I lost my job at 56. Can I retire?

Important information - the value of investments and the income from them can go down as well as up, so you may get back less than you invest.

I used our cash flow modelling tool to assess whether you might be able to retire based on your current savings and spending. Our modelling suggests you risk depleting your pension and other savings by age 82 if you retire today and never return to work.

This assumes you will be entitled to the full State Pension from age 67. You can check your State Pension forecast on Gov.uk to see how much you're on track to receive and whether you may be able to fill any gaps in your National Insurance record.

• Read: Why you don’t get the full State Pension

According to data from the Office for National Statistics, a 56-year-old man has more than a one-in-three chance of reaching age 90 while a woman of the same age has a roughly 50% chance. With the modelling suggesting your savings could be exhausted by 82, there's therefore a significant risk that you could outlive them.

You should continue receiving a State Pension even if your personal savings run out. However, that would mean living off an income that is today worth only around £12,500 a year.

If you were able to reduce your annual expenditure from £30,000 to £25,000, you could potentially eke out your savings until age 97. However, that’s a sizeable spending cut and there’s a risk you could end up needing more money in later life due to health issues and/or care costs.

Finding a new job in your 50s can be tough, but it’s not impossible, especially if you’re happy to consider a new career path. For example, in 2024 easyJet launched a ‘Returnship’ initiative to encourage more over-50s to retrain as cabin crew. There’s also an organisation called STEM Returners that helps experienced professionals return to STEM after career breaks or transition into STEM from other industries.

• Read: The overlooked retirement asset: your ability to keep earning

Let’s assume you managed to find a job by September 2027 that paid you £50,000 per year. If you continued working to age 65 and paid 5% of your salary into your pension over that time (with your employer adding another 3%), you could retire with a pension worth around £850,000. That £850,000 is a projected future value and doesn’t represent the same purchasing power in today’s terms.

Your savings could then last you until age 100 and you may even have more than £1m left by that age if your investments continued growing steadily.

If you’re willing to take on part-time or less senior work, you might be able to find a new role sooner.

Let’s say you found a part-time job tomorrow paying £25,000 a year. You find you enjoy this new work so much that you’re happy to continue working to age 70. You maintain your £30,000 annual spending, using some of your existing savings to make up the shortfall between your earnings and expenditure. During this time, you contribute 5% of your salary to your pension, with your employer adding 3%.

• Read: Could this ‘CHILL’ hack slice £80k from your pension target?

In this scenario too, we estimate your money could last all the way to 100 – again with more than £1m (in projected future value) potentially remaining at this stage.

If you only worked the part-time job until age 65, you should still have enough money to last you to age 100 under our modelling.

All of these numbers assume:

• Inflation is 2.5% per year
• If you’re working, that your earnings grow smoothly with inflation 
• Your investments return 6.61% a year on average
• You pay fees of 0.41% on your pension
• You receive a full State Pension from age 67

Remember, these are forecasts, not guarantees. Actual investment returns and inflation could be very different from our assumptions, while unexpected costs could also affect how long your money lasts.

A robust financial plan should be stress-tested against shocks such as these.

Overall, the modelling suggests that retiring permanently at 56 could leave you exposed to a significant risk of depleting your savings later in life. Continuing to earn for longer – even if that means taking a lower-paid or part-time role – could considerably reduce this risk.

That doesn't mean you necessarily need to recreate the career you've just lost. A different role, fewer hours, or a new career altogether could still make a meaningful difference to your retirement finances.

Please remember this is not financial advice. If you’re unsure about what’s right for you, you should speak to a qualified financial adviser.

• Get personalised advice on savings, investing, retirement or pensions from Fidelity’s financial advisory service

This article was originally published by City AM.

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