Planning for Partial Early Retirement

a pile of books, sunglasses, on a beach
Could you enjoy more of this whilst working part-time in your fifties?
Is early retirement realistic?

I started this site when I discovered the financial independence/retire early movement, which has gained in popularity in the UK over the past few years. At my age the likelihood of me being able to accrue a large enough portfolio to fund my living expenses before I reach traditional retirement age isn’t truly realistic. I’ve started too late. I am unlikely to be able to save enough money to stop work completely over the next ten years.

gold number four on a blue background
If you are going to receive a pension at 60 or 65 you can withdraw more than 4% from your portfolio
variations of fi/re

Whilst listening to an episode of the Choose FI Canada podcast about the 4% rule (i.e. you need to save 25 times your annual expenses and then can draw down 4% of that every year to live on without ever running out of money) I realised that there are many types of early retirement. They talked about lots of different ways that you can achieve financial independence. If you are nearing traditional retirement age then you should consider what your pension will provide when you get there. Unlike those in their twenties and thirties your savings don’t need to last for the rest of your life. You also don’t need to ‘retire’. You could work part time or change your job to something more rewarding, but which doesn’t pay as much.

the word money on a white background
Do you know how much money your pension is going to provide you to live on?
know your pension

I am lucky enough to have a ‘defined benefit’ pension. This means that I know exactly how much money I will receive when I retire. Nowadays most pension schemes are ‘defined contribution’. You put in a set amount, but what you will receive depends on how the market performs.

Do you know what type of pension you have? In the UK you are automatically enrolled into your company pension scheme and you should get a statement every year. Dig it out and take a look at it. How much will you have to live off once you reach traditional retirement age? Is that realistic for you or will you need to have some money in savings to live off as well? It may be that you’re lucky enough that your predicted pension will provide you with a great standard of living. If so, you won’t need a lot of savings in the bank pay for a new car or that luxury cruise.

arched stone bridge over a river
Could you use interest on your savings to pay some of your bills for a few years?
will your Savings bridge the gap?

Unlike typical FI/RE, partial early retirement allows you to use your savings to pay a part of your day to day living expenses. For example, in five years’ time I am hoping to have saved £71,000. This is nothing compared to the portfolios that those thirty-somethings need to accrue to live on, but it may be enough to pay some of my expenses so that I can work part time. If we apply the 4% ‘assumption’ i.e. draw 4% every year, that would be £2840 per year. Then divide this by 12 and we get £236. This would go quite a way to paying my half of the bills e.g. gas and electricity

Would like to reduce your working hours or move to a more rewarding job? How much money would you need to have saved to meet the shortfall between your currently salary and what you will receive once you’ve made that change? It may be that your living expenses will be less in the future. For example, you may be working hard to pay off your mortgage now, but decide once it reaches a certain level just to make the minimum monthly payment rather than overpaying.

the number seven on an orange background
Maybe you could draw down more money and reduce your nest egg over time
Could you draw down More than 4%?

The figure of 4% is chosen as it is believed that at that rate, the capital will last and still increase in value for many years to come. When you are you are approaching traditional retirement age, you don’t need to worry about this. It doesn’t matter if you reduce your savings pot a bit, as long as what you have left, along with your pension, will be enough to provide you with a comfortable life in the future.

make some extra money

Under this plan it seems very likely that I could work part time from aged 55, but ideally I would like to have paid off the mortgage by this point. If you want to reduce the daily living expenses that your savings’ interest will have to cover you will need to think about ways of earning more money. Those of us who have discovered FI/RE late in life may have certain advantages which enable us to do this. For example, one possibility is to do Airbnb or rent out a room. You can earn £7,500 a year doing this before having to pay any tax.

Are you aiming for complete financial independence or are you just hoping to work a little less in the future? I would love to know your plans for the future.

15 Replies to “Planning for Partial Early Retirement”

  1. Great post. I see no problem with semi retirement. I don’t want to achieve financial independence to retire completely but to give me options. I may want to retire, or to keep working, or to drop to 2 days a week, or change to a job close to home which pays less etc.
    It’s about the freedom to choose for me, not a need to retire early.

