What is Early Retirement?
Now that the default retirement age has been abolished there is, in one sense, no such thing as 'early retirement'. If we are not being told that we have to retire at a particular age, then there can be no 'early' or 'late'. However, there are certainly two milestones that we might wish to measure our retirement against.
The first of these is age 55, which is the earliest age at which we are permitted to take any company pension that we might be entitled to. Certainly when it comes to volunteering for or accepting redundancy, then age 55 can be very important. People in their late 50s are very often tempted with taking redundancy and retiring (even though they may well look for further work afterwards) because they can take their company pension. So people who leave their main career in their late 50s can probably be considered to have retired 'early'.
The second age milestone is the age at which we can receive our state pension. Currently, this is 65 for men, rising to 66 by 2020 (although the Government is now talking about raising it to 67 by that date). The age at which women may receive their state pension has, since 2010, been rising gradually and will reach 65 by 2018 and 66 by 2020 (again, this might rise to 67 by 2020). Many people will consider that if they retire before they reach state pension age they have retired early.
For more information on both company and state pensions, have a look at our Guide to Retirement Pensions.
Some people have the misfortune to have to retire early, due to illness or incapacity, and that is very unfortunate. Each individual case will be different and there is no set template for this. People who are able choose to retire early need to think very carefully before they make the decision. It is, of course, a big decision and if we are going to retire before we can receive our company pension or before state pension age there will, of course, be financial implications for us in retirement - certainly in the first stages of our retirement..
The decision to retire early will, of course, be made on financial grounds in the vast majority of cases. The financial implications need to be thought through very carefully but they can't be divorced from what we want to do in retirement, so the two elements of retirement, financial and lifestyle, are inextricably linked.
The rest of this short Guide explores this further, so click on the links in the box for some more thoughts on early retirement.