My Story: How I took 27 years off my retirement age

To emphasise the potential of the information and simple, actionable tips I’ll be sharing with you in my future blogs, I felt it best to share my own story as a live case study. I’ll update you on a monthly basis with my progress, including: monthly expenses, savings, net worth and years to FI. Whilst posting weekly about my successes and failures, my investment choices, my frugal wins and anything else I think could bring value to you! This way I can very simply demonstrate the immediate impact this knowledge has had on my life. Implement what I have learned and your future self will be thanking you in their early retirement.

My story: I went from thinking, accepting even, that I was going to work until I was potentially 67 (best case) and then struggle through retirement on a super crappy pension. As you can see in the below images, my workplace pension was not even going to meet that dismal outlook! Not even close for that matter. Unless I was willing to work until I was 82! Which I most certainly was not!

Based on my 4% matched contributions from my salary a couple years back. Doesn’t look good, does it?

Lol.

I was paying in 4%. My employer was paying in 4%. And that’s what I was going to end up with?! £4.2K per year? PER YEAR?! Something was off.

Of course, not being financially savvy at this point, I had no idea of what our yearly living expenses were, what our savings rate was, what money we needed in retirement, our net worth, value of assets, how to invest properly or what the power of compound interest can achieve! But it doesn’t take a genius to deduce that £4.2K wasn’t gonna cut it! My conclusion? My thought process was a little like this:

“Well, I can’t afford to up my contribution any more than 4%! We’ve got bills to pay and we have to eat! I’m sure as shit not giving up holidays and that new car I’m working towards. What’s the point of working if you can’t do what you want sometimes?! Hopefully I’ll end up with more than that measly £4.2K anyway. I’ll be earning more year over year and they’re obviously giving me worst-case market returns. Besides, my wife has got an NHS pension, so we’ll be okay surviving off that.”

Surviving’ – Not really how I would describe the quality of life I hoped for in retirement after 40+ years working my ass off. But, hey! What could I do about it? I was just going to have to knuckle down and hope for the best! I was wrong.

Your situation may, of course, be different. It might be a little better. Maybe a lot better. Maybe a lot worse. My point is, don’t worry at this point. It doesn’t matter. You’re here now, reading this, which must mean you’re at least interested in taking action and taking back control of your finances and future retirement! If you don’t know how much you need in retirement, and you don’t have a plan in place to get there, then you’re in the right place. Subscribe to this blog and apply these tools so you can take control of your destiny and have a meaningful, abundant, and most importantly, early retirement.

My situation now? Well, I’ve taken the advice and tools used by many in the FI community and applied them to my own life. And now, I have a solid plan to retire no later than 55 (worst-case) with an income that will cover our joint retirement expenses, including 15K per year simply for travelling and holidays. It would have been a lot sooner had I found this information when I was 20 instead of 29. I’m confident I’d have been retiring in my 40’s! ‘How the F have I managed this?!’ you ask. Let me explain:

The first question I had to ask myself, and that you should ask yourself was:

‘What income do I need in retirement to support the kind of lifestyle I want my partner and I to have?’

Answer: The simplest way to work this out was to figure out what we were spending on a monthly and yearly basis now, and then adapt this based on what retirement was going to look like. For example, most things stay the same with a little added to account for inflation. However, our monthly mortgage payment for instance is a huge chunk of our monthly outgoings now, but we have a plan in place to have this paid off before we retire. So, that’s a payment we won’t need to cover in retirement. Great! In fact, all the current data shows that as we get older, we spend less. Less on housing, less on food etc etc. This is great news for those trying to reach FI, as the amount we need to save is generally a little smaller than it would be if it was based on our expenses in our 30’s or 40’s. I’ll show some screenshots of the spreadsheet I built to track this below:

This is my tab for ‘Current Month Expenses’ – Forgive me for blanking out the gifts section. Seemed wise in case any of my family should read my blog! I update all tabs at the end of each month and ‘Save as’ for that month, keeping an archive folder of all previous months versions. I highly recommend tracking all your expenses like I have above. I added a little monthly split chart too (see below). This is our actual expenditure. Which, you might think is oversharing. But I want to be completely transparent with my readers so they can draw comparisons to their own circumstances and see that I’m not some secret millionaire. I’m completely average and you’re situation is likely very similar. Therefore, if I can achieve an early, abundant retirement, so can you!

I’ll add my spreadsheet as a download at some point in the future, once I’m happy with it, in case you want to use it. It’s not the most complex form in the world but I think that’s what makes it work better than most others I have downloaded and tried out. It’s centred around visuals that help you to see your life in facts and figures. It took me a fair few hours to get it to this point. So, I will charge a very fair price based on the time and energy I put into creating it. This will go towards the running and maintenance of my blog. So, if you feel like you’ll get value out of it, and I am very confident you will! Please do purchase it when it’s released. If not, I’m sure you can build your own if you dedicate the time to it.

The next question I needed to ask myself was:

‘If this is how much we’re spending now, what will our retirement expenses look like?’

The next tab (below) and the next thing I needed to work out, was our estimated expenses in retirement. This is almost identical to the previous tab. The difference being that I’ve removed any payments we won’t have at that stage, i.e. mortgage, petrol (I’m sure we’ll be driving electric by then) etc. but I’ve increased the amounts for certain payments based on inflation and the fact that we’ll have a lot more spare time to fill with things like lunching and travel. As the months and years go by, and we approach retirement, I’ll update this so it’s as realistic as possible so I can adjust, up or down, the amount of time we need to work for to cover the updated expenses.

