Dreaming of early retirement? Here’s how to make it a reality

The 56-year-old actress, Cate Blanchett, recently announced that she is “giving up” acting because she wants to do other things with her life.

Perhaps you have similar ambitions. Yet, unless you have the bank balance of a Hollywood star, turning your dreams of early retirement into reality will take careful financial planning.

Read on to discover some key steps to take if you want to leave the world of work behind before you reach State Pension Age.

Set clear goals

Having a clear goal in mind is the key to effective financial planning, and it could help you stay motivated over the long term.

So, take the time to think about what early retirement means for you.

It might help to ask yourself these questions:

• When do I want to retire?
• Will I move into part-time work or retire completely?
• How do I want to spend my retirement years?

Once you know what your goal is, you can start planning to achieve it.

Make a realistic assessment of future income needs

Of course, no one can predict the future, but you can make an educated estimate of how much you need to save for your ideal retirement.

Consider your everyday costs

These are likely to include:

• Essential outgoings, such as food and housing
• Outstanding debts, such as your mortgage
• Healthcare, including later-life care
• Leisure activities, such as travelling
• An emergency fund.

The Retirement Living Standards provide a handy guide on average living costs in retirement. While your future income needs will depend on your specific circumstances and ambitions, these estimates might help you start planning.

Remember that your spending in retirement is unlikely to remain the same year in, year out.

Indeed, your costs may be higher in early retirement as you rush to fulfil long-held dreams, such as travelling. When you settle into your new work-free lifestyle, your spending may level out for a while before increasing again as expenses such as later-life care arise. This is known as the “retirement smile”.

Factor in your life expectancy

Research by Canada Life has revealed that people aged 50 and over on average, underestimate their life expectancy by 4 to 7 years.

This could lead to a shortfall in retirement savings later in life.

So, if you want to stop working in your 40s or 50s, you’ll need to be realistic about how long your retirement might last.

As such, the Office for National Statistics’ life expectancy calculator could be a useful retirement planning tool.

Seek financial advice

Making an accurate estimate of what your income needs might be in 20 years or more may be complicated.

A financial planner can use cashflow modelling software to provide a visual representation of what your financial future could look like based on different scenarios. This could give you the insight you need to plan for your dream retirement.

Assess your current financial situation

Now you know what your goals are, the next step is to assess whether you’re on track to achieve them.

This means evaluating all your potential retirement income streams by:

• Reviewing your assets (including savings, investments, and property).
• Calculating the total value of workplace and private pensions
• Checking your State Pension entitlement
• Tracing any lost pensions.

It’s also important to factor in the ongoing cost of any outstanding debts you have, such as a mortgage.

If it looks like you don’t have enough to fund the early retirement you want, don’t despair. There are steps you can take to bolster your savings.

3 ways to build the funds you need for early retirement

If you’re determined to retire early, here are three things you could do to help you achieve your goal.

1. Increase your pension contributions

Recent research by the Pensions and Lifetime Savings Association has revealed that 50% of UK adults have never considered increasing their current workplace pension contributions.

Yet, saving into a pension is a tax-efficient way to grow your retirement pot. What’s more, increasing your contributions by even a small amount could have a significant effect on the income you receive.

Indeed, according to pensions provider Standard Life, just rounding up your pension contributions to the nearest £100 could boost your pension by £64,000 in retirement.

If you’re planning a retirement that may last 30 years or more, this extra money could be invaluable.

2. Save and investment wisely

In the 2025/26 tax year, you can add up to £20,000 to your ISA accounts, without paying Income Tax or Capital Gains Tax.

As such, making full use of your annual allowance could be a tax-efficient way to save and invest for the future.

It’s also worth having a good mix of different savings and investments. Remember, you can’t normally access workplace or private pension savings until you’re 55 (rising to 57 in 2028). Likewise, you’ll have to wait until you reach your State Pension Age to withdraw from these funds.

So, if you want to retire before 55, you may need other sources of income (such as ISAs) to draw on.

3. Pay off outstanding debts

According to a survey by SunLife, in 2024, 14% of over-50-year-olds in the UK were still paying off their mortgage. At £887 a month on average, a mortgage was the biggest repayment for most people.

If you still have an outstanding mortgage balance when you retire, this cost could rapidly diminish your savings and negatively affect your lifestyle.

So, if you have the means, it may be worth considering overpaying your mortgage while you’re still working.

However, it’s crucial to ask your lender what the annual limit for overpayments is, to avoid incurring early repayment charges (ERCs).

Get in touch

If you’re dreaming of retiring early but you’re unsure how to make this a reality, we can help.

Our financial planners in Bristol can support you to create a financial plan that aligns with your circumstances, needs, and goals.

Email helpme@aspirellp.co.uk or call 0117 9303510.

Please note

This article is for general information only and does not constitute advice. The information is aimed at retail clients only.

All information is correct at the time of writing and is subject to change in the future.

Please do not act based on anything you might read in this article. All contents are based on our understanding of HMRC legislation, which is subject to change.

The Financial Conduct Authority does not regulate cashflow planning or tax planning.

A pension is a long-term investment not normally accessible until 55 (57 from April 2028). The fund value may fluctuate and can go down, which would have an impact on the level of pension benefits available. Past performance is not a reliable indicator of future performance.

The tax implications of pension withdrawals will be based on your individual circumstances. Thresholds, percentage rates, and tax legislation may change in subsequent Finance Acts.

Workplace pensions are regulated by The Pension Regulator.

The value of your investments (and any income from them) can go down as well as up and you may not get back the full amount you invested. Past performance is not a reliable indicator of future performance.

Investments should be considered over the longer term and should fit in with your overall attitude to risk and financial circumstances.

Your home may be repossessed if you do not keep up repayments on a mortgage or other loans secured on it.