Planning for Early Retirement - what do you think?

fred246

The other problem is the child. It seems reasonable that if 2 adults want to live a frugal existence that's OK. I am not sure about forcing it on a child. I would find it difficult myself. Refusing to allow them on school trips and not allowing them to have the things that their friends have. We are big spenders on holidays. We would take them to say Paris or Rome for the week. You soon realise that that sort of trip is probably more educational than going to school. I think you will find that you want to spend more money on them as they get older.

NumberMan

Secret2ndAccount said:

If your job is paying 75k and you don't hate it, I think you should do it for several more years. Let me tell you the story of my next door neighbours. Mr neighbour had a decent job, and, like you, was able to put away a good sum every year. He could have retired earlier, but waited until his daughter was through education. This left a nice chunk of change in reserve - he didn't have a reason why he needed all that extra money, but it wasn't a big hardship to accrue it. Then two things happened together. Mrs neighbour's mum was getting on in years, and needed constant help with day-to-day living. At the same time, the house next door came up for sale. Mr & Mrs neighbour were able to buy that house for cash, and move Mrs neighbour's mum in next door. Now Mrs neighbour could visit her mum 3 times a day, or all day if she wished, and could provide her with everything she needed in her twilight years. Then they passed that house to their daughter as a BTL, so she was well set on her path too.

I think you are targeting retirement date like it's some sort of competition - like your only thought about work is 'how soon can I be outta here'. If you are shoveling dung for £8 per hour, I can see that point of view. If you like your colleagues, or you have good toys to play with (I know people who work on supercomputers and racing cars, and someone who rides a horse for a living), or you are earning a lot of money, then work is a two-way street. Why the urgent need to be out of there when you have no knowledge of what life will look like in 30 years' time. You are limiting your choices, and you might not find it easy to walk into a 75k job if you decide at 54 that you need 100k for something.

You are correct that having extra contingency money might be helpful and in practice, i might not leave work the moment it seems feasible. My work is not unpleasant but does come with a level of stress and i don't see the value of sticking with it until age 60 just because that is what everyone else does. This sort of argument could be used to prevent retirement at any time. The scenario i am tryimg to avoid is dying early with a huge bank balance.

NumberMan

fred246 said:

I always wonder if people go through these scenarios in their head. You retire at 40 with £250K in shares and £60K as cash. Your spreadsheet says £310K. You are happy. Suddenly shares drop 50%. You don't trust shares any more and you now value cash because cash doesn't suddenly drop 50% in value. However you know the drill. Shares can drop in value for 3 years so you use cash. So after the next 3 years you have no cash and your shares are worth £125K. You have 15 more years to make the money last. It's not exactly a happy retirement is it?

How i would view this scenario working out in practice:
I retire at 40. Shares drop 50% within the first year. This timing is incredibly unlucky but i was aware this was a potential worst-case scenario. I start looking for a job, where the less than one year career break hasn't sigmificantly hindered my employability. I get a job earning £40k after say 18 months and put my cash buffer back into the market to benefit from any recovery. After 2/3 years i would expect share prices to be recovering and potentially would be in a position to retire again. If not, there would be many retired people in a significantly worse position than me.

NumberMan

fred246 said:

The other problem is the child. It seems reasonable that if 2 adults want to live a frugal existence that's OK. I am not sure about forcing it on a child. I would find it difficult myself. Refusing to allow them on school trips and not allowing them to have the things that their friends have. We are big spenders on holidays. We would take them to say Paris or Rome for the week. You soon realise that that sort of trip is probably more educational than going to school. I think you will find that you want to spend more money on them as they get older.

I think you underestimate how well you can live on the budget we have. We live in the north and while we don't waste money, we don't deny ourselves trips out and holidays. We are allowing an extra c.£5k pa above what we spend now. I don't see why you think a week in Paris would be prohibitively expensive. Saying this, as i think about it more, i am leaning on staying an extra year or so to target around £25k rather than the lower end of the £20-25k range.

fred246

I found that after 6 months I was starting to see the advantages of work in terms of giving you a purpose, the intellectual challenge, the social interactions. I was missing work but not wanting to go back because on balance I preferred retirement. After 2 years off I felt unemployable. Getting up to an alarm clock every day. All the stresses. I felt I could never work again. Whether you can get a job again depends on the job market. You would have to explain a few years gap on your CV.

vacheron

Fred246 above made a good point along the same lines I was thinking while reading this thread.

