My Early Retirement Story - Another Perspective
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ams25
Posts: 260 Forumite
With thanks to OldMusicGuy for his inspiration (and format), I thought I would post on my early retirement experience.
Background: I early retired from my 30+ year high stress (but quite well paid) corporate career over 2 years ago at 52. Loved my career for most of that time, but not so much once past 50. I believe I suffered “burn out” which made work harder and less enjoyable. So as soon as I realised I could stop (financially) it seemed the only thing to do. Other factors were that my wife had just gone back to work after many years looking after our children and I was keen to spend time with the kids while still young (primary school age). My wife is younger than me and will work for a few more years while she enjoys it, but would like to stop within 5 years. So while we have my wife’s income at the moment and it certainly helps bridge the gap, it’s not part of our long term planning. It currently covers around 45% of expenses.
Our number: We live in London/south east so the cost of living is quite high but the house is mostly paid for (< 5% mortgage remaining). We are neither very frugal nor spendthrift and I would say live a normal/modest middle-class lifestyle. I’ve kept a detailed budget for years and have been tracking spending closely since I stopped working and we are pretty much achieving our plan. We tend to spend around 45k pa (after tax), including holidays (which is the largest single expense). Lots of spending is child related – clothes, days out, after school activities etc. We spend much more on the kids than ourselves. My planning allows our number to be around £50k but trying to stay below it. Our lifestyle has not changed since I stopped working, in fact we spend more as my savings rate was previously quite high – around 35% if you include mortgage overpayments and tax/NI also took out a big chunk (HRT) which thankfully it no longer does.
Pensions/Investments: I’ve been investing since I started earning (back in the days of PEPs, before ISAs) and that habit plus time in the market and compounding is what has enabled me to stop working early. In my case having kids relatively late helped because I was investing “that” money which then had time to grow.
I’ll have a decent DB pension at 60 (c.50% of expenses) and full SP at 67. My combined SIPP and ISAs pot at about 3% withdrawal rate should cover the other 50% of expenses. For the next 6 years these funds (plus some cash reserves) have to bridge the gap to the DB. Like OMG, I have taken a relatively defensive approach: I hold 2-3 years expenses in cash and a further amount in bonds and less volatile investments so hopefully no need to sell equities in a bear market. Equity allocation is just over 50% (down from around 90% when working). Like OMG my DC/ISA pot is down about 4% from the peak but about the same level as when I stopped working. My wife has relatively poor pension provision so we are diverting some funds to build that up. I have ringfenced some money for the kids to cover uni and associated costs – this is an area of my plan I am less secure with as it may not be enough, but also assume we have enough in our number to cut back in other areas if we need to fund other child related costs. Downsizing is not planned in the short term, but 10-15 years out I can see us doing this to release equity to help the kids property wise and provide for LT care if needed.
The retirement experience: In my case I have a fair amount of childcare responsibilities so I will not be typical of early retirees, with less time for other hobbies, but it’s been great being the only dad in the park! I have spent time getting fitter, improved my cooking, I am much more relaxed but still wonder where all the time goes let alone how I found time to work!! I’ve yet to do any volunteering, but I do plan to. Financial literacy really interests me (as there seems so little of it and I know the difference it can make first hand) so I would like to get involved in that area. I know I should do more new things, but with kids the time available is actually quite limited.
Like OMG, Moving from accumulation to decumulation after over 30 years saving has been a struggle (as a natural saver/investor) but I am getting used to it. I’ve read a lot on safe withdrawal rates, market volatility etc and the more I read and learn the more comfortable I feel that I should be ok even when we do experience a bad market (though I know it won’t be fun). Also recognising that the go go years (50 and 60s) need to be enjoyed before the go-slow years (70s and 80s) - if you are indeed lucky enough to have them - has helped me to appreciate that front ended spending down is a good thing.
I thought I might miss work after a while, but so far I have not and have no regrets. I am glad I took the decision to quit when I did. I feel that sticking it out another year or two would have been bad for my mental health and feel so grateful that the decisions I made in my 20s to save and invest have enabled my 50s self to quit when I needed to. Having a good (but not stellar) job helped but it was saving/investing early and spending modestly that really worked.
Thanks again OMG for your post and I hope others will be willing to tell their stories to help and inspire the community.
Background: I early retired from my 30+ year high stress (but quite well paid) corporate career over 2 years ago at 52. Loved my career for most of that time, but not so much once past 50. I believe I suffered “burn out” which made work harder and less enjoyable. So as soon as I realised I could stop (financially) it seemed the only thing to do. Other factors were that my wife had just gone back to work after many years looking after our children and I was keen to spend time with the kids while still young (primary school age). My wife is younger than me and will work for a few more years while she enjoys it, but would like to stop within 5 years. So while we have my wife’s income at the moment and it certainly helps bridge the gap, it’s not part of our long term planning. It currently covers around 45% of expenses.
