✦Money · 14 recordsPlan to retire early

Retiring early, or reaching financial independence and working because you want to, comes down to three numbers: what you spend, what you save, and the size of the pot that could cover the spending. This works all three out honestly, raises the savings rate where it is cheapest to do so, and reviews the plan every year, since markets and lives both change the answer.

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Free on any plan. You will see this list again in the app, and nothing is created until you press install.

✦ Everything it creates

The whole plan, before you install it

Goal

A financial independence date I believe Month 3

Real spending, a number, a savings rate, reviewed every year.

Know the numbers Week 4

What I spend, what I have, what I save.

  • Add up a real year of spending from statementsDo firstDay 7
  • List every account, pension and investment with its balanceDo firstDay 12
  • Work out my current savings rateDo firstWeek 2
  • Work out a cautious FIRE number and a coast FIRE numberDo firstWeek 4

Close the gap Month 3

The big levers first.

  • Check I am using the tax-advantaged accounts available to meDo firstWeek 6
  • Look at the three biggest costs: housing, transport, taxDo firstWeek 7
  • Automate a higher savings rateDo firstMonth 2
  • Consider an hour with a fee-only financial adviserMonth 3
  • Diarise the yearly reviewMonth 3

Routines

  • Check spending against the planweekly
✦ It comes with a note

The three numbers

Spending: a real year from statements, not an estimate. FIRE number: a common rule of thumb is 25 times annual spending, from research into withdrawing about 4 percent a year. A longer retirement, fees and taxes argue for more. Savings rate: what you save as a share of take-home pay. It decides the date more than returns do.

This is a planning tool, not financial advice. Review it every year, because markets and lives both change the answer.

✦ Questions

Plan to retire early, answered.

A common rule of thumb is about 25 times your annual spending, based on research into withdrawing around 4 percent a year. It is a starting point rather than a guarantee: a longer retirement, fees and taxes all argue for a more cautious number, and this is not personal financial advice.
The point at which your existing investments, left to grow, would reach your retirement number by a normal retirement age without further contributions. From then on you only need to earn enough to cover current spending, which many people use to work less rather than stop.
The savings rate. Saving half of what you earn reaches independence far sooner than saving a tenth, and the biggest levers are usually housing, transport and tax-advantaged accounts rather than cutting small daily spending.
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