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When can I retire? 5 things that affect when you can retire

Updated: Jun 9, 2021

When can I retire? It’s a simple question, but the answer is far from straightforward.

It’s not uncommon for people to think the date they can retire is that on which they receive their state pension. But with the state pension age gradually rising, fewer and fewer people want to keep working until then. Others have heard about the new pension freedoms and think they can retire at 55. So when can you really retire? Read on to find out.

So, when can I retire?

The good news is that you can actually choose to retire anytime you want if you’re prepared to make some compromises. Some might be palatable, some not. In the end, you’re the only one who can decide which trade-offs you want to make.

To help you through the process here are five factors that affect when you can retire.

1. Life expectancy

How long you will live in retirement is quite possibly the single biggest determinant of when you can afford to finish work. Life expectancy dictates how long your retirement savings must last.

It may seem illogical, but statistics show that the older you are – the longer you can expect to live. 55 year-olds can expect to live to age 83 on average. However, make it to 70 and you can expect your life expectancy to extend to age 86.

2. Your Living Expenses

Spending less in retirement makes it more likely that you can retire sooner as your pension pot will naturally last longer if you’re taking less money from it.

Once you’ve prepared a budget and you know how much you’ll need to live on, you’ll be able to make smart choices about the retirement lifestyle you want. You might find ways of cutting your expenses to allow you to retire earlier or alternatively, you might choose to keep the same retirement age but spend more on the hobbies or holidays you value.

If you prepare a budget, remember that:

  • People in their 80’s don’t tend to spend as much as people in their 60’s so reckon on your spending slowing down over time.

  • You may want to provide for care costs as you get older.

3. The Forecast Income From Your Pension

If you want to work out when you can afford to retire you’ll need to calculate how much income you’ll be able to secure from your pension.

Depending on the type of pensions you have, your provider will be able to give you a current fund value, transfer value and a projected fund valuation at your chosen retirement date. They should also give you a projection of the lump sum you can receive and the income available. However, there are other options apart from taking benefits direct from the plan or scheme and so working out what you can achieve isn’t as easy as it seems.

You may therefore want to get an independent financial advisor to do this for you as this will give you a more comprehensive report on your options. Reeves do this as part of a free initial financial review.

You can also get a statement of how much state pension you’ll get when you reach the state pension age.

These two together determine the annual income you’ll be able to secure from your pensions.

If your forecast income falls short of that amount you need to meet your expenses you’ll need to consider either:

  • Delaying the date of your retirement to allow your pension fund more time to grow and to reduce the lifetime drawdown you’ll need to take.

  • Increasing contributions to your pension fund, or

  • Improving the returns of your existing pension investments.

4. Your Primary Investment Objective

How much money you can take from your pension fund each year depends on your objective for the fund:

  • If you’re willing to eat into some or all of your pension fund during your retirement, you’ll have more available for drawdown and can therefore retire earlier.

  • If you want to preserve or continue building your fund to pass onto your beneficiaries, there’ll be less available to take as an income. This will mean delaying retirement of reducing your income relative to the first scenario.

Put bluntly, the more money you want left in your pension on death, the less you’ll be able to take in terms of income each year.

5. Other Savings/Investments

Current legislation prevents you from taking an income from your pension before the age of 55 unless you work in a protected occupation or cannot work due to ill health. However, that doesn’t mean that you’ll not be able to retire sooner if you’ve got other investments that you can use to provide an income in the meantime.

Withdrawing money from ISAs, selling a rental property or even downsizing your main residence are all ways in which you can generate an income to bridge the gap between your retirement and the point at which you can access your pension.

If you’ve enough invested outside your pension, you may even be able to live off these investments without reducing their value in real terms.

So there you have it. The five key factors that affect how soon you’ll be able to retire. Balance these in a way that works for you and you’ll hopefully be able to stop work sooner than you would think.


The articles are for information only and should not be construed as advice or a recommendation. The investment strategies mentioned are examples only and may not be suitable for your particular: circumstances, tax position or objectives. Please seek independent financial advice before taking any action.

Names have been changed to protect identity.

No advice should be conferred from the articles. No action should be taken without independent professional financial advice as any actions on your pension may be irrevocable and have a big impact on your income in retirement.

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