Early retirement advice - how would those who have done it do it today?

Gen_Y_Saver · 15 June 2017 at 2:17PM

Hi all,

I’m a long time lurker, first time poster, in this section of MSE! So please be gentle…

I’ve read lots of posts over the past year or so and gained a basic understanding of what is required to achieve early retirement. In particular, I’ve been inspired by lots of people’s threads as it has helped me believe I may be able to retire before I keel over at my desk age 67.

I just wondered if you learned posters/investment heads could give a bit of advice to those a bit younger in their journey? What would you do if you were 29 and could do it all again? What do you reckon to my plan set out below?

I’m 29. I’ve acquired a net worth of c£200K with my partner. Most of this is tied up in my property. I set myself a challenge about two years ago to pay off my mortgage in 2-3 years. I became mortgage neutral recently.

I am now focussing on investments. My aim is to generate enough passive income to live a relatively simple life. I aim to live on 20K per year. I understand I will need a portfolio of £500-660K to generate this amount, depending on whether I subscribe to the 3% or 4% rule.

Me and my partner have been investing in the Vanguard Lifestrategy funds (VSL 100 and VLS 80). My partner is 27.

We are saving 50-60% of our net income. I have cut all expenses to the bone (cycling to work, no car, home cooked meals etc).

Is there anything you guys suggest I could do to optimise my approach (other than a side hussle, earning more etc).

All the best

Gen_Y

dunstonh · 15 June 2017 at 2:26PM

. I understand I will need a portfolio of £500-660K to generate this amount, depending on whether I subscribe to the 3% or 4% rule.

Forget model rules. They dont matter in the real world as there are nuances and scenarios that will happen that cause you to adjust these things. They are a guide but do not be religiously attached to it.

However, do not forget tax. Some assets may be tax free. Some within your personal allowance. However, some may be above your personal allowance and subject to tax.

We are saving 50-60% of our net income. I have cut all expenses to the bone (cycling to work, no car, home cooked meals etc).

Dont take it too far. I am in my 40s and there are things that I wish I had done in my 20s and 30s that I didnt. It is about finding balance.

Me and my partner have been investing in the Vanguard Lifestrategy funds (VSL 100 and VLS 80). My partner is 27.

Within what tax wrappers?

atush · 15 June 2017 at 2:39PM

I agree, are you using pensions and ISAs?

You seem to going well, but I agree do set up a leisure budget and have a little fun as well.

You could be run down by the no12 bus after all?

Malthusian · 15 June 2017 at 2:39PM

dunstonh wrote: »

Dont take it too far. I am in my 40s and there are things that I wish I had done in my 20s and 30s that I didnt. It is about finding balance.

Agreed but I bet none of those things were "driving to work" or "eating more ready meals"

Assuming the OP isn't going hungry or risking his life on a 20 mile commute on main roads, cycling to work and cooking for yourself is an end in itself, the money saved is a happy coincidence.

In particular, I’ve been inspired by lots of people’s threads as it has helped me believe I may be able to retire before I keel over at my desk age 67.

What makes you think you'll die 13 years before the statistical average? Even 80 is a very conservative target given that your statistical cohort includes 29 year olds with genetic disabilities and terminal illnesses that you don't have.

Gen_Y_Saver · 15 June 2017 at 2:45PM

Thanks for all of your replies

We are saving into ISAs. I also contribute the max into my employer's scheme (I put in 5% and they match 5%), as does my partner.

What Malthusian said; the things I love doing generally don't cost that much cash. I like cycling, painting, sports, walking, reading etc. However, I enjoy a drink just as much as the next guy!

Point is: I don't want to wait until I'm 67 to chose what to do with my time. Its about freedom. Maybe that includes working a bit, but the option will be mine.

Keep the pearls of wisdom coming. Much appreciated.

Gen_Y

dunstonh · 15 June 2017 at 3:03PM

I also contribute the max into my employer's scheme (I put in 5% and they match 5%), as does my partner.

You are on £400,000 a year each income?

I assume you didnt mean that you were paying in the maximum or you dont realise what the maximum is as if you are earning £400k p.a. each then you must have some big monthly expenditure and I doubt early retirement on £20k-25k a year would be desirable.

Gen_Y_Saver · 15 June 2017 at 3:06PM

Hi dunstonh!

Apologies. I meant I am contributing as much as I currently can into my employer's pension scheme. I can contribute a max of 5%, which is matched by my employer.

Thanks

dunstonh · 15 June 2017 at 3:14PM

Gen_Y_Saver wrote: »

Hi dunstonh!

Apologies. I meant I am contributing as much as I currently can into my employer's pension scheme. I can contribute a max of 5%, which is matched by my employer.

Thanks

Is that the actual maximum you can pay in via the scheme or the maximum you get matched contributions on. (often you can go beyond the matched level). Even if you cant use the employer scheme, you can still have an individual one.

Triumph13 · 15 June 2017 at 3:20PM

Gen_Y_Saver wrote: »

What would you do if you were 29 and could do it all again?

The main thing we'd have changed is to have had our kids earlier! Are you planning to have any and if not are you sure that won't change?

I would echo the concerns of other posters about your phrase "I have cut all expenses to the bone "
There are no prizes for making life a misery, just to be able to stop working earlier. The question shouldn't be 'how little can I spend ?', but 'what's the most efficient way of managing my finances to maximise lifetime happiness?'. It's great to find ways to cut back that don't decrease your happiness (or even increase it like cycling and good home cooking), but when it starts to really hurt you need to find a creative solution or stop cutting.

AnotherJoe · 15 June 2017 at 3:20PM

To answer the question you asked, what would I do differently ;
I'd get a bigger house so I could downsize with a big tax free sum.
I wouldnt obsess about paying off my mortgage to the extent that I had a poorer lifestyle, I'd put the money in my pension instead, especially if I was a high rate tax payer.
Instead of messing about with individual shares (as I did) I'd do as you are already, a few high quality global funds, plus a small gamble with perhaps 5-10% each in some funds I thought might do better than average with an eye on the long term, healthcare and emerging markets for example.

Gen_Y_Saver · 15 June 2017 at 3:22PM

Hi Dunstonh

You're very quick to reply. Thanks!

Re: employer's scheme. I can only contribute a max of 5% at present. After a couple of years service, I can contribute more.

Re: setting up a SIPP or PP - I have considered this. But my present thinking has been just to put money into ISAs. I understand the tax benefits of SIPPs, but I don't like (a) that I can't access until 55 and (b) worried government may increase the age I can access by the time I reach 55!

I was thinking of ploughing 20K a year into ISAs. If I do that for 20 years and average 5% I should be sitting on around 694K. And a mortgage free house and employer's pension.

I'm not sure. You guys are the experts. That's why I posted here. What approach would you guys go for if you were in my situation? Purely academic discussion. I was just interested in hearing different views.

Early retirement advice - how would those who have done it do it today?

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