Noteworthy point: I’ve not accounted for the state pension in my retirement income. And unless you’re less than 10 years from retirement, you shouldn’t count on there being a state pension either. It’ll be the biggest crime against our generation if they take it away. But I wouldn’t put it past them not to at least make it means tested. The way I look at it is, if we get it, great! We’re £100’s better off every month! If not, well we planned accordingly and have accounted for the lifestyle we want so we’re no worse-off.

So that’s more or less what our expenses are going to look like. The final question then:

How much do we need to save to fund this lifestyle?’

To know how much you need saved to retire, you need to know your ‘FI number’ or ‘Stash goal’. The spreadsheet works this all out once all your expenses are loaded in. It does this by essentially multiplying your yearly expenses to account for tax and NI, dividing by the number of people saving for retirement (assumes 2, formula can easily be changed if you’re going it alone), and multiplying by 25. This is what is commonly referred to in the FI community as your ‘Perpetual money-making machine’. Because once this number is reached, you can safely withdraw 4% of this amount each year, which, by magic, is equivalent to your yearly expenses and will mean you never run out of money. Sounds ridiculous, I know. But it’s true. Your money will inevitably be invested in a SIPP or ISA or, in my case, a split of the two and will therefore be invested in the stock market, in low-cost index funds, ETF’s etc. The return for these funds, on average is 7-9% per year. Therefore, market returns will outpace your 4% withdrawal, meaning you never run out of money. Look up the trinity study on Google if you fancy a more in depth, scientific analysis of this theory. But the numbers don’t lie. Thousands of people are currently living their best retirement life thanks to this simple maths and I plan on joining them! Will you be joining them too?

What does this maths look like for me?

Based on my spreadsheet, our current estimated yearly expenses are £36,442.96.

Multiply this by 1.25 to give you a rough idea of what you need pre-tax = £45,553.70

Divide this by 2 as our expenses will be shared between my wife and I = £22,776.85

Multiply this by 25 to give me my FI number, what I need saved to retire = £569,421.25

Easy, right? Now I just needed a plan to hit that number. Seems really daunting, I’ll admit. But in my next post you’ll see why this is achievable and how I’m planning to get there.

There are a bunch of other tabs in my spreadsheet: savings, House LTV and Assets, Debt and Net Worth. All these are critical to becoming financially savvy, reaching FI and really knowing your situation. More about these in a future post.

I’ve pushed the big, red button..”

So, that’s it. That’s how I figured out my ‘Path to FIRE’. Of course, there’s more detail about how I’m making my savings work for me and how I’m adapting my lifestyle to enable a higher than average savings rate which I will cover in the next post. But fear not! It’s really, really simple. It’s a flexible, adaptable plan that affords me an early retirement and by design, more time to spend with my family and to do the things I love doing. I’ve pushed the big, red button to initiate my early retirement. You should do the same. There’s nothing to lose and so much to gain!

In my next post, I’ll be diving deeper into how to make your money work for you with minimal maintenance – a ‘set and forget’ plan to make you richer and allow you to achieve your retirement goals. I’ll also do my best to explain the power of compound interest, the importance of taking advantage of this sooner rather than later, debt prioritisation and many other strategies that are helping me and will hopefully help you to achieve your financial goals.

Subscribe below to receive my latest posts direct to your inbox. To get in touch, reach out to me via Twitter or Facebook using the links at the top of the post. And check out my list of resources; all the books, blogs and podcasts that have fast-tracked my journey to FI.

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Published by Finance&Lifestyle

A Dad from the UK documenting his journey to financial freedom. Sharing my lifestyle and finance hacks so more people can find financial independence, retire early and take back control of their future.

3 thoughts on “My Story: How I took 27 years off my retirement age

  1. Hi, FSD. Interesting read. I’m curious as to why you’re only saving an FI fund for yourself and not including your wife? Is she relying on her NHS pension?

    Incidentally, I don’t think you’ll be able to draw down from the pension fund until 58 (for someone of your age) – the minimum is tied into the state pension age (i.e. 10 years lower). See https://www.youinvest.co.uk/faq/can-i-withdraw-cash-my-sipp-any-time. NB might be worth your wife checking her pension too – as it’s public sector, it too is likely tied into the same requirement.

    Of course, a lot change before you get to 55/58!, and you can always use just the ISA until 58.

    Like

    1. Hey NewInvestor, good question! And you’re right, she will be relying on her NHS pension which we’ve calculated will cover her half of our expenses, and then some. My company pension however, didn’t come close. Although technically it’s me saving for a FI fund, all our money is shared so it will go towards supporting us both.

      You raise a very good point about the minimum draw down age though. This is something I only learned a couple of months back, after writing this post. Very frustrating! However, if and when they do raise this, I’ll prioritise my ISA savings and live on this whilst I wait to get access to my company pension.

      Luckily for my wife, she’s happy working for as long as she needs before she gets access to her pension, as she loves her job and can simply reduce her hours when she nears full retirement. In effect, it becomes her part time passion project.

      Whereas, I’d be retiring early from my 9-5 to pursue my own passion project, unrelated to my current career.

      Thanks for the comment!

      Like

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