When Can I Retire?

There isn't one retirement age

People still talk about "retirement age" as though everybody reaches the same birthday and collectively puts their feet up. That isn't how retirement works. You could:

• retire completely;
• retire gradually;
• reduce your hours;
• leave one career and start another;
• stop work before State Pension age;
• or continue working long after it.

Your retirement date is ultimately a personal and financial decision.

Steve's observation

I think we've accidentally mixed up three completely different finish lines.

Someone says: "I can take my pension at 55, so I can retire at 55." Not necessarily.

Someone else says: "My State Pension starts at 67, so I have to work until 67." Again, not necessarily.

One tells us when a particular pot of money may become accessible. Another tells us when State Pension begins. Neither automatically tells us when you can afford to stop earning a salary.

When can I access my private pension?

Under current rules, most people can normally access money from registered private pensions from age 55, subject to the rules of their particular pension scheme and certain exceptions.

The normal minimum pension age is due to rise from 55 to 57 on 6 April 2028.

Some people may have a protected pension age or qualify under other exceptions, including certain ill-health circumstances.

So don't simply assume every pension can be accessed at exactly the same age. Check the rules of your own arrangements.

We've already covered this in more detail in ODW-WP-015 — When Can I Take Money From My Workplace Pension?

Being able to access a pension doesn't mean you should

Imagine somebody turns 55 and has £300,000 in pensions. They think: "Brilliant. I can retire." Maybe. But suppose:

• their State Pension doesn't begin for many years;
• they still have a mortgage;
• they need £35,000 a year;
• they have no other income;
• and retirement could last 35 or 40 years.

Pension access simply opens a door. It doesn't tell you whether walking through it is financially sensible.

When does State Pension start?

State Pension has its own separate age. Your State Pension age is the earliest age at which you can normally start receiving your State Pension.

It may be different from the age at which you can access workplace or personal pensions.

State Pension age is also subject to government review and can change over time.

So rather than relying on an age you've heard from somebody else, use the government's official State Pension age checker. And obtain your own State Pension forecast.

We've covered the income side in ODW-RP-006 — How Much State Pension Will I Get?

Do I have to stop working at State Pension age?

No.

There is no general default retirement age requiring most people to stop work at 65.

You can normally continue working after reaching State Pension age.

Equally, reaching State Pension age doesn't mean you have to claim State Pension immediately.

Retirement and State Pension are related, but they're not the same decision.

So how do I work out my real retirement date?

I'd start with five questions.

1. What will retirement cost?

You need a realistic household spending figure. Not just: "We can survive on £20,000." What will the retirement you actually want cost?

If you haven't worked this out yet, start with ODW-RP-005 — How Much Income Will I Need in Retirement?

2. What income will I have?

List every source. Then establish when each source starts. That could include:

• State Pension;
• defined benefit pensions;
• workplace pensions;
• personal pensions;
• savings;
• ISAs;
• investment income;
• rental income;
• part-time earnings.

Our completed guide ODW-RP-007 — How Do I Work Out My Total Retirement Income? takes you through this process.

3. How long might retirement last?

This matters enormously. Retiring at 60 rather than 67 doesn't simply mean seven extra years of freedom. Financially, it may also mean:

• seven extra years requiring funding;
• seven fewer years of earnings;
• fewer pension contributions;
• potentially fewer employer contributions;
• and less time before you begin drawing on accumulated assets.

We've explored this in ODW-RP-008 — How Long Will My Pension Need to Last?

4. Can I fund the gap before other income starts?

This is one of the biggest retirement-timing questions.

Imagine you stop work at 60. Your State Pension begins later. Perhaps a defined benefit pension also starts later.

During those first years, your private pensions, savings and investments may need to provide considerably more income. Once other income begins, pressure on those assets may reduce.

That period is often described as a retirement income bridge.

The earlier you retire, the wider that bridge may become.

5. Does the plan survive things going wrong?

Don't only test retirement under perfect conditions.

• What if investments fall?
• What if inflation is higher?
• What if we spend more than expected?
• What if one of us lives into our 90s?
• What if the car, roof and boiler all decide to retire at roughly the same time?

A credible retirement date needs a plan with some resilience.

What difference can one more year of work make?

