AIBU to think that I can retire early just earning 45K a year?

[freedomsearcher]

I'm 30 years old and earn roughly 45K per annum.

The goal is to retire early or just cut back on the work before retirement age. Maybe around 50 years old.

I have a house with about 50K left to pay off. House is worth 250K at the minute.

AIBU or am I being unrealistic to think that I could save enough to be able to retire or go part time when I'm 50?

I love my job and my colleagues but can't see myself earning more than 50K where I am now as I'm paid generously for the job that I do, owing to long term service to the company I'm with. So I couldn't go elsewhere and command the same salary or more - but that's a whole other story for another time.

Do you anticipate inflation keeping pay rises ? or having children ?

Part time sounds very achievable. Not working at all? You’d need a very large pot of money that was well invested to pay all your expenses for 30 odd years. I guess if you lived extremely frugally you might be ok but how enjoyable is that?

YANBU if you've got low expenses which will remain low for the rest of your expected life span and have access to some fairly high-yield investments; right now most of them aren't even beating inflation.
It'll depend on where you set the bar for your lifestyle, but I know people who have managed this and made it work.

need to know more about why you do not see potential for progressing (in another company) over the next 20 years?

if you absolutely stack your pension for the next 20 years and invest well, it’s probably doable to go part time. Retirement - entirely depends on what you’re able to live on!

What is your pension fund currently worth and what contributions are you making? This sounds optimistic, but if you put all the monthly mortgage money into your pension once that's paid off (be careful with amounts as there are tax rules) that would bump it up.

@mudgetastic Yeah I think my pay will go up with inflation as well but can't imagine I'll be getting an extra 10K any time soon. Kids aren't on the cards for me right now and potentially never will be but it's still a possibility. Obviously that would throw a spanner in the works.

@MatildaTheCat That's true, I do want to enjoy life. Maybe part time is the way forward in the future.

@gwenneh Good to know you know people who have done this. I live fairly minimally. I'm not one to splurge on expensive items or hoard a load of clothes in my wardrobe that I don't wear.

I think it’s almost impossible to say based on your original message so have not voted! It all depends on how you want to live your life after you’ve retired really, and what assets/ pension you have accumulated so far to generate an income.

What you need to think about though is not just savings but an income for the rest of your life, which now could be at least another 40 to 50 years. What do you see yourself doing in terms of lifestyle, holidays, hobbies, health insurance cars etc and where do you want to live? Would you be happy to sell your house and use the equity in it to buy a smaller place for yourself and another place to bring in an income? What you really need to think about is how much it’s going to cost you to live comfortably per year and what you can do to get an income to generate at least that amount for the rest of your life. You don’t say whether you have a pension already – they will presumably be happy to give you a forecast of what the monthly annual income would be at the moment? Lots of workplaces also offer an advisory scheme where you can go and speak to a qualified financial advisor, work out what money you’re going to need and what you would need to do to do to achieve that, which I would also recommend using.

You need to get investing, if not already. You need around a £1million pension pot for an income of £35k at 4% withdrawal rate.

Anyway Yes if it possible
make a spreadsheet
work out how much you spend each year now adjust that upwards for anything else you might want to do
will your pension give you that each year when you finally draw on it ?so if you need 20k to live on, and you have 40k saved and your pension will pay 20k, that's 2 years early
build in lots of slack for unexpected stuff

I assume you have a defined contribution pension? How much are you contributing and how much do you have?

What level of income do you want in retirement?

You can’t retire and claim a pension at 50, the earliest you can claim will be 55 under current system so if you want to retire at 50
you’ll need an alternative source of income (savings/investment for example). If you go part time remember that’ll mean even less into your pension pot during that time.

Look up ‘FIRE’-financial independence, retire early

OP, it sounds like you would benefit from looking at this website. It really got me thinking about what was possible re financial independence monevator.com/highlights/

Depends on lifestyle expectations but working part time should definitely be a possibility.

A lot of people trap themselves into expensive lifestyle choices that they see as essentials but are actually quite a lot more than the actual basic level and the cost could be reduced if you're serious about working less.

Just need to get saving/investing and have a good think about what is important to you.

It totally depends on what you’re saving rather than what you’re earning.

You can go part time at any age. Lots of people do it in their 20s and also have childcare costs to pay at the same time.
Have I misunderstood the question?

