How I plan to retire early

Firstly, retirement means an end to steady paid employment to me. It doesn’t necessary mean an end to earning money. Early retirees need to make this call. If retirement means your pension arrangements will be your only means of support you will need a much larger pension pot.

It’s wage slavery I want shot of. I also want my time back; my current job is reasonably well paid so if I’m going to be working for the Man I may as well stay put. But I am looking at retiring about 10 years early relative to the normal retirement age for my job.

The keys to successful early retirement are

  • clear debts
  • reduce outgoings
  • save more
  • develop alternative income streams

I owe nobodyΒ  – Debt Free and Mortgage-Free

I didn’t achieve this by winning the lottery. It’s taken me two thirds of my working life and it was done the boring way; I spent less than I earned and I paid my mortgage in 18 years, by overpaying for a few years. There are no short cuts; I had fewer holidays than most and stayed closer to home – while colleagues were jetting off to Egypt or Australia I stayed in the UK or Europe with the odd foray to the States.

Unlike many personal finance bloggers who became inspired to master their finances after building up frightful debts, I never ran up traumatic debt and juggled credit cards. I credit my parents for that, they’d even put sixpences into a tin towards the bill when they used the phone when I was a kid.

Clearing mortgage debt is liberating – it means I can focus my efforts on saving over 70% of my take-home pay. By saving half of it in my company pension additional voluntary contributions (AVCs) I keep Gordon Brown’s grubby mitts off it.

Reduce outgoings

I live on considerably less than the take-home of someone on Britain’s minimum wage last year (full-time UK NMW is about 12k gross or 10k net). That’s not as hard as it sounds for me since I have no mortgage or rent outgoings. It does mean no foreign holidays and low-cost staycations, which is hard when working the 9-5 life. It was particularly hard last year, what with some of the nutty practices at work after some dreadful business results meant HR are trying to stress people to leave by abusing the performance management process to avoid paying redundancy money.

There’s no way round it, not getting a decent break is the grimmest part of living frugally but working in a stressful environment. It brings it home just how much holidays were as much a respite from work as a positive acquisition of new experiences. However, I figure a year or two of that is worth it to win a permanent holiday for the rest of my life!

Reducing my outgoings also gives me a dry run on what it would be like on a lower income – the fact that I can do it gives me good confidence in my retirement calulations. I’d recommend it to anybody thinking of retiring early – live on what you plan to retire on and save the rest. That way you test the theory while you can still back off and work for a bit longer if you got the estimates wrong.

Save hard

If you can save 50% of your take-home then for every year you work you can take a year off. It’s obvious when you think about it, the half you don’t use this year pays for your next year.Β  I thank Jacob from Early Retirement Extreme for bringing it to my attention in his blog post.

Find alternative income streams

I have to admit that I am not really doing that well at this. Most of these need creativity, such as writing, recording, photography, and this is at a low ebb while living frugally while tolerating a poor work environment. I’ve got some ideas and am improving my writing.

And of course I am investing, both in shares ISAs and in pension AVCs, and my ISA and company sharesave holdings are paying dividend incomes. But the stock of capital is pretty low so that is not a large alternative income. And realistically, these alternative income streams are dwarfed by my employment income. At times I am in danger of getting sucked into the one more year before comfort trap that ERE highlights.


22 thoughts on “How I plan to retire early”

  1. Yes, a huge benefit of living frugally to save is that when you live on those savings… you’re used to living frugally.

    Big difference to lottery winners who get and spend.

    For a great many people, the idea of having money and not spending it is as alien as ice hockey on Mars.


  2. hehe, the idea of having money and not spending it is/was new to me too. However, at least I managed to avoid spending money I didn’t have (mortgage excepted until recently)

    It took about three to six months to get over the feeling of being skint and changing lifestyle. Now I wouldn’t go back, certainly in day-to-day living spending!


  3. Great post! I retire 9 years early at the end of this week. Working on the alternative income streams and we’ll just have to see what happens over the next couple of years. If it doesn’t work out, then there’s always the joy of going back to work. The thing about retiring early is the option of going back to work – if you retire “late” then you’ll never get those lost years back. Difficult equation to solve, be interesting to see if I’ve miscalculated or not.


