A how to guide on retiring at 55

Pensions & retirement 17 October 2022

For many of us, retiring at a reasonable age is all but a pipe-dream. But if you can afford an early retirement, there are many things to consider before taking the plunge.

So, whether your ideal retirement means gardening, holidays or new hobbies, join us as we explore all you need to know about retiring earlier than planned. We'll take you through the pros and cons, how to start planning and where to get advice.

Pension freedoms

Since pension freedoms were introduced in April 2015, it means that you can now take up to a 25% tax-free lump sum from your defined contribution pension pot, from age 55. You also have the option to take out more than the 25% of your pot, but this would incur income tax.

Before 2015, you would usually only have the option to buy an annuity. Today, your full options include:

  • Taking your entire pension pot as a lump sum (paying income tax on the remaining 75%)
  • Taking your pension pot in many lump sums
  • Arranging what’s known as ‘flexible drawdown’, where you take your pension in lump sums or payments
  • Buy an annuity to gain guaranteed retirement income

Retiring at 55: the pros and cons

With every decision in life, it’s always a good idea to weigh up the pros and cons to make a more informed decision. Retiring at 55 is a big decision. Here’s some factors you could consider.


  • Extra time to spend with family, friends and loved ones
  • More time to explore new hobbies, travel or projects you’ve been putting off
  • Opportunity to focus on health and wellbeing through exercise and mindful activities
  • Leaving a stressful work environment could improve your wellbeing and health


  • There’s a possibility that you have to bridge an income gap before actually accessing your pension
  • You may find it difficult to deal with so much free time, leading to poorer health, boredom or depression
  • Taking your pension pot earlier could see it deplete faster
  • Inflation could creep in during your years of freedom, hitting you harder with only your savings to rely on
  • Underestimating your life expectancy could mean you don't have enough to cover care and medical costs
    It can be difficult to secure part-time work as a mature adult if you find you need extra income to make ends meet

Can you afford to retire at 55?

It is completely down to you whether you can afford to retire at 55. You'll need to consider many different factors such as your personal wealth and assets, when you can access your pension and your medical history.

Money Helper's pension calculator can help you make a start. This helpful tool can help you figure out how much money you should aim to save and get a forecast of your pension pot value at retirement.

How much do I need to retire at 55?

How much you’ll need for a good retirement is up to you. Many pension experts recommend the 50/70 rule, which would aim to help you save enough to have a pension income that equals 50% to 70% of your salary. For example, let’s say you were on an average salary of £45,000. Research from the Department for Work and Pensions (DWP) suggests that you’d need to contribute 60% of your salary to earn a decent retirement income.

Based on these figures, if you started saving at 30 you’d have to contribute for 25 years if you wanted to retire at 55. This would mean you could have a £675,000 pension pot if you save £27,000 for 25 years. And to achieve this, you’d need to save at least £2,250 per month.

This may sound like a huge amount, but it won't all come out of your wallet. Your employer will also contribute if you're enrolled in a workplace pension. So, if your employer contributes 3%, you’ll only need to contribute the rest to hit your saving target.

Another rule of thumb is to take your age when you begin contributing to your pension and half it. This means that if you start saving at 26, you’ll need to contribute 13% of your salary until you retire. Of course, you should consider contributing more if you can afford it or get a pay rise.

Whichever rule you choose, you’ll need to factor in your life expectancy and your ideal retirement lifestyle. For some, living a luxurious retirement means saving up to £1 million. The Office for National Statistics estimated the average age of death for Brits between 2018 - 2020 was 84 years old. While it’s never pleasant, considering your life expectancy can help you better adjust your retirement budget.

Does retiring at age 55 impact your State Pension?

Although you can retire at any age, you can only access your State pension from age 66 onwards. Unfortunately, this means you won't be able to take your state pension for nearly a decade.

Leaving the workforce at an earlier age will also impact your National Insurance contributions. To be eligible for the full State Pension, you need at least 10 years’ of contributions. So, taking an early retirement could mean you fall short of the requirement - potentially missing out on extra retirement income.

If you’re not sure whether you’ll qualify for the full amount, you can check your State Pension forecast on the government’s website.

How to start planning for an early retirement

As mentioned earlier, planning for early retirement involves a lot of number crunching and can be a complex process. If you’re serious about retiring early, you’ll need to follow a few key steps.

Step 1: Estimate how much potential income you’ll have at retirement

Taking stock of your personal and workplace pensions can help you understand how much you’ll have to draw up in your collective pension pots. MoneySavingExpert’s DIY pension dashboards guide can help you get started.

Step 2: Calculate your future State Pension income

Check what age you can retire from as the State Pension age is set to increase from 66 to 68 between 2037 and 2039.

Step 3: Create a rough retirement budget

Whether you choose a moderate or luxurious retirement, chances are you’ll spend less in retirement.

Step 4: Decide what age you’d like to retire

You may have set your mind on retiring at age 55. But it’s important to see how realistic this goal is, compared with your retirement lifestyle budget.

Step 5: Seek retirement guidance or advice

Getting an impartial view of your situation and options can help you gain the perspective and knowledge you need to make a better informed decision.

Ways to boost your pension income before retirement

There’s no quick fix when it comes to saving money. But, the earlier you begin planning ahead for retirement, the more prepared you’ll be. According to MoneyHelper there are two main ways to boost your retirement income - either save more before retirement or wait to retire.

If you’re itching to say goodbye to the workplace, it can be tempting to retire as soon as you can. But, waiting a few years or even phasing into a part-time contract can help you further build your pension pot. For example, if you qualify for the new State Pension, you’ll get 5.8% more income for every year you delay taking your State Pension.

Pension pot

Where to get retirement planning guidance and advice

The government’s Pension Wise service is a good place to start if you have a defined contribution pension and are age 50 or older. They offer free and impartial retirement guidance that can help point you in the right direction if you’re new to retirement planning.

But if you’d prefer personalised advice that’s tailored to your unique situation, you can also get support from a financial adviser. Some workplace pension scheme providers offer an ‘Employer-arranged pensions advice exemption’. Under the exemption, you can take up to £500 from your pension pot to use towards financial advice in a single tax year.

Getting expert advice on your retirement plan

We hope that the above tips have helped you better understand the pros and cons of pension retiring at 55. If you’re still unsure whether pension consolidation is a good idea or not, don’t worry. We can help by connecting you with a local financial adviser, wherever you’re based in the UK.

Working with an FCA-regulated financial adviser can help you:

  • Understand whether retiring at 55 could be suitable for your circumstances
  • Gain a good overview of your current financial situation
  • Determine your financial goals and retirement priorities
  • Form a solid retirement plan for when you turn 55
  • Get personalised advice and options for early retirement

Getting advice on your pension has never been easier. Fill out our simple form and we’ll match you with the most suitable expert for your needs.

Your expert will invite you for a free consultation, which we’ll arrange so you can ask questions and decide if their services could help you better manage your pensions.

Get matched with a pensions and retirement adviser today. Click on the button below to match with a local expert now.

Find me an adviser

Editor’s note: This article was originally published in May 2015 and has been fully updated for accuracy and freshness.