Any chance of early retirement

angelicmandy

Hi all

my partner is currently 39 and I am 36. We have been fortunate enough to be able to pay off our mortgage due to an inheritance.

We are currently able to save approx £800 per month between us. Ive no idea if i am living in cloud cuckoo land but we would love to aim to retire early (although i realise this is still years ahead).

My main question really is that is this enough to be putting away and where should we be putting it? I currently have a works pension where about £70 a month gets put away.

Also, as the mortgage is paid off I would like to be able to drop my hours rather than working full time as I do at the moment. Is it possible to do this so young and still plan for early retirement?

We do not have children so really only have ourselves to think about.

Thanks for any advice/opinions

dunstonh

My main question really is that is this enough to be putting away and where should we be putting it?

depends on how much savings/investments/pension provision you have already and when you want to retire early and how much income and capital you want.

I currently have a works pension where about £70 a month gets put away.

Unfortunately, that is a pittance of a contribution nowadays. So, unless its a defined benefit scheme or there is a rather large employer contribution or you have significant other provision, that isnt likely to provide you with much.

At the moment, there isnt much to go on. What you ask needs figures and timescales. However, £800 to save for about 20 years could provide you around £10k a year income as a rough guide So, you can factor that into your projections on whether early retirement or a phased retirement is possible.

bilbo51

At what age do you want to retire? How much do you want to have at that point in today's terms? In other words if I said you could have £x,000 per annum now from your pension, what would x have to be for you to give up work now?

angelicmandy

Thanks for the replies,
I suppose really in "today's terms" we could retire on no less than £10k per annum as we've got rid of the mortgage. We currently have around £50k in savings between us

bilbo51

angelicmandy wrote: »

Thanks for the replies,
I suppose really in "today's terms" we could retire on no less than £10k per annum as we've got rid of the mortgage. We currently have around £50k in savings between us

And at what age do you want to retire?

angelicmandy

well im 36 so how about 40?! just kidding, i know its really hard to give advice without a specific age but all i can say is "as soon as possible". If there is anything we can do to avoid working till nearly 70 which is what the government seems to be planning all the better

dunstonh

The Govt has no plans to increase peoples retirement age. It is only increasing the state pension age. At the moment, the average retirement age is earlier than the state pension age and that is expected to continue. Obviously, those that don't save or don't save enough will be forced to work longer but thats the choice you make when you decide whether to buy a new Xbox game or have a McDonalds a few times a week or have a mobile phone bill that is higher than your pension contributions. You are not in that situation and can do something about it.

You have the right idea but I fear what you want is too specific to a forum to answer beyond generic information. You need to look at what you want now, in the short term, medium term and long term and then work out what you have for those needs which will tell you the shortfalls and then you can see what is needed to fill those shortfalls. You can then see if your plans are realistic or not. £800pm at nearly 40 should see you fine for an age 60 finish. Earlier will depend on other provision.

Loughton_Monkey

angelicmandy wrote: »

well im 36 so how about 40?! just kidding, i know its really hard to give advice without a specific age but all i can say is "as soon as possible". If there is anything we can do to avoid working till nearly 70 which is what the government seems to be planning all the better

When you early retire, the State Pension is usually relatively irrelevant.

To be frank, nobody here can in any way guage when you can safely retire. Only you can work that out. And it isn't difficult.

You start with a critical examination of your expenditure. Saying 'retire on no less than £10K' is not good enough. My own experience is that you tend to spend as much in retirement as you did just before retirement. There is a slight change in shape, that's all. I think there is something 'psychological' about getting your pay into your bank every month. You know where it all goes [that's the 'expenditure' bit, not the 'savings' or 'pension conributions' bit]. And you are totally comfortable with living within that expenditure.

So now you can confidently 'stab' at your spending requirements and project them forward well into the future by adding inflation assumptions.

The next stage is to write down all your future income, less future spending. The difference is 'savings'. Hopefully, the bulk of that savings will go into pensions and/or Stocks & Shares ISA to give good [better than inflation] growth. Model how this accumulates on top of your current savings and pension values.

On a spreadsheet, it's then very easy to plug in retirement at various dates and see how viable this is.