  4. Well this is 8 months into (early) retirement – I’ll drop another note when the full year is up. What do I find? My calculations for living costs were pretty accurate – so if there are no “luxury” outgoings like computer bits, camera bits or holidays, I can actually save a little from the pension income alone (I retired 9 years early). I don’t use the car every day – in fact I use the car very little and will look into trading it in for a camper van this year. The lack of car use means a massive saving in petrol expenditure (which I hadn’t included in my original calculations) and it is mainly this that actually allows me to save πŸ™‚ I seem to be busier every day than when I had the day job (I know all retirees say this – I have no idea why it’s true) and I haven’t looked at any daytime TV and have no intention of doing so.
    When you retire you realise how much of your hard earned money was being ripped off you at source – so although your wage may be pretty impressive (and the thought of giving that up IS very scary) when you actually see just how much of that big wage was disposable the picture is not so rosy. So although you may feel it is impossible to survive on less than 25% of what you were earning in the day job – I can promise you not only can you survive – you can even save (I’m assuming there is no mortgage and you are debt free of course).
    Best decision I have EVER made in my life – yearly report in 4-months πŸ™‚
    Oh – and on the problem of holidays – I am off to Tenerife next month for a week’s all expenses paid break at an Astronomy Conference – so even that problem can be solved if you are creative enough πŸ™‚


  5. @Cybermystic – That’s truly inspiring – a report from the front line is confidence boosting! With you on the issue of petrol costs, the humble bicycle is my friend there!

    Yes, I’m mortgage and debt-free, well, I have a credit card 0% debt and a corresponding amount in a building society savings account, it’s kind of rude not to take a free sub πŸ˜‰

    Look forward to the 1 year report!


  6. Well this is a few days early but as I’ve got a few minutes this morning I thought I’d write up my year end report πŸ™‚ First the “free” holiday in Tenerife in June – brilliant. I was a judge for an astrophoto competition for the Starmus Festival held on Tenerife and “payment” was an all expenses paid trip for the week of the Festival, thank you Garik Israelian!! I had the most fantastic time and it was my first “holiday” in years. So it can be done, but you need to find alternative ways to do it. Holiday next year? No idea – nothing sorted yet, just have to see what opportunities (if any) come along. The cash situation so far is entirely as predicted in the early planning – so my main message to those of you thinking of retiring early is to very carefully check your outgoings over the period of a year (you need to see the seasonal fluctuations in food, gas, electricity) and then calculate whether you will be able to survive on the pension or alternative income stream. I have invested a not inconsiderable amount of cash in a new astroimaging setup – but I had planned this expenditure in the “retirement game plan” and all is still o.k. on the money front. Since retiring I have held two Exhibitions of my astronomy work, sold a few books and sold a few prints. No serious alternative (extra) income stream sorted yet although there is the possibility of another book to be written (currently under discussion with a publisher). I have had plenty of my pictures shown on Meridian Weather and also on the EPOD (Earth Science Picture of the Day) web site as I now have the time to commit to taking pictures and processing them properly. Still no daytime T.V. and the wife and I are still talking so me being around all day doesn’t seem to have upset things too much at home. I will admit that for the first time since retiring a year ago, this morning I did feel “more of the same” as I woke up this morning – first signs of boredom? Possibly, if so it took me a year to unwind from the day job and get to this stage, not bad. Need to keep a close eye on this and make sure it doesn’t develop into full blown boredom. Could just be the beginning of Autumn/Winter which I find a bit of a trial in this country anyway. I still feel that retiring 9 years early was the best thing I have done so far (would have been better if it had been 10 years early). I like getting back some of all that money I have paid in over the years, and I like having “cheated” the Government by not working right up to the day I die so that I get none of my investment back – and I am looking forward to also drawing my “old age” pension to give my cash income a further boost. I haven’t sold the car yet, I will give it another year to see if it gets much use (or not). For the moment we have decided not to trade it in for a camper van but that will be reviewed during 2012. There have been no shock-horror revelations cash-wise or lifestyle-wise this past year, all that has changed is that I don’t fight my way along 10 miles of motorway every week day and as a consequence I think I’ve probably added 10 years to my life expectancy. I will probably give another report in around 6-months rather than a year as I suspect there are changes around the corner. Oh by the way, nearly forgot, we have been looking at houses with some land (couple of acres) attached so that we don’t have a mile walk to get to our allotment. Nothing suitable so far, but we will keep looking.


  7. I just came across this old post again, and as I have now passed the 3 years retired mark I thought it a good time to give a further update. Car not sold for a camper van – will be using it tonight for a trip over to Patrick Moore’s place for a Sky at Night party. It probably gets less than 2,000 miles a year on the clock now and I’m just too lazy to get rid of it – at least we have a backup car if the missus’ car breaks down. Managing to scrape a little extra income from articles and pictures to Astronomy magazines, I get Royalties from a company who has the rights to manufacture and sell my high-speed flashguns (for photography) and they did well this year. So the main worry about retiring – the money!! – seems to be o.k. for now. The 23 year pension from the University covers everything, including a few luxuries during the year – I am surprised. I already have a few talks and courses (which I give) booked up for next year, so 2014 should be a fun year. No holidays sorted since the Tenerife trip, but I’m working on it. No boredom yet, but I am working on getting a new “mega-project” underway so that I have no spare time at all, probably a piece of astronomical kit. Merry Christmas to you all (it’s December 16th 2013 today) and if you are thinking of early retirement – don’t think about it – just do it πŸ™‚ πŸ™‚


  8. @Greg Parker – that’s an inspirational summary! Here’s to a great 2014. I haven’t been as active as you, though my sensor network is coming along using Raspberry Pi boards and Arduinos with a RF serial network to manage the system at low power.

