Ask the expert: I lost my job at 56. Can I retire?
Lost your job in your 50s? Marianna Hunt is back to take a look into whether retiring early, cutting spending or returning to the workplace is the best option when thrust back into the job market later in life.
I’m 56 and lost my job in January after a successful career in financial services. I’d been with my previous employer for years and had always assumed I would carry on working until at least my early 60s.
I’ve been looking for another role ever since, but despite applying for numerous jobs I’ve had very little success. I’m starting to wonder whether I need to accept that I might not find another job at a similar level, or at all.
Financially, I’m mortgage-free, have around £100,000 in savings and approximately £430,000 across my pensions. I spend around £30,000 per year. I had always thought I was in a reasonably good position for retirement, but I hadn’t planned to stop earning at 56. Should I keep looking for work or could I realistically afford to stop working altogether?
Marianna writes:
I’m very sorry to hear about your situation. Unfortunately, it’s one that many over-50s are finding themselves in. Almost 900,000 people aged 50 to 64 in the UK are not in work but would like to be, according to government figures.
Fidelity’s recently launched Longer Working Lives Index ranked the UK last among the G7 countries for supporting over-55s to remain in work.
Let’s look at your options.
The first piece of good news is that, at 56, you have already reached the normal minimum age at which most people can access their private pensions. This is currently 55 and will rise to 57 from 6 April 2028.
That means, if you need to access your pension savings to get by while out of work, you should be able to do so.
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.
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 per cent 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 care costs.
Finding a new job
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.
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 five per cent of your salary into your pension over that time (with your employer adding another three per cent), 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 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 five per cent of your salary to your pension, with your employer adding three per cent.
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 that inflation is 2.5 per cent per year and if you’re working, that your earnings grow smoothly with inflation.
It also assumes that your investments return 6.61 per cent a year on average, you pay fees of 0.41 per cent on your pension and 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.
Do you have a personal finance question for our expert? Email asktheexpert@cityam.com