early retirement?
Discussion
When is it possible to retire?
I'm 45 now, mortgage has been paid off for a couple of years, don't owe anything to anyone apart from a few hundred quid on the credit card, that gets paid off each month. We have about £100k in various bank accounts, plus £20k in our everyday accounts (which is going down, slowly, my wife doesn't understand the "not spend any money" thing!). We have 4 children, current ages are 9 to 12 years old.
Pension - don't know much about that, I know I set myself out of the state second pension for several years, however I have been back in for just over 5 years, I think. I have had a personal pension since I was about 18, although I lost a couple of years when I didn't do anything about it and didn't pay any money in. Now I am on a 3% / 11.5% payment (3% from me, 11.5% from the employer) which will go up to 12.5% when I turn 46. Before that I was on a higher wage, I think the amount was 6% / 6% which was a little bit higher.
My wife works on low pay - she works with children and to be honest she would work for no money, she does like doing what she does with them (she has 3 degree level qualifications, I think - a couple of marketing / direct marketing, and has recently got a degree level qualification for child care!) She doesn't want to retire yet!
I had a stroke 2 years ago, and now work is quite hard for me. I can't remember what I used to do very well, and have had to change my role a little - I used to be an IT architect covering all areas of the business in terms of SOA / platform areas, now I am doing BI work for them. I don't think I am the best in the world at the BI work!
So, where do I go from here? Ideally, I'd really like to work on the roads! I know, it is a drop in terms of cash, but I really like the idea of working as a HATO traffic officer, but I know the competition for these roles is quite high. I don't think I am providing good value for my current employer, either I need to get good at doing the role or I leave, which is making me wonder about retirement!
I know I am a little young, but my dad retired at around 56 / 57, and he had a good 20 years before he died - the last thing I would want is retiring later and not having many years to enjoy it?
I'm 45 now, mortgage has been paid off for a couple of years, don't owe anything to anyone apart from a few hundred quid on the credit card, that gets paid off each month. We have about £100k in various bank accounts, plus £20k in our everyday accounts (which is going down, slowly, my wife doesn't understand the "not spend any money" thing!). We have 4 children, current ages are 9 to 12 years old.
Pension - don't know much about that, I know I set myself out of the state second pension for several years, however I have been back in for just over 5 years, I think. I have had a personal pension since I was about 18, although I lost a couple of years when I didn't do anything about it and didn't pay any money in. Now I am on a 3% / 11.5% payment (3% from me, 11.5% from the employer) which will go up to 12.5% when I turn 46. Before that I was on a higher wage, I think the amount was 6% / 6% which was a little bit higher.
My wife works on low pay - she works with children and to be honest she would work for no money, she does like doing what she does with them (she has 3 degree level qualifications, I think - a couple of marketing / direct marketing, and has recently got a degree level qualification for child care!) She doesn't want to retire yet!
I had a stroke 2 years ago, and now work is quite hard for me. I can't remember what I used to do very well, and have had to change my role a little - I used to be an IT architect covering all areas of the business in terms of SOA / platform areas, now I am doing BI work for them. I don't think I am the best in the world at the BI work!
So, where do I go from here? Ideally, I'd really like to work on the roads! I know, it is a drop in terms of cash, but I really like the idea of working as a HATO traffic officer, but I know the competition for these roles is quite high. I don't think I am providing good value for my current employer, either I need to get good at doing the role or I leave, which is making me wonder about retirement!
I know I am a little young, but my dad retired at around 56 / 57, and he had a good 20 years before he died - the last thing I would want is retiring later and not having many years to enjoy it?
What do you mean by 'retire'? Stop working entirely and spend the days on the golf course, or change to doing something you enjoy but which makes you (a lot) less money.
I'm 39, and 'retired' four years ago with a paid-off mortgage on a couple of houses, no debts and a chunk of investments. The wife carried on working as she enjoys her job. I found things to be very boring and after a year started a business doing something I really wanted to do. It now (just about) makes a profit and I am loving almost every minute of it.
Using your definition, have I retired? I don't think I have, just changed vocation. (I suspect I will probably never 'retire' using the former definition of the word, I'll just do less and less as I get older.)
Oli.
I'm 39, and 'retired' four years ago with a paid-off mortgage on a couple of houses, no debts and a chunk of investments. The wife carried on working as she enjoys her job. I found things to be very boring and after a year started a business doing something I really wanted to do. It now (just about) makes a profit and I am loving almost every minute of it.
Using your definition, have I retired? I don't think I have, just changed vocation. (I suspect I will probably never 'retire' using the former definition of the word, I'll just do less and less as I get older.)
Oli.
