Ideas for retiring early (at age 40ish)

2nd_time_buyer

A £900k house will tend to have high running costs (council tax, maintenance, bills). You may find much of the income from the annex will be absorbed by running costs.

400ixl

Planning for future costs for children can be much higher than you may think.

If they go to university there is a good chance you will need to subsidise this as accommodation if they live away from home can be expensive and living costs outstrip the Student loan value.

Things like their first car if you want something even half decent is a few grand, plus insurance will be expensive for the first few years. It maybe that they become self sustaining early but that is not always the case so you need to have planned for it.

Personally I would be budgeting £5k a year at least for the 18-22 years for a child. 

It may also be that you want to help your child get on the property ladder, a 10% deposit these days is £20-30k or more depending on where you live.

Holiday wise, as children get older then you may want to travel further (maybe even that Disneyland trip) and holidays can be a lot more expensive than 2 weeks in Benidorm.

The last thing I would want to do is retire early and have to compromise on what I would have been able to do if I had worked a few more years.

Gary1984

What about contracting to boost your income? You can take on contracts for a few months at a time then take a month or so off in between time. 

MallyGirl

2nd_time_buyer said:

A £900k house will tend to have high running costs (council tax, maintenance, bills). You may find much of the income from the annex will be absorbed by running costs.

This is a significant factor.
My bills were £3.5k a year before everything went through the roof - I am not looking forward to coming off the end of my 2 year fix. My council tax is £3.5k per year. House insurance isn't cheap either.
I chose to send my daughter to independent school up to age 11 and then again for sixth form - maybe you have good local options so that isn't on the cards. She is now doing a 6 year degree - even if she got the full maintenance loan there are costs associated with being a parent that will carry on till she is earning.
As another in IT I can fully appreciate the desire to get out but this seems very big bang.

ex-pat_scot

A couple of thoughts.

1. child(ren). University for each of ours have required £500- £600/month contribution, for accommodation costs not covered by student loan.  If they are looking at courses not covered by loans (eg performing arts) then you can be looking at £2,500 /month for fees and living costs. Times 3 or 4 years.

2. school fees. I dont know if it's on your radar, but they are expensive. £20,000 to £30,000 pa for day pupil.

3. access to private pension is likely to be SPA minus 10 years ie 57-58 for you approx

4. NI for state pension. You won't have nearly enough years of credit towards the 35 for full SP entitlement. You ought to factor this into your calcs - either to buy extra years, or to get credit via some working

5. contracting can be a great way to keep your skills current, whilst being in control of your time and commitments, and minimising the stress of a job.

6. You have broad shoulders, and I expect that you will be squeezed ever harder from now on, for as long as you continue to earn at your current level. (I certainly am)

Yankee24

My only build, is that depending on the age of your child, you probably haven't hit the expensive years yet.   We earned together around that amount.  Once our children hit high school, there were a lot of on costs--   school trips which were a HUGE impact on their eventual career choices were around £3k a year.   (yes, we had them pay half, but throw in the extras like hiking gear and you are net neutral) plus university costs.  Paying living costs at uni ran about £1k per month.   And...then with the way uni funding changes, you may want to consider paying off of their fees.  

Grumpy_chap

ent_moot said:

Hello,

I've been super-lucky with my career in the tech industry, and am nearing the point where I could potentially retire (or semi-retire) early.

I'd like to get some ideas for early retirement that could provide a small income with, let's say, on average, 1-2 hours of work per day.

My current situation is as follows:

Age: late 30s
Family: we have one child
Private pension: 300k
Personal savings: ~200k
House: ~550k
My salary: 170k (with 50% bonus)
Spouse's salary: ~20k
Debts: none (I have paid off all my mortgage)

My current plan (A) is: 

1. Work for 2-3 more years
2. Sell up and buy a house (outright, with no mortgage) for ~900k which includes an annex
   
3. Try to make a small income of ~10-15k per year by renting out the annex (e.g. airbnb)
   
4. Live a relaxed life off this income, with minimum spending (*)
5. Pursue some of my dreams, like writing a novel (I know it's cliched, but would be doing it with zero expectation of success)
6. If 3 fails, go back to working full time, but remotely (I expect my salary will be cut in 1/3 )

Downside: it might be stressful if 3. doesn't work and I have to fall back to fulltime work.


