Want to retire as soon as possible!

theticketinspector

I've spent the last five years clearing my debt and am now debt free so now is the time to start saving. My partner is ten years older than me, so what I'm hoping to do is retire at the same time or soon after him if this is at all possible.

I'm just wondering what the best way to accomplish this is. Ideally I don't want to tie all the money into an investment that I won't have any access to in case I have any problems a few years down the line, but I would also like to maximise the return I would get on any savings.

At the moment I'm building savings up in a regular saver paying 5% gross and will transfer this over to an ISA at the end of the year. I'm paying £50 a month into stocks and shares ISA with the co-op and whilst I can see that this is probably one of the better ways of growing money over a long time, I do like to keep a track of what I've got where and if that total was to go down substantially I would be gutted.

I've also got an option of paying extra into my pension scheme in work to be taken as a lump sum on retirement but I expect the retirement age will increase before I get there - at present earliest age is 55 and I'm 27.

Can you buy an annuity if you've saved money in an ISA?

If I leave work before then and was to live on savings, how would that affect my pension - I guess I wouldn't get anything until age 55 at least and then it would be reduced! I have no idea who to ask all these questions. I don't have masses of money and live on a modest budget so not sure how helpful going to a financial independent advisor would be.

Desperate_Housewife_2-2

Hi theticketinspector, I am sure someone will be along soon to answer all your questions but my feeling is that you should explore your pension scheme at work as this may be an efficient way of building up your pot.

My approach to retirement is a 3 pronged one...

1. no mortgage
2. build up pension funds
3. build up savings in isas

I have achieved the first goal and I am trying to build up isas now. The pension funds have been added to for many years.

Maybe you could get a financial advisor to come and sort out your retirement plan?

Whichever way you decide to go, well done on deciding to do it now as you have time on your side.

atush

well at 27 you are doing well so far as you at least have a pension (and a possible PS one from the little you said).

Saving in cash, owning your own home, having a pension, and making other investments like S&Sisas are the 4 prongs to an earlier retirement approach. So carry on what you are doing and just do more of it ;-)

ermine

if you are young and want to retire particularly early (in your 30s or forties) then you can broadly ignore compound interest. This is a question of reducing your outgoings, in a big way.

If you can save 25% of your income, you can take one year off for each 4 years you work. If you can save 50% of your income you can take a year off for each year you work. So if you want to retire extremely early you have to reduce your outgoings in a big way, like this guy did

Most people don't want to make that sort of adjustment in their lifestyle. To do this more conventionally and retire in your 50s, eliminating debt is the first step, and that includes a mortgage. I can't understand why this site has a separate debt-free wannabe and mortgage free wannabe section, a mortgage is debt. Not having children also helps, though there is some cost in lifestyle there

I'm paying £50 a month into stocks and shares ISA with the co-op and whilst I can see that this is probably one of the better ways of growing money over a long time, I do like to keep a track of what I've got where and if that total was to go down substantially I would be gutted.

You need to increase your savings and change your thinking. In particular if you can't bear to see the value of an investment go down you will never invest properly. You need to understand diversification and how to broadly assess risk. Not all of your investments will increase. Even Warren Buffett screws up occasionally. What matters is that your overall portfolio is a mix of diverse investments. You need to know what is in your S&S ISA and direct it to match your investment goals. It is the investments in your ISA that do the work for you, or not, it isn't the ISA itself, which merely keeps the taxman's grubby mitts off some of the proceeds.

You are young enough that you can do this, if it matters enough to you.

Can you buy an annuity if you've saved money in an ISA?

Yes, all you have to do is put up the cash. At the moment you would have to be a little bit crazy to do that, but you can If you were over 55 (which is when you would start to think about an annuity, an annuity at 27 would give you a microscopic return you could probably beat with a cash ISA) I believe you can even buy a pension, get some tax advantage and create an immediately vesting pension via an annuity. But by that time a lot will have changed.

I'm not sure you need a financial advisor at this stage. You need to apply yourself to understanding the issues, as you are doing. You need to work out what your hopes, dreams and aims are, then apply the knowedge gained.

theticketinspector

Thanks for all your help guys. I've read up on and begun to understand diversification. I've got about six months net salary in cash now so I've decided to pay more into an Investment ISA (probably around 75% of what I will save from now on. I'm not afraid of my investment going down, but I do have this obsession with knowing how much I'm worth at any given time! Is there a way of working this out easily with a stocks and shares ISA?

Well I've decided based on my attitude to risk that 75% of what i will save will go into S&S ISA to be divided up as follows: 36% in UK equities, and 22% each in European, Asian and North American equities. As time goes on I will lower the shares and increase the cash investment. Does this sound right so far?

I'm unsure of what provider to with. I am with the Co-op at the moment with money going into the UK growth fund. I'm struggling to compare different trusts. Has anybody got any tips? Are the co-op good? To be avoided? I can see performance of investment trusts everywhere over 1,3,5 and ten years but not clear on what it means.

I live almost rent and bill free and on a very modest budget so I can't really cut back any more but since I've worked hard over 5 years to clear my debts I've no real desire to increase my spending and am happy with my current lifestyle. I'm looking to save about 60% of my salary as I'm sure its about this amount I would be paying if I was paying for a house on a mortgage.

Thanks again guys,

atush

Some ISA platforms wil have an online portal that allows you to trade, sell and value your holdings instantly.

As far as diversification, I see you with Asia but not the rest of the Brics and emerging markets.

kidmugsy

"I've also got an option of paying extra into my pension scheme in work to be taken as a lump sum on retirement": if you can do that with an accompanying employer contribution, that might be attractive. Or, it might also be attractive if you can do it by "salary sacrifice". Otherwise I think you may be right that a more flexible alternative might be preferable. I'm a great fan of the Index-Linked Savings Certificates sold by National Savings and Investments from time to time. The next issue will perhaps be available in April or May, at a guess. You could buy them with money from your Cash ISA if you find their terms attractive.

Derivative

If you can save 25% of your income, you can take one year off for each 4 years you work. If you can save 50% of your income you can take a year off for each year you work. So if you want to retire extremely early you have to reduce your outgoings in a big way, like this guy did

This is essentially what I am doing at current, though I don't quite live on $7000/year (more £7000-£8000).

Every £6 or so you stick in a bank account now, is one hour less you will have to work during your lifetime. £10000, if you own your house outright, gets you a year of being able to literally sit on your !!!! and do nothing.

In a strange way, after budgeting hard for quite a while, I've fallen into a mindset in which I don't really want to spend money anyway. I prefer to have the knowledge that I could drop everything tomorrow and survive a few months/years without having to answer to anyone.

gadgetmind

kidmugsy wrote: »

I'm a great fan of the Index-Linked Savings Certificates sold by National Savings and Investments from time to time.

I'm also a fan of these, but only for an emergency savings buffer and not for long-term investments.

CLAPTON

do you own a property?

what are your general circumstances?

getmore4less

Retire in 18-20 years

Live off 1/3 (not including property puchase)
Buy a property with 1/3
save/invest 1/3

This asumes a return of 4% over inflation and income/savings rises with inflation.