Early-retirement wannabe

A question about : Early-retirement wannabe

I would like to create a topic (don't see it at the moment - other than the NUMBER thread).

Who is aiming for early retirement (or who has retired early already)?
When did you begin planning and what drove the decision?
What is the strategy for getting there?
How much of a relative decline in income are you prepared to take / did you take?
What are your main concerns?
For those already in early retirement - how is it progressing? What have been the good and bad surprises (financial and otherwise)?

I will post my strategy but wanted to get some thoughts

Best answers:

• Linton
  Thanks - very interesting.
  Makes me realise that really have got a lot of work to do. The main problem for me (us) is that I really have no idea what our current expenditure is. Of course I know what the big chunks are (House, Car etc) but have not been tracking how much we spend on (for example) food. I think for day to day items we are quite frugal, don't eat out a lot, don't spend a lot on lunches (I make my own) but the money goes on big things and house maintenance.
  You mention an increase in expenses of 10% (if I understood that right). Was that to cover the increasing cost of just "being"? Did you not have any savings on things like travel costs? How accurate was your 10% estimate?
  I assume you have a pension which funds your day-to-day expenses ?
  I have a million other questions but I will keep it light for now.
• I'm 46 and will be retired by the time I am 50, possibly earlier. I could retire today but am prudently deciding to make hay while the sun shines and continue saving hard, notwithstanding the considerable personal sacrifices I'm currently making.
  I decided I wanted to do this five years ago, and have basically saved as hard as a I could in the interim, building up a solid cash pile, a paid-for property and now I'm working on the pension side of the equation. The strategy is simple - live off the income from the cash pile without eating into the capital from, say, 50-55 - and then boost my income with income drawdown on the pension fund which should be a decent size by then.
  As a previous poster has said, the 'decline' in income post-working isn't a consideration. I earn a high salary and spend a tiny fraction of it - my living costs are miniscule. I plan to retire overseas where I already have a home so, in fact, my living costs post-retirement will be even less then. If I retired today and used what assets I have, I would seriously struggle to spend the forecast income although I'm sure Mrs Bendix would find a way to blow it.
  I have no major concerns - not financial ones anyway. My assets are spread in various asset classes and in various geographies around the world so I do pay a huge amount of attention to FX markets, but at the end of the day when I crystalise those assets, that will be less of an issue.
• My own situation has been posted several times before. A remarkable similarity to the above post of Linton:
  I retired age 56. Built a retirement model around age 50 to tell me at what stage I could retire. My criteria included: 1. Cautious assumptions, 2. Must be able to continue spending exactly as when working (with inflation provision for life, of course).
  Also, I'm now 5 years into it, and worth about 11% more than I was 5 years ago.
  You will find there's a "virtuous circle" to this. If you build an excel model that doesn't lie or exaggerate, then it informs you adequately when you can retire. Provided the 'default' answers are pretty much close to what you want to hear, then the motivating part is 'controlling' your life (financially) from then on to meet the assumptions you've already made. Or even exceeding them.
  It is my strong opinion that the vast majority of people complicate it for themselves. The evidence is clear - by finding all the posts along the theme of "How much do I need to save..." or "Should I save in Pension X and will it be enough....". My main point here is that the "Focal point" for your deliberations must be spending. This is the real subject and not 'saving'.
  Thinking this way simplifies and clarifies things no end. Because the fact of the matter is you are spending now. You will spend in the future, and you will want to spend when you retire. The shape and profile of your spending changes over time, but what you spend now and in the future is the key thing.
  It then follows, that if you are spending everything you earn, then savings doesn't enter into it. If you spend less than you earn, then by definition you are 'saving' the balance. So model what you spend and want to spend in the future. And then wrap around that what your income will be - earned and unearned (interest). The resulting calculation then tells you when you can retire.
  If this gives unsatisfactory answers? Then go back to the drawing board. The answer, invariably, is to spend less. [Yes, I know this is really the same as saving more, but I very strongly counsel you to think from the spending angle. Because that's what lifestyle really means.]
  Once you have a reasonably cogent retirement plan, then that's half the battle. NOW you can concentrate on more detailed, and sometimes challenging issues about pension choices, fund choices, savings strategies, interest rates, tax management.....