Our number: We live in London/south east so the cost of living is quite high but the house is mostly paid for (< 5% mortgage remaining). We are neither very frugal nor spendthrift and I would say live a normal/modest middle-class lifestyle. I’ve kept a detailed budget for years and have been tracking spending closely since I stopped working and we are pretty much achieving our plan. We tend to spend around 45k pa (after tax), including holidays (which is the largest single expense). Lots of spending is child related – clothes, days out, after school activities etc. We spend much more on the kids than ourselves. My planning allows our number to be around £50k but trying to stay below it. Our lifestyle has not changed since I stopped working, in fact we spend more as my savings rate was previously quite high – around 35% if you include mortgage overpayments and tax/NI also took out a big chunk (HRT) which thankfully it no longer does.
Pensions/Investments: I’ve been investing since I started earning (back in the days of PEPs, before ISAs) and that habit plus time in the market and compounding is what has enabled me to stop working early. In my case having kids relatively late helped because I was investing “that” money which then had time to grow.
I’ll have a decent DB pension at 60 (c.50% of expenses) and full SP at 67. My combined SIPP and ISAs pot at about 3% withdrawal rate should cover the other 50% of expenses. For the next 6 years these funds (plus some cash reserves) have to bridge the gap to the DB. Like OMG, I have taken a relatively defensive approach: I hold 2-3 years expenses in cash and a further amount in bonds and less volatile investments so hopefully no need to sell equities in a bear market. Equity allocation is just over 50% (down from around 90% when working). Like OMG my DC/ISA pot is down about 4% from the peak but about the same level as when I stopped working. My wife has relatively poor pension provision so we are diverting some funds to build that up. I have ringfenced some money for the kids to cover uni and associated costs – this is an area of my plan I am less secure with as it may not be enough, but also assume we have enough in our number to cut back in other areas if we need to fund other child related costs. Downsizing is not planned in the short term, but 10-15 years out I can see us doing this to release equity to help the kids property wise and provide for LT care if needed.
The retirement experience: In my case I have a fair amount of childcare responsibilities so I will not be typical of early retirees, with less time for other hobbies, but it’s been great being the only dad in the park! I have spent time getting fitter, improved my cooking, I am much more relaxed but still wonder where all the time goes let alone how I found time to work!! I’ve yet to do any volunteering, but I do plan to. Financial literacy really interests me (as there seems so little of it and I know the difference it can make first hand) so I would like to get involved in that area. I know I should do more new things, but with kids the time available is actually quite limited.
Like OMG, Moving from accumulation to decumulation after over 30 years saving has been a struggle (as a natural saver/investor) but I am getting used to it. I’ve read a lot on safe withdrawal rates, market volatility etc and the more I read and learn the more comfortable I feel that I should be ok even when we do experience a bad market (though I know it won’t be fun). Also recognising that the go go years (50 and 60s) need to be enjoyed before the go-slow years (70s and 80s) - if you are indeed lucky enough to have them - has helped me to appreciate that front ended spending down is a good thing.
I thought I might miss work after a while, but so far I have not and have no regrets. I am glad I took the decision to quit when I did. I feel that sticking it out another year or two would have been bad for my mental health and feel so grateful that the decisions I made in my 20s to save and invest have enabled my 50s self to quit when I needed to. Having a good (but not stellar) job helped but it was saving/investing early and spending modestly that really worked.
Thanks again OMG for your post and I hope others will be willing to tell their stories to help and inspire the community.
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Comments
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Really interesting to read your perspective particularly with still having dependent children (as have I). Early days for me, but I feel still having dependents makes "the number" trickier to work out, and I am being cautious about decumulation and spending generally until I have ring fenced DD's uni money. Are you absolutely certain you will have full SP at 67? Have you obtained a forecast? I only ask because of your age and the likelihood of those years being contracted out for SP purposes.0
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Yes. I have 36 years contributions and need another 2 years for the max SP amount which I am getting through child benefit. Actually aiming for 40 yrs in case they increase the required years for max SP from 35 to 40 in future.
I do have funds earmarked for uni support but wonder how it will all change in the next 10 years. I am perhaps more concerned with the general cost of supporting the teenage years. Grateful if anyone can help quantify the cost of supporting primary vs secondary... I assume it's more but unsure really how much. Already covering a host of activities, clubs etc. I am sure you can spend as much as you want...but what's typical might be helpful. Anyone?0 -
The retirement experience: In my case I have a fair amount of childcare responsibilities so I will not be typical of early retirees, with less time for other hobbies, but it’s been great being the only dad in the park! I have spent time getting fitter, improved my cooking, I am much more relaxed but still wonder where all the time goes let alone how I found time to work!! I’ve yet to do any volunteering, but I do plan to. Financial literacy really interests me (as there seems so little of it and I know the difference it can make first hand) so I would like to get involved in that area. I know I should do more new things, but with kids the time available is actually quite limited.
