Ask the expert: I lost my job at 56. Can I retire?

You were let go from your job at the age of 56, after a successful career in financial services. You had been working for your previous employer for many years and had always planned to continue working until at least your early 60s. You have been actively searching for another position, but have had limited success. You are now contemplating whether you should continue your job search or consider stopping work completely.

You are in a good financial position, as you are not burdened by any mortgage and have £100,000 in savings and around £43,000 in pensions. You spend approximately £30,000 per year. The good news is that you have already reached the minimum age to access your private pension, which is currently 55 and will increase to 57 in April 2028.

If you need to draw on your pension savings to make ends meet while unemployed, you should be able to do so. However, based on a financial model accounting for your current savings and spending, continuing to work could help prevent your pension and other savings from being exhausted by the age of 82. If you were fortunate enough to find a new job paying £50,000 annually, and continued working until age 65, with your employer contributing an additional 3% of your salary to your pension, you could accumulate a pension worth around £850,000 in projected future value.

With your savings, this could potentially allow your funds to last until age 100. If you were able to secure a part-time role earning £25,000 per year, you might be able to work until age 70, while still maintaining your current spending level. This scenario could also potentially result in your funds lasting until age 100. However, it is important to note that these projections are based on certain assumptions, such as a 2.5% annual inflation rate and an average annual investment return of 6.61%.

Actual outcomes may vary, and unexpected expenses could impact the longevity of your funds. It is crucial to have a robust financial plan that can withstand various scenarios, including unforeseen events. Retiring at 56 may pose a significant risk of depleting your savings later in life; therefore, continuing to work, even in a reduced capacity, could significantly mitigate this risk.

It is not necessary to return to the same career path you had been following. Exploring alternative roles, reducing your working hours, or transitioning into a new industry could contribute positively to your retirement finances. Please remember that this information is not financial advice, and it is essential to consult with a qualified professional to determine the best course of action for your specific situation.