Retiring early is the dream of many workers – but how does giving up your job too soon impact your pension?
With no official retirement age, it’s only natural people want to give up their jobs as soon as possible, but research shows early retirement can hit your income hard.
The average annual retirement income for someone leaving work for good at 65 years old is £21,961 – but this drops to £18,567 a year for those giving up work before they reach the age of 65.
That £3,394 a year drop in income magnifies over an average 20-year retirement to a massive shortfall of £67,880.
Hit in the pocket
According to research by pensions firm Prudential, although early retirees take a hit in the pocket, they are also feel the most comfortable about their finances when they give up work.
More than half (56%) say they are well-prepared to fund their retirement, compared with 49% who work until 65 or beyond.
The average age for early retirement is 57 years old – with 37% planning to fill their time by taking up a new hobby or sport; 27% start charity work and 17% intend to spend travel.
Slightly more early retirees (68%) take professional financial advice than the rest (60%).
Vince Smith-Hughes, retirement expert at Prudential, said: “It’s encouraging to see that so many of this year’s retirees are in a comfortable enough financial position to enable them to retire early.
Early retirement hot spots
“People stopping work early are not planning to put their feet up. They want to keep busy and active by taking up hobbies, sports, charity work and some are even planning a post-work gap year. These are fantastic ways to spend your retirement but can be expensive and, with everyone living longer than ever before, it is vital to ensure you can fund your whole retirement.
“Seeking guidance can help people identify the best course of action to achieve their specific financial retirement goals at any stage in their working life.”
The East Midlands is the early retirement capital of the UK with 72% leaving work for good early, followed by Wales (69%) and Yorkshire and the Humber (67%).