#9 Retirement

Debt current stands @ £25,300  (Student Loan £8,000, Credit Card Loan £7,300, House Loan £10,000)  

Probably the freezing cycle to work this morning in the dark has focused the mind... but my #1 aim is to retire as early as possible.

This morning I've been running through calculations to see how soon I'll be able to reach that goal.

Current spend (minus debt re-payment) is £2,200 per month, or £27,000 per year.

A million pound would return the below annually:

£10,000 based on 1% interest

£20,000 with 2% interest

£30,000 with 3% interest

£40,000 with 4% interest

This is the aim. 

So how long is it roughly going to take?

Based on current budget I should be saving £12,000 per year or £20,000 including bonus payments.

With no compound interest or investments this'll take 83 years (exc bonus) or 50 years (inc bonus).

We'll start wiith no bonus. So £1,000 per month saved

@ 3% annual interest it would take 42 years to save £1,000,000. Enough to retire on.

@ 4% annual interest = 37 years 

@ 5% annual interest = 33 years

Increase savings to £1,500 per month (including bonus payments) 

@ 3% annual interest = 33 years

@ 4% annual interest = 29 years

@ 5% annual interest = 27 years

The average savings rate over the last 20 years was 4%.  http://swanlowpark.co.uk/savingsinterestannual.jsp

So if I aim to save £20,000 a year (including bonus) and gain interest at a point better than average over the next 20 years I can expect to retire in 27 years, at the age of 57.

Not really that great.

This should focus the mind on improving the three levers I've used to generate this...

1) Increase amount saved (although in reality I need to pay off debt and achieve any savings first)

2) Decrease the amount spent

3) Increase interest rate (through investments etc)

I find I enjoy working through calculations such as this so much and the main purpose should be to sharpen the mind, focus and look for areas of improvement.