How to retire early?

M

MrEarl

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Hello,

I'm wondering what people are doing, in order to retire early.

Clearly, getting rid of debt is vital, as is ensuring that there's sufficient provision made for a future pension.

Thereafter, what are people doing, to facilitate early retirement ?

I believe that a lot of people have a retirement age of 65 specified in their pension, so they can't draw pension funds before they hit that age.

Assuming that those people want to retire at age 50, how to they fund the 15 year period, to get them to age 65 ?

Cash savings are probably the obvious answer, but funding a 15-year term could cost €500k (or more), so gathering that sort of lump sum may not be achievable.

Likewise, income generating assets could play a part, but like the cash balance referenced above, this may not be an option, at least not at a level to fund living costs.

Are people taking part time jobs, after (early) retiring from their full time jobs and if so, what type of work are they opting for ? In reality, people over 50 often struggle to secure employment, AFAIK.

So, what are people doing, to facilitate their early retirement, please ?
 
Most private pensions can be taken from 50 or 55 onwards. Most if not all voluntary early retirees do so because they have a good enough pension to allow it because they have put a lot into it, especially in rhe 10-20 years pre retirement. Often the max of 25/30/35%
 
MrEarl said:
I believe that a lot of people have a retirement age of 65 specified in their pension, so they can't draw pension funds before they hit that age.
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Depends on what "their pension" is. Many pensions can be accessed from age 50 but obviously then there's the issue of his big the pension pot is and what it's growth rate versus drawdown rate is going forward.

Edit: post crossed with @Setforlife's.
 
Not specific to this situation but generally and in the context of many of the money makeover threads here on Askaboutmoney...

Know what your ACTUAL representative annual expenditure is. Only then can you make plans for going forward. Whether or not you're planning on retiring.

I see so many posts/threads where people seem to have little to no idea where their income/money is going on a regular basis.
 
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If you want to retire at 50, you want to have it all planned out. 15 years less income, 15 years less pension contributions, 15 years less compounding will all have a big impact on your ability to accumulate wealth.

You also need to have your expenditure reduced. I am 50 this year and still have a mortgage and teenage kids, so there's 3 expenditures that I would need to get off the books before I retire!!

Besides the finance, what are you going to do? Work gives a lot of people purpose, a reason to get up in the morning. If you want to get out of your job at 50, you are in the wrong job. What are you going to do with yourself at age 50? How are you going to fill your day productively? It's not as if you are going to have other people your own age to do things with, they are going to be working! You'll be talking hip replacements with people in their 70s...except you won't be getting their pensioner discounts!!

Personally, I think retiring in your early 50s is a bad idea and it usually because people are doing a job that they really hate.


Steven
 
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For me and I'm sure for most people early retirement can be quite a shock to the system for a whole host of reasons
Obviously if a person is considering it, they have some sort of understanding of what is required especial on the finance side
As Mr Earl suggests you need to be debt free and have access to funds now and in the future to cover your expenditure going forward

I've said it here many times before as have others, the most important number is your annual expenditure or your burn rate
But also you need understand how that number is going to or can fluctuate each and every year, which is way you also need to know the difference between essential and non essential spending and how this can be fine tuned to achieve your goals
After that It comes down to the size of the funds available to you and the reasons why you want to retire early

But what if you don't have enough funds to achieve this but still feel the need to change your situation for the better
Well then a part-time job is the perfect way to not only bridge the financial gap but also a great way of easing yourself into full time retirement
What that job is and how much you need it to pay is very much an individual thing,
it could be as simple as going part-time in your current job or a complete change of direction to something you have an interest in
Of course it's all easier said than done but it doesn't mean it can't be achieved once you're realistic about what can be achieved

For me I found a part-time job with my local bicycle shop, mainly looking after their website but also providing cover for shop duties
I did it for just under 4 years and the only reason I packed it in was, every year I was getting more sucked into the daily running of the shop
so much so that it was turning into a full time job but on a salary that was well below what I was used to earning
But it was a great way of bridging the financial gap I had at the time and for easing myself into fulltime retirement
 
MrEarl said:
I believe that a lot of people have a retirement age of 65 specified in their pension, so they can't draw pension funds before they hit that age.
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I guess you’re thinking of the Normal Retirement Age (NRA) which is often set to 65 by default. My understanding is this is not a legal minimum age for you to access that pension but rather it’s used for things like deciding how much you can contribute to avoid hitting Revenue over funding limits etc. Depending on the pension type you may actually be able to access it at 50 or 60 regardless of the specified NRA.
 
