How you possibly can retire at 50: Read our final 10-step information to boosting your pension and leaving work a decade early… and precisely what to do if retirement continues to be out of attain

As you step back on to the crowded commuter train after the Christmas break, you may dream of a life where you’re no longer trapped in the daily grind.

Almost everyone dreams of retiring early, swapping days in the office for more time with family, spending sunny days abroad and going on long country walks.

The goal for many adults is to retire at 60 or even younger, according to recent figures from financial group Brown Shipley.

Early retirement usually means stopping full time work in your mid to late 50s – or around ten years before the age at which you can claim your state pension.

But leaving the workplace early takes planning, guts and perseverance. Fail to and you run a real risk of running out of money during retirement – or even having to return to work again.

Money Mail has calculated that a couple who want to retire at age 50 will need a pension pot of at least £1million between them – £500,000 each.

This may seem daunting at first, but with hard work and meticulous planning, it may be more attainable than you think.

Here’s our 10-step guide to boosting your pension and making your dreams of leaving workplace a reality – and what to do if it’s still out of reach.

STEP 1: Define your goal

The key to success when planning for an early retirement is clearly setting out your goals and have a vision of what you would like to do once you’ve left work.

While setting an age-based goal such retiring at 50 might seem like the easiest way to think about retirement, experts say that those who simply form this dream without any concrete plans for their next steps are doomed to drift.

Deepak Shukla, of financial education group Pearl Lemon Invest, says: ‘The happiest early retirees tend to plan towards something, consulting, investing, volunteering or flexible project work, rather than simply planning an exit from work.’

So, if you’re thinking about stopping work at 50, think about what your life might look like at that point and whether there are part-time jobs or volunteering opportunities that might bring you joy and meaning instead of your daily work, and consider how you might fill your days.

STEP 2: Work out how much you will spend

Everyone’s idea of a comfortable retirement is different and it can be tricky to pinpoint exactly how much you will need day to day. But it’s important to make an estimate so that you can figure out how much you’ll need to have saved in your pension.

A useful place to start is Pension UK’s Retirement Living Standards, which are used as a benchmark by the pensions industry for the amount of income you will need in retirement once you stop work.

A single person would need £31,700 a year for a moderate retirement, whereas a couple who can live more cheaply together would need £43,900 between them, according to Pensions UK calculations. A moderate retirement would include running a small car, taking one overseas holiday a year and eating out once a month.

If you would like a more luxurious life, you’ll need to tuck more into your savings account. Pensions UK says that for a ‘comfortable’ retirement you’ll need £43,900 for one person or £60,600 for two. This would give you enough money for streaming services, extra holidays and activities.

The very minimum you need is £13,400 a year per person to cover the basics in retirement, according to the industry guidelines.

None of these figures take inflation into account, which will raise the cost of living significantly over a long retirement, but they can give you a rough idea of what spending you’ll need to budget for.

STEP 3: Apply Bengen’s golden rule

It’s impossible to know how long you’ll live, so planning to save enough to see you through until the end is a tricky task. Anyone retiring at age 50 may need enough to see them through another 50 years.

One way to work out how much you might need is to apply a guideline known as ‘Bengen’s Rule’, which was created by an American financial planner called William Bengen in 1994.

Bengen calculated that if you wanted to have enough money in retirement and never run out, you should take 4pc of your pension pot in the first year and then a similar amount each year, only increasing it by inflation.

The rest of your money should be left invested, hopefully growing over time and helping to make up for the amount you are withdrawing each year.

More recently, Bengen revised his 4pc rule by looking at stock market data and suggested that pensioners could withdraw up to 4.7pc and remain safe, with those looking at a longer retirement period – such as those retiring at 50 – withdrawing 4.2pc instead.

In order to withdraw the £43,900 that a couple needs for a moderate standard of living in retirement, you’d need savings of just over £1million by the age of 50.

STEP 4: Max out your state pension

Anyone retiring before state pension age will have to build a big enough nest egg to make up for the shortfall in retirement income.

The age at which you start to collect your state pension is currently 66 but will rise to 67 between April 2026 and 2028. The change will be phased in, so there will be periods when the state pension age is 66 years and between one and 11 months. State pension age will rise again to 68 between 2044 and 2046.

This means that anyone retiring at age 50 will 17 or 18 years to receive the state pension, depending on their current age.

The state pension is currently £23,946 a year for a couple, meaning it makes up more than half the income needed for a moderate retirement, so you’ll need much less from savings.

The payments are also inflation-linked, though there is of course little guarantee of what will happen in the future.

The best thing you can do for now is to ensure you’ve got a good national insurance record and find out whether you’ve made enough years of contributions to receive the full amount.