Have a look at this guy's site:
http://www.mrmoneymustache.com/
It's American, but the same principles apply, he retired at 30. Sounds like you've got a good way there, mortgage paid off, reasonable amount of savings. Just need to bolster those enough to be able to live on and invest them well, then manage to live within your means.
http://www.mrmoneymustache.com/
It's American, but the same principles apply, he retired at 30. Sounds like you've got a good way there, mortgage paid off, reasonable amount of savings. Just need to bolster those enough to be able to live on and invest them well, then manage to live within your means.
aclivity said:
I had a stroke 2 years ago, and now work is quite hard for me. I can't remember what I used to do very well, and have had to change my role a little
this is what is worrying me most at the moment - that said, at least I was paying off the mortgage early and I have kept my mobility, I know others who have had a lot worse after a stroke. In my mind, though, it is harder to do things in work, mainly because I can't remember what I used to do!My boss has recently decided to retire, I guess my worry is that I will take time to get to know whoever replaces him, and it is difficult to say "I've had a stroke" as people just seem to think I am perhaps a bit slower than I am? That's the worst part really. in the psychologist tests, they found that my brain is still at a high level, but I can't get my words out / communicate very well any more.
aclivity said:
aclivity said:
I had a stroke 2 years ago, and now work is quite hard for me. I can't remember what I used to do very well, and have had to change my role a little
this is what is worrying me most at the moment - that said, at least I was paying off the mortgage early and I have kept my mobility, I know others who have had a lot worse after a stroke. In my mind, though, it is harder to do things in work, mainly because I can't remember what I used to do!My boss has recently decided to retire, I guess my worry is that I will take time to get to know whoever replaces him, and it is difficult to say "I've had a stroke" as people just seem to think I am perhaps a bit slower than I am? That's the worst part really. in the psychologist tests, they found that my brain is still at a high level, but I can't get my words out / communicate very well any more.
Try to reduce that to concern, and use your energy to make a plan
Sit down with your wife to see how you stand financially if you stopped working today.
Repeat for working one more year.
I know your wife enjoys her job, but maybe she could do similar for a little more money.
100K sounds a lot, but it isn't really when considering it as income producing.
Fortunately you live in UK, so any fears of moving into cardboard are alleviated (unlike the US)
Try to find out what is available to you if you are classified as disabled and enter that into your plan.
Don't be proud, take what is on the table. I think you would at least qualify for a car, possibly not with the correct number of cylinders, but that reduces monthly outgoings quite substantially.
Stay active.
jeff m2 said:
Try to find out what is available to you if you are classified as disabled and enter that into your plan.
Don't be proud, take what is on the table. I think you would at least qualify for a car, possibly not with the correct number of cylinders, but that reduces monthly outgoings quite substantially.
Stay active.
I don't think I am disabled ... just a bit less abled than I used to be!Don't be proud, take what is on the table. I think you would at least qualify for a car, possibly not with the correct number of cylinders, but that reduces monthly outgoings quite substantially.
Stay active.
Rule of thumb... Take the income level you could retire on and divide by 0.04.. That gives you a rough idea of what size of investable pot you would require to retire early (without having to earn further money and without resorting to having to sell your home till much later in life).
isleofthorns said:
Rule of thumb... Take the income level you could retire on and divide by 0.04.. That gives you a rough idea of what size of investable pot you would require to retire early (without having to earn further money and without resorting to having to sell your home till much later in life).
Won't the ratio be greater the earlier you wish to retire? I.E. £20k pa pension is £500k but at what age are we pitching this at? 55? 65? If OP wants to retire at 45 then surely he needs more money?
-very interested in this thread, my dream is to retire!
No, the idea is that with appropriate investments, a 4% annual return should be achievable without affecting the capital, so when you take your required annual income and divide by 0.04, you're just calculating what size capital will produce that annual income assuming 4% return. Then of course if you can economise further, or your return is better, all to the good.
I'm glad someone mentioned Mr Money Moustache, it is a very US-centric site but a lot of the stuff on there translates well here too. There's no doubt he's been fortunate to be in the right industry in a good time for that industry, but he's also not just blown the money.
I'm glad someone mentioned Mr Money Moustache, it is a very US-centric site but a lot of the stuff on there translates well here too. There's no doubt he's been fortunate to be in the right industry in a good time for that industry, but he's also not just blown the money.
So, to get £1000 pw you need capital of £1,250,000 if that capital is to be protected. This emphasises how people underestimate the cost of a retirement income if they think they are going to maintain their pre-retirement lifestyle to any extent.
The government in the 1970s should never have taken away compulsory membership of pension plans for all employees, which at the time were mainly final salary, and the government in 1990s (1996?) should not have taken away £5b of tax relief for pension plans investments. Had they not done so we may have been in a better place that we are now. Off topic I know, and a personal gripe, but still true.
R.
The government in the 1970s should never have taken away compulsory membership of pension plans for all employees, which at the time were mainly final salary, and the government in 1990s (1996?) should not have taken away £5b of tax relief for pension plans investments. Had they not done so we may have been in a better place that we are now. Off topic I know, and a personal gripe, but still true.
R.
As mentioned, it's a general rule of thumb. It a concept that has been back tested against various portfolio mixes over the past several decades, with the conclusion that (in the vast majority of the time - I can't recall percentages off the top of my head), that a 4% withdrawl rate was a 'safe' level of withdrawl to allow for both income in present value terms and also allow for inflation-adjusted income for the future.
It's not something I've looked into with any great detail, but if you google "4% safe withdrawl rate", I'm sure they'll be plenty to gem up on.
