Making retirement your choice- P45 or no

As you approach your 50s and highest-paid years, it’s time to prep not just for your preferred retirement date, but the one circumstances might just choose for you

I do like to accentuate the positive in these posts, but I do have to warn you I’m going to make you a bit uncomfortable with this one. (Hopefully, for your own good.)
And it’s this warning: the most dangerous assumption in retirement planning is that YOU get to choose when your career ends.

Ask a room full of successful 50-somethings when they intend to retire, and you hear remarkably similar answers:

“I dunno, 60?”
“Maybe 62.”
“I’d like to work until 65, but perhaps then do something less demanding.”
“It’s the moped stand in Macedonia for me, mate.”

The thought behind all these wish-list items is the same: I decide when I stop.

Chances are, that’s what will happen. But it may turn out to be not at all what comes along.

Because there is another ‘retirement’ date that doesn’t appear in the Teams calendar and doesn’t come with some cake and a carriage clock (or modern equivalent; seems these days you’re more likely to get a gift card) by a farewell lunch.

Yup… redundancy. And for a highly paid executive in their mid-fifties, getting ‘rightsized’ or found to be lower valuable human capital than your new AI colleagues can be considerably more consequential than it was 20 years ago.

Which means—you need a plan.

Your experience is valuable. But you are expensive

Please don’t think I am saying being unexpectedly P45-ed in your sixth decade equals being put on the scrapheap. Despite all the gloomy headlines about how hard it is for older workers to get work, the UK’s permanent recruitment market has just recorded its first monthly increase in hiring since September 2022, according to the latest REC/KPMG survey.

But the same job, at the same level, for the same money? That could be a real challenge. Be it IT, Cybersecurity, Finance, Sales, whatever is your wheelhouse reaching the top of your field means that yes, your experience becomes enormously valuable, but so does your salary.

And in a tough or changing jobs market, that can leave you a bit exposed. A company under pressure may decide that it doesn’t need a £250,000-a-year executive, the bank may decide now’s the ideal time to move an operation elsewhere, and, of course, a tech (or other!) company may decide that AI can do some of the work previously done by an entire layer of management.

None of this means you failed or chose the wrong career. You can be extremely good at your job and still find the job has disappeared. And if this happens, you may end up circling the airport for a long time; in 2025, 26.1% of people aged 50–64 was economically inactive, a figure that remains above pre-pandemic levels.

Losing your job at 36 is usually just a setback, in other words, but losing it at 56 can change the trajectory of the rest of your working life.

Write the next chapter the way you want it to go

Bottom line: you don’t want to end up telling people at the Uni reunion that you didn’t retire but your career just stopped. You need a next chapter.

Now, it could be that you regroup and accept that that next chapter is at a slightly lower rung than you were used to, with less salary and maybe a period of retraining or taking a punt on a completely new direction in life.

Or you accept forced retirement and turn that into a positive. But being able to pivot like that means a little bit of a different financial plan from the one marked ‘Retirement on my 60th birthday’.

To be honest with you, for affluent clients in their fifties, I think the question needs to not so much be “How much do I need to retire at 60?” and instead a little bit more of a defensive one: “OK. What happens if my income stops at 56?”

That means facing some hard questions of yourself and your spreadsheet. What does the rest of paying off the mortgage look like? Where might we be with school/Uni fees? How long could (or should) we look to maintain our current lifestyle?

And, perhaps most important of all, How long can I afford not to take the next job?
That last question gets to the heart of financial independence. We tend to think of financial independence as the point at which work becomes optional, but a more useful one is to orient yourself such that you might have sufficient financial independence to not necessarily HAVE to take the next job.

Having that cushion means that negotiations for that next job (if you decide to go back to the grindstone) might be much more in your favour—stopping you from making any compromises in your desperation that could later cause resentment or regret.

With clients in this possible position, I really try to encourage a viewpoint that wealth isn’t really about early retirement, but the option to make the years before retirement less financially hostage to your employer and the industry you’re competing in.

Giving yourself some wriggle room

In pounds, shillings and pence terms, the goal here isn’t necessarily to have enough money to stop working, but always enough money to be ready to stop working.

Getting there may mean:

• holding more accessible capital than you once thought necessary
• reducing debt
• reconsidering how much of your wealth is locked away for a retirement date that may move.

And for high-net-worth families, it increasingly means thinking about pensions not simply as retirement vehicles, but as part of the wider family balance sheet. From April 2027, most unused pension funds and pension death benefits will come within the scope of Inheritance Tax, changing the role pensions can play as a source of family wealth and legacy.

While pensions can generally be accessed from age 55, rising to 57 from 2028 in most cases, accessing them earlier is not necessarily the right answer: leaving funds invested can allow both the pension and any tax-free cash entitlement to continue growing.

The key is therefore to have enough accessible wealth elsewhere – such as ISAs and cash – to meet spending needs without being forced to draw on pension assets at the wrong time. Put all this together, and the message is, I think, to face a scenario where your employer or biggest client called you tomorrow morning and said you are essentially surplus to requirements now. How much financial freedom would you need to make your next move on your terms, not anyone else’s?

That is a much more interesting retirement number. Perhaps the better goal approaching 50 isn’t going all-out to retire on the dot at 60 but reaching 60 ready to retire but financially not being obliged to. And certainly not at anyone else’s behest.

If that sounds a better position than the one you’re in now, let’s schedule a chat and get you on that pathway.

 

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