Despite Chancellor Jeremy Hunt’s endeavours to keep people working as long as possible, for many people the dream is to retire as soon as possible.

And figures show increasing numbers of people are achieving their goal of stopping work before the state pension age (currently 66 but soon rising to 67). The number of people classed as “economically inactive” – those who are neither in a job or looking for work, excluding students – has risen by 565,000 to 6.7 million since early 2020.

On of the key drivers of this rise has been the number of 50–64-year-olds who do not wish to return to work, found a House of Lords report. Many said it was a “lifestyle choice” to stop work rather than being forced out due to sickness.

People who retire early will typically pay themselves an income from pension savings when private pensions can be accessed aged 55. Those who want to retire before their mid-55s will rely on income from savings held in ISAs and other investment accounts.

But what’s it like to retire early? We asked these people how they achieved it and how they spend their time.

‘We’re in Vietnam renting an apartment on the beach’

Alan Donegan, 44, and his wife Katie, 39, retired four years ago with total savings of £1m to pay them an income of £40,000 a year. Their portfolio has now grown to £1.65m, despite the economic uncertainty, and they have an income of £60,000 a year.

Alan, who met Katie in 2005, says the pair saved hard over the years to stop work well before the official retirement age. They lived in a two-bed flat, drove a second-hand Skoda Citigo that cost £5,000 and made their own lunches rather than eat out.

They committed to retiring early in 2015 and gave up their day jobs in 2019 (Katie was an actuary and Alan delivered training courses) and now live off income from their investments so they can spend their time how they like without needing to make any money.

They invest in global tracker funds through Isas, Sipps and general investment accounts and their investment portfolio is currently worth around £1.65m. The main fund they invest in is the Vanguard FTSE Developed world ex. UK.

“Katie and I are currently in Vietnam, where we’ve been renting an apartment on the beach for the past couple of weeks. At the moment, our life consists of an early morning run on the beach and a swim in the ocean before tucking into a leisurely breakfast with a cup of coffee before we spend the day working on our projects. We’re in Vietnam for a month before heading to Japan and returning to the UK for the summer. I spend my time seeing the world, meeting new people and doing the work I really want to do.

“We did own a flat in Basingstoke, as well as a couple of flats we rented out, but we recently sold all our properties. We just rent different places on short-term lets, wherever that is in the world.

“We follow the 4 per cent rule – meaning we withdraw up to 4 per cent from our investments each year to fund our living costs. This means we currently have an annual income of around £60,000. A £60,000-a-year budget obviously goes further in different places. Where we are in Da’Nang Vietnam now, you can live like a king. A nice hotel room on the beach in Da’Nang is £20 a night. But if you were to live in New York City, for example, it doesn’t go very far. You’d struggle to get somewhere for under £100.

“Early retirement can go seriously wrong if you don’t have a purpose. Ours is to help other people get their finances in order. Katie and I write blogs and articles to help other people take control of their finances and retire early through our free Rebel Finance School course. Last year 5,000 people took part in the course and we didn’t make a penny from them or have any sponsors.

“Retirement is not about sitting on a beach sipping margaritas for the rest of your life, it is about getting to do what you want to do with your time. We’ll be back in the UK for the summer. We’ll stay with friends and family for a bit but we don’t know where we’ll be beyond July. That may seem strange to some people. But not knowing where we’ll be living or what we’ll be doing is what keeps life exciting for us.”

David Margetts (Photo: Supplied)

‘I was left with a massive vacuum that was hard to fill’

David Margetts, 60, retired three years ago aged 57 after a career in financial services. He had been running his own business for six years before retiring and frequently travelled to Asia to meet clients.

When the Covid-19 pandemic hit, his travel stopped and he had the opportunity to spend more time with his three children and three grandchildren. He decided to retire and now lives on an income of more than £6,000 a month (around £70,000 a year), mostly drawn from private pension savings and general investment accounts.

“I’ve been a saver all my life and I planned very well for his point. When I got my first pay package working in a petrol station aged 15, my dad took me aside and said ‘right son, put 33 per cent away and don’t touch it, put another 33 per cent in an instant access account for special things or unexpected bills, and go and enjoy the rest.’

“I carried this on throughout my career. When I got promotions I tried to save the extra money (investing at least 60 per cent in equities). Houses were cheaper too. I bought my first house for £60,000 in 1985 aged 22 with a £30,000 mortgage. It’s tougher for people nowadays but not impossible if you start early enough.

“The transition into retirement wasn’t easy. I was left with a massive vacuum that was hard to fill. But now I’m a few years in, I’ve settled into it. Initially I threw myself into lots of volunteering, but I’ve scaled that back and now I spend my time working out, playing sports such as tennis, doing gardening, studying (I’m doing a philosophy course at the moment) and spending time with my wife and children.

“I saw that Jeremy Hunt wants early retirees to go back to work. But it’s a bit of an insult really. People like myself have worked extremely hard to get to this position and to be independent. We don’t rely on a state pension or any benefits, and we’ve earned this freedom to choose how we want to spend our lives.

“It also doesn’t make any sense as my earnings will be taxed at 50 per cent because I’m a higher-rate taxpayer. So financially it’s not worth it and I don’t think anything could tempt me back to work.”

By admin