Alternative plan (B):

1. Work for ~5 more years
   
2. Buy a house for about 900k, and have enough cash to live comfortably until age 55, then rely on my pension
   

Downside: I have to work at my current job for 5 more years


Alternative plan (C):

1. Work for ~10 more years
   
2. Be ridiculously wealthy...

Downside: 10 years. Oh dear God.



Spending(*):

We tend to be very frugal, hence the large savings at an early age (the crazy salary helps too, though you'd be amazed at home much tax I pay!).We live pretty comfortably on around 25k per year, given that we have no mortgage or debts. We go on regular holidays, but have never spent more than 3k on a single holiday, and not more than 5k on holidays in a year. My hobbies are all inexpensive, and I have zero desire to drive an expensive car. I would like a nice house with a large garden.


So, my main question is: any other ideas to keep a small reliable income ticking over that requires not masses of work? 

You have done very well to be in this position at age under 40, but you don't seem to have anywhere near enough to retire yet.

When you are retired, what will you do to keep mind, body and soul active?  
What will these hobbies cost?
Won't you want to do things with your time?  These things will all cost money so I can't see how you can live as frugally (£25k per year) once you have more time to fill as you do now.

Albermarle

ent_moot said:

Other things to note: 

• I enjoy DIY, though I suspect that I would hate doing other people's handywork because of the stress of getting it wrong
  
• In a perfect would, I would do my current job 1 day per week and get a 30k salary. However, I highly doubt I would be allowed to do this. Generally, anything less than 4 days per week is frowned upon in the industry

You could buy a house that needed a lot of work, that would test your DIY skills/commitment, although probably would not leave much time to write any books!

ent_moot

Have you seen 'the number' thread here where people calculate how much they will need in retirement?

No, but I have a very sophisticated spreadsheet which models my financial situation (including interest rates, inflation, tax rates etc) in intricate detail until the age of 90. It has tracked pretty accurately over the past 5 years, though I have had much  bigger salary increases than I expected, so the model has been pessimistic.

Actually, my whole post was not asking about the finances specifically, which I have a very good understanding of. It was more about what alternatives might there be to making a small income. Currently, there have been some good ideas:

• Airbnb
  
• Shove a load of it in index funds, and live off the growth
  
• Contracting
  

If I bought something with ~5 acres, would it be possible to make a small farming incoming, or would this likely be a lot more than 1-2 hours per day average? I'm interested in brainstorming ideas for a low-effort semi-retirement business, I guess.

While you live frugally on £25k, what are your expectations in retirement? Would £25k indexed do, or do you intend to relax the purse strings and spend a bit more? Would your spouse continue working? Any plans to have more children? They can be a huge financial commitment, with expensive hobbies, before you get to things like private education.

1. I feel like 30-35k (indexed) would be ideal 
2. My wife wants to keep working, hence me wanting to earn 10-15k on top of her ~20k to make things comfortable. 
3. No more children

Are you tied to the area you live in, or could you relocate?

No, I'm keen to move to Devon as it's a lot cheaper than where I live, whilst also being more beautiful (albeit, not the cheapest place to buy).

Is it £170k plus bonus, or have you included bonus in that?

That's base salary. I also get 8% employer pension contributions, plus up to a 50% bonus (with a number of strings attached). I don't really count on the latter, though it's a pretty safe bet to say that I'll get ~20k+ from it.

But there is a good market for professional handymen. It's a trade that is under-staffed, perhaps more so than many others.

I actually quite like this idea. Having done so fairly major DIY myself (replacing ceilings, fitting skylights, laying floors, fitting a new bath etc.) I'm reasonably capable. I suppose it would be fun to try it for a year and see what it's like.

ent_moot

When you are retired, what will you do to keep mind, body and soul active? What will these hobbies cost? Won't you want to do things with your time? These things will all cost money so I can't see how you can live as frugally (£25k per year) once you have more time to fill as you do now.

I have a million and one things I love doing outside of work. I'm not really capable of being bored. Most of them cost very little. Maybe tennis is the most expensive at about £250 per year for the club membership, and then maybe £150 on balls, rackets, shoes on average per year.