Early retirement

How to Retire Early (Before You Hit 45)

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Why work your entire life just to struggle in the future?

Rather than worrying about money as you approach older age, why not take control of your finances now and ensure your comfort in the future?

Retiring early shouldn’t just be reserved for those who strike it lucky with a lottery win or those who receive hefty inheritance from a family member, with the right investment early on in your working life, you too can retire early.

By working hard now, you’ll be able to relax when you get older.

So how can you retire early?


In your 20s


Don’t make saving the last thing on your mind after securing your first job - start saving as early as possible so that you can relax later.

Even if your job pays little more than your living costs, you should aim to save as much left over money as you can.

If you live in the UK you can put as much money as you can into an ISA (Individual Savings Account) or a suitable equivalent, this will provide you with tax-free returns.

If your employer offers a workplace pension, then take advantage of it. With a workplace pension, a percentage of your pay will automatically be paid into your pension each month.

In most cases, your employer and the government will also add money into the pension scheme for you.

Your twenties are the perfect time for you to start a private pension.

Mark Twain - Age


In your 30s


Your 30s should be about planning for the future. At this age, it can be hard to save because of mortgages, children etc. but you should consider creating a budget and saving at least 10% of your income.

If you start saving at 30, you only need to save 16% of your income to retire at 55, but if start saving at 40, with the aim of retiring at 55, you have to save 32% of your income.

Put together a diverse portfolio of assets that includes an ISA, pensions, property and cash savings.

This is also the age for you to clear any debts you may have and creating a passive income; becoming debt-free is the best way to becoming financially secure in the future. Of course becoming debt free means sacrifices, but these sacrifices will be worth it in the future.

If you haven’t already started paying into a private pension at 30, then I suggest you start doing this now.


In your 40s


With your earnings at their highest, you’ll find that in your 40s it s easier to save.

That’s if you’re already in the habit of saving.

Take advantage of this and utilize every opportunity to build your nest-egg for the future.

Open a self-invested personal pension, which’ll give you investment freedom and also allow you to transfer any older pensions.

Aim to invest at least 10% of your salary into this each month.

If you’re an aggressive investor you can consider investing in venture capital trusts.

You can also invest in a fund that backs small start-up firms; in the UK you will get 30% tax relief for doing this.

For those who can afford it, your 40s is also the ideal time to consider buy-to-let or investment properties.

Make a success of it and you could build up a portfolio of properties which will provide you with ample income for retirement.


Financial best practices to adopt:


i. Spend less than you earn and save the difference

ii. Save 6 months’ worth of your salary for use in emergencies

iii. Minimize your monthly entertainment expenses – do you really need to be spending so much on a mobile contract? Do you need satellite TV? Can you just pay for the channels you actually watch? Can you read a book instead of watching TV?


Do you have a plan in place to retire early?


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Guest article by Dean Ronnie from Wake up your Wealth