    But my experience of retiring and money is similar – the thought of running out of money scared the bejesus out of me. It didn’t happen, indeed I’m playing with the thought of deferring my pension another year for a 4% uplift. So congratulations – and thank you for the inspiration!


  9. What a brilliant first (well, second) post ermine! πŸ™‚

    Great to read the comments from yourself and Cybermystic/Greg Parker, over the course of the 4 years, it feels like time travelling in a weird sense.
    Hopefully I can look back on my blog in 3-4 years time and see things have gone as well as they have done for you guys.


  10. @Firestarter thanks – it does look very different looking back after four years πŸ˜‰ Perhaps I shall celebrate the 4 year anniversary with a look back – it looked much worse when I wrote this post that it turned out. Not all of that was skill, some of it was good fortune. I had only just pitched for the London 2012 Olympics work that were a great swansong, that was luck.

    In the interests of anyone coming across this in future, it is a tactical mistake for an early retiree to pay down their mortgage early like I did. (That’s someone retiring earlier than the point you can draw a DC pension which is 55 at the moment.)

    The reason isn’t obvious and I missed it, but you will get an income suckout between leaving work and geting to 55. Whereas if you save up extra in your pensions so your 25% tax-free pension commencement lump-sum is the amount of your outstanding mortgage then you don’t have to pay down the mortgage with taxed income, and it’s an easier ride, particularly for 40% taxpayers.

    The corollary is that I will be a richer pensioner in a couple of years than I otherwise would have been; I will have to invest the 25% PCLS over a few years into ISAs, thereby deriving a tax-free top-up to my pension. And then work out how to inflate my lifestyle a little πŸ˜‰


  11. Now 5 years into (early) retirement πŸ™‚ Still above ground, health o.k. and money o.k. too – so not a lot (hopefully) to worry about. Just got the go ahead to write the 2nd Edition to my Deep-Sky Imaging book by Springer, so that is my 2016 project. Interest rates still suck wherever you look, but property is still looking like a good place to stick any excess cash. Still no holidays, and still haven’t sold the car for a camper van, and now I don’t think I’ll bother with that idea. Looking into selling up and moving from a 5-bedroom house in the New Forest to a 5-bedroom house in Cornwall with acreage – and putting Β£100,000 into the Bank at the same time. No need for us to be 10-minutes walk from a main line station any more as we hardly ever go up to the big smoke anyway. Still loving every day out of the pit, especially this time of the year when I would be going to work in the dark and then returning home in the dark as well. Just don’t miss that at all πŸ™‚ πŸ™‚ πŸ™‚


  12. Now passed 6 years into early retirement (September 2016). Got the second edition written and it is now available. Still got the car and will be using it to drive up to Newbury tomorrow to give a talk. Less than 1,000 miles a year goes on the clock and as I can’t sell it for anything near what I think it is worth, I’ll just keep hold of it. As I get bad hayfever every year here in the forest from Feb until Sep I think we are very likely to be moving somewhere nearer the coast. Shame as that will mean selling this house with its 4kW solar array on the roof which actually covers my electricity bill for the year!! The Government has,as you probably know, reduced the tariffs to near zero so it isn’t worth a light anymore. Just this minute put a new pair of springs in the garage double-door as one of the springs snapped a couple of days back (not bad for 40 years of use). Only just realised in doing the job that there is a scary amount of energy stored in those springs when the door is shut – several kJ each I would imagine!!


    1. Hi I retired semi early in 2013, lived in Cornwall for 20 years.I get bad hayfever here and live on the coast ! Also as I work part time as a pharmacist I can tell you the NHS here is in freefall as we have so many elderly folk.I would choose Wales if I could leave but my partner is from here….


  13. @Greg = well done – it’s great to hear a sustaining success story! Moving does sound like a good move – 8 months of hay fever is too much!


  14. Thank you for that very useful information Berti!! I am trying Hay Max for the first time this year as I am not going to take antihistamines for 8 months of the year anymore. I didn’t expect this (basically glue for pollen) to do anything – so contrary to all expectations I am doing alright. It’s not 100% successful, but I am not suffering at all and the hayfever is really no bother. Whether that’s because the hayfever isn’t so bad this year – or this stuff is actually working – I don’t know. I’ll guess we’ll see in a year’s time πŸ™‚


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