When do you think you’ll retire?

15 November 2024

Written by Retirement Line

In decades past, retirement at 60 was a near certainty for many in the UK. However, research from Canada Life reveals that nearly 70% of adults think that retirement at 60 will become “a thing of the past”. 

So, has this age milestone really become out of reach for most? We explore key factors shaping when people retire, from financial readiness to the evolving State Pension age, and look at resources available to help plan ahead.

When do people retire?

The Office for National Statistics (ONS) and government data show that the average retirement age in the UK has gradually crept up. According to the latest ONS statistics, on average men and women now both retire at age 66, a number that has increased steadily as the State Pension age has risen. 

The notion of an earlier retirement has been replaced by a more uncertain reality of when and how people can afford to retire. Rising living costs, longer life expectancy, changes to the law and shortfalls in pension savings all appear to have had an effect.

As life expectancy continues to rise, the challenge of sustaining a longer retirement without sufficient income has prompted many to rethink their retirement plans entirely.

The State Pension age vs. actual retirement age

One of the most significant factors influencing retirement timing is the State Pension age. For most, the State Pension age is currently 66, and is set to rise to 67 between 2026 and 2028. Further reviews are anticipated, with an increase to 68 potentially affecting those currently in their 40s and 50s.

The State Pension age is a key benchmark in retirement planning. It provides a crucial safety net for thousands of people, allowing them to retire once they can claim their pension. Of course, some people are able to retire before they reach State Pension age.

However, there are also many people who choose to continue working beyond this age. This might be due to financial necessity but also because many wish to remain active and socially engaged. 

Fortunately for those wanting to work in their later years, a law allowing employers to force workers to retire at 65 was repealed in 2011, giving more workers the choice to continue in their careers past this age.

For others, working part-time or in a more flexible capacity allows them to gradually transition into full retirement. Latest data from the ONS shows that in April to June 2022, the number of people aged 65 years and over in employment increased to 1,468,000 – a record level.

The variability in these patterns demonstrates that retirement is increasingly becoming a personal decision based on individual circumstances rather than a fixed milestone.

The financial realities of retirement planning

One of the main reasons people delay retirement is concern over having enough income. UK pension savings have traditionally lagged behind those of some other European countries, and some workers overestimate the income their pension pots will one day generate. 

Some financial experts suggest aiming for a pension pot that provides at least two-thirds of your pre-retirement income, but current savings levels often fall short of this. For instance, FT Adviser recently reported that 77% of pension pots in the UK mature with less than £50,000.

This financial reality highlights the need for careful retirement planning, especially for those who hope to stop working before reaching the State Pension age.

Making sense of the right retirement age for you

Deciding when to retire depends on numerous factors, including your health, family situation and personal goals. Here are a few considerations to keep in mind when deciding on your retirement age:

Health and longevity

Health is one of the most unpredictable factors influencing retirement. If you’re in good health, you may be content to work longer and save more for your potentially long retirement. Conversely, health concerns may prompt you to retire earlier if work becomes physically challenging or if your priorities shift. 

If you are lucky enough to enjoy good health long into your retirement, it means you’ll need your pension savings to stretch further. The latest life expectancy data from the ONS shows that women who are 66 can expect to live on average to 87, and men aged 66 years can expect to live until 85. 

And for those of us planning to celebrate our centenary one day, women aged 66 have a 5.5% chance of living to 100, compared with a 3.1% chance for men. 

Satisfaction and work flexibility

Many people find that they want to keep working in some capacity, either because they enjoy their work or because they like the structure and social aspects it provides. Part-time or freelance work offers flexibility, allowing people to adjust their workload as they transition into retirement.

Financial security

Personal savings, investments and other sources of income heavily influence retirement timing. Many choose to defer retirement until they have achieved a sufficient income, which can be a moving target as living costs fluctuate and life expectancies increase.

Lifestyle aspirations

Finally, consider your lifestyle goals for retirement. For instance, do you want to travel extensively, or are you more focused on staying close to family? These aspirations require budgeting and planning to ensure a lifestyle you’re comfortable with.

Resources to help plan your retirement age

With so many variables to consider, planning your retirement age might feel overwhelming. Fortunately, there are resources to help you map out a retirement that aligns with your goals, finances, and circumstances:

• State Pension age checker. On the UK government website, this tool allows you to find out your State Pension age based on your date of birth. This information can serve as a useful guide when planning your retirement timeline, especially if you are considering claiming the State Pension as part of your income strategy.

• Retirement income calculators. Many financial services companies offer pension and retirement income calculators to estimate how much income your savings can provide in retirement. This can help you determine whether your current savings trajectory aligns with your desired retirement age.

• Seek financial advice. If you have complex savings and investment plans then seeking financial advice may be beneficial. They can help you work out how long you need to continue working to achieve the pension income you want, explain your tax considerations, and discuss the best withdrawal strategies for your retirement income.

• Retirement planning tools. MoneyHelper provides useful tools and resources, including calculators and guides to help you assess your retirement readiness and explore different retirement income options.

Remember, choosing when to retire is deeply personal, driven by factors that are unique to you. The idea of a ‘normal’ retirement age is becoming increasingly outdated because people are tailoring their retirement plans to fit their circumstances. That can mean working a little longer, gradually transitioning to part-time, or stepping away early to enjoy retirement in full.

With the right planning tools and resources, you too can build a retirement strategy that reflects your goals and financial needs.

Sources

Recent research reveals that nearly 70% of adults view retirement at 60 as outdated: Almost 70% of adults say retiring at 60 is a thing of the past. FT Adviser. Accessed 05 November 2024.

State Pension age is currently 66, but set to rise to 67 between 2026 and 2028: What is the UK state pension age and will it go up? The Times. Accessed 05 November 2024.

On average men and women now both retire at age 66: Milestones: journeying through modern life. Office for National Statistics. Accessed 05 November 2024.