I'd perhaps mention that most of the back-testing has related to a period of history with relentless asset price growth in both property and equities (and now air-cooled porsches!), and adopting this as a way of life does require a certain leap of faith that this is likely to continue.
From my own perspective, aim to be in a position to be 'financially independent', whilst continuing to earn money in pursuits that interest you or that you enjoy seems to be the best answer.
It's not something I've looked into with any great detail, but if you google "4% safe withdrawl rate", I'm sure they'll be plenty to gem up on.
I'd perhaps mention that most of the back-testing has related to a period of history with relentless asset price growth in both property and equities (and now air-cooled porsches!), and adopting this as a way of life does require a certain leap of faith that this is likely to continue.
From my own perspective, aim to be in a position to be 'financially independent', whilst continuing to earn money in pursuits that interest you or that you enjoy seems to be the best answer.
isleofthorns said:
From my own perspective, aim to be in a position to be 'financially independent', whilst continuing to earn money in pursuits that interest you or that you enjoy seems to be the best answer.
Agreed. OP doesn't even begin to have enough money to "retire". Some ongoing income will be essential.Another "simple" way to look at things in the context of very early retirement is simply to decide what income you need and multiply that number by 30 to find the amount of money you need to start with.
i.e. if you fancy £10,000 a year for life you'll need to have £300,000 set aside to start you off.
Why is the number so big? Because (a) life expectancy keeps increasing, and (b) without allowing for protection against inflation the money will run out pretty quickly.
Or to put it another way, if investment return is 4% a year and inflation is 2% a year you can only afford to spend 4% - 2% = 2%.
[This is all very, very rough but shows the scale of the issue.]
i.e. if you fancy £10,000 a year for life you'll need to have £300,000 set aside to start you off.
Why is the number so big? Because (a) life expectancy keeps increasing, and (b) without allowing for protection against inflation the money will run out pretty quickly.
Or to put it another way, if investment return is 4% a year and inflation is 2% a year you can only afford to spend 4% - 2% = 2%.
[This is all very, very rough but shows the scale of the issue.]
at the age of 45, you could only be halfway through your life and have young (ish) children to budget for (especially if they all go to uni')
Do you have any hobbies or interests that you could get a job doing or set up a business? if you only need a basic wage to cover your living expenses, it would protect your savings and gets you doing something you like and enjoy and would not mind doing for 20 years.
Would you be bored actually retiring and doing nothing?
Do you have any hobbies or interests that you could get a job doing or set up a business? if you only need a basic wage to cover your living expenses, it would protect your savings and gets you doing something you like and enjoy and would not mind doing for 20 years.
Would you be bored actually retiring and doing nothing?
zcacogp said:
I'm 39, and 'retired' four years ago with a paid-off mortgage on a couple of houses, no debts and a chunk of investments. The wife carried on working as she enjoys her job. I found things to be very boring and after a year started a business doing something I really wanted to do. It now (just about) makes a profit and I am loving almost every minute of it.
This is a route I'd like to take. I'm not in a hugely dissimilar position and a similar age to you now. I could clear the mortgages on my home and 2 rentals and would still have a small-ish nest egg and an income from the rental properties. I don't enjoy the job I do currently, but finding it hard to make that leap as I don't know what else I would want to do (although perhaps I'd work this out in time!)As for the OP, I would guess the biggest challenge will be the change in lifestyle with the change in income, and the 4 cost centres as they grow up! Money isn't everything though, so it really depends on whether you truly mean "retire", or as you suggest, just changing to a job that would provide more time or more enjoyment and ultimately a better quality of life. It then comes down to crunching the numbers and assessing the risk and then going for it.
droopsnoot said:
No, the idea is that with appropriate investments, a 4% annual return should be achievable without affecting the capital, so when you take your required annual income and divide by 0.04, you're just calculating what size capital will produce that annual income assuming 4% return. Then of course if you can economise further, or your return is better, all to the good.
I'm glad someone mentioned Mr Money Moustache, it is a very US-centric site but a lot of the stuff on there translates well here too. There's no doubt he's been fortunate to be in the right industry in a good time for that industry, but he's also not just blown the money.
That makes sense, thank youI'm glad someone mentioned Mr Money Moustache, it is a very US-centric site but a lot of the stuff on there translates well here too. There's no doubt he's been fortunate to be in the right industry in a good time for that industry, but he's also not just blown the money.
Be very interested to hear of anyone else who has done or aiming to do this
Soir said:
That makes sense, thank you
Be very interested to hear of anyone else who has done or aiming to do this
I'll be doing this next year. Be very interested to hear of anyone else who has done or aiming to do this
Will leave my job and start doing small scale property development, renovations & interior design projects. Having absolutely loved designing, building and part project managing my own home over the last 18 months it's something I have a massive passion for and, thankfully, some talent for.
I tried 'retiring' 15 years ago at 36 with no real idea for a business and accidentally got involved in property rental but divorce scuppered that.
Since then, the issue for me has always been to find out what business I would want to start when I 'retire'. Now I know what it is, the whole decision process becomes much easier and clearer.
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