How to retire at 55

Stopping the nine-to-five grind and retiring early remains an aspiration for many. But the financial realities of doing so have become increasingly difficult over the past few decades. A large part of this comes down to increased longevity and the decline of so-called gold-plated final salary pensions, which paid an earnings-linked pension for life.

This does not mean that retiring at 55 is impossible. However, those who want to achieve this goal should start planning early, maintain a disciplined approach to saving — and it helps to have a generous disposable income along the way.

But if you don’t tick all these boxes, don’t despair. The tips below should help you to significantly boost pension savings, giving you the opportunity to start your retirement earlier and make the most of this next stage of your life.

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Think big picture

Before you get to the number crunching and setting target retirement dates, it’s worth thinking about what your retirement will look like. Does retiring at 55 mean no work at all and golf every day? Or would you rather have a different relationship with work after this date — perhaps reducing the hours you work, working part-time, or being your own boss, perhaps in a consultancy role?

The type of retirement will have a major impact on the financials when it comes to working out how much you need to save.

It’s also worth thinking about how you plan to spend your retirement. Travel and leisure activities, while desirable, are expensive — particularly if you stop work at 55 and may be retired for 30-plus years.

Retirement planning often involves trade-offs. For some, this might be a question of weighing up whether they want a longer retirement but with a more frugal lifestyle, or to retire later but be able to afford more adventurous holidays. Alternatively, there may be other options to cut costs — for example, downsizing and relocating to help meet your retirement dreams.

Crunch the numbers

The next step is to work out how much income you’ll need each year from the age of 55 — and then calculate the size of pension pot you’ll need. The Retirement Living Standards, produced by trade body Pensions UK estimates that a single person needs an income of around £32,000 a year after tax for a 'moderate' retirement — and a couple can achieve this with a joint income of £43,900.¹

• Read: Income needed for a ‘comfortable’ retirement - the basics explained

It’s important to note, though, that this assumes no housing costs — so if your mortgage is not likely to be paid off by the age of 55, you may want to readjust retirement plans.

Don’t forget the State Pension — which currently pays around £12,000 a year. Of course, the caveat is that this is not paid until the age of 66 and will increase in future. Some people may also have guaranteed defined benefit (DB) pensions. Again, these are often not payable until 65 and may be reduced if taken earlier.

• Read: How quickly will UK pension ages rise?

This means those looking to retire at 55 need to fully fund day-to-day living costs from pensions and other savings for at least a decade. It’s also worth bearing in mind that while the age for accessing pensions is currently 55, this will increase to 57 from 2028 — so this needs to be factored into planning.

Once you have an idea of how much income you’ll need each year, you then need to calculate what size of retirement pot will be required to generate that sort of sum.

Many retirees opt for flexible drawdown when it comes to taking pension benefits. Previous research suggests that, if investors limit their withdrawals to 4% a year or less, their funds should not run out for at least 30 years. This is the famous “4% rule” - but remember this is not an exact science and it’s important to do your own calculations.

What’s more, the 4% rule does not account for investment platform fees or tax, so you will need to consider both. 
If want an after-tax income of £30,000 a year, you’d need a pre-tax income of around £34,000-£35,000 (depending on personal allowances and other income). 

Using the 4% rule of thumb, you would need a pension pot of approximately £850,000-£900,000 to generate a pre-tax income of £34,000 to £35,000 a year. 

Accumulating a fund of this size can seem daunting. But Fidelity has some useful calculators that take into account factors like investment growth. They also allow savers to change the amounts contributed each month or alter the retirement date — both of which can make a significant difference to the overall size of your fund.

• Read: How much to save? What it takes for a ‘comfortable’ retirement

Maximise pension contributions

Pension contributions attract valuable tax relief, so you need to be maximising contributions if you want to retire early.

This means starting young and paying in as much as you can throughout your working life. To retire at 55, you need a ‘jam tomorrow’ mentality and cut back on discretionary spending today — whether that’s holidays, new cars or the latest smartphone.

So how much can you stash into a pension? In the 2025/26 tax year, most people can contribute up to £60,000 a year into a pension (or up to the value of their annual salary if lower) and receive tax relief at their marginal rate. This is particularly beneficial for higher-rate and additional-rate taxpayers, who receive a government top-up of 40% or 45%. However, it’s worth noting that this £60,000 annual allowance is reduced for those earning over £200,000 and it includes your employer's contributions as well as your own.