  2. 💕 Really enjoyed your detailed and honest blog. I would really miss your lovely blogs if you only wrote once a month. It must be incredibly difficult to write something when you sit down. I would like to know a little bit more about how and what was the turning point in your life that helped you decide on your future path. Do you feel happy/unhappy with the choices you have? Oh dear if this is a bit depressing please ignore my question. 💕

    1. Sue, you don’t need to worry. When I said that I may write once a month, I meant I might write a Frugal Friday post once a month rather than every week as I have been doing. At the moment I am trying to post every Tuesday and Friday, so I will continue to try to do that, but the FF posts are on hold.

      That’s a deep question you’ve asked there. When you talk about my ‘future path’ I am not exactly sure what you mean, but I will do my best to answer. In respect of my interest in keeping myself fit and healthy, this came about due to my diagnosis of atrial fibrillation (irregular heartbeat). As I get older it may get worse. I will most likely have to take blood thinners and maybe have an operation. I hope that the healthier I keep myself the less likely it will be that it will get worse.

      In respect of my financial journey, my interest in FI/RE is fairly recent. I can’t remember why, but a few months ago I googled ‘frugality’ and found ‘The Frugalwoods’. I did her ‘Uber Frugal Month’ and it went from there. Obviously, as well as saving money they are an example of the FI/RE movement. From that point on I started to look at my life through a different lens. Since then I have been consuming blogs and books on the FI/RE movement.

      As to whether I am happy with the choices that I have made, I would say that it is no use regretting the past as you can’t change that. Obviously I wish that I had discovered the FI/RE movement sooner, but at least I have discovered it now and over the past few months I have made major changes to my spending. I am starting to realise what is important to me and which things I am prepared to spend money on. I find that both reading and writing helps me constantly evaluate where I am going and I am really enjoying the journey.

      I hope that answers your question. If not, let me know. Sam

      1. 💜Thank you so much for your answers. Yes it’s everything I wanted to know, thanks, I appreciate your honesty. I felt from reading your blogs that you and I are reaching a stage in our lives were you realise that your priorities change. I’m a little older than you (55) and have reached a point were my life is changing, we feel in control of our future. My hubby and myself have never chased the Jones, so to speak. Mainly because we haven’t had jobs that payed fantastic salaries. We’ve always lived within our means. We haven’t craved big houses, cars and holidays abroad. For the past 5 years our sole focus has been to pay off all our debts. So at last we are mortgage and debt free. This means financial freedom, ok we still have the day to day running cost but I’m now working par time and my hubby has literally retired this week. So if we’ve done our sums right and continue to live a frugal lifestyle we should enjoy the next chapter in our lives. It’s not been an easy decision for us but we do love a challenge.
        💕Thank you once again💕

  3. Hi Sam—wow, thanks for the shout-out! We’re thrilled to have a non-Canadian listener. 🙂

    It sounds like you could quite safely scale back on work as you approach your pensionable years. Have you heard of Coast FIRE? (You have enough in investments/savings that, even without further contributions, they’ll grow enough to cover your retirement.) Maybe you’re there already?

    Even if not, it looks like you’ve got plenty of options to reach you goals. It’s always interesting and educational for me to read about other’s creative strategies for reaching FI. Thanks for sharing!

    1. Chrissy, I haven’t heard of Coast FIRE – any recommendations for good blog posts on this? I don’t think that I can stop saving quite yet, but at least now I have a plan and that feels quite exciting.

  4. I’m in love with the FIRE movement but plan to work until 55 because of the pension (and I currently enjoy my job a lot). I completely understand your logic. Freedom comes in a lot of different ways!

    1. I agree. The concept of FI/RE is so exciting. I just want to tell everyone I meet all about it. Unfortunately not everyone is as interested as we are. It’s great that you enjoy your job as there is a lot of people who don’t, but they can’t see that if they spent less they wouldn’t need to work as much. 55 is still early retirement, certainly here in the UK, where pension age is currently 67 for me and will probably keep increasing.

  5. You totally took a long “early retirement” in your 20s. We in the FIRE community get so fixated on full retirement sometimes that the whole goal of freedom, options and a fully designed, intentional life can get lost in the shuffle.

    1. The thing is that I didn’t know at the time what I was doing. I just didn’t want to get into the ‘rat race’ like everyone else.

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