Perhaps apart from winning the lottery, retiring early is one of the biggest dreams most people have. It may seem impossible in today’s tough economic climate, but a lot of people manage to retire before their mid- to late-60s if they’re determined enough.
How Early is Early?
Firstly, defining what ‘early’ is will be an individual opinion. If most people expect to retire between the ages of 65 and 70, then leaving the office life behind at 60 is technically early.
Yet, with some careful planning and realistic lifestyle adjustments, it may well be possible to retire much earlier than this, perhaps by even 10 years or more.
Doing the Sums
The first thing you’ll need to figure out is how much you’d actually need to retire early. Again, this is far from a concrete number, and different people will have varying expectations of the kind of life they’d like to live in their retirement.
This will be harder to predict if you’re younger, because it’s harder to know what the economy and your personal situation will be in 30 or 40 years. Yet, a retirement planning specialist will be an excellent first step in realistically figuring out how much you’d need in your pension pot to retire and draw from each year.
Depending on your age and if you’re in a position to invest any of your savings and absorb the possible risk, the magic figure could be anything from a few hundred thousand pounds to a million or more. Those might sound like astronomical figures, but many people earn well enough to make that a reality in a few decades.
The Simple Life?
The basic idea is that you’ll need to put as much into your retirement savings as possible if you want to retire early. There are two ways to achieve that: Either work harder at earning more money or just spend less. Combining both is obviously ideal!
Many will balk at the idea of what they see as sacrificing enjoyment for the sake of a payoff later in life. Yet, there’s a growing movement in the concept of early retirement, with many doing it very early indeed.
Someone on six figures who resists lifestyle inflation and lives in a smaller house, drives a used car and invites friends round for drinks at home rather than clubbing every weekend could potentially set aside more than 50% of their income for retirement. In 10 years, that would be a lot of money set aside.
This may sound unrealistic, and it’s up to each individual to decide what’s worth saving on for the sake of not having to grind away at work for those extra years.
Ultimately, this will depend on your individual situation. If foregoing those extra bedrooms and a nice new car every year sounds like too much of a sacrifice, this post has hopefully at least been food for thought. Perhaps you could think about how to make a small few adjustments here and there to give yourself a couple of years off work in the future.
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