Since April 2011 there has been no such thing as a legal retirement age.
You can basically retire as young or as old as you like.
Fantastic if you are someone that values freedom of choice. Scary if you have no idea how to plan for retirement.
So, is there such a thing as the perfect retirement age? Let’s have a look at some of the key points.
Important retirement age milestones
Whilst there is no legal retirement age, there are a couple of legal ages when it comes to accessing pensions.
The State Pension cannot be taken until you reach State Pension age. Which for most people will be 67 or 68. A reminder that you can still continue working even if receiving your State Pension.
You cannot access your private or workplace pensions until minimum pension age 55 (unless suffering from ill health or you have a protected pension age).
The minimum pension age is supposed to be rising to age 57 however at the time of writing this has yet to be written into law.
What retirement age are people using?
As of 2021 the average retirement age for men was 65 and for women it was 64.
The average retirement age has been increasing since the mid-20th century.
What about early retirement? Is there such a thing as early retirement? If there is no legal age to say you have to retire, then who is to say what is early and what is not.
Research from Aviva back in 2021 found that the most popular age to retire early was 60.
The top three reasons people felt enabled them to retire early was as follows:
- Having a defined benefit (final salary) pension.
- Paid off the mortgage.
- Saved little and often.
The overwhelming majority of retirees surveyed said their health and wellbeing improved when they retired.
On the downside nearly half said their financial situation worsened as a result.
Of those who retired ‘early’, 17% went back to some form of work.
In fact, there is a trend of people continuing to work well into their 70s with the number doubling over the last decade.
What makes the perfect retirement age possible
The key factor that is going to determine what the perfect retirement age is for you will be when you feel you have enough to retire.
The Retirement Living Standards have done some great work on determining what people can expect to need income wise to get through retirement.
Two of the biggest risks you will face in retirement are:
- Inflation. The cost of living generally increases each year and your savings have to work harder to keep up.
- Longevity. Living longer. There is roughly a 10% chance that one person in a couple will live to age 100.
In order to retire you need to be sure your savings are enough to cope with these two factors.
It’s hard to budget for this and you might feel you will never have enough and therefore will put retirement off for as long as possible.
On the other hand, you may have more flexibility than you realise to retire earlier than originally planned.
Some of the obvious steps could be:
- Reduce your spending in retirement so your savings go further.
- Downsize your home in retirement and release the extra cash to spend.
Other options are less obvious but could really help including:
- Work longer but starting on part time hours now.
- Take private and workplace pensions earlier to supplement your income from a part time job.
- Use your pensions flexibly to spend more in the early years of retirement in the knowledge you will spend less in the later years.
There is no default perfect retirement age, only the perfect retirement age for you.
If you are not sure what to do with your personal and workplace pensions at retirement then please get in touch for a free no obligation 15-minute call. We would be happy to review your position, explain where you stand and what you need to do to get the outcome you desire. We have created hundreds of happy retirements over the years. This could be you too.
Risk warning:
Stock market linked investments and any income from them, can fall as well as rise and is not guaranteed. Any figures quoted are for illustrative purposes and should not be taken as a forecast or guarantee. Past performance should not be seen as an indication of future returns and clients may get back less than they have invested.
