Let me begin with the motivation for retiring early, which neatly fall into two main camps:
- What are you running away from? – a bad boss, a boring and repetitive job, the too-long commute, low pay, or colleagues who drive you crazy? This is the most frequent category – you can’t wait to escape to anything else but the job you have. Any direction will do.
- The second category, which is growing fast in these more flexible times is – what are you running towards? This is quite different, it’s not an escape but an exciting new adventure. You have found a passion for something different and want to explore it before it’s too late. The focus is specific, not an ‘anywhere will do’.
Step one is to realise which of those two camps you are in.
This is conventional retirement. The origin of the word retirement is from 16thcentury France, in the sense ‘withdraw to a place of safety or seclusion’ which sounds quite fitting today.
The end of ‘work’, which also means the end of your earned income. Hopefully your income is replaced in part by your own pension savings, plus any state pension entitlement.
QUICK TIP: You can get your state pension forecast online here https://www.gov.uk/check-state-pension
When you retire ‘early’ you need to understand just how long you will live. Retiring at 60 and living to 90 means 30 years or so of living off your own accumulated savings and investments.
The big question becomes – ‘have you got enough income, after tax and inflation, to live the life of your dreams without any worries?’ And to be honest, most retirees don’t know the answer to that. The emotional drive to ‘escape’ overwhelms the rational response to calculate the numbers. Perhaps because they may give a negative result.
There is a simple equation that anyone can use: WANT minus HAVE equals NEED. Put simply, if you want £40,000 a year, but have £25,000, then you need to fill the £15,000 shortfall.
The next questions are: have you got enough time to fill the gap; and can you afford to fill it? Camp 1 is often about survival.
For many people these calculations are left in the ‘too difficult’ box and ignored.
The answer is to find a financial planner who does Cashflow Modelling, who understands excel spreadsheets, investment returns, taxation, and inflation. The results will be enlightening.
This is more about the adventures that lay ahead, rather than the dread left behind. And this is NOT about retirement, more about passionate reengagement. Not an ending, but a beginning.
People in this camp don’t want to stop, in fact they have just got started. Let me share a few examples –
Dame Judi Dench – Judi has received seven Oscar nominations, all of them when she was over 60. She won Best Actress in Supporting Role in 1999 for Shakespeare in Love. No other actor or actress has collected more nominations when older than 60.
Frank McCourt only took up writing at the age of 65. His book Angela’s Ashes won both the Pulitzer Prize.
Colonel Sanders did not start developing Kentucky Fried Chicken until he was in his 60s.
Arnold Schwarzenegger left a successful career in Hollywood to become the governor of California in 2003 at the age of 56.
Of course these are exceptional examples but they do prove the point. Passion, energy, and persistence will get you a long way.
The questions they ask are different to Camp 1, not so much ‘can I afford to’ but ‘I can’t afford not no’. No more survival questions, this is about fulfilment, meaning, and purpose in life.
…is very similar though – Cashflow Modelling handled by an expert. I will close with a quotation from Winston Churchill – Success in not final, and failure is not fatal: it is the courage to continue that counts.