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Financial planning in your 50s: the consequences of taking early retirement


Travelling the world to see all those far-flung destinations on your wish list. Enjoying long days out on the golf course with friends. Taking up that hobby you’ve always promised yourself you would learn.

Whatever you plan to do, it’s easy to see why, for many of us, retirement can’t come soon enough. And over the past few years, that dream has captivated increasing numbers of people thanks to the sobering impact of the pandemic.

These difficult times have not only led to many workers being burnt out by the intense experience of remote working, but it has also delivered a bit of a wake-up call regarding our own mortality, triggering many to reassess the factors that truly make them happy.

As a result, large numbers of those within touching distance of retirement are considering pushing the career ladder aside with a view to gaining more freedom and more time. Indeed, research from Legal & General says this cohort could comprise as many as 1.3 million people.

For those in their fifties thinking about the idea of jumping into early retirement or phasing down their work commitments ahead of the official retirement age, such a decision has important consequences. You might be motivated by freeing yourself from the nine-to-five and escaping the rat race, but sound planning is strongly advisable to ensure your personal finances can accommodate the absence of regular income that employment or self-employment brings. After all, the earlier you retire, the longer you will have to wait to benefit from the additional security provided by the State Pension, which is currently only available from the age of 66.

How much is enough?

Unfortunately, there is no single, simple answer to the crucial question of ‘how much will I need?’. This depends on a variety of factors, including the standard of living to which you are accustomed as well as the standard of living you will expect throughout your retirement.

The Pensions and Lifetime Savings Association (PLSA), drawing on research from Loughborough University, has explored how much income an individual or couple will need on an annual basis to support three theoretical standards of living in retirement: Minimum, Moderate or Comfortable. It suggests, for example, that a couple living in London at the Comfortable standard, who expect to benefit from more financial freedom and higher levels of discretionary spending, should plan for a retirement income of £51,500 per annum. State pension allowances would contribute towards this combined total figure.

The PLSA is at pains to point out, however, that the exact amount will vary from person to person. And while it’s possible that you’ll benefit from additional income if you pursue any profitable new ventures, equally, you will need to take into account all demands on your income, such as care costs, bills and any remaining mortgage debt.

It’s also important to be realistic about discretionary outgoings in areas such as leisure activities, hobbies and travel. Any costs you are factoring in today could also be higher at the point you are looking to retire when taking into account inflation, which is projected to hit 7% this spring.

Paying into the pot

By the time we reach our fifties, many of us will have some form of pension savings pot – or pots – that we have been paying into over the course of our careers. Making contributions from an early point in your working life, presents the best opportunity of realising gains later on, which underlines the importance of planning ahead from a young age.

If you’re looking to boost your pot ahead of a possible early retirement, then it is advisable to talk to those in charge of your workplace scheme about ensuring you’re maximising employer contributions. You may also want to discuss the possibility of making higher contributions and, if your circumstances allow, you might also want to consider topping up your pension with a lump sum, which will be eligible for tax relief from the government up to a certain limit.

Talking to your employer might also uncover options to vary the level of risk and possible return associated with your pension since, as you get closer to retirement age, savings will typically be placed into less volatile investment vehicles, such as bonds or gilts. You must, of course, be comfortable with whatever level of risk you choose since any decision you make could negatively impact your early retirement plans.

Personal investment choices

For those seeking greater autonomy, you might want to consider a Self-invested Personal Pension (SIPP), whether you choose to manage your own investments or entrust your wealth to a ready-made portfolio.

Tax-efficient savings vehicles such as ISAs can also be used to form part of your broader financial planning for retirement. The current ISA regulation allows you to contribute up to £20,000 into an ISA every year, and in the case of a stocks and shares ISA, any increase in the value of investment is free of Capital Gains Tax.

Putting a plan in place

Clearly, there are lots of aspects to consider if you are looking to retire early and there can be unpleasant consequences if you’re not financially prepared. Research from Aviva found that 47% of early retirees experienced a hit to their finances, and anyone looking to access their pension savings before the age of 55 could find themselves faced with early exit fees.

However, the same research also points to the positives of early retirement, with 68% of people saying the decision has made them happier. No doubt this is partly down to having more precious time on their hands, but also having the reassurance of a sound financial platform in place to be able to tick off some of those long-held retirement plans.

For a free holistic review of your retirement goals and financial plans, contact one of our specialist advisers on 020 8371 3111 or by emailing


The information contained within this communication does not constitute financial advice and is provided for general information purposes only. No warranty, whether express or implied is given in relation to such information. Vintage Wealth Management or its associated representative shall not be liable for any technical, editorial, typographical or other errors or omissions within the content of this communication.