Advice on setting up for an early retirement

[Reluctantadult]

Has anyone got sage advice on how to set yourself up to retire before 68? More like 60 or 64?

According to 'which?' a couple can live comfortably on £28k. Does that sound about right? No advice I can see for a single.

I believe retiring early means taking a lump sum to tide over to state pension age.

Which? assumes that the mortgage is paid off. Ours runs until 64 at the mo, so should reducing the term by overpaying be a priority?

My husband and I retired early (53). We spend over £40k year, even without a mortgage (this is partly because we have two adult children who live with us and don’t contribute to the household debt finances). Also while we could spend less we want to do things with our retirement; travel, visit and socialise with friends and family, enjoy our hobbies (including paying for tuition, equipment), etc.

We started preparing for early retirement from the age of 35. The most important thing we did was have a proper realistic budget, which allowed for fun spending. We also considered our priorities and so became a one car family, overpaid the mortgage and considered pension options. Holidays were important (that doesn’t mean 5 star luxury) but household furnishing were not (as our 33 year old stair carpet will testify). Luckily my husband and I more or less agreed on our priorities so that made everything easier.

Good Luck with your plans.

Thanks @dormouses ordered both ✅✅

We have an appointment with a SIPP advisor tomorrow so will be interesting to see if we did the right thing setting that up in 2008.

I’m 45 and would like to retire before 68 as well! I’ll share my plan with you (although I don’t know what I’m doing either so maybe ignore it 😂)

Mortgage will be paid off at 62 - might over pay to knock a couple of years off if I can.

I’m shovelling as much as I can into equities (ISA) - hopefully in 15-17 years they’ll have compounded into a decent sum.

Regular money into S&S JISA then LISA for the DC - this is the dodgy part of my plan as they’ll then have to use it for a house deposit as opposed to spunking it on booze and trainers

Im working a lot - planning on working extra until 55 to build up the ISAs. Not like really hard, just when the DC are in bed or doing something else, certainly not at the expense of family time. I feel energetic and enthusiastic enough to do this as I was so drained by the baby/toddler phase that having slightly older children is like a new lease of life!

According to 'which?' a couple can live comfortably on £28k. Does that sound about right? No advice I can see for a single.

Just on this bit. Which do include the numbers for both single and couples if you are looking at this www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-aNmlv7V7sVe9 For individuals they say 19k comfortable and £31k luxurious. For couples 28k comforbable and £45k luxurious.

There is also this research www.retirementlivingstandards.org.uk that has slightly higher numbers but in the same ball park.

Of course the best thing to do is to know your own needs/wants but those are quite helpful to give you an idea when you are decades away.

One thing to note is that the numbers in that research are based on spending not on income so you have to factor in the tax that you will be paying depending on where the money is coming from.

My DH and I retired a year ago at mid/early 50’s with pension pots of 1.5 million which works out at about 60k per year income. We do spend really a lot on holidays. We paid off our mortgage and bought a new electric car which will hopefully last for years so this keeps bills down. We’re on a good fuel fix until September 24 too.

What we’ve noticed is hobbies and the amount of leisure time we have does eat into our money. We like to eat lunch out a couple of times a weeks and have both joined a fancy spa plus my DH has joined a posh club. We also both have a cineworld card which is really good value for money.

We have young adults at home so bills are higher than if it was just DH and myself buy hopefully this will change in a few years time. Then we can downsize or do a sideways move to a different area.

We haven’t really factored in state pension. My DH has the full entitlement and I have 31/35ths.

I'm glad I asked on here, lots of food for thought. I wonder if ISA's are the way to go, as a way of postponing decisions about whether its for dc or pension.

Interesting. Do you have an actual pension as well?

I wonder if ISA's are the way to go, as a way of postponing decisions about whether its for dc or pension.

ISAs can be a very helpful way of investing for the period before you can access your pension or for other longer term aims that might mean you want to use them before retirng (e.g. helpfing children with deposits). There are significant tax advantages to a pension though, especially if you are a higher rate tax payer.

The first thing to do is to really understand your position - get your state pension forecasts, make sure you understand exactly how much you have currently built up in your pension(s) and how that will continue to be built up. Look in more detail at the kind of lifestyle you would want and roughly what number you are aiming for. Only then can you start to map out your plans and see where to target extra savings.

Yes - have a DB pension, thankfully. Should’ve mentioned that if I didn’t have a workplace pension I’d be trying to max contributions into a SIPP or something

Sorry that was @FrownedUpon

We did it.

We overpaid the mortgage and then paid it off completely with a redundancy payout. We maxxed our pensions (one DB) and ISAs for a few years and built up a pot between DC pensions and other savings. Calculated our annual expenditure quite carefully and were able to stop work when our DB pension + a proportion of our pot = expected annual expenditure.

Don’t assume SP is available with 35 years NI, that is frequently quoted but is NOT the case for most people, it’s for people entering the workforce now. Older people must log on and get their own, personal forecast.

