The end of early retirement?

New analysis from insurance provider Aviva hints at the end of early retirement, suggesting that early retirement will disappear entirely by 2035.

The prediction comes on the back of a decrease in the number of people retiring before their 65th birthday.

New employment figures published today by the Office for National Statistics show a continued fall in the number of people who refer to themselves as ‘retired’ before age 65.

Those retired ‘early’ have fallen to 1.15 million, down from a peak of 1.6 million in June 2011.

Alistair McQueen, head of savings and retirement at Aviva says this decline “followed years of continued increases since records began in 1993.”

McQueen expects this trend to continue due to continued improvement to life expectancy at birth and future state pension age rises.

With official data showing life expectancy now at 83 for women and 79 for men, the prospect of an early retirement before age 65 looks increasingly expensive to sustain.

The prospect of an early retirement before age 65 looks increasingly expensive to sustain Share on X

This rising life expectancy is also leading to higher state pension ages for men and women.

Last year the state pension age was raised to 68 between 2037 and 2039, earlier than the originally proposed timetable of between 2044 and 2046.

Mr McQueen said:

A longer working life is one of the most powerful ways of supporting our longer lives in retirement.

Workers must be supported through this change. Employers must take action to recruit, retrain and retain this valuable older workforce.

Despite this forecast of an end to early retirement, there is continued growth in the Financial Independence/Retire Early (FIRE) movement.

This movement aims to create financial freedom and the ability to retire early; although many FIRE practitioners continue to work in a flexible way through choice.

Retiring early in a world where life expectancy continues to rise takes a lot of hard work and financial commitment.

The financial rule of thumb for retirement planning sees people saving 20% of their disposable income towards the future, with 50% spent on essential expenditure and 30% on discretionary spend.

Many FIRE practitioners aim to stash away at least half of their income each month towards their financial independence, also using ‘the 4% rule’ as a guide to calculate a target savings amount.

For example, in order to be financially independent if you have living expenses of £40,000 a year, you would need a savings pot of £1,000,000 in order to make sustainable withdrawals.

This 4% rule is only a rough guideline, with the actual sustainable withdrawal rate dependent on your personal circumstances, risk tolerance and a whole raft of other factors. But it’s a good place to start to understand the scale of the challenge that comes with early retirement planning.

Is early retirement one of your financial goals?