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I wish I had retired in my 50’s. Actually, I did retire at age 49, but I (literally) panicked and started a new job two days later. I wasn’t fully prepared mentally or financially back then. But, I had to get my act together regarding retirement. It took another fifteen years and I nearly had to be forcibly removed from work (exaggeration). But, at this stage I was prepared financially and ten minutes later mentally.

Thinking back, I reckon I was ready to retire in my early 60’s, but opportunity missed, I hasten to say now. Like a famous Corkman keeps saying Fail to prepare, Prepare to fail. And when you retire, retire, forget about part time work or any other kind of work. These are years, months, weeks, days, hours, minutes you’ll never get back.
 
Leper said:
I did retire at age 49, but I (literally) panicked and started a new job two days later.
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This is an important point.

If you do retire at 50, it does not mean that you can never work again.

If your investments crash and you are not as comfortable as you expected to be, you can find another job. Probably not at your earlier salary, but it wouldn't have to be.
 
Zenith63 said:
it’s used for things like deciding how much you can contribute to avoid hitting Revenue over funding limits etc. Depending on the pension type you may actually be able to access it at 50 or 60 regardless of the specified NRA.
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The only real caveat to add to this is that DB schemes would need to approve early retirement, and that can depend on the funding status of the scheme.
 
Brendan Burgess said:
If you retire at 50 with a small mortgage and a tax-free lump sum big enough to clear it, that might well be a better strategy.
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This is my current plan (just at a different age); some of the lump sum will pay off the small remaining mortgage unless rates in the intervening years change the maths on it.
 
I actually know quite a few people that retired in their early 50’s, it’s not that uncommon.

They all seem perfectly content and I have never heard any of them express any desire to return to the grind.

One received a chunky redundancy payment when one of the banks pulled out of Ireland and, coupled with decent pension savings, he simply decided that he had “enough”.

Another is a Garda who retired on a full pension on the completion of 30 years’ service at the ripe old age of 53!
 
Steven Barrett said:
Work gives a lot of people purpose, a reason to get up in the morning. If you want to get out of your job at 50, you are in the wrong job.
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I'd be of the opinion that if work is your reason for getting out of bed in the morning, then you seriously need to start working really really hard on the "life" part of your work-life balance. If you don't want to live more and work less then you've probably failed at life.

Steven Barrett said:
What are you going to do with yourself at age 50? How are you going to fill your day productively?
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Well, aside from the never-ending projects in the house & garden there's always going to be books i haven't read, movies i haven't seen, places i haven't visited etc. I could even take up golf (although that's vanishingly unlikely).

MrEarl said:
I'm wondering what people are doing, in order to retire early.

Clearly, getting rid of debt is vital, as is ensuring that there's sufficient provision made for a future pension.

Thereafter, what are people doing, to facilitate early retirement ?
Click to expand...
"Early" retirement for me will be 55 at best but most likely 60.

Clearing the mortgage before I turn 50, pouring as much money into my pension as i can afford, fully covering my offsprings early adulthood through a child savings account so I'll definitely have breathing room in terms of not having to financially support them if my pension underperforms my hopes/expectations.

All of which is facilitated by me knowing and tightly controlling my burn rate. That means (for example) I drive a 12 year old car instead of dropping a few hundred euro a month on a car loan. I have solar panels and no electricity bills. I DIY my kitchen from Ikea and B&Q instead of dropping €20k on it- I've probably saved €100k renovating my own house rather than paying other people to do it.
  • I'm not Scrooge, I have nice things: leisure centre membership, 2 holidays a year, as many concerts etc as i want to go to etc. But just the annual depreciation on a new car would pay for all of that...
And that'd be the best advice to facilitate early retirement: learn how to get more value for less money, and buy less rubbish you don't need. (Less, not none- we all like having shiny stuff).

And once it's financially viable, go for it.
 
Of course work gives people purpose and is a hugely important part of ones life. But for most people I would say its a means to an end.

If you are financially able to retire then why wouldnt you. Unless, as some have said, you literally need your work for non financial reasons and/or you have no other outlet, hobby or interests then you should stay working. I suspect this applies to the minority.

I will retire as soon as financially viable and the sooner the better. There are so many things I want to do but cant because of the 9 to 5, 5 days a week, 48 weeks per year. I dont mind my job but id prefer to be doing several other things with my time.

I max my pension but i live life to the fullest. My pension is my vehicle on the road to retirement and the market's performance is the engine. So when I retire, depends a lot on the market.
 
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