Although it may seem unattainable to retire early, are these best practices able to assist you in doing so?
Even though we might save for a pension for years, many of us want to quit our jobs early and retire early.
According to data from the Institute of Fiscal Studies released in November 2023, nearly 25% of the wealthiest 20% of the population retires between the ages of 55 and 64, compared to only 7% of the poorest 5%. This suggests that early retirement is becoming more and more reserved for the wealthy.
The decline of generous defined benefit (final salary) pensions in the private sector, the state pension age increase, and the cost-of-living crisis, which caused sharp increases in bills, are some of the factors that make it more difficult to retire early.
Meanwhile, the Financial Independence, Retire Early (FIRE) movement is gaining traction. This movement promotes extreme savings and investments in addition to frugal living in order to attain financial independence. In their 30s or 40s, FIRE adherents typically save up to 70% of their yearly income with the goal of retiring and living off modest withdrawals from their accumulated savings.
But not everyone is a good fit for FIRE. Tom Selby, AJ Bell's director of public policy, states: "The FIRE movement often promotes rather drastic savings plans that aren't feasible or appealing to many people.
We look at the eight actions you can take right now, as well as how to invest to help you enjoy life after work sooner. How else can you help yourself end the daily grind of work and reduce or stop working before retirement age?
There are eight strategies to retire early.
1. Spend less
Just cutting back on expenses can help you save money for an early retirement.
Making a shopping list or reducing a few unused subscriptions are two ways to help you cut costs.
Try using a free budget planner, like the one available on the government education website Moneyhelper.
Alternatively, you can use a free budgeting app that links to your bank accounts, like Plum, Emma, or HyperJar, to help you organize and review your spending.
2. Pay off your mortgage
. When considering an early retirement, not having to worry about a mortgage can help ease financial stress.
PensionBee's director of public affairs, Becky OConnor, states: "Having a mortgage that extends into retirement can be problematic because repayments may require individuals to deduct more from their pensions during the early years.
You may be able to use the 25% tax-free lump sum from your pension, which you can start taking at age 55 (it will increase to 57 in 2028), to pay off the mortgage. However, think about overpaying as well. Up to 10% of the loan amount may be overpaid annually under the majority of mortgage agreements.
3. Go over your investments
Anyone hoping to retire earlier than the typical retirement age must make sure their investment strategy fits their objectives.
The fact that so many of us are unaware of how our pension is invested is concerning.
Eighty-two percent of pension savers understand their pension is invested, but only 26 percent are aware of what it is invested in, according to a study conducted by the Pensions and Lifetime Savings Association.
Workers aren't taking enough risks when it comes to their investment choices, according to earlier studies.
Opinium's research for Interactive Investor estimates that four million workers under 40 may be losing out on investment returns because they are enrolled in low-risk pension plans that do not offer the possibility of greater growth.
If your retirement is at least five years away, the majority of your portfolio should consist of stocks. This is because, despite the increased risks, they are the tried-and-true method of gradually increasing your wealth. Younger investors have more time to endure market fluctuations.
The disparity widens over many decades.
According to actuarial consultants LCP, an average earner would anticipate having 46,000 more money in retirement if they invested all of their money in stocks as opposed to a balanced, moderate-risk fund, which normally has 60% in stocks.
According to Selby of AJ Bell, "Don't assume your automatic default pension investment is appropriate; instead, review your investments and make sure you are comfortable with the risks you are taking.
4. Start early and save more money
The larger your final pension pot, the more you can afford to contribute. Your money will have more time to grow if you invest early.
According to AJ Bell's analysis, an individual who begins making pension contributions at age 22 may need to save £1,900 annually in order to retire at age 68 (the state pension age) with a net income of £31,300 annually, which is the amount required for a moderate standard of living as specified by the Pensions and Lifetime Savings Association's Retirement Living Standards.
These savings are predicated on inflation-adjusted investment returns of 5% annually after charges and contributions that increase by 2% annually until retirement.
Contributions of £3,100 annually, more than twice the amount, might be required if you wished to retire at age 60 on the same income. If an individual wishes to retire at age 60, their annual contribution amounts increase to £5,300 if they begin contributing at age 30.
5. Take advantage of the free money
The impact of the upfront income tax relief on pension contributions should not be understated. For taxpayers with basic rates, each pound paid becomes 1 point25; for those with higher rates, it becomes 1 point66.
