How do i get myself in a position to retire/semi retire early?

rictus123

I am just serving my time as a builder in 2 months. I plan to get my first property next summer. I dont mind working for someone just now(too early to go it alone in this game) so self employed outside of 9-5. Can and willing to work long weeks as love my work/learning and getting a job done. Find myself bored easy on the days im not working and while im still young need to make the money when i can.

So how do i go about getting myself in a position to retire early/semi retire in 20-30 years? So im not slugging it out to late 60s/early 70s building away and breaking my back*not to mention terrible winters in this industry in Scotland*

By "retire" i mean i would like to have a property portfolio to manage. My boss is worth a fair bit of money and has lots of property, i would like to get in his position just a smaller scale. I think overall aim would have to be taking home £2k minimum after tax...

So how do i go about it?

kidmugsy

I tend to be a bit doubtful about "i would like to have a property portfolio" but it probably makes more sense for someone in the building trade than for a layman. Anyway, consider saving anything you can into a pension if it is either (i) accompanied by an employer's contribution, or (ii) lets you avoid paying the higher rate of income tax. For anything else you can afford, save up in ISAs towards buying your first property when next you reckon that property is good value.

rictus123

Can you cash in pensions before retirement age, 65-70 etc?

Lokolo

You can start taking your pension from 55.

dunstonh

Can you cash in pensions before retirement age, 65-70 etc?

You cant cash in pensions. They are pensions not savings.

rictus123

I didnt know i could take them from 55. Where can i find out more? How much do they tend to return etc? Im a total noob for it.

Lokolo

rictus123 wrote: »

I didnt know i could take them from 55. Where can i find out more? How much do they tend to return etc? Im a total noob for it.

http://www.direct.gov.uk/en/Pensionsandretirementplanning/index.htm

dunstonh

How much do they tend to return etc? Im a total noob for it.

There are about 50,000 different types of investments you could hold in a pension and an infinite amount of variation. The returns are always unknown. You have a general opinion of what may be likely over the long term based on the risk and potential of the investments you choose.

Loughton_Monkey

rictus123 wrote: »

So how do i go about getting myself in a position to retire early/semi retire in 20-30 years? So im not slugging it out to late 60s/early 70s building away and breaking my back*not to mention terrible winters in this industry in Scotland*

There is no fairy dust, magic wand, or even any complexity about this.

First, you start with the obvious. If you want to retire early then for those years you work, you must work as hard/cleverly as you can and maximise the amount of money you earn. Only you are 'in charge' of this one. Let's assume you will do that.

Secondly, you must again deal with the 'obvious'. Close your eyes and think about the paragraph above. Try to imagine the fact that once you have chosen a retirement age, then the amount you will earn - in your working life - is a fixed amount.

Thirdly, you must understand that (inheritances and lottery wins apart) you will have only two sources of cash. 1. Your lifetime earnings, and 2. Your State Pension [subject to paying enough stamps]. I am deliberately ignoring investment income for the moment.

Now as you go through life, you will build up a lifestyle. This includes all your bills, tax, outgoings, spending, cost of vehicles, getting married, having children, ...... right down to the cost of your lunch every day. This cost will go up, go down, but eventually settle into an amount you will need when you finally hang up your trowel and spirit level.

So think of it as being exiled to a desert island from now until age 90, where you are given an aircraft hangar full of food and water meticulously calculated to last you until 90. It is your choice to decide the rate at which you eat it. A certain proportion is available to 'plant' and it will produce a little bit more for you. Say 7% - the same, very roughly, as what you might earn in the longer run on investments.

Hence the answer to your question largely lies in that mathematical calculation of "What is the sort of lifestyle I can lead, which enables all this food [money] to last me until I die?"

In my opinion, it is essential to percieve it in this way first, without (as I have managed to do so far) even thinking about 'pensions'. Early retirement and wealthy retirement is much more about spending than it is pensions. Much more.

Show me a man who spends 99% of his income, and the best pension imaginable will be of no help to him.

Show me a man who spends 50% of his income, and I can virtually guarantee he can continue his lifestyle well into retirement at 55, without ever contributing to a pension.

But somewhere in the middle is the 'correct' %age of income and the general concensus would be in the order of 75%. Maybe 65% to 70% if you wish to retire nearer to age 55. And to do that, you will need to earn a 'reasonable' rate of return on the money you don't spend. One of the best products to do this is a pension - not least because of the tax relief. Other investments that can provide a long term return include property, and the slightly less tax efficient (but more flexible) Stocks & Shares ISA.

Decisions on where unspent money should be invested can be assisted by an IFA, but it is helpful (to get the most out of the cost of an IFA) to have really thought through your future earnings, future lifestyle, and your retirement objectives.

The knee-jerk advice is simply to "go out and get yourself a good pension". That's better than no advice at all, but it's a bit pot luck unless you do quite a bit of planning yourself.

Good luck.

Derivative

Loughton's post above is excellent. A description most of us can think of, but not describe in plain terms so well.

It really is that simple. If you have £2k in the bank lying there untouched, and spend £1k of it, that's a grand less you'll have later on. All you need to do is make the decision between fun now and a secure retirement.

The percentage you save, what you choose to give up, etc. is up to you.
Saving for retirement is less about the actual vehicle of a pension and more about figuring out that you're working not just to live for the moment but to prepare for after work too.