How much do you need to retire in the U.K.?

[Rainbows08]

I’ve recently started to hear about FIRE (Financially Independent retire early - started in the USA)

They basically say you can retire once you have 25x your annual spending saved - so for example I spend £20k a year - I can retire when I hit £500k.

Ive found forums on other sites where people say they need 2 million to retire?! Is my number really low or is it the super rich that are on these other forums?

If your happy to share - what would be your fire number? (And would that just be for you or partner too?)

But you've forgotten investment growth. The idea is that the bulk of your money is in global tracker funds, preferably ISAs, that will over time at least keep up with inflation and you gradually draw down some of the growth via a 'ladder' that mitigates the risk of having to withdraw from an investment pot when the market has performed poorly.

The main variable is lifestyle expectations. If you're going to want to maintain a large home in an expensive area, eat out with fine dining, drive expensive cars, go on world cruises, fund DC university costs and house deposits etc etc, you'll likely order an order of magnitude more funds than someone who's main motivation is not working and are happy with a simple but fulfilling life to achieve that.

Someone with a good DB pension is in a completely different position to those who have to rely on a pension pot and the unpredictability of markets and inflation.

I'm on the verge of retirement at 64 with what should be a decent pot but trump's shenanigans, gratuitously destabilising everything, are concerning.

I'm genuinely terrified of having nothing in retirement.

I'm 38 and hoping to have the mortgage paid off by the time I'm 50, but I'll have no real savings and no pension to speak of. I only earn £30k a year so it's nearly impossible to save for retirement.

Retirement will probably never come for someone like me. Which really pisses me off!!

Rant over

State pension, a mortgage free house, whatever you've saved due to auto-enrolment and whatever you can save after your mortgage is paid off is quite a good start.

Especially as you're used to a lifestyle based on £30k pa. You'll probably be better off in retirement than you are now.

I'm still figuring out what the number needs to be plus I'll be 68 when state pension kicks in. I live pretty frugally now but worry I'll need extra emergency funds if need a new car, boiler, other repairs, etc. Its hard to know how much I need put by for those unknowns. I'd like to continue having an abroad holiday at least once a year too. For a moderate retirement the research says I need £31K per year, however I currently only spend approx. £16K a year now in full time work!

If I retired at 50 years old, I'd need to fund £20K a year (current living costs plus extra for holiday, repairs, etc) until 68 then I'd need to fund a minimum of 12 years at an extra £9K. I work that out to be c£470K!

I'd like a mix of cash and pension. Ideally we'll still be getting some interest on cash too so that could work as a small income too. I'm currently trying to max out my ISA allowance each year which only became possible when I repaid my mortgage almost 4 years ago.

I'm very much working towards FIRE.

Aren't you paying into any pension at all? If not, you need to start asap to at least have a chance of having something in your pot.

Depends on :

How old you are
Partner's input amount
What you want to do in retirement
If you have a property?
Will you get full state pension?

@WhatATimeToBeAlive I can't afford to unfortunately.

It's a case of eat today, or save for tomorrow.

The 25x is really based on the idea that you can pull 4% out of an investment portfolio a year whilst maintaing the balance. Good investment returns can get you to the 25x quickly, but once you are reliant on that income you have to move a good portion to low risk products, which brings the investment return right down.

The issue with inflation is that the $20k figure the OP thinks of as annual expenditure is not what her annual expenditure will be at the point she retires (unless it's pretty much tomorrow). The 20k needs to be adjusted by inflation (and tax!), and realistically unless OP is planning on retiring tomorrow it's going to be much higher than $20k.

In theory if you have 25x you annual spending on retirement (adjusted for any tax you'll pay eg capital gains), then that should see you through even if you end up having to start eating into capital at the end. In reality though it depends on inflation, and how long you end up living.

So in OP's case if she thinks she needs 20k I'm retirement based on current prices, and realistically is looking at 10 years before retirement, she probably needs more like 40-50k a year at the point she retires (although no one has a crystal ball on inflation). If at retirement she needs 50k to cover her then expenses, the 25x logic says that if she has a pot of 1.25m she should be able to cover her living costs including any inflation on those costs for the rest of her life. It will ultimately depend on how long she lives and what the level of inflation is.

My theoretical FIRE number is about 2m with house paid off but to be honest I invest what I can rather than aggressively focusing on that number. The 2m is based on retiring in about 10 years and having a paid off house and no dependant kids at that point. The latter in particular is probably overly optimistic!

I spend 2k a month on my mortgage and save about 1k a month plus spend probably £500 a month on the cost of working. Feel pretty comfortably off on 6.5k a month now (between two of us) so I think I'd be fine on 3k (inflation adjusted) plus I'd want a bit of a lump sum to cover unexpected household stuff like a new roof or something. Considering full state pension x 2 gets us over half way there I'm not too worried.

FIRE works on the basis of taking out 4% per annum and assuming that growth will cover that + inflation. Which on average over the long term it may well. Personally I would want more than £20k pa and I’d want a big buffer in case of downturns. But you know best what your needs will be. Don’t forget state pension too.

But you are planning on having paid off your mortgage by 50? So presumably either overpaying, or have taken it out over an unusually short term. You could extend the term of your mortgage to take it to age 60 or 65 and that would then free up cash now to be investing in pension. With compound interest on your pension this is likely to yield a much better return over the next 30 years than your current strategy. If you don't start paying into your pension until the mortgage is paid off at 50 it doesn't have anywhere near as long to grow. I recommend running some models assuming average pension growth and the difference between overpaying and not overpaying your mortgage.

Thanks @DisappointingAvocado maybe I should speak to a financial advisor and see what my best options are.

Me to. Neither of us have private pensions will only have state and we are part ownership so will never own the house at all so will still have to pay rent on the 50% they own. No savings. 7 years to go.