Yes haha. I was looking more to go part time but have enough saved up to live on a full time salary I suppose. Either that or retire early. I figured if I work full time on my salary and be really good with my money for the next 20 years, I'll be much more relaxed in my 50s and not have to keep slogging away.

This…people keep posting about “retiring” young pre 55. You can’t “retire” and draw any pension at all until 55 currently. You can give up work and live on independent means (savings) but those savings aren’t coming from any pension pot.

The government also plans to change this to 57 by 2028 , so you could only retire 10 years earlier than state pension age by then- that will apply to OP.

MOST pensions will be investing based on retirement at 60 at least. So it will be important to ensure your investments are veered and reviewed according to a “life plan” to retire early at 57.

Aside from income / savings projections, also look very seriously at cutting the costs of heating/energy/water use, as well as car/fuel use too.
Over successive years we've double glazed with increased thickness of double glazing, added insulation, added solar, added more insulation and our latest scheme is added an immersion heater that cuts in using the solar as soon as we're generating more than we're generating on solar (meaning we use no oil in summer from now on). Our energy costs even with current high prices will run at half what they were a decade ago. Also look at car usage - will you need one or can you walk/cycle/bus/train wherever you go - bear in mind most places in England don't give you free transport till you're state pension other than London, elsewhere it's 60.

Questions

1. are you single? Married? Partner? Intend to marry?


2. will you ever intend to have children or have them already?


3. how secure is your career- always employable and future proofed?

How much are you saving into your pension? What are your pension pots/savings at currently?

How did you work that out? ( Not doubting you!)

I guess it depends how much money you are able to invest each month and what returns you are expecting. And then of course your outgoings matter. I've calculated that I'd need approximately £800k to retire and if I made £45k I wouldn't be able to save enough money. But of course it's possible if you make smart investments (or have alternative income sources)

Hi OP,

I'm watching with interest. I'm a few years older than you, I earn more, and I'm looking to 'retire' in my mid-40s.

Where are you investing your money at the moment?

Yes, I think YABU, but it's up to you to sit down and do the figures to find out if it would realistically work for you. It's not unreasonable to believe that you could live until you're 90, if not older. That's 40 years from when you would like to retire / go part time. So, things to consider include:

• when will you have paid off the house


• what sort of retirement would you like to live e.g. going out for a meal once a week / going out for coffee a few times a week / going to the cinema or another activity regularly / maintain a gym membership so you can go swiming or do a class or something like that / going on national or international holidays once or more times per year / running a car / paying for public transport or taxis


• how much are you likely to have to pay in gas, electricity, water, council tax


• how much do you need to put aside for things like house insurance etc?


• at some point you may need help to do things you find easy now, e.g. gardening or even just cleaning the house etc - how much is help likely to cost?


• how much do you need to put aside for regularly mainintaining your property e.g. by painting it once a year, ensuring window frames are kept in good order etc


• how much do you need to put aside for annual dental and eyecare checkups?


• what happens if you get sick and need help? How much will a carer cost if you were to get someone in once a day, for example


• what sort of a financial safety net are you comfortable having?

I would also carefully consider your plan to slog away now, in the hope that you can save enough to enjoy yourself later. You never know what's going to happen in life - later may never come. I am all for being sensible and saving now, but I think it should be balanced with some pleasure now as well.

I suggest you pay off your mortgage ASAP then start investing/saving your old mortgage payment . Meanwhile, think of ways to reduce your spending requirements for life :

Live in a home that's well constructed, easy to maintain,. cheap to heat. Close to public transport to services you'll always need (supermarket, library, GP).

Learn to grow food, cook, make stuff, upcycle, mend stuff, DIY skills. Develop affordable/free hobbies and social interests (playing music, walking/running/cycling/reading/ singing/sewing/gardening. Acquire saleable skills that are always in demand (reiki, childcare, crafts, computer buddy, translation; think wide).

List everything you spend and buy so that you can see ways to eliminate waste and live more economically and sustainably. Look after your teeth and health.
List the unavoidable expenses; CT, food bills, and the stuff you could live without ; car, takeaways, beauty treatments and products.

A few years of doing that and A) you'll know exactly what part-time work income you could live on in reasonable comfort and B) what you need to salt away as a contingency fund. Consider a period of middle age "lean and mean years" on a very reduced income between stopping full time work, and the start of pensions.

Its all about longterm planning. But a lot of financial planning, is less about money-investment and more about skilful creation and management of longterm personal resources.