I remember doing this way back in the late 90's, having a loose plan to retire at the end of 2004 after a 5 year contract to work abroad. I ended up staying until 2005 but that just added extra 'fat' and very little had actually changed since my orifinal model.

Five years after I retired, my same model (more or less) still applies and I still religeously track my income and expenditure and it is working in trumps.

If it helps, I can look back over my 34 years of working, and discover that I spent in the order of 67% of gross income [that's everything including employer pension contributions]. That %age tended to decrease as I got older. This was a function of heavy mortgage commitments in the early years, the healthy increase in salary as the career progressed, and a relative 'plateau' in lifestyle spending as we reached quite a high living standard.

So work it all out, and you can then have fun playing with all the different factors to see how important each 'thing' is [inflation, or investment rates, or the size of your spending, or the projected wage increases above inflation....]. Provided you are spending a lot less than income, then there is no question that you can early retire. It's simply a matter of choosing the optimum date.

jamesd

angelicmandy wrote: »

my partner is currently 39 and I am 36. ... We are currently able to save approx £800 per month between us. ... we would love to aim to retire early.

You do have a good chance of being able to retire early but it depends on what income you want when you retire.

angelicmandy wrote: »

My main question really is that is this enough to be putting away

First work out what income level you want in retirement in today's money. Then you will be able to work out the ages and contributions that are involved to get that income. From that you can choose your best compromise between how much current spending to give up to get your retirement each bit earlier.

angelicmandy wrote: »

and where should we be putting it? I currently have a works pension where about £70 a month gets put away.

Pension is first choice, but maybe not the works one. Is it defined benefit, like final salary, or money purchase, where you can pick your own investments? Does your employer add more money if you do? Is it using salary sacrifice (also called smart pension)?

angelicmandy wrote: »

Also, as the mortgage is paid off I would like to be able to drop my hours rather than working full time as I do at the moment. Is it possible to do this so young and still plan for early retirement?

Yes but your early retirement will be later than it could be because you won't be putting so much money away.

edinburgher

As a couple of previous posters have pointed out, the key will be assessing your current spending, aspirations for lifestyle after retirement and then coming up with a required income to make this feasible. You mention 'no less than £10k' - how does this compare to now?

As Loughton Monkey rightly points out, there's a good chance you won't spend significantly less in retirement and very few people have the fortitude to adapt successfully to a significantly lower income in later life.

A few things to consider for now:

• Try using spreadsheets to map your income and expenditure for a full year (you've got 19 years 'til 55, a fairly common goal for early retirees) and come up with a realistic retirement income
• Look at your existing pensions, savings and investments and see what the gap is between what you currently have accrued/saved/invested and what you're aiming for.
• Play around with a decent savings calculator to see what sort of ROI/contributions you'll need to put by to make your plan a reality and act accordingly (be sure to account for inflation!)
• Maximise the earning potential of your current portfolio - your pension contributions sound fairly low - would additional contributions gain a higher employer match/a good level of added pension? Ensure that your £50k of savings is in ISAs where possible, take maximum benefits of the tax exemption offered and realise that it's unlikely you'll reach your goal without using investments (as opposed to cash).

Originally Posted by angelicmandy
Also, as the mortgage is paid off I would like to be able to drop my hours rather than working full time as I do at the moment. Is it possible to do this so young and still plan for early retirement?

Again, this depends on a few things (largely how much you earn and whether or not you live within your means or under them).

For example, I spend less than 50% of what I earn and in theory, could work less hours and keep the same quality of life. That said, it leaves a lot less of a buffer and my savings and investments might have to work a lot harder to make up any shortfall for any potential calamities before I retire. I'm very much in the 'work to live' camp, but I'd rather work longer hours while I'm able for the carrot of being able to work no hours a lot sooner than might otherwise be the case

angelicmandy

thanks lots for all the detailed information - lots to think about there.

someone told me that I cant have both a works pension and a separate private pension - is that correct. I know what you mean also about what is being put away in my work's pension hardly being worth anything. The £70 includes both what I contribute and what my employer does too so I agree that's not much.