How much do I need to save to retire at 55?

A simple, realistic guide to how people on moderate incomes could save enough to be able to retire at 55.

You’d need at least an estimated £650,000 pension pot to retire at the age of 55 or 57. But as well as a good pension pot, you also need a good retirement plan. Here’s how you might set about creating both.

There’s an old joke: ‘Jumping from a plane is easy; the hard part is hitting the ground.’ Similarly, choosing to stop work is something you can do at any age; what’s difficult is supporting yourself afterwards.

Anyone with a pension pot can access it however they wish from the age of 55. However, ‘can’ does not mean ‘should’. It’s usually good practice to preserve your pension pot for as long as possible before cashing in any of it, since this will be your main income in retirement. For most people, therefore, retirement will usually come in their mid-60s.

But suppose you did want early retirement at 55? How much would you need to save, and how achievable is it? Here are some of the things you would need to think about – with the help of a financial adviser.

Before we start: can you still draw your pension at 55?

The current age at which people can access their pension pots is 55. However, this age is set to rise over time to reflect increases in the state pension age. From 2028, the ‘pension freedom age’ will rise to 57, so if you haven’t reached 55 by this time then you will have to wait another two years (at least) before being able to access your pension pots. There may be further increases in future.

Therefore, if you expect your retirement to take place later than 2027, then wherever it says ’55’ below, please assume this is ’57’.

Planning for retirement at 55 or 57: start with what you know

Although you can’t predict the future, there are some things you can estimate now with reasonable certainty. Start by asking yourself the following questions:

How much retirement income will I need?

A popular way to estimate this figure is the ’70 per cent rule’, which states you will need 70 per cent of your working income to maintain the lifestyle you want in retirement. So if you retire on a salary of £50,000 you would be looking at achieving an income of around £35,000.

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