Potentially quite a lot. Working one additional year can mean:

• another year of earnings;
• another year of pension contributions;
• another year of employer contributions;
• another year before withdrawals begin;
• another year for investments to potentially grow;
• one fewer year of retirement requiring funding;
• one year closer to State Pension.

That's why comparing "Retire this year" with "Retire next year" can sometimes produce a surprisingly large difference.

That doesn't mean you should automatically keep working. It means the trade-off is worth understanding.

Could I retire gradually instead?

Absolutely. Retirement doesn't have to involve a leaving card on Friday and 30 years of gardening beginning Monday morning. You could potentially:

• work four days;
• reduce to three;
• change role;
• consult;
• become self-employed;
• take seasonal work;
• or gradually wind down.

Even relatively modest earnings can reduce the amount that needs to be taken from pensions in the early years.

And psychologically, some people prefer gradually changing pace rather than stopping overnight.

What about my mortgage?

Your mortgage can materially affect retirement timing.

Imagine your retirement lifestyle excluding housing costs requires £30,000 a year. You also have £1,000 a month of mortgage payments. That's another £12,000 a year of expenditure.

If the mortgage disappears two years later, your required retirement income may fall materially.

So don't simply ask: "Can I retire while I still have a mortgage?" Ask: "What does keeping the mortgage do to the retirement-income requirement?" Then assess the available options properly.

Should I wait until my mortgage is paid off?

Not necessarily. There isn't a universal rule saying: mortgage = no retirement.

Some people can comfortably support mortgage payments from retirement income. Others may struggle. The question is affordability.

And don't automatically use pension money to clear a mortgage without considering the full picture.

• tax;
• pension sustainability;
• interest costs;
• liquidity;
• investment position;
• and wider objectives.

What if I've already got enough?

This is an interesting problem. Some people reach a point where continuing to work isn't financially necessary — but they haven't realised it. Perhaps they've:

• accumulated substantial pensions;
• paid off the mortgage;
• secured defined benefit income;
• built savings;
• and have a strong State Pension entitlement.

They keep working because: "I thought I needed to make it to 67." Perhaps they do. Perhaps they don't.

That's why doing the calculation matters. You may discover your realistic retirement date is later than expected. But you might also discover it's earlier.

Steve's observation

There's a slightly sad version of retirement planning nobody talks about.

It's the person who could afford to retire at 61 but carries on until 67 because nobody ever showed them the numbers.

Six years later they've accumulated more money. But they can't accumulate another six years of being 61.

Money matters. Time matters as well.

Health can change the decision

Financially, working longer may sometimes improve the numbers. But retirement isn't solely a financial optimisation problem. Health matters. So does:

• stress;
• family;
• caring responsibilities;
• partner health;
• job satisfaction;
• and what you actually want to do with your time.

There is little point constructing the theoretically richest retirement if you sacrifice all the healthy years you hoped to enjoy.

The financial plan exists to support the life decision. Not the other way around.

What about couples with different retirement ages?

This is extremely common. Perhaps one partner is 62. The other is 58. One wants to stop. The other is happy working.

That can create useful flexibility. One salary may continue while the other retires. State Pensions may begin at different times. Pension access dates may differ.

The household therefore needs one combined timeline rather than assuming both partners retire on exactly the same day.

How much money do I need before I retire?

That's really a different question. The amount depends on your expenditure, other income, retirement age, State Pension, longevity, housing and other assets.

We've already built that sequence through ODW-RP-001, ODW-RP-002 and ODW-RP-004.

The key point is that there isn't one magic retirement pot.

What's the difference between "can retire" and "should retire"?

This is important. A financial plan might show: you could probably afford to retire. That doesn't mean a financial adviser should decide: you should retire.

Retirement is personal. Financial planning can help identify the choices. You decide what those choices mean for your life.

A simple retirement readiness test

Before choosing a retirement date, I'd want answers to these questions:

If several of those answers are: "No idea," the next step probably isn't handing in your notice. It's doing the planning.

What Should I Do Next?

Write down four ages:

• 1The age you'd love to retire
• 2The earliest age your pensions can realistically be accessed
• 3Your State Pension age
• 4The age you're currently assuming you'll retire

Then ask: why are those ages different?

Now calculate what retirement would look like at several dates.

Don't let an arbitrary birthday make the decision for you.