How to see if I can retire early - about 47?

tlee

Hi All

I am currently in a banking job in the city which is causing me real stress and seriously affecting my health recently....I am fearful of getting extremely depressed and sick long term. I am looking for a different job but it is tough given I am in a real niche area ...it then occurred to me that I may just possibly be able to walk out and 'retire' at some stage soon. I am cash rich at present with private pensions, shares, several ISA's, paid off mortgage etc and have saved a fair amount too. I am not looking for a luxurious lifestyle and happy to watch the pennies but would like to know if there is a sum/calculation which I can use to see what's possible. In addition I have a 6 year old daughter and obviously want to see her happy and comfortable. My partner earns a little as a temp worker but is not enough to support the family if I do not work. Happy to take advice from anyone...? Oh and sorry for the slight 'sob' story but I am not enjoying life at present and have to do something soon!!

atush

https://www.hl.co.uk/pensions/interactive-calculators/pension-calculator

You wont be able to draw your pensions til 55. So you need to fund a lot of years from your savings. Consider if they remained invested (with a 3-5 year income buffer in cash) that you could draw an income of 4-5% w/o depleting the capital too much. So use that and work backwards from a min income you need to live on.

then, what other work can you do? What would you like to do? Qualifications? Could you consider a slower lower paid job somewhere, even part time? This could give you even more flexibility. 47 is realy very young to retire, so I think you just need to change your job/lifestyle

BobQ

There is nothing more important than your health. If this is the effect your job is having on you then it should be a priority to get a less stressful job.

At 47 you need to ask yourself what sort of job you can reasonably get and what it would pay. The next question is whether that is enough for the lifestyle you lead or are prepared to leave.

You cannot draw any pensions until 55 and even then they will be worth less because they are drawn early. Also you may find that by then the earliest date you can access your pension is higher.

So the questions to ask is will your salary plus other assets be sufficient to fund the gap? Also will your pension at retirement be enough for the lifestyle you want to lead, if you do not pay is as much from now on?

grey_gym_sock

4-5% drawing from investments might be roughly sustainable. that is for any of pension/ISA/other. if 4-5% from your non-pension investments wouldn't be enough, it is OK to run them down a bit before you get access to pensions at 55 - since, without any drawings, the pensions will be building up to compensate.

if that doesn't give you enough, what about moving to a cheaper house? perhaps further from london, rather than in a cheaper part of london. this is dependent on how it fits in with your partner and daughter - which are what matters, along with your health.

there is a lot to be said for getting in a position where you don't have to work, if you can. which doesn't necessarily mean not doing any kind of work.

xylophone

Are you able to take a holiday?

A month off might give you time to think and to explore job opportunities.

ozzage

You tlee sound like a perfect candidate for early retirement, and the internet is full of wonderful people doing/planning the same thing, and those who already have.

A couple of posts to begin with:
http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

http://the-military-guide.com/2011/01/03/how-many-years-does-it-take-to-become-financially-independent-2/

The first is Mr Money Moustache. Given your situation I would definitely recommend getting acquainted with him and his blog. It's a mix of healthy happy living, frugality and investment advice.

The second is a ex-US military man. Seems a bit irrelevant but the post is good in your situation.

They are a good start to thinking about this topic. The world of early retirement planning awaits. With a high paying job in the city and a willingness to live a simple life, you can probably retire much more quickly than you think, with a bit of commitment.

richbeth

Hi,
First of all the suggestion for a holiday is a great one, get some time to think about things.

Second to retire early you need to be financially independent so do the following
1) Work out how much you income you need in an average month – there is a thread about this and good thoughts from people like Ermine https://forums.moneysavingexpert.com/discussion/2146737
So work out your outgoings and then look at these and determine what they would be if you weren’t working, less clothes, no commute etc. remember to include an allowance towards replacing cars, home maintenance etc.
2) Determine your current assets and where they are held (pensions, ISAs, cash etc etc, include any final salary pension)
3) Prepare a spreadsheet with a cash flow which takes into account average investment growth and when you can start drawing income each of the ‘assets’ e.g. FS may be at 65, state pension at 67
4) Consider downsizing or relocating to a cheaper area to release equity

The first attempt at the cash flow could be quite rough and ready but it will give you an idea of where you stand, you can ignore inflation to simplify as it will all cancel out. You’ll find there are a number of stages

• Pre 55 when you can’t get hold of pensions so need income from ISAs etc. These will be tax free so that helps.
• Between 55 and when you can start getting and FS and state pension – during this time you can use any pension pots and the associated tax free lump sum – the proposed pension changes could really help.
• Post 67 where you will have state and FS pensions

Planning so far ahead is quite difficult so it’s good practice to assume a modest investment growth (I use 4% above inflation as this is less than the actual in my pension over the last 10 years) and have a minimum limit which triggers a cell colour change or something in your spreadsheet.

In my experience doing these things will also make you feel better, there is nothing like positive action to help beat off stress. Also if you find you are e.g. £10k pa short you can look at how to generate this maybe via part time job or a hobby that generates an income.

FWIW I was in a similar position a few years ago and creating a plan has really helped my wife and I realise how achievable early retirement was and helped us focus on achieving this. We’re on schedule to retire at 49/50 and are in the process of making the house move now. You’ll get lots of good advice and ideas from reading this forum so make it a regular place to visit.

Good luck and remember you are master of your own destiny !
R

kidmugsy

It's worth looking at ermine's blog
http://simple-living-in-suffolk.co.uk/author/SLS/

Your first duty is to your girls, so you accordingly need to sustain your health. Good luck.

Eric_the_half_a_bee

tlee wrote: »

I am currently in a banking job in the city which is causing me real stress and seriously affecting my health recently....I am fearful of getting extremely depressed and sick long term. I am looking for a different job but it is tough given I am in a real niche area ...it then occurred to me that I may just possibly be able to walk out and 'retire' at some stage soon. I am cash rich at present with private pensions, shares, several ISA's, paid off mortgage etc and have saved a fair amount too. I am not looking for a luxurious lifestyle and happy to watch the pennies

It doesn't have to be all or nothing. There are plenty of modestly paid jobs outside of banking which are not stressful - with a bit of income from your shares and ISAs, and perhaps capital freed up from a move to a cheaper home, you could have a comfortable and happy life, and think about retirement again in a few years.

Thrugelmir

richbeth wrote: »

Planning so far ahead is quite difficult so it’s good practice to assume a modest investment growth (I use 4% above inflation

That's an optimistic assumption in the long term. Fees and charges will chip away too. So will the occasional market correction which people fail to factor in. Also the lower Corporate profits being reported are also lower than expectations. Holding investments is a roller coaster ride. Which relies on income reinvestment to a high degree.