Most people will need 35 years of national insurance contributions to get a full state pension, and you can pay extra contributions for missing years if you won’t quite have enough. You can go back six years to fill in gaps. Find out more on the government website at gov.uk/voluntary-national-insurance-contributions

STEP 5: Get your pensions in order

One of the biggest hurdles of retiring at age 50 is that most of us have saved into workplace pensions that can’t be accessed until we’re 57 (10 years before state pension age).

That means those who retire at 50 will need a different income stream for the first seven years of retirement, before they can switch to pension savings. For example, this can be income from rented properties or money taken from savings and investments.

Your next step is to find all of your workplace pensions from past employers and see how much you have saved in total. You can trace any mislaid pensions by writing to trustees of the pension schemes, or by using the government’s Pension Tracing Service at findpensioncontacts.service.gov.uk

You’ll also need to make a note of other savings and investments that you can access earlier, so that you can use these before you reach the age when you can take cash from your pension.

Once you put these figures together and compare them with the £1million figure above, you’ll see how far you are from your retirement goal.

STEP 6: Fill in the gaps

You may be some way away from a £1million retirement pot, but there’s no time like the present to start filling in the gaps.

Alice Haine, of investment group BestInvest, says that taking every tax break possible will help you turbocharge your plans.

She says: ‘Maximise every opportunity to boost your pensions savings. This includes taking full advantage of employer perks such as higher employer matching or salary-sacrifice schemes, which remain highly tax-efficient but will be capped at £2,000 from April 2029,’ she says.

The earlier you can start overpaying your pension, the easier you will find it to build a large retirement pot, especially if you have an employer who will match pension contributions.

The minimum pension contribution through auto-enrolment is 8pc of your salary (5pc from you and 3pc from your employer).

Some employers are willing to contribute more than the minimum if you do the same, matching your savings up to 6pc or more. Some go even further, offering contributions of 15pc.

This is known as the employer match and can significantly boost your pension pot over the long run.

Outside of your pension, ensure you use up your £20,000 Isa allowance to build up money to use before you can get at your pension, so that this pot can also grow tax-free.

To build a pot of £500,000 between the ages of 20 and 50, you’ll need to contribute around £600 a month to your pension. But not all that needs to come from you because you will receive tax relief at your marginal rate on contributions you make. This means that in order to make a total contribution of £600 a month, a higher rate taxpayer would need to pay £630 into their pension each month, on which they would receive £240 in government tax relief. If your employer contributes too, you will need to contribute even less.

To reach the same figure if you are starting to save at the age of 30, you’ll need to roughly double the contribution you make each month, to between £720 and £1,200 a month depending on the amount your employer will pay in.

If you start at 40, you’ll need to put away over £3,110 per month – £1,920 from you and the rest in tax relief.

STEP 7: Get the rest of your finances in shape

Retiring early and building a large pension pot is easier if your other finances don’t blow you off course. As well as maximising your pension contributions you should ensure you’ve got an emergency fund in an easily accessible account so that you can deal with the unexpected.

Tackling other debts such as credit cards and ensuring that you aren’t still paying a mortgage in later life by making overpayments could also put you in a stronger financial position for the future.

STEP 8: Avoid lifestyle creep

If early retirement is your goal, you’ll need to prioritise saving for it above everything else. That means that, if your income rises or you receive an unexpected windfall, diverting it into pension savings above all else.

Most of us succumb to so-called lifestyle creep, whereby the more we earn the more we spend. But if you can keep your spending in check and save more instead, it’ll pay off in the long run.

One option is to keep your lifestyle unchanged even when your circumstances improve.

Many of us will receive a pay rise this year, whether from January or April.

Aaron Peake, of free credit checking service CreditAbility, suggests that you divert that money straight into savings, so you don’t get used to having more. ‘Don’t let lifestyle creep eat it away,’ he advises.

STEP 9: Review regularly

The stock market can be volatile, and your pension savings will fall as well as rise at times. The calculations above assume that your money grows at a steady rate of 5pc and avoids fees and charges.

Instead, you’ll need to check whether your money is growing as it should and, if it is not, adjust either your retirement expectations or your contributions.

STEP 10: Consider ‘semi-retirement’

Retiring at 50 could be seen as a drastic step, and accountancy firm Archimedia in Nottingham notes that many people are searching for the term ‘semi-retirement’ as they aren’t quite ready to step back completely.

They describe the term as ‘a flexible approach to winding down a career without stepping away from work entirely’.

This approach may mean maintaining some level of income while beginning to work less.

You could consider semi-retirement to bridge the gap until you are able to take your workplace pension at 57, or until you are able to take your state pension. Either way, it will reduce the amount you need to save before you start reducing work.