I'm in a similar situation to you: Mid 40's, heavily contributing into pensions, house paid off, one school age child, living in the north, decent amount of disposable income, and it certainly looks like you are well on top of the numbers and spreadsheets.
 
However, In both your threads you mention that you are "planning to retire early". But have you actually "planned your retirement"?

Say you retire at 40 rather than 65, what do you plan to do in those 45,000 hours that you would have otherwise spent at work?
Unless it is sitting at home watching TV, I would imagine that time would be filled with other other interests / hobbies / travelling, some of which could prove expensive. 
You could easily live for another 50 years after you retire. Do you have any plans envisaged that may incur larger expenses?

In our case we are looking to possibly buy somewhere abroad so we need to factor that into the plans, and it will be another 10 years before our son will be ready for University / independence, so I would rather be squirreling more cash away now rather than sit at home for the next decade while we are still tied to his education etc. It also coincides well as "if" (big if) things carry on as they currently are, I should be on target to hit the pension LTA just a couple of years after that.

I am totally on board with planning so you are able to retire early and so  no longer "need" to work. and for many the thought of packing up and strolling out of the office in your mid 40's would feel like giving a very satisfying middle finger to your company and bosses, but just because you can, does it necessarily mean that you should?

westv

fred246 said:

I always wonder if people go through these scenarios in their head. You retire at 40 with £250K in shares and £60K as cash. Your spreadsheet says £310K. You are happy. Suddenly shares drop 50%. You don't trust shares any more and you now value cash because cash doesn't suddenly drop 50% in value. However you know the drill. Shares can drop in value for 3 years so you use cash. So after the next 3 years you have no cash and your shares are worth £125K. You have 15 more years to make the money last. It's not exactly a happy retirement is it?

Best not retire -  ever! 

quirkydeptless

fred246 said:

I found that after 6 months I was starting to see the advantages of work in terms of giving you a purpose, the intellectual challenge, the social interactions. I was missing work but not wanting to go back because on balance I preferred retirement. After 2 years off I felt unemployable. Getting up to an alarm clock every day. All the stresses. I felt I could never work again. Whether you can get a job again depends on the job market. You would have to explain a few years gap on your CV.

I'm in contemplation of retirement, and could afford to even now, but not planning to resign from my current job just yet.

I have plans for some things to do in retirement to replace the 'purpose' of having a full time job, e.g. I have a hobby which has potential for a little part time work, some things I've collected which I could sell off, but currently don't have the time to do all the trading/packing, ideas for a couple of novels and a sit-com, but have no writing skills, just the ideas, so I could also learn to become a writer without having to depend on it for my money, plus also the usual fun stuff, and of course, the MSE forum 

MallyGirl

Kids are definitely expensive - this comes from a Mum whose only daughter has just started a 6 year uni course. We are lucky enough to earn well so she only gets the minimum maintenance loan - that leaves us on the hook for a £4.5k a year top up for the next 6 years. 

Brenster

Very Interesting post, whilst i envy your position financially (I am around the same age, not doing badly but along way off the thought of retiring), if i was in this position i wouldnt be looking to retire.  I would worry about having a 'purpose' as mentioned in one of the posts above.  I am in a similar high pressure job, and i am working towards the day when i have sufficient financial security to be in the fortunate position to 'choose' a job with less pressure and more flexible working hours (i hope this will be possible at around 48/49), so that i still have an income (albeit significanly less), but i enjoy my work, have more flexibility to enjoy time with my family, and my life will still have a structure, i would hope to then look to retire at 55/56, but you never know with my job of choice, i may choose to work longer.
With such an early retirement there is a very real possiblity of stagnating, and the lack of focus can effect your mental and physical well being.