The pros and cons of early retirement

Quick summary: what are the pros and cons of retiring early

Early retirement is a goal that appeals to many – whether driven by burnout, a desire to travel, or simply wanting more family time. But is it as straightforward as ‘can I afford to retire early’? Samantha Gibson, Senior Wealth Planner, draws on two decades of experience advising clients through all stages of life to explore what planning for early retirement really involves and weighs up the pros and cons of making it a reality.

• What is considered early retirement?
  What is considered an early age to retire? Typically, leaving full-time employment before State Pension age would be considered early retirement
• Reasons to retire early
  What are the personal and practical reasons to retire early? People retire early for health, lifestyle and financial freedom, but must weigh emotional readiness and risks like inflation and market volatility
• Early retirement and pensions
  Early retirement means accessing pensions earlier, saving more and planning for longer to avoid running out of money
• The benefits of retiring early
  More time to enjoy life on your terms, health benefits and a chance to reset after burnout
• Pitfalls of retiring early
  Risks include outliving savings, loss of work’s social benefits, missed pension growth and higher healthcare costs
• How to decide to retire early
  Financial planning is key to figuring out whether you can retire early. A Canaccord Wealth Planner can help you make informed and sustainable decisions.

What is considered ‘early retirement’?

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 – or even sooner – would be considered early.

For some, early retirement means completely stepping away from paid work. For others, it could involve transitioning to part-time work or passion projects.

Crucially, early retirement is about having the freedom to choose how you spend your time without relying on a salary. But reaching that point takes careful planning and a clear view of both the benefits and the potential challenges.

Reasons to retire early 

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

For some, it’s about enjoying life while still in good health. Others are driven by a desire to slow down.

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 can erode purchasing power over time, while market volatility may impact investment income. 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. It’s important to consider not just whether you can retire early, but whether you’re mentally ready for such a major lifestyle shift.

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 – especially relevant if retiring early and benefiting from decades of compounding
• 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 pros and cons of retiring early?

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.

Time itself is another motivator. It’s arguably our most valuable asset and early retirees often want to make the most of their healthiest years.

What are the downsides of retiring early?  

One of the biggest risks and potential pitfalls of early retirement is outliving your money. Retiring at 50, for example, could mean needing to fund 30+ years of living expenses. This calls for careful financial planning, tax-efficient structuring and having a contingency plan in place.

Work also provides structure, purpose and social interaction. Without it, some early retirees can feel a loss of direction or become isolated – particularly if their friends or peers are still working.

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. This is especially relevant for those in senior or highly skilled roles: early retirement might mean stepping away from peak earning potential or passing up further career opportunities.

Healthcare costs can 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.

How to decide to retire early

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. You’ll ask yourself: is early retirement worth it?

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.

Whether preparing for retirement early, or generally, wealth planning will align your money with what matters most in your life and ensure this is sustainable long term.

 

* The Lifetime Allowance (LTA) was the limit on how much you could build up in pension benefits over your lifetime without facing extra tax charges. It applied across all your pensions (excluding the State Pension). As of April 2024, the LTA has been abolished.