How to retire early in the UK

Introduction

I thought I’d write this piece of content to bring together a number of the other posts that I have written over the past 6 months- to provide some basic detail on how to retire early in the UK, for those people that are new to this. If you know all about FIRE- you probably want to skip this post 🙂

What does retiring early mean?

Well, in general this means finishing work before the state pension age- which is currently 65 years old. However, depending how old you are now, this is due to go up (and probably even higher too). So, any retirement before this age is basically early- even if it’s at age 64. From a FIRE point of view- its usually considered as early as possible, as soon as you have a big enough stash of money!

Why do most people wait until retirement age to stop working?

Money- is basically the answer. When you stop working- then you are no longer getting paid for that work that you were doing (let’s ignore pensions for the moment). As soon as you do this, you need some other way to pay your bills, you mortgage, pay for your food/car/hobbies. If you need the state pension in order to retire (assuming it’s still there when you retire if you are young)- then you won’t be retiring before then.

So, how can I retire before this?

Well, it’s the same answer as above- Money! If you have enough money to live for a year, before you get to pension age, then you can retire one year before your state pension (and perhaps private pensions). If you have 10 years worth, then, well, you get the idea. Basically- you need to build your financial bridge to get you to your pension age. This means outside of your pension you need money to both live on now- and until you can take your pension/state pension.

This seems like I have to save a LOT of money!

Well, basically, yes- but why? So- if you do the “normal” thing and work all the way to whatever retirement age is, you have your wage paying for your lifestyle all the way up to retirement. Then, your pension only needs to do the “light work” of supporting you from this age onwards- likely to be about 20~ years give or take. Every year you want to retire early, not only are you not earning anything from working that year- but you are also spending during that year. Making it basically a double whammy- and that’s why retiring early (can) cost so much money.

How much do I need?

Well- basically enough to live on each year until you die. How much that is for each person/couple is going to depend on how much they spend, and how much their assets can earn. I’ve covered this in more detail within my post What is your FIRE number?. This is the main reason why lots of people look to a lean-style FIRE, so they can make the FIRE number as small as possible- and retire earlier.

How can I manage to save this much?

Well, there are basically 2 ways (and a follow on third):

1. Earn more
2. Spend less
3. and a follow on- invest the money that you have saved into assets that grow.

It really is that simple- and there are very few (legal) shortcuts, unless you like gambling by playing the lottery etc. Otherwise, it’s going to be (probably) lots of hard work, a little bit of luck, but mostly just staying the path and eventually you will get there. If you are considering a career- it’s definitely worth considering how much you are going to be able to earn once you have experience/additional qualifications. Though- work isn’t all about money, you need to feel fulfilled as well.