Your employer's pension contributions, which typically amount to at least 4% of your pay, are free funds that can assist you in retiring early. Always inquire about the pension when you start a new job. As part of their total compensation package, some companies provide additional employer contributions. If your employer matches your contributions, think about raising them when your pay increases as well. This will increase your pension savings even more.
6. Verify your eligibility for a state pension
Depending on inflation and earnings growth, the triple lock protects the state pension, making it a valuable source of retirement income. The state pension age, which is currently available from the age of 66, is expected to increase to 67 by 2028 and to 68 by 2046.
To receive a state pension, you must have made National Insurance (NI) contributions for at least 10 qualifying years. To receive the full new state pension amount, which was slightly more than 11,500 in the 2024 - 2025 tax year, you must have made National Insurance (NI) contributions for at least 35 years.
As of April 6, 2025, the full new state pension will rise by more than 470 to 11,973 annually (230 points per week).
Finding any gaps in your state pension record and filling them could be one of your best retirement choices, according to Alice Haine, personal finance analyst at investment platform Bestinvest.
If you do have gaps, find out if you were eligible for a benefit that comes with an NI credit from the Department for Work and Pensions. Universal Credit and child benefit are two examples.
People can now pay for any gaps in their NI record dating back to April 2006 thanks to the government. Haine states: "It is crucial that taxpayers take advantage of this special window of opportunity to plug up to 17 years of missed NI contributions in one go before it closes on April 5, 2025.
Although the deadline was loosened by HMRC in March 2025, anyone who wants to claim additional credits must submit an online callback request by April 5th.
7. Plan your finances
Note that you typically cannot access your private pension before the age of 55, which is important for anyone planning to retire in their 50s or earlier.
In 2028, the minimum pension access age is expected to increase to 57.
"It is possible to retire before this age, but you will need non-pension assets, like buy-to-let real estate or individual savings accounts (ISAs), to support your lifestyle until you can access your retirement pot," Selby says.
"In the future, the state pension age may rise even more. That could make it even harder to retire early because you'll need to earn extra money to cover the extra years you won't be receiving the state pension.
Therefore, be sure that you have taken the time to carefully consider your spending plans and how an earlier retirement will affect them, ideally with the help of a regulated independent financial adviser.
Eight.
Locate previous pensions. There are lost accounts holding billions of pounds in pension savings that could be yours and increase your retirement income.
According to the most recent research, there is an astounding 31 billion dollars in unclaimed, inactive, or lost pension pots, which is 60% more than in 2018.
At an average of £9,470, about £33 million in pension funds are currently regarded as lost.
When individuals lose track of their pension funds from previous employment, such as when they move and fail to notify their plan providers of their new address, they lose their pension funds.
Using the government website's free pension tracing service, you can locate previous pensions.
"You could also go back and review your career path, review old documents, check for any gaps in your pension history, and get in touch with your provider to update your contact information," said Chris Blackwood, spokesperson for the Pension Attention campaign.
We go into greater detail in our "how to find lost pensions" guide about tracking down old pensions.
What is the amount required to retire?
There is no magic amount for how much you should save for retirement, though some people decide to adhere to the 8 percent pension rule. Everybody will have different circumstances.
According to the Retirement Living Standards, which are based on independent research from Loughborough University, a single person may need to earn at least £14,000 annually from pensions and savings in order to enjoy retirement, along with the occasional fancy dinner, a trip to the UK, and some reasonably priced recreational activities.
This increases to 31,300 for a more active retirement that includes dining out a few times a month and taking one annual vacation abroad.
A retirement income of £43,100 per year is necessary to live comfortably.
The numbers are 22,000, 43,000, and 59,000 for couples, respectively.
The 11,973 per year from April 2025 makes a minor but significant dent in these numbers for those who qualify for the full state pension rate.
The remainder must come from private and workplace pensions, income from any real estate that is owned, or possibly trust funds.
Returning to work is an option for those who are short on funds. According to the Standard Life's Retirement Voice report, one in seven retirees are going back to work or are thinking about doing so because of financial strains, a lack of pension benefits, and a need for social interaction.
While 27% have realized their pension is not giving them enough money to live on, 34% have discovered that their living expenses have gone up. In the meantime, 43% of respondents say they would like to increase their income in order to supplement their retirement income.
For those over 55, Pension Wise is a free, unbiased government service that explains your options for your pension fund.
However, if you need assistance creating a plan for an early retirement, you can consult a financial advisor. Go to unbiased . co . uk to find one in your area.
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