Want to retire early - where to begin??

Thrugelmir

Alternatively work bloody hard but don't kill yourself in the process. Sometimes it's just as easy to have a balance to life.

Money_Saving_PhD

Thank you all for your comments so far, it is really interesting to hear everyone's views. I'm not good at quoting individuals but have gathered a few initial first steps from what most people are saying:

-Decide on the amount pa you could live on in retirement, based upon current cost of living - I would put my amount at £12k per year but I could probably do less. I am living on around £10k pa at the moment and overpaying my mortgage with the rest.

-Set up a spreadsheet and start playing with projections for the phases others have identified (i.e. gaps between end of employment and start of different pensions) I love playing with my spreadsheets I've downloaded a few templates to try this with, but does anyone have a particular one they would recommend for pension projections?

-Get up to scratch with knowledge of cashflow, tax etc before getting into details of investing. Would anyone recommend a book to read on this subject, I'd prefer paper/kindle based, but otherwise a website/blog that starts with the basics and works its way up?

-Retiring at 45 would be quite a challenge (probably impossible). I'm willing to accept that it probably wont happen, in this early stage where I need to stay motivated to do something about this, it was good to set some kind of target, and this is also roughly when my mortgage will finish on my current OP schedule. That time scale was also brought about by the following point...

-From Marine_life - Read MMM, cut everything to the bone, maximise income and take on more risk in investments.My 15 year goal came from MMM, and I am currently reading the whole blog from the start! I have avoided the forums as others have also said how extreme the followers are. I have recently become very frugal and will increase this each month as I see where I can cut down more. I save about 25% of my scholarship money (which I use to OP mortgage) and have work earnings and lodger income on top of that to put into pension planning. I walk to work and take lunch, shop around for best deals on my utilities, food shop at Aldi, meal plan, batch cook, don't own a TV, have an allotment... I don't want to live on rice and peas, but I'm capable of living on not-very-much if needs be as I have some similar views to MMM - although I've missed the boat on retiring before having kids, if only relationships could be projected reliably on spreadsheets

Is there anything I've missed that I should do first? (Boyfriend is also a student so the millionaire route is out )

If anyone has suggestions for the above questions to get me started, that would be great. I might do the necessary background reading and investigation and set myself a date, maybe in 4-6 months when I aim to start taking action.

PeacefulWaters

I would put my amount at £12k per year

I wish you luck.

Won't you be bored brainless for the last c40 years of your life?

TheTracker

What's the PHD in? I have a different take on scrimping to many. You can indeed invest in S&S but one of the most valuable items to invest in is yourself. You are probably doing this with student fees now. Consider whether you can make additional steps there. Perhaps that what your "second job" is. I've known academics that have a healthy other life with an "applied" money stream.

ViolaLass

To look at it another way, why do you want to retire early? Is it so you can spend your time doing the things you want to do? Why not build a life where you can do that now, alongside earning enough to live?

sleepless_saver

Money_Saving_PhD wrote: »

-Get up to scratch with knowledge of cashflow, tax etc before getting into details of investing. Would anyone recommend a book to read on this subject, I'd prefer paper/kindle based, but otherwise a website/blog that starts with the basics and works its way up?

I'd wholeheartedly recommend "Smarter Investing" by Tim Hale. As the title suggests it is about investing, but it also includes the basics of pretty much everything you need to think about before you even start investing. Monevator is also worth looking at, though more on the investing side.

Marine_life

Three further thoughts:


1. We are in a historic period of low inflation so interest rates and investment returns will remain low. This means inflation will not eat the purchaisng power of your savings but building a pot will be more difficult (as the compund returns are low).


2. Volatility driven by global terrorism, economic meltdown, political uncertainty etc. is more than likely here to stay for a very long time. If you are really smart you might try and second guess the market, but otherwise be prepared to strap in for a bumpy ride.


3. I have been reading a number of blogs recently where people have taken a very low cost route to retirement ( by moving to Asia etc.), where comfortable living costs could be one-third of those in the UK. So if you really want to retire as early as possible you may need to think different.


http://owee58.com/2014/08/27/retire-in-vietnam/


Vietnam currently has interest rates of 7% or thereabouts and therefore theoretically you could retire with around $100,000.


Not for everyone though ;-)

Money_Saving_PhD

Just wrote a long post and then lost it

Thanks to everyone who has replied so far, it's all been really helpful.

I've been reading loads of the Monevator blog since it was suggested, have downloaded William Bernstein's book 'If you can' as recommended on there (99p on kindle and only 40pgs), will try and get a copy of Tim Hale's book 'Smarter Investing' as recommended too. It seems that passive investing in NISAs and SIPPS could be the way to go and I'm getting to grips with all that entails.

To answer a few questions, my PhD is in psychology and evaluating a well-being intervention. I then plan to become trained in delivering this intervention by the end of this year as my self-employed job. I think I will find this really rewarding and enjoyable and would likely continue it beyond 'early retirement' at a reduced rate. My plan would be to work hard in academia for a few years to try and secure a lectureship whilst building my business on the side, then probably after the arrival of children, scale down academia and scale up self-employment until I can quit academia and have free time to pursue my interests whilst maintaining my own business part-time if I chose. (This is a rough and ready plan with no set timescales to give you an idea of my goals/motivations and will all the while be throwing everything I can at my retirement pot and paying off my mortgage!)

I realised a new option today that has changed everything!
Because my bit of part-time work is for the University, and at a high enough grade, I am able to join the USS now (and will probably be auto-enrolled next month as I will be paid for a big chunk of exam marking). My contributions will be 6.5% with employer contributions of 16%. Not sure how it works in practice in terms of service and active membership as I have a zero hours contract, am below the personal allowance, and will possibly not get any work at all over the summer. They will also accept my LGPS benefits through the 'transfer club' scheme for public sector transfers.

The USS seems like a good route to go with the benefit of employer contributions. Particularly as I hope to remain in academia with access to the USS for some time. But I am aware that I might be missing something. If I enrol in the USS, that 6.5% contribution is on average about £15 per month! I don't get the tax benefits of making AVCs to this scheme whilst I'm earning less than £10k, so would it be better to invest any extra money in a SIPP up to my pension allowance, and then a NISA? Or is extra money paid into the defined benefit USS scheme still a better (and safer) strategy than investing it?

Thanks in advance for any replies. I'm also wondering if there's anyone else out there in the USS or similar who has made the decision whether to overpay in the scheme or invest outside of it?

atush

The USS is a DB pension, the best type of pension to have. So join it, and stay in it as many years as possible!

Reue

Money_Saving_PhD wrote: »

My 15 year goal came from MMM,

Big fan of MMM myself and have been following him and that circle for awhile now.

15 years however is extremly ambitious, especially in this country. We have higher housing costs, less opportunity to move for employment and limited access to pension funds early.

Living cheaply is the key message. There's a few UK people around your age attempting similar timescales. Take a look at some of their blogs for an idea of the savings %s required and long term planning:

http://thefirestarter.co.uk
http://financiallyfreebyforty.blogspot.co.uk
http://www.earlyretirementguy.com

And of course the UK early retirement guru who also frequents these boards:

http://simple-living-in-suffolk.co.uk/