Want to retire early - where to begin??

ermine

The period between 45 to 57 is probably the hardest challenge. You can't use pension savings for this because you aren't allowed to get hold of them. So you must use S&S ISA savings for this period.

To be honest, your choice is probably going to be having children or retiring so early unless you manage to dramatically increase your earnings while keeping your outgoings low. Whilst the joys of having children are many, high earnings and low outgoings don't usually go with that particular territory.

The spreadsheet is your friend. Map out the years from now to SP age, in today's money. Identify both your expected income(s) and your running costs, as well as your savings. Over the long term (averaged over 10 years) equities pay about 5% in real terms. Alternatively you can take the rule of thumb that from an equity investment portfolio can be drawn down at 4% without running down the capital value.

With the spreadsheet you can then estimate when various pensions would come through and how much you need to save. The biggest challenge will be coasting between age 45 and 57 with the ISA income without spiking your pension savings. The spreadsheet is a high-level guide rather than a plan, no 15-year battle plan survives contact with the enemy intact. Mine was about 50% in error after only 6 years, but it showed what could and couldn't be done.

I don't know details of the USS but if it's a DB scheme you'd probably be very hard pushed to beat it with any sort of SIPP. But a SIPP to run down between 57 and 65(assuming the USS normal retirement age is 65) could still help you.

Aiming to have some part-time income particularly between that 45 and 57 period makes the maths much, much easier, Inquire within and ask yourself why you want to retire early and how much it is worth to you. Your study area and PhD should serve you well - many of us don't do this until the eleventh hour and make a mess of things in the hurry and undefined jumble of wanting 'anything but this'.

To achieve such early retirement you will be living at a much lower material standard of living that your colleagues. Some people can do that but not all - powerful advertising forces all around us are trying to normalise high levels of spending, Many of these forces target people via their natural fears for the well-being of their children.

Without that part-time income it's much harder. I was so shattered clearing the workforce in my early 50s that I have coasted for nearly three years without an income. Slowly the damage was undone, but the recovery period took years, not months or weeks. And the areas where I was first fit enough to earn an income were totally unconnected to my erstwhile career, only now do I consider using the skills I learned over three decades of working life. I don't need the income so I don't push myself. No excess consumer spending is as good as freedom to use my own time feels. In reducing my outgoings from typical middle-class-consumerist-you-can-have-it-all-worker-drone to the bare minimum I learned what really mattered to me. And I learned what enough looked like. You need a lot more money when you don't own your own time or define your own day, oddly enough.

And I look around at my ex-colleagues, and I see shocking levels of casual spending and unthinking decadence. Some have had health problems from the stress of working in the more hostile workplace, some have adapted well to the changes in the workplace, good luck to them, each to their own.

One daft berk retired only after his second TIA - your third is often your last one-way ticket to ride - he was nuts. Your target of just before 50 is good, that last decade does seem to be one where things catch up with people.

Make no mistake, this is not going to be an easy path. Knowing yourself is the first and most important step on the path to early retirement. Most people don't retire early. It takes an unusual degree of self-knowledge and self-determination to make the tough adaptations required to retire early

Reue

ermine wrote: »

Make no mistake, this is not going to be an easy path. Knowing yourself is the first and most important step on the path to early retirement. Most people don't retire early. It takes an unusual degree of self-knowledge and self-determination to make the tough adaptations required to retire early

Or some excellently timed voluntary redundancy packages. My employer offered it a couple of years ago. Many of those who had been working there for ~25years jumped at the chance to walk away with 6 figures and retire in their late 40s/early 50s.

marianneke

Marine_life wrote: »

if you want to retire really early then ignore the traditional logic, you need to do the following:

- cut your expenses to the bone (no more frothy coffees, cycle to work etc.)
- maximise your income
- take on some risk in your investments (the more you are able to stomach the earlier potential retirement date you have - but beware the risk of losing it all)

If the question is where to start then the best thing you can do is have a plan .....and some speadsheets.

Have a read of:

mrmoneymustache.com

I like his philosophy but not his disciples.

Yes, I was about to suggest this route, but you gave an excellent summary.

Also, when accounting for kids, remember that they don't stop costing you money after they leave the house. Perhaps a cat isn't such a bad idea after all

Spreadsheetman

atush wrote: »

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!

There are changes happening to USS at the moment due to their large deficit - no one really knows how it is going to pan out though as it is still at a "consultation" stage.

mlv-1967

Money_Saving_PhD wrote: »

Hello all, I have been lurking for some time on many of the boards here and wondered if I could ask for some advice please?
Like many people on here, I have come to the decision that I certainly don’t want to be working full-time, over even part-time right up until state pension age, whenever that may be by the time I get there. I also am not drawn to a largely consumerist lifestyle and have begun to take on many OS and frugal techniques to further reduce my outgoings. I’ve been really looking at my values and wish to spend as much my of the time on quality interactions with family and friends, not on ‘stuff’ or damaging my health to pay for said ‘stuff’ as have been off work due to stress in the past.

I confess that I know very little about pensions even though I paid into one for 5-6 years, and whilst I have read up recently on Stocks and Shares ISAs and a bit about different kinds of pensions, I have yet to wrap my head around a lot of the jargon and how to read the plethora of conflicting advice out there with regards to investing. I’m hoping that if I share my situation here, some of you might be kind enough to point me in the right direction to begin my education in financial independence. I should also mention that I currently have an optimistic figure of 45 for my retirement age! Trying to aim high, and make sure I ‘load and fire that gun’ sooner rather than later, to use a very apt metaphor I read on here, but I also know that life may yet get in the way, but the sooner I start, the better.

