Early retirement typically means leaving full-time employment before state pension age. In the UK, state pension age is currently 66 and set to rise to 67 in 2026. Therefore, retiring at 55 would be considered early.

Early retirement is about having the freedom to choose how you spend your time without relying on a salary.

Reasons to retire early

People choose to retire early for a variety of reasons – both personal and practical.

A major reason is financial security – having built enough wealth through pensions, ISAs, property, or investments to support a lifestyle without relying on employment income.

For those who feel financially prepared, the appeal of taking back control of their time is powerful.

Early retirees must be realistic about long-term risks. Inflation means prices rise over time, so your money doesn’t stretch as far, while market ups and downs can affect the investments in your pension.

Finally, there’s the emotional aspect. After decades of routine, stepping away from work can be a significant adjustment and you may not be mentally ready.

What happens to my pension if I retire early?

In the UK, most pensions can’t be accessed until age 55 (rising to 57 from 2028). Retiring before then means relying on other income sources like savings, investments or rental income.

Even retiring at 55 or 57 means your pension may be smaller due to fewer contributions and less investment growth. Taking benefits early can also reduce what you receive – particularly in final salary schemes.

There’s also the risk of drawing down too quickly (taking money out of your pension). Poor investment performance or high inflation can erode your pot – especially if you retire during a market downturn.

Other key considerations around an early retirement pension plan include:

State pension delay: you can’t claim the state pension until the appropriate age, so you’ll need to bridge that income gap

Possible shortfall: you may not qualify for the full State Pension; requesting a pension forecast via gov.uk will help you check for national insurance gaps

Pension lifetime allowance risks: although recently abolished, future changes could affect larger pension pots

Loss of employer contributions: you’ll forgo valuable years of employer pension top-ups

Loss of employee benefits: benefits like death-in-service life cover and private medical insurance usually end when you leave employment.

In short, early retirement has a compounding effect on pensions: fewer years of paying in, more years of drawing out and often earlier-than-ideal access.

These factors underscore the importance of cash flow modelling in understanding how much you need to retire early, which a wealth planner can help with.

What are the benefits of early retirement?

Early retirement gives people the chance to spend more time doing what they enjoy. For many, these years are seen as a reward for decades of hard work.

Stepping away from a high-stress job can also bring health benefits. Studies suggest that retirement can improve both mental and physical wellbeing – especially when individuals remain active and socially connected. That said, if life slows down too much, the effect can be the opposite.

After years of long hours and demanding roles, many professionals reach a point of burnout by their 50s. I’ve worked with several clients who’ve chosen early retirement as a much-needed reset, particularly in high-pressure industries.

What are the downsides of retiring early?  

One of the biggest risks and potential pitfalls early retirement is outliving your money. Retiring at 50, for example, could mean needing to fund 30+ years of living expenses.

Work also provides structure, purpose and social interaction. Without it, some early retirees can feel a loss of direction or become isolated.

Leaving the workforce early usually means missing out on valuable employer-matched pension contributions and future salary increases, which could have boosted retirement income in later years.

Healthcare costs be another challenge. Without employer-provided cover, private insurance premiums may rise with age and funding these out of pocket could put extra pressure on your retirement income.

Financial planning for early retirement

Early retirement can be deeply fulfilling, but it is not a decision to be made lightly or without expert advice and guidance.

As a Wealth Planner, I always encourage clients to look beyond the surface and examine not just whether financially they can retire early, but whether they should and how to do so responsibly and successfully.

Samantha Gibson is a senior wealth planner at Canaccord Wealth