How early can you retire?

DireEmblem

The thread title is the thought running through my head as I wake up on my last day left of the two week holiday I took from work. Going back to work sucks, its a job which provides a means to an end and funds my current lifestyle, but I wouldnt like to continue until I retire. I'm going to figure out how long it would currently take to squirrel enough away to quit/go part time. I'm currently 30, and thinking of setting some goals for when I turn 40. Not that I would be able to retire then, but to actually set some targets/benchmarks to see how I am progressing at that point.

I guess the general idea would be to calculate the minimum I need to get bye for the basic bills etc, and see if there are any I could comfortably reduce? This should give me a figure which I could pro-rata up to determine how much funds I would need to quit work. Is there a general rule on what rate should be used for this?

Second part should be to download all my bank statements/CC bills into a spreadsheet, see how much I have spent over the minimum bills, and ask myself "right now, am I seeing any benefit in that?". This will probably iron out all the just-eat/hungryhouse/dominoes orders. I'm not looking forward to that figure! From that I can calculate how much savings I would have now if I didnt waste money away on short term things. I expect this to be a bit of a wake up call to be honest, to highlight what I could potentially have saved.

THe last part I presume would be to determine my risk appetite, where/when/what I will save.

I think they are the three key steps - yes? Once I have completed all 3, I should be able to calculate a prospective date, and then its just a case of finding motivation?

Chickereeeee

DireEmblem wrote: »

I'm currently 30, and thinking of setting some goals for when I turn 40.

Seriously, spend the time planning how to move into a job you would enjoy, or at least get satisfaction from.

C

winspiration

Do you have a mortgage? If so, I'd recommend focussing on paying that off as a priority - every £1 you pay early will save you several more £s over the lifetime of your mortgage - once it's gone or at least significantly reduced, that will make a big dent in your monthly outgoings, giving you a bit more flexibility.

I left a very well paid job 10 years ago to go self employed, but before doing so, I managed to get the mortgage down to less than £10K, surprising how quickly it goes down when you really concentrate on it. Would have been better to clear it completely, but I just couldn't bring myself to stay there longer. I don't earn anywhere near as much now, but I don't need to as my outgoings are far less.

Also look at how you are going to fund your retirement - it's good to pare bills down to the minimum, but possibly harder to actually live like that forever more - if you are going to enjoy your retirement, won't you want a bit of spending money to do so?

Not answering the specific question that you asked, I know - but maybe some food for thought.

SailorSam

I don't suppose there's anything from stopping you leave school at 16 and deciding to retire the following year. So long as you can afford to keep yourself. Remember when you get to be 65 your pension may suffer if you've not paid enough 'stamps'.

redped

Welcome to the world of FIRE (Financial Independence, Retire Early). Your thoughts are along the right track - it's simply a case of saving more, and spending less - easy in principle, a bit harder in real life.

If you're like most people and only think about saving some money at the end of the month (when you see what you've got left over), you'll have frittered a lot of it away on non-essential things. So the one tip I'd recommend (and which has made a big difference to me) is the concept of paying yourself first - work out how much you can afford to save each month, and as soon as you get paid, transfer that amount to wherever you have your savings (a separate bank account, S&S ISA, etc.) - and don't touch that money unless you absolutely have to.

Doing this means you'll be saving for the future, and forcing yourself to live on less money (reducing the amount you'll spend on takeways, clothes, etc. which you may want, but don't actually need). That's not to say you should go cold turkey and stop all treats, it's just a case of re-prioritising what you do with your money.

There are plenty of blogs by people who have the same goal as you, e.g.

http://monevator.com

http://simple-living-in-suffolk.co.uk - the author (ermine) frequents these boards

http://theescapeartist.me

fifeken

winspiration wrote: »

Do you have a mortgage? If so, I'd recommend focussing on paying that off as a priority - every £1 you pay early will save you several more £s over the lifetime of your mortgage . . . . .

With mortgage rates being so low just now, that's not necessarily the best option. It's more a psychological thing that no mortgage = good, when it should be high interest investments/savings = better.

Sam_J12

A few things I would think about doing:

Investigate pension plans - all employers are obliged to provide them and some make very generous contributions on your behalf.
Look into moving into an industry with the best potential for high pay. This is probably the most important thing you can do that will help you retire early. At 30 you have plenty of opportunities to retrain. If you want to remain doing what you are doing, work hard to earn promotions.
Set a budget for yourself each month, make it realistic, and stick to it. This way you can have takeaways guilt free!
Buy a property as soon as you can, and aim to pay off the mortgage by the time you retire.
Invest heavily in the stock market. Go 100% equities and don't bother with bonds, which will only reduce long term returns.

HappyMJ

DireEmblem wrote: »

The thread title is the thought running through my head as I wake up on my last day left of the two week holiday I took from work. Going back to work sucks, its a job which provides a means to an end and funds my current lifestyle, but I wouldnt like to continue until I retire. I'm going to figure out how long it would currently take to squirrel enough away to quit/go part time. I'm currently 30, and thinking of setting some goals for when I turn 40. Not that I would be able to retire then, but to actually set some targets/benchmarks to see how I am progressing at that point.