• I should mention I was 46 last week and looking to retire before 55 (earlier if the sums add up)
  Ok, I am getting the strong message so far that focus in the first instance. I have a figure in my head which could be wildly wrong. I think the comment about not spending (and saving the balance) is very appropriate i.e. at the moment we really do not track spending very closely (as we do not have to) and therefore we simply save what is left.
  I plan to split my current spending into 4 buckets:
  1. Expenditure that I expect to fall away (school fees! Mortgage interest hopefully)
  2. Money going into saving at the moment.
  3. Day-to-day expenditure.
  4. Discretionary spend (cars, holidays, capital goods etc).
  I suspect I will be left with a gap which I think will be money that "leaks" away i.e. I can't account for it - Clearly if I start imposing some discipline I am to get much clearer on that.
  I would be interested to hear from some of the posters on category 4. I am guessing we would be able to manage with one car but that might be balanced by increased spending on holidays.
  The other big question will be where do we live. We have some equity in our home but also a big mortgage. We also own a holiday apartment. If we sold the two we might end up with around Ј300,000 net which would probably be enough to buy a decent property (although not as big as our current house)
  Oh.....and of course I did not forget the non-financial category - what do you do with the spare time you have available now?
• Great thread.
  I'm 38 as of yesterday and have started thinking about retirement quite recently.
  It looks as though were I to work until I'm 65 and all things go to plan, then I should have a comfortable retirement.
  However I'm keen to get out of full time employment earlier than age 65 and things don't always go to plan in the long term!
  But I'm not sure I want to be fully retired as early as say 55. There is only so much golf, travelling and hobbies I can stomach! Maybe I lack imagination but I suspect would get bored.
  Also the nightmare scenario is hitting 50 being made unemployed and not being able to get a job that covers the remaining retirement plan cost, being in effect made to retire before I'm ready.
  So strategy wise I'm thinking about starting a 5-9 type business venture with potential to grow if needed.
  My thinking is that a part time business on top of my full time employment will both increase my income now (bringing early retirement closer to reality) and be a potential hedge against future unexpected unemployment, as well as keeping me busy and interested in the world outside my window when I do retire.
  Other than that I'm finally tracking all expenditure in detailed personal accounts, because I agree with LM that understanding what you spend is a big key to the whole retirement plan.
• ok, a while since my last post on RFW but I thought I would give a progress update.
  My OH has started to maintain records of how much we are spending. We will look at it over the next few months to see where we are. The main excess seems to be food shopping where we are spending somewhere around Ј20 per day (no junk food but I am wondering where it is going).
  Next - we have been looking at the cash we have saved which looks like around Ј700,000. I know it sounds a lot but I am aiming for retirement in around 5 years so that cash would need to last the rest of my life! I am hoping we can add another Ј3-400,000 to that over the next three years but we will have to really cut back if we are going to hit that figure. I am confident that if we can get to Ј1 m with no mortgage then I can retire at 50.
  3 years 11 months to go!
• Good luck Marine_life. Even though I don't have an income like you hope yours will be (far from it!), retirement is wonderful!
  IMO opinion if you have no debt, no mortgage and some safety net savings, retirement could be an option for lots of people.
• Yes, Good Luck Marine Life
  ...and very interesting/useful thread.
  I started THE NUMBER thread because, as Loughton Monkey states, it is EXPENDITURE that is the key to a well planned retirement at any age...
  knowing what you need/want to spend is crucial in trying to work out how much you need to save in pensions/investments.
  The majority of people miss this point. (but not on here!)
  We use one credit card to purchase all Food/Fuel(petrol)
  so its easy to keep track of expenditure on those items
  (and we get cashback too )
  The non-financial aspects are equally interesting to discuss.
  We have a growing number of friends that have semi-retired and
  (as mentioned on here) are finding the reduced stress factor alone is a major positive of early (semi) retirement.
  Working 3 days a week is so much more relaxed than the usual 5-2 routine.
  Personally, I want a mix of activities in retirement and that includes "money generation"
  (but let's not call it working eh? )
  Income of around Ј12k is my aim, to top up pension/savings income.
  Target age: from 55.
  Great experience last year following sudden "redundancy" ... made me realise the true value of more free time
  and opportunities to enjoy it (while we are fit & healthy).