• More on pension allowances

If your employer offers a matching scheme, where they increase contributions if you do, make sure you take full advantage of this where possible to get the maximum employer payment. You wouldn’t turn down a pay rise so don’t miss out on these pension contributions.

• Open a Fidelity Self-Invested Personal Pension (SIPP)

Don’t rely solely on pensions

If you want to stop work at 55, then it can help to have other savings beyond pensions to bridge the income gap between stopping work and when the State Pension and any other DB pensions kick in.

ISAs are particularly useful. You can withdraw funds at any time, without triggering a tax charge. Each adult can currently save £20,000 a year into ISAs — and this can be split between cash and stocks and shares. However, there are plans to reduce cash ISA contributions to £12,000 per year from 2027. 

• Watch: Cash ISA overhaul: what can savers do now?

A couple could essentially shelter up to £40,000 per year from tax in stocks and shares ISAs — and the income from these investments can supplement early retirement income, without affecting pension contribution limits.

• Read: How much cash to hold in retirement
• Read: How to make cash-like returns - without a cash ISA

Go for growth

Whether you are investing in workplace pensions, SIPPs or ISAs, you may want to take a more adventurous investment approach to boost growth. But it’s important to be aware that funds offering potential for higher returns will always come with higher risk, so this must be considered. Having a well-diversified portfolio is important to spread exposure to risk, as well as presenting broader opportunities.

If you’re not confident choosing your own investments, most providers offer a selection of ready diversified fund suggestions. Fidelity’s Navigator, for example, will ask you a few simple questions, then present you with a diversified fund option based on a level of risk you’re comfortable with.

Some pensions will de-risk portfolios automatically as you near your planned retirement date, by moving more into bonds and cash — often over a five- or ten-year period.

But if you are planning to retire at 55, you may want to swerve this, as these are primarily designed for those who are planning to buy an annuity or cash in their pensions entirely at retirement. Annuities are likely to be pretty poor value at the age of 55 (the rates get more attractive as you age).

If you are aiming to retire at 55, you are probably looking to keep funds in a SIPP or drawdown post-retirement, so will need to stay invested in a diversified portfolio which maintains a growth outlook, as these funds will need to support you for a further 30-plus years. If market volatility hits fund values, you may need to accept a slightly later retirement date.

Seek advice

Retirement planning can get more complex as you near the finish line. Getting professional financial advice in your early 50s can help to fine-tune your investment strategy, maximise tax breaks, and ensure you don’t overlook key details as you approach your planned retirement date. It is also useful to discuss with a specialist the most tax-efficient way to take benefits when you have a range of pensions, ISAs and other investments.

All those aged over 50 qualify for a free session with the government-backed Pension Wise to discuss retirement options. This is classified as information and guidance rather than tailored financial advice, but could be a useful starting point. You can access the guidance online at www.moneyhelper.co.uk or over the telephone on 0800 138 3944.

Fidelity’s retirement specialists also provide free guidance to help you with your decisions. They can provide advice and help you select products too, though this will have a charge.

Be realistic about your goals

Remember, this is not an all-or-nothing situation. You might not have the financial firepower to retire at 55 — but this doesn’t mean you should forget about retirement planning and resign yourself to working until you drop. Taking small steps now — whether that’s increasing pension contributions, building up ISA savings, or putting a proper retirement plan in place — can ensure you retire before the State Pension Age, and potentially with a much better standard of living. That's a goal many will agree is worth planning for.

If you’ve got a burning question you want to ask, why not drop us a line? Ask us your question.

• Read: How do I cash out my pension over 30 years?
• Read: The best (and worst) years to retire
• Watch: Is 2026 a good year to retire? 

Source:

¹ Retirement Living Standards, 2025

Important information - investors should note that the views expressed may no longer be current and may have already been acted upon. Eligibility to invest in a SIPP or ISA and tax treatment depends on personal circumstances and all tax rules may change in the future. Withdrawals from a SIPP will not normally be possible until you reach age 55 (57 from 2028). This information is not a personal recommendation for any particular investment. If you are unsure about the suitability of an investment you should speak to one of Fidelity’s advisers or an authorised financial adviser of your choice.