Like OMG, Moving from accumulation to decumulation after over 30 years saving has been a struggle (as a natural saver/investor) but I am getting used to it. I’ve read a lot on safe withdrawal rates, market volatility etc and the more I read and learn the more comfortable I feel that I should be ok even when we do experience a bad market (though I know it won’t be fun). Also recognising that the go go years (50 and 60s) need to be enjoyed before the go-slow years (70s and 80s) - if you are indeed lucky enough to have them - has helped me to appreciate that front ended spending down is a good thing.
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While it's strange for people retiring in their 60s to have dependent children, it's quite common for early retirees to have them. The difficulty with ER for many is having all the middle aged expenses like mortgages and children and having to span the income gap between ER and pensions being available. I'm in the US and another issue here is healthcare as many people get that through their employment and if they retire they have to navigate the private insurance market and that was basically impossible before Obamacare and is still very expensive particularly with a family.
I was able to ER because I have no dependent children and made sure I paid off my mortgage before I stopped working. I was also lucky to have a government job that offered a pension and retiree healthcare insurance at age 55. I was able to span the gap from age 52 to 55 by using non-pension savings and rental income and was also able to get health insurance through a state benefits plan for the poor; bizarrely as I was living off savings my actual taxable income put me below the poverty level and the state swooped in and put me on their Medicaid program.
So it's important to have a robust plan and when you have dependents that makes it all a bit more worrying as it's not just you that's taking the risks.“So we beat on, boats against the current, borne back ceaselessly into the past.”0 -
My husband retired at 49 from police when our youngest was 14. Has been great to have home to be there for our son, shop, housework, prepare meals etc.
I am plotting to retire at 55 in another 2.5 years so currently maximising my additional DC pension contributions. Will drawdown on this until my DB pensions kick in.
Do have fears of retiring and unexpectedly having unexpected major expenses/ life changes but currently feel that burned out by work really looking forward to leaving it all behind.
Our annual income after 55 will be approx £30k plus income profit of approx £12k from 3 properties, though conscious that things could go wrong on that element.
Living on that at moment so life shouldn't change too much after 55.
Exciting times.Money SPENDING Expert0 -
If you ER it’s even more important to stress test your plan than with a regular retirement. So be brutal and make sure you have a way to sensibly survive. See what would happen to your finances if the house burnt down, check your insurance, what if there’s a 10 year recession, a divorce or your spouse dies. These are not nice things to plan for, but they should be considered.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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Our kids remain expensive in secondary school, football, ballet, stage school all seem to carry on plus lots of jollies (school trips), we have opted out of non educational such as ski trips and also things like orchestra tours as these just don't seem like vfm but I guess they are 'missed experiences' .
Our kids don't live a guilded lifestyle now and if they want to afford daily Costa at uni they will have to earn the money to pay for it themselves.I think....0 -
Yes. I have 36 years contributions and need another 2 years for the max SP amount which I am getting through child benefit. Actually aiming for 40 yrs in case they increase the required years for max SP from 35 to 40 in future.
I do have funds earmarked for uni support but wonder how it will all change in the next 10 years. I am perhaps more concerned with the general cost of supporting the teenage years. Grateful if anyone can help quantify the cost of supporting primary vs secondary... I assume it's more but unsure really how much. Already covering a host of activities, clubs etc. I am sure you can spend as much as you want...but what's typical might be helpful. Anyone?
I do not keep detailed budgets however I think there is little change from primary to early secondary years except maybe mobile contracts (not my personal experience but understand it is not unusual). Costs increase for 6th form, paying for previously free school bus, driving lessons/cars etc. We are quite rural so transport generally is more relevant.0 -
Having dependent children does make it trickier to work out ‘the number’ but I worked on current expenditure. We’ll help with Uni etc but plan positively derailed by eldest doing apprenticeship! We have both been self employed for many years, which I think helps, as income is variable and we just adapt /build in reasonable margins. The number is not set in stone after you retire so do not stress too much when calculating it.Dorian1958 wrote: »Really interesting to read your perspective particularly with still having dependent children (as have I). Early days for me, but I feel still having dependents makes "the number" trickier to work out, and I am being cautious about decumulation and spending generally until I have ring fenced DD's uni money. Are you absolutely certain you will have full SP at 67? Have you obtained a forecast? I only ask because of your age and the likelihood of those years being contracted out for SP purposes.0 -
bostonerimus wrote: »If you ER it’s even more important to stress test your plan than with a regular retirement. So be brutal and make sure you have a way to sensibly survive. See what would happen to your finances if the house burnt down, check your insurance, what if there’s a 10 year recession, a divorce or your spouse dies. These are not nice things to plan for, but they should be considered.
I agree, trouble is how far to go to truly stress test.
Worst case scenario financially for me would not be my oh dying as I would get 75% of his current pension plus a significant life insurance.
Now divorce would have a massive financial impact for both of us as we go from being comfortably off as a couple to each struggling.
If I were to plan for that I would have to work significantly longer than planned.
A 10 year recession - as majority of our income is in DB schemes not sure how to calculate impact of that.
Off to check my home insurance
Money SPENDING Expert0 -
Thanks for sharing and it's good to see a somewhat different perspective on ER. Good to see that you have time to spend with the kids.0
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