I guess the general idea would be to calculate the minimum I need to get bye for the basic bills etc, and see if there are any I could comfortably reduce? This should give me a figure which I could pro-rata up to determine how much funds I would need to quit work. Is there a general rule on what rate should be used for this?

Second part should be to download all my bank statements/CC bills into a spreadsheet, see how much I have spent over the minimum bills, and ask myself "right now, am I seeing any benefit in that?". This will probably iron out all the just-eat/hungryhouse/dominoes orders. I'm not looking forward to that figure! From that I can calculate how much savings I would have now if I didnt waste money away on short term things. I expect this to be a bit of a wake up call to be honest, to highlight what I could potentially have saved.

THe last part I presume would be to determine my risk appetite, where/when/what I will save.

I think they are the three key steps - yes? Once I have completed all 3, I should be able to calculate a prospective date, and then its just a case of finding motivation?

If your job funds your lifestyle then change your lifestyle.

You don't need just-eat/hungryhouse/dominoes.

If you could learn to cook you can make all those meals and put them in the freezer. It only takes less than 5 minutes to reheat them when you get an urge for a takeaway...it's quicker than ordering a meal and waiting for someone else to cook it and deliver it to you.

I've pretty much retired now at 40. I just do odd jobs every now and again. I don't need much money to get by. I've got investment income of around £1,000 per month and that's more than enough for me and my partner. That capital should run out by the time I reach 70 at which point the state pension which currently pays £1,000 per month for a couple will be payable.

Pincher

There's a phrase "cash is king", which is good for haggling for discounts when you buy things.

For long term retirement, modify that to "cash flow is king".

The last time they made me redundant, I was in my mid-30s.
I got £30k redundancy tax free, and the SAYE stock option ended up around ~£12k+. In those days, you could still get interest only Buy-To-Let mortgages on a self-certification basis, so you can imagine what I did.

The fantasy investment is something that:

1. Generates income to live on.
2. Grows in asset value
3. Allows leverage by borrowing

And as a bonus,

4. The interest on the borrowing is tax deductible

I couldn't get a 100% mortgage the first time round, but the Buy-To-Let re-mortgage a few years later meant that I could borrow the acquisition cost of the house, so I managed to extract all the initial capital invested, so effectively I have £0 invested, at the point of re-mortgage.

With the unexpectedly long term low interest rate, this cash machine is generating ~£15k after expenses (2.25% interest, ~10% letting agent commission, repair, maintenance and replacement, mostly tax deductible )

You need about £300k to buy an annuity of £15k a year, from age 65 until you die. For no money invested, I get £15k a year. CASH FLOW.

The BTL property is worth £800k, with ~£200k interest only mortgage. The capital gains is £600k, so I will pay ~£160k in CGT if I sell. If I don't sell, the £160k is working for me!


Like Iraq, people just don't have an exit strategy.

The problem is, the property will be worth ~£1million when I die, and it's not even my principal private residence, so the £800k net value will be subject to 40% IHT tax, £320k! I should spend the £320k, not George Osborne! I therefore need a dodgy lender that will let me re-mortgage for say £800k, without selling, so I can spend the money on fast cars and loose women, before I get too old to enjoy it.

The aim is to spend all my money by the age of 75, and have just enough left for a decent cremation.

missile

Pincher wrote: »

There's a phrase "cash is king", which is good for haggling for discounts when you buy things..

Not necessarily so.


When it comes to buying some items e.g. new car & home improvements. The seller is often incentivised to sell you finance. If you are careful, you may find it can work out cheaper to take the finance offer.

enthusiasticsaver

It is a good plan to check what your outgoing essentials are and how much you spend on "extras" or non essentials and one we did many years ago and still do now. It is surprising how much of our money goes on things we want rather than need. However we have always taken the view we want to live and enjoy life now as well as save for the future so have always balanced our budget with disposable income split three ways. One third was fun money for holidays, meals out and theatre trips, clothes and other such non essentials. One third was saved long term (in addition to pension so either avcs, isas, peps when they were around and now stocks and shares) and one third was used to reduce our mortgage - we avoided debt like the plague from our early 20s and saved ourselves a fortune.


Do you own a property, are you married and do you have children because all those things can impact on your retirement plans. We have focussed on finding a lifestyle we enjoy and can live with up to a reasonable retirement age. As my husband is an engineer and I am a part time administrator we knew we could never realistically retire at 40 with 2 children to bring up. However we moved out of the rat race of London to Cornwall meaning my husband had a less stressful but still well paid job and I was able to go part time to be able to bring up our daughters. I still enjoy my job now although I moved out of banking and debt counselling to higher education and we are now looking at retiring in 3 years when my husband is 60 and I am 58.


The point I am making is not only should you be saving more and spending less but at your age you should be focusing on finding work you enjoy and can fit in with your lifestyle. 30 is too young to be resigning yourself to work you do not find satisfying and hate doing. That way true happiness lies. Work you enjoy and financial independence. You can have both.