It's not possible to give a definitive reply as there's not enough info and we're all different, but I reasoned about 5 years before retiring that the most efficient way of achieving early retirement was to focus on my DC pension.

I didn't bother to pay into ISAs or pay down the mortgage because I would have to had used money that I had paid income tax on before I could use it.

I used salary sacrifice to put all spare money into a DC/SIPP free of tax - then at age 55 used some of the 25 % tax free drawdown to clear the mortgage. I focussed on getting a big pot in order to do this at the expense of almost all other investment options as it is really the only available tax free option (in my opinion) that worked for me.

used salary sacrifice to put all spare money into a DC/SIPP free of tax - then at age 55 used some of the 25 % tax free drawdown to clear the mortgage. I focussed on getting a big pot in order to do this at the expense of almost all other investment options as it is really the only available tax free option (in my opinion) that worked for me
Thats exactly what my DH and I did, for most of our adult life we had virtually no savings but prioritised overpaying in company pensions. I know lots of people like to pay off their mortgage early but this was never our priority. We cleared the mortgage with some of the 25% tax free amount and then very fortunately my DH got made redundant three months before he was due to retire and relieved a year’s salary so we bought an electric car with this and used the money to live off too.

My theory is to save into both my current pension (get at 68) and isas. I also have an old workplace pension which is age 60 (only £2k a year but better than nothing!) planning on retiring circa 56 but will take work for part of the year (we want to extensively travel before we can't, dp is older than me). Our house is paid off now so £1500 a month goes into the travel fund

Should add whilst travelling dp is going to be working 2 days a week for current job (well paid) and I can help him with part of it (so he's only actually working an hour or two each day)

I am early 40s, but have structured things so I (hopefully!) have the option to retire at 60. Although, as above, I may go part-time for a year, it’s flexible.

My goal is to retire with a paid for house (with all maintenance up-to-date (eg new kitchen, new boiler or whatever) and paid for car in good condition. To have 12 months worth of expenses in a cash fund, to have all appropriate insurances in place. To have a retirement fund able to pay me my current salary (minus mortgage payment), each fortnight. Just a note, I know there will be inflation on this amount between now and when I am 60, but I have seen the modeling that if you have a paid for house in retirement you only need 67% of your income in retirement. Others also say you spend less on transport, business clothes etc. So I am hoping this evens out, but keeping an eye on it.

My plan -

1. Pay off my house ASAP, at least 5 years before retirement, so I can be maximising this income.
2. Budget, and know my expenses, both now AND a good guess for what they would be in retirement
3. Increase the amount I put into retirement account, so it meets the amount the calculators say is needed. I have a defined contribution account.
4. Have an Emergency Fund equaling 6 months of expenses. If I decide to retire before I can access retirement funds, this fund needs to increase to cover that amount AND the 6 months.
5. Enjoy the rest of the money now!

I’d second looking at the FiRE Facebook groups. The uk one has loads of really good resources and is a bit less full on than some of the US ones which can seem a bit cult like (about spending as little as possible). There is a good calculator on there about balance of pension v isa investments (which may become more important if the government fiddle with the age you can access a pension).

We have taken a bit of a gamble in that instead of overpaying our mortgage for the moment (have a low 10 year fixed), we’re going to put that money into a s&s Lisa with the hope we’ll have a bigger lump sum at 60 to pay off including the government bonus and investment growth. When we come out of that fix might need to overpay depending on rates but trying to maximise time for investments to compound. That has taken me quite a lot of time to get my head around and be ok with as every instinct of mine was to overpay mortgage rather than investing. We’re also ok with taking pension out of pensions if needed to pay any outstanding mortgage balance.

@Bunnycat101 what does 'investment to compound' mean?

it’s basically just about time. So, in theory you could start a junior SIPP for a 5 year old with very little money but by the time they’re 60 it will have had 55 years of growth (which historically has been a few percentage points above inflation). The younger you start investing the more time it has to grow so if you throw everything at a mortgage from 30-50 and then start investing, you have less years for your money to grow than I’d you were investing some of that money from 30.

What you need is how much you need to spend.

Me and the other half could live comfortably on £18k once the house is paid for. We live comfortably now on not much more than this with a mortgage.

This www.theretirementmanifesto.com/15-building-block-ii-the-most-powerful-force-in-the-universe/ is a good example of what Bunnycat's explanation.

I wish I had understood this when I was 18!

@Mia85 that article is really clear. Bizarrely I remember my a level history teacher telling our class about the importance of starting a pension as soon as we started working because of compound growth. Can’t think how that was relevant now but glad he did!

In your shoes, the single biggest move I would make would be to work full time, for the impact to my CS pension. It’s a great pension and it will be downgraded in value again in the future, during the current recession cycle, I’m sure. So lock away as many years as possible now, in my opinion.