Early retirement: how I saved enough to quit work in my 50s

If you want to retire early, it helps to hear from people who have done it themselves. loveMONEY speaks to Lynne Murtagh who managed to retire in 2018 aged 55 – here's how.

Fancy an early retirement?

Quitting work may seem like a faraway dream for most of us – but some people are still managing to defy the odds and turn this into a reality.

Despite gloomy surveys suggesting we’ll be working well into our old age, these enterprising individuals have found a way to escape the rat race.

Some are using inheritances, while others are downsizing to release equity. There are even those who have always wanted to retire early and have just saved carefully for years.

Lynne Murtagh is a prime example. The 58-year-old was focused on making enough money to give up the daily grind since leaving school at the age of 17 – and achieved her goal in 2018.

“I came to the conclusion fairly early on that work wasn’t something I really enjoyed doing,” she said.

“It was always my intention to retire as early as possible.”

The initial retirement target

Lynne, who has enjoyed a high-flying career in human resources, initially estimated she would need a £100,000 pension pot.

She developed a three-pronged plan to hit this target:

• paying into pensions to provide an income;
• ensuring she had regular savings to bridge any gaps;
• paying off outstanding debts.

“I started paying into an occupational pension scheme when I was 18-years-old,” she said.

“I ended up with two pensions, which together now bring in around £1,200 a month after tax.”

Putting money into savings accounts was seen as important – particularly should there be a future shortfall between when she wanted to retire and when the pension could be drawn.

“I also made sure that I carried as little debt as possible – and paid it down when I could,” she added.

“Credit card debt is particularly expensive.”

Safer investments

Lynne describes herself as a “horribly risk-averse” investor who shied away from any investments other than employee share schemes and a sprinkling of unit trusts.

“I did have some endowments back in the day when you took those out to cover the mortgage but ended up selling them on – and we all know what happened to them,” she said.

The rest of her money has been kept in traditional savings products.

“As I had my eye on the long-term I was always happy to tie up my cash for long periods of at least five years,” she said.

“I was also paying down my mortgage whenever I could.”

Revised investment goal

As well as regularly monitoring if she was on track to hit her target, she also revisited her original projections to see if they were accurate.

“I started keeping spreadsheets of my expenditure so I had a realistic idea of what my future costs would be,” she explained.

This information covered everything – from the day-to-day living expenses to the one-off items such as holidays and replacing the car.

“I gradually built up a picture of what I’d need to maintain my lifestyle,” she added. “Assuming I retired at 50 and lived until I was 82, it meant I had to have those 32 years covered.”

This resulted in a revised investment target of £300,000 when Lynne was in her mid-40s.

While this is a huge upgrade on her initial £100,000 estimate, she’d fortunately been saving more than she’d needed to so it wasn’t a huge adjustment.

Underestimating the ‘what if’ scenarios

Central to Lynne’s long-term planning was the completion of various ‘what if’ scenarios – but even going to these lengths is no guarantee of success.

“I messed these up as I looked at the impact if the interest rate was 3%, 2% or 1% but never in a million years did I dream that they would drop as low as they ended up,” she said.

Unfortunately, she’d already pretty much paid off the mortgage so wasn’t even getting the benefit of a low rate on her borrowing – just on her savings!

“Luckily, being quite prudent about my savings meant I wasn’t too impacted by the rate falling because the interest I was getting on the capital was just a bonus really,” she added.

A relationship with the property market

Lynne had worked hard to whittle away her mortgage as she always wanted to be mortgage-free as soon as possible.

“It was then my intention to downsize when I finished work and release the capital from the last property I was living in when I was working,” she added.

However, she has now revised this plan and is actually planning to buy a bigger property, even though she acknowledges the day-to-day running costs will be greater.

“What I’m looking at now is moving the capital into income generation to supplement my pensions and my initial thoughts are getting involved in peer to peer lending,” she added.

Achieving her goal

The good news is that not only did Lynne achieve her target – she actually ended up with a net worth of almost £400,000, enabling her to buy a car and still be comfortable in retirement.

“I have transferred more of my money into lower-risk cash savings, such as ISAs,” she added.

“I also like the idea that I can access some of that cash fairly quickly if needed.”

Fewer commitments

Lynne is quick to acknowledge that her financial journey has been helped by not having children or getting married.

“I didn’t have those commitments – but I’d thought about them when I was making decisions,” she said.

“Buying a house and having a family are the biggest costs you’re ever going to face.”

Never wanting children gave her the freedom to pursue career opportunities. “I could go after jobs paying better salaries in other parts of the country,” she said.

It’s a similar story with not getting married.

“A lot of people my age have at least once divorce under their belts,” she said. “It sounds mercenary but I never wanted to be in a situation where someone else could take my money.”

Guide: how to get divorced cheaply

Advice for anyone wanting to retire early

Lynne insists people need to be aware of the worst-case scenarios for various decisions they make. What’s your fall-back position? How would you recover from a financial shock?

However, she maintains that a lot of the basic principles she followed in order to retire early are applicable to almost everyone.

“I’d advise people to get rid of debts where interest is being charged, if this is possible, and only use credit cards as a way to get free cash if you can pay it off each month,” she said.

Similarly, she is a believer in buying items you want on interest-free credit. “I baulk at the idea of paying interest on anything if I can avoid it – and that’s how I funded renovations to my house.”

The key, however, is getting into the savings habit.

“Commit to putting something away every month, even if it’s just £50, as something happens in your head that makes you not want to touch this money,” she said. “It’s psychological.”

Fighting for the best interest rates helps too.

“I’m constantly opening and closing accounts to get better rates – and with the internet, this is incredibly easy to do,” she said. “You can close one and open another within half an hour!”

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Revisit your plan regularly to see if you are still on track. This isn’t something that needs to be too time-consuming.

“Even if it’s an hour a month to do a quick review of your finances, or looking on price comparison sites for the best rates of interest, it’s worthwhile,” she said.