This content is for information and inspiration purposes only. It should not be taken as financial or investment advice. To receive personalised, regulated financial advice, please consult us here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Many people dream of retiring early. The thought of enjoying more time for travel, family, and passion projects is certainly appealing. However, “early retirement” has undergone a significant generational change.
In previous decades, men often retired earlier than women. There were “send off” ceremonies with one main employer (which workers had spent a lifetime serving). In 2024, however, men and women largely retire at the same age.
There is more choice and variety in the retirement “landscape,” with some people retiring fully and others taking a more gradual approach—balancing part-time work with a pension.
What might “early retirement” look like for you, and how could you realistically achieve it? Our Burnley financial planners at Elmfield explain this question in more detail below. We hope these insights are helpful to you. Please get in touch for more information or to discuss your own financial plan with us.
Redefining “early retirement”
Given the diverse forms that early retirement can now take, it is often helpful to consider it via another phrase—“financial independence.” Here, the focus is less on “stopping work” once you reach a certain age and more on the ability of an individual to sustain their lifestyle without engaging in paid work (e.g. employment).
A diverse range of income streams could make this possible. For example, perhaps an individual draws income from rental properties, pensions, ISAs and occasional freelance consultancy work. Others might rely mostly on “traditional” income sources to achieve early retirement—i.e. generous workplace pension schemes.
Mapping out some key “milestones”
It is helpful to be aware of certain key pension rules when considering how you might retire early. Firstly, the State Pension is not available as an income source until you reach your State Pension age. In 2024-25, this is 66 for both men and women. It is likely to rise to 67 by 2028.
As such, those hoping to retire before 66 will need to account for the absence of the State Pension in the years beforehand. For some, this might involve building up a larger pension pot by increasing contributions earlier in their careers.
The other key milestone is the Normal Minimum Pension Age (NMPA). This is the age at which you are legally allowed to start taking pension benefits, such as from workplace pensions or private pensions. In 2024-25, the NMPA is 55 years old and will rise to 57 in 2028.
Therefore, those looking to retire before their NMPA will also need to factor this into their retirement plan. This may involve building up extra “non-pension” savings, such as those in a Stocks & Shares ISA, which do not place an age restriction on withdrawals.
How do I know when to retire?
Early retirement may be an aspiration for some, but not for others. A range of factors can influence an individual’s decision about their retirement date. Of course, the choice is a very personal one. What is “right” for you may not be appropriate for others, and vice versa.
Naturally, your financial preparedness is a key factor. Certain people will be able to afford early retirement more easily than others. You need to be confident that you can support your lifestyle without a salary, over many decades.
You also need to consider your health. If you enjoy a strong physical and mental well-being level, you may be prepared to work longer. This may especially be true for those with high job satisfaction and a pleasant workplace environment.
Alternatively, perhaps you long to spend more time pursuing other interests or developing new skills outside of your career, such as painting. Maybe you long to escape the 9-to-5 routine and enjoy more family time. These factors may lean you towards a form of early retirement.
Preparing for early retirement
To retire early, you need a strong financial foundation to support your future lifestyle. This involves managing debt responsibly, such as keeping “costly” debts (e.g. personal loans and credit cards) to a minimum.
For some clients, it will help to clear their mortgage. Owning your home outright will remove a significant monthly expense which your retirement fund would otherwise need to cover. It also frees up more income to put towards savings and investments.
Consider building up a strong “emergency fund” – e.g. 3-6 months’ worth of living costs – in easy-access savings to help you cover unexpected expenses, such as a major home repair. This will help you avoid the temptation to turn to credit or retirement savings to cover the costs.
Another crucial step is to build a robust investment strategy. This needs to align with your financial goals, investment horizon and risk appetite to give yourself the best chance of long-term growth. A financial adviser can help you with the portfolio construction process, also assisting with ongoing monitoring and management to ensure everything stays on track.
Invitation
If you are interested in starting a conversation about your own financial plan or investments, then we’d love to hear from you.
Please contact us to arrange a free, no-commitment consultation with a member of our team here at Elmfield Financial Planning in Padiham, Burnley, Lancashire.
Reach us via:
T: 01282 772938
E: info@elmfieldfp.co.uk