A bit about me if that helps: I’m 30, female, in a newish relationship so single in financial terms atm, no children and have owned my own house, with mortgage which I am overpaying, for almost 5 years. I have £8k in savings as an emergency cushion, and am about to take on a lodger again for extra income.

My preserved benefits statement from my LGPS pension for 6 years’ service is a pot of just less than £50k, or £2466 annual pension. I’m not clear whether I can chose to access this before 68, as although I was a member after April 2014, I was on a career break and not paying anything in, but it seems they have included this time in the calculations. The rest of my adult life I have been in University and not paying into a pension. I am now doing a PhD and my income is a tax-free scholarship of £14k, plus tax-free lodger income, and a few hours paid work per week which doesn’t reach the personal limit for income tax. As I don’t pay any tax, but can afford to save/invest I find some of the advice hard to apply to myself as a lot of the benefits of pensions, stock and share ISAs etc, are based on being a tax payer now, as well as having to pay tax later. But I will be a tax payer again in 2 years when I graduate and hopefully get a job, with the option of a University pension scheme.

I will be looking for a role in academia after I graduate, but am also training to have a second much smaller income from self-employment, which I hope will become the job I love and will continue on a small scale after ‘retiring’ from full-time work. In the next five years I also hope to be settled and beginning a family, which will also impact my earnings, but perhaps be offset somewhat by not being single any more and sharing some costs.

I’ve been looking at S&S ISAs, and using a platform like iWeb to invest in some national and global funds, but scared to take the first step. The MSE article on this gets bashed on the forum discussion, so my usual font of knowledge doesn’t seem like a good place to look. I’ve also read comments recently on not overpaying your mortgage if you want to retire before 55, but overpaying this has also been a strong drive for me and will be hard to give up without much convincing or seeing the clear benefits of the alternatives, but I'm willing to be convinced! It's all very confusing and I feel a little bit late to the party, although it could be worse!

Many thanks in advance for any comments, these forums are so inspiring and helpful to me.

The easiest way is to marry a rich man! :rotfl:

I don't see how it is realistically possible to retire before 55, and even that target is extremely ambitious, given the multiple hoops that the government has created for us to jump through.

I am resigned to retirement at 67 (or later) and there is precious little I can do about it. You need to get real.

The best you can hope for at 45 is some kind of semi-retirement where you perhaps only work 2-3 days a week. For this you need to make sure that your mortgage has been paid off by then and/or your partner earns sufficiently for you to take this income drop. Or else you need your investments to provide you with enough income to make up for the salary shortfall.
Personally, I would drop the whole idea of such a ridiculously early retirement and instead aim for a more realistic target of age 55. This is the earliest you can take your LGPS pension, which your 'golden egg', and any additional savings you may have will also significantly boost your lifestyle.

mlv-1967

Reue wrote: »

Or some excellently timed voluntary redundancy packages. My employer offered it a couple of years ago. Many of those who had been working there for ~25years jumped at the chance to walk away with 6 figures and retire in their late 40s/early 50s.

Public sector employer? The government is now cracking down on huge handouts like these. And even in the private sector this sort of thing is happening less and less.

AlanP_2

mlv-1967 wrote: »

I don't see how it is realistically possible to retire before 55, and even that target is extremely ambitious, given the multiple hoops that the government has created for us to jump through.

I am resigned to retirement at 67 (or later) and there is precious little I can do about it. You need to get real.

The best you can hope for at 45 is some kind of semi-retirement where you perhaps only work 2-3 days a week. For this you need to make sure that your mortgage has been paid off by then and/or your partner earns sufficiently for you to take this income drop. Or else you need your investments to provide you with enough income to make up for the salary shortfall.

Personally, I would drop the whole idea of such a ridiculously early retirement and instead aim for a more realistic target of age 55. This is the earliest you can take your LGPS pension, which your 'golden egg', and any additional savings you may have will also significantly boost your lifestyle.

I certainly couldn't, nor at 55 either but that does not make it a universal truth.

If someone wants to target retiring at 45 or 50 and is prepared to make the financial scarifies / arrangements to achieve that goal then good luck to them.

The more that do then the better for me and my family as there will be more job opportunities.

I would say it is unlikely for the vast majority of people in the UK to achieve but I would also say the the vast majority do not want to retire that early if the conversations I have with family, friends and colleagues is anything to go by.

gadgetmind

My brother worked on the railways, and then moved to the civil service (where he claimed people moved even slower!), and took early retirement at 50.

This simply wouldn't be possible in the private sector.

mlv-1967

AlanP wrote: »

I certainly couldn't, nor at 55 either but that does not make it a universal truth.

If someone wants to target retiring at 45 or 50 and is prepared to make the financial scarifies / arrangements to achieve that goal then good luck to them.

The more that do then the better for me and my family as there will be more job opportunities.

I would say it is unlikely for the vast majority of people in the UK to achieve but I would also say the the vast majority do not want to retire that early if the conversations I have with family, friends and colleagues is anything to go by.

Well, I would retire tomorrow if I won the lottery jackpot. It's all about being realistic and planning logically instead of dreaming.

mlv-1967

gadgetmind wrote: »

My brother worked on the railways, and then moved to the civil service (where he claimed people moved even slower!), and took early retirement at 50.

This simply wouldn't be possible in the private sector.

Even in the public sector that is not longer possible. 55 is now the earliest age and you would need a very long service to do this.

In the private sector the death of the defined benefit pension has also killed off any prospect of early retirement. The knock-on effect will be felt by younger people who will be waiting forever to get promoted - very much a case of 'dead men's shoes' now.