may still dream of retirement, although it could still be a few years off.

According to The Motley Fool, the average retirement age is around 65 for men and 64 for women in the UK. So, depending on where you are in your career, it could still be a while off.

However, a growing number of individuals are exploring a different trajectory: early retirement.

Indeed, retiring early could be a major investment in your wellbeing, personal freedom, and overall quality of life.

That being said, there are some important financial factors to consider.

First, let’s look at the benefits of early retirement and then explore how you could get there.

Retiring early could free up valuable time for what’s really important to you

While financial independence is undoubtedly a cornerstone of early retirement for many, the true benefits can extend into physical health and happiness.

According to studies reported by Saga, there may be a positive correlation between early retirement and improved health outcomes, alongside an improvement in your emotional and mental wellbeing.

This may be because moving away from the pressures of a demanding career can create invaluable time for physical activities and more mindful lifestyle choices, resulting in a general stress reduction.

In reality, the traditional extended working life is a relatively modern concept. Research from Inc. (the voice of the American entrepreneur) notes that, from an anthropological point of view at least, our ancestors may have thrived by working fewer hours each week.

While most of us are certainly better off than the 14-hour, six day-week workers from the Industrial Revolution, the current 9 – 5 setup may still not be ideal.

Early retirement could offer you the opportunity to realign your values with a more balanced pace of life; perhaps one that suits the innate function of both your mind and body.

Moreover, in an increasingly time-poor society, the ability to reclaim your time could be considered the ultimate luxury. Early retirement could grant you the ability to pursue your aspirations, whether it’s a long-awaited grand tour of Europe or dedicated time to reclaiming an artistic passion.

Planning for an early retirement doesn’t necessarily have to involve very strict savings tactics

While the idea of early retirement may conjure up images of unattainable wealth, disciplined financial planning and strategic resource management could make it a more realistic goal.

Indeed, some communities support the concept and are actively working towards it, including the Financial Independence, Retire Early (FIRE) movement.

Advocates for the FIRE movement assert that aggressive saving and careful investing are the strategies required for early retirement, even going so far as to save 50% of your income each month.

While the FIRE movement can offer an effective, albeit intense, route to early retirement, it is by no means the only pathway.

A more traditional, yet equally effective approach could involve a combination of smart financial behaviours and making full use of the resources available to you.

• Maximise your pension contributions: Many employers offer “matched contributions” to your workplace pension pot, so you could consider contributing enough to receive this bonus. Moreover, contributing to a pension can be a tax-efficient way to save money.
• Use tax-efficient savings vehicles: Individual Savings Accounts (ISAs) and General Investment Accounts (GIA)s can be crucial for early retirement planning, as they can offer tax-efficient ways to grow and diversify your wealth.
• Strategically manage your debt: Where you can, prioritise paying off high-interest debts, such as credit cards or unsecured loans, as the interest payments on these can significantly erode your ability to save over time. When it comes to your mortgage, reducing the amount you owe or aiming to be mortgage-free by a certain date could help your early retirement plans.
• Diversify your income streams: Beyond your primary employment, exploring alternative income streams could help you grow your savings. This could include investing in assets that provide a passive income or involve turning a passion into a “side hustle”.
• Seek professional advice: Navigating the complexities of pension rules, tax implications, and investment strategies can be challenging alone. A Financial Planner can help you assess your current position, project your future needs, and build a bespoke plan that aligns with your goals.

It’s important to note that the State Pension Age in the UK is currently 66 but will start to gradually increase from 6 May 2026.

If you’re considering early retirement, you’ll need to find a way to temporarily bridge this income gap from your private pension savings, which are generally accessible from age 55. From April 2028, this will increase to 57.

Concerns about money lasting throughout retirement are common, which highlights the need for advice

The prospect of early retirement may sound appealing, but it requires financial discipline and a willingness to potentially embrace a more frugal lifestyle as you accumulate enough to gain financial freedom.

A recent survey conducted by the Financial Services Compensation Scheme (FSCS) revealed that, while 27% of adults under the age of 65 plan to retire early, a significant 69% worry that the rising cost of living will affect their retirement finances.

Concerningly, the FSCS states that 82% of respondents can identify at least one concern when it comes to saving for retirement, with most worried about not having enough money to last through their retirement.

This highlights the importance of robust financial planning to help alleviate such concerns.

Read more about managing the stress about not having enough money for retirement in one of our latest articles.

However, exploring the pathway to early retirement could prove to be one of the most empowering and rewarding decisions you make, so let us help you get there.

Get in touch

If you have any questions about your finances or retirement, then we encourage you to get in touch. Together, we can work towards you achieving true financial independence.

Email us at enquiries@pen-life.co.uk, or call 01904 661140 to find out more.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate cashflow planning or tax planning.

Workplace pensions are regulated by The Pension Regulator.

Your pension income could also be affected by the interest rates at the time you take your benefits. The tax implications of pension withdrawals will be based on your individual circumstances, tax legislation, and regulation, which are subject to change in the future.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.