  Needed F/T job to continue pension saving... but it confirmed that early semi-retirement
  is just what I want. (although not sure OH wants me around all those extra hours! )
  Places are quieter and more relaxed Monday-Friday 9-5 too!
• Great thread.
  I'm also looking to retire early. I used to earn a lot of money and would spend it all on unimportant things. Then 2 years ago (age 43) I got made redundant and my outlook has completely changed.
  I had to take part-time work and while I enjoyed the extra free time I was always under pressure to find another highly paid full time job. 18 months later I'm back in full time emplyment but had to take a 25% pay cut compared to before.
  I have cut my expenses by around 50% and I'm much more careful with my money. My plan is to be in a position to retire by the time I'm 55. I've made a decent start with my pension but I still have a long way to go,I figure if I make a real effort over the next 10 years I should be fine.
• Gatsa
  That's a good idea about using a single card for petrol. That happens anyway as i have a fue card and actually only pay petrol once a year (company car).
  In this thread I am going to call wasting money "leaking" as that is what seems to happen - it just leaks away.
  One of this years biggest leaks has been holidays - as a family of four holidays are very expensive. I hate to skimp on holidays as I have a stressful job so last thing I was is a stressful holiday. Anyway this year we did three holidays one of which was Thailand which was very expensive.
  As we move towards retirement I actually think we may want to travel less or at least travel more within Europe which I think will materially reduce outgoings. I have been very fortunate to travel a lot with work and whilst that mainly involves seeing the airport and a hotel room - we have in between seen quite a lot such that I don't really feel the need to roam anymore.
  So whilst holidays will stay an important part of my retirement plan, the spend will be significantly reduced.
  Just thinking on that - is it still fair to call a holiday a holiday in retirement?
• i started my 'semi-retirement plan' about 2.5 years ago, which consists of a few stages:
  1) overpay on mortgage big-time to pay off asap (since helped by very low rates).
  started small ebay business to also assist with this. hopefully paying it off completely will co-incide with
  2) leave high-pressure job (in 2.5/3 years by choice if not before due to new government changes) with 24 years pension (to be claimed at 55-60 years).
  3) do same job at lower grade (and less hours), but same money as a temp worker to keep saving for a few years
  4) eventually just work locally doing a part-time job plus up the ebay side of things to constitute a combined income.
  i am in my early 40s now. we can downsize in the future. after paying off the mortgage (offset). we need to put the same money into savings, which is what we are currently lacking.
  the uncertainty lies for me with a what age will i get/be able to get my work and state pensions - as they keep moving the goalposts.
  with no mortgage, i think we would happily live on very little - no dependents. i worry about having enough for new cars when required and major house maintenance.
  my plans are very low-tech and basic, maybe naive even. my occupationalpension when i get it would be the equivalent today of approx Ј11-1200 per month.
• I retired on 31 July 2010 aged 53. I won't get my occupational pension until 60 and state pension until 66 but I actually took voluntary redundancy so with that payout (just over a years salary but only taxed on the amount over Ј30,000) and my savings I'm confident that I can support myself until 60 and hope to be able to live on my pension (final salary scheme with 37 years service) without dipping further into my savings on a day-to-day basis. The lump sum payment I will get will cover about half of what I'll have spent of my savings up to then.
  I only decided about 12 months ago that I was going to retire, although I'd always hoped to retire before 60. I had AVCs for about 16 years and for most of my working life have saved between half and a third of my income, so my savings are quite high plus the drop in income is relatively lower when you save such a high proportion. Also I paid off my mortgage about 3 years ago so that helps.
  At the moment I have no plans to look for any kind of work, but then it's only been 4 months yet so who knows how I'll feel in a year's time. In any case, I would not work for the money but for something that would interest me. I'd probably start out volunteering.
  I decided to retire early because I was off sick with stress for 4 months in 2008/09 (before that the longest I'd ever been off sick was 3 weeks following cataract surgery, and before that, only the odd day for colds, bad toothache etc). It was hard going back to work, and the stress actually increased rather than decreasing and I just knew that if I continued working much longer I'd be off sick again, which I didn't want.
  I keep thinking I've done my sums wrong, because it's hard to believe I could afford to give up work at my age, especially with no particular forward planning, but so far it's fine. Hope your plans work out.