Retiring early is a dream for many but making it a reality takes careful planning and smart financial decisions. Whether you want to travel the world, spend more time with family, or simply enjoy life without the pressures of work, early retirement may be possible—but only if you plan ahead.
In this guide, you’ll discover what early retirement really means, the key factors to consider, and five essential steps to help you achieve financial independence sooner than you might think.
Quick tips for planning your early retirement
Do you want to know how to retire early but find yourself short on time? Here’s a quick breakdown of the 5 key steps to achieving financial freedom. Read on to learn about them in more detail.
- Set a financial goal: Multiply your planned annual expenditure by 25 to estimate how much you need (e.g., £30,000/year = £750,000 saved).
- Save and invest more: Maximise pension contributions, take advantage of tax reliefs, and consider investing to grow your wealth.
- Reduce debt and cut expenses: Eliminate high-interest debt, reduce unnecessary spending, and avoid lifestyle inflation to increase your savings.
- Build passive income streams: Consider how you could create income from any rental properties, dividend stocks, side businesses, or other investments that you hold to supplement your retirement fund.
- Plan for pensions and taxes: Understand when you can access your pension (55, rising to 57 in 2028), withdraw funds tax-efficiently and check your State Pension entitlement to maximise benefits.
What does early retirement mean?
When we talk about early retirement, we mean stopping full-time work before the official State Pension age, which is currently 66 (rising to 67 between 2026 and 2028). Some people aim to retire in their 50s, or maybe even their 40s, by building enough savings and investments to live comfortably without a regular employment income.
If you’ve heard of the FIRE movement (Financial Independence, Retire Early), you’ll know that many people are making this a reality through disciplined saving, investing, and creating passive income streams. But early retirement doesn’t have to mean stopping work altogether—it’s about having the freedom to choose how you spend your time.
What should I consider before retiring early?
Before you decide to quit your job and start your retirement adventure, you need to ask yourself some key questions:
Do I have enough savings and investments?
You’ll need to be financially independent, with a sustainable income that covers your lifestyle.
How will inflation affect my savings?
Over time, the cost of living increases. Your money needs to keep growing to maintain your spending power. Having an adviser by your side can be invaluable to ensure your money is working smart and hard.
When can I access my pension?
You can’t usually withdraw any monies (income or lump-sums) from a private or workplace pension before 55 (rising to 57 in 2028).
What about healthcare costs?
If you’re leaving a job that provides private healthcare, you may need to budget for private medical insurance. Also, think about the care you may need in later retirement, not just for when you are still relatively young and in good health..
How will my lifestyle change?
You are about to become time-rich (or maybe still busy, but on your own terms!). Early retirement allows you to pursue interests, passions, and ambitions for longer, and with that lifestyle, needs and priorities will change, as will your income requirements..
Why should I retire early? The benefits of financial freedom
Retiring early allows you to make the most of life while you’re still active and healthy. Whether you want to travel, spend more time with family or to focus on personal passions, financial independence gives you the freedom to choose how you spend your time. Instead of waiting until later in life, you can enjoy these experiences without the constraints of a full-time job.
Beyond lifestyle benefits, early retirement can improve your overall well-being. Stepping away from work-related stress gives you more time to prioritise health, fitness, and relaxation. It also allows for greater flexibility, so you can be present for family moments and one-off experiences.
Early retirement isn’t just about stopping work—it’s about creating new opportunities. With financial security in place, you can explore hobbies, further your education, or even start a new business or passion project. Rather than seeing retirement as the end of a chapter, it becomes a fresh start filled with possibilities.
How to retire early: 5 key steps
Step 1: set your financial goal
To determine how much you’ll need to retire, we recommend calculating your planned annual expenditure and multiplying it by 25 (e.g., £30,000 per year = £750,000 saved). This target helps you plan your savings and investments for long-term financial independence.
Step 2: save and invest more
Maximise your pension contributions for tax relief and employer-matching benefits. Invest to achieve a balance risk and growth. Using s ISAs allows for tax-free returns, helping your wealth grow faster.
Step 3: reduce debt and cut expenses
Clear high-interest debts like credit cards and personal loans to avoid financial strain. Lower expenses by downsizing, cutting unnecessary costs, and avoiding lifestyle inflation (how many streaming channels do you really need?). The less you spend, the more you can save towards early retirement.
Step 4: build passive income streams
Create income sources that don’t require active work, such as rental properties, dividend stocks, or bonds. Consider side businesses or royalties for additional income. A strong passive income strategy can ensure financial stability in retirement.
Step 5: plan for pensions and taxes
Know when you can access your pensions. The current minimum age is 55, rising to 57 in 2028. Withdraw funds tax-efficiently to make them last longer and check your State Pension entitlement and National Insurance contributions to maximise benefits.
Your early retirement plan starts now
If retiring early feels out of reach, the good news is that with the right plan, it’s more achievable than you might think. By making smart financial decisions, managing your savings effectively, and putting the right investment strategies in place, you can work towards financial independence and greater freedom—at a pace that suits you.
The sooner you start planning, the more options you’ll have. At Flying Colours, we simplify the process, helping you create a plan that aligns with your goals and lifestyle.
No matter where you are on your journey, we’re here to guide you.
Take the first step towards financial freedom. Contact us today and let’s see if we can make your early retirement a reality.
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.
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.
