Saturday, 20 February 2016

Am I an outlier or could most people do it?

I don’t think there would be much argument that millennials have it pretty tough financially with their plight now starting to make it into the mainstream media (FT link or search “Why millennials go on holiday instead of saving for a pension”).  After all:

  • They’re graduating with big chunks of student debt that their grey haired work colleagues didn't have to contend with, while their even greyer haired fellow countryman are being protected with triple lock state pensions;
  • They’re unlikely to receive anything better than a defined contribution pension with no hope of a defined pension; and
  • They’re graduating into a housing crisis where houses are today priced in such a way that ownership, particularly in the South East, is almost beyond reach.

While this is going on as a Generation X’er I'm starting to get comments that my current personal financial approach has become a little extreme.  To me it doesn't feel like it but I'm also conscious of the boiled frog analogy.

So with both of these in mind I thought today I’d run a simulation to see if a millennial graduating today, who didn't want to be as extreme as I am, but also didn't want to roll over and be a victim could still FIRE (financial independence, retired early)?  So a Saving Hard'ish, Investing Wisely, Retire Early simulation.  In short the uncomfortable maths suggests that the answer is yes...

A millenials journey to financial independence
Click to enlarge, A millenials journey to financial independence

Let’s look at the story in detail.

Our millennial, let’s call him Dave, has just spent the last 5 years of his life completing a sandwich STEM degree.  Dave is determined to do well in life so while at University studied hard, took a gap year to gain some work skills and was also prepared to work part-time while studying to pay some of his way.  The end result was a good Honours/Masters degree, but unfortunately while Dave was able to cover his meagre student living costs, he was unable to pay for the education itself.  Dave therefore leaves University with a piece of paper, some work skills (some of which are relevant) and £36,000 of student debt.

These skills enable Dave to get a job quickly securing a salary of £28,000 which includes a 5% employer’s pension contribution if he contributes 5%.  Dave knows nothing of personal finance but the company pension adviser is pretty convincing so he signs up to the pension.

Dave’s student debt frightens the hell out of him so he decides to try and pay that debt down quickly making a pact to pay off the debt at a rate of £2,000 or 9% of salary, whichever is the greater, per annum.  After pension contributions, debt repayment, tax and NI Dave is left with £18,223 to spend.  This, even after the extra contributions, puts his leftover earnings pretty close to the 50 percentile of after tax earnings in the country so he’s not exactly struggling when compared to others.

In his first year of work, where he learns quickly and delivers consistently, Dave in his free time stumbles across the excellent Monevator site where he learns a lot about investing.  Through some of the excellent Saturday links he also stumbles across this site, The Finance Zombie and Quietly Saving.  This site is a little Extreme but Mr Z / weenie don’t sound like nutters so Dave is convinced that he too would like a piece of the FIRE pie even though he isn't prepared to go at it 100%.  In his 2nd year of work he makes a simple pact with himself – I’ll save 2/3 of any pay increase (after tax, NI and pensions salary sacrifice) I get from here on using the 1/3 remaining to increase my standard of living.

The teachings of Monevator tell him that those extra savings are put into a balanced portfolio, possibly even a simple Vanguard LifeStrategy fund within an ISA.  As he has time on his hands Dave holds a high'ish proportion of equities initially which enables him to earn a real (after inflation) return of 5% per annum.

Dave’s day job continues to go well.  For the first few years his real salary ramps at the rate of 8-10% as he learns more and becomes a valued employee.  (Note: The model assumes Dave increases earnings at a real 6% for the first 20 years after which he reaches peak earnings.  The starting and ending salaries look right but in between I’d expect earnings to grow faster early on, then slow down only increasing as promotions or job changes occur).

5 years into his career Dave’s approach has seen him increase his savings rate from 10% (the pension only) to 19%, his spending is up from £18,223 to a real £19,708, student debt is still hanging around like a bad smell at £31,116 and total wealth is still negative at -£4,842.  Dave doesn't give up in work or in his approach to seeking financial independence.  His work ethic is rewarded with a promotion to a senior technical team member which gives him another salary jump.

Roll on 10 years and that student loan is still there with debt of -£24,955 however total wealth is now a healthy real £66,254.  Come on compound interest, do your stuff for Dave.  His savings rate is now 27% which is far above that of most UK workers.  Dave’s now starting to manage people as well as doing his day job.  Another jump in salary occurs.

At age 40 Dave makes his final student debt repayment.  Instead of spending the money that was going to the debt Dave decides that FIRE really is possible and he has the bug so he starts putting what was going to the debt into his ISA and Non-ISA investments.  After all his wealth is now at £324,985 so why wouldn't he believe.  Things now take off in the FIRE stakes.

At age 42 Dave reaches peak earnings.  He can see more opportunity but calls it a day as he also realises that to climb the ladder further his work/life balance is going to get hit pretty hard and he really values the time that he currently spends with Mrs Dave and the Davelet.  His spending is now a real £24,826 which would put him in the top 1/3 of after tax earners.  His savings rate maxes out at 35%.

At age 43 Dave’s wealth just about reaches half a million pounds.  With FIRE fast approaching he decides to start de-risking his portfolio which also means that from here on in his portfolio only generates an average real 4% rather than the previous 5%.

At age 50 Dave has accrued real wealth of £926,195 and is spending £24,826.  Dave has also done the maths and realises his investment wrappers will mean that he will pay no tax if he was to give up work.  Dave realises that if he were to live off his wealth alone his withdrawal rate would only be 2.7%, which if history repeats, is probably enough to FIRE!  A small celebration with a bottle of champagne ensues.  The world just became Dave’s oyster!  That oyster might include continuing to work...

As always DYOR

  • Dave’s financial life could move forward in an infinite number of ways.  In this model for simplicity reasons I've assumed he doesn't buy a home.  In the UK we do like our houses and so if Dave was to buy a modest home he’d end up with less wealth but he’d also end up needing less to live on.
  • I've assumed a worst case regarding the State Pension.  That is that the country going forwards means tests the pension which excludes Dave because of his wealth.  If that doesn't occur Dave just gained plenty more options.


  1. Interesting but sadly I don't think your example ties in with the title of "could most people do it?". Good old Dave manages to hit peak earnings of £85k, which is definitely not something that most people could do, no matter how hard they worked.

    I would say re-do the example with peak earnings of the median UK income for a non-graduate who simply does not have the IQ required to complete a degree (say an IQ of 100, which is supposed to be average after all).

    1. Good to hear from you John.

      I admit I could have maybe spent some more time to come up with a better title but "Reasonably intelligent (I don't believe you need to be a genius) millennial, with a good degree, working in the productive economy and with a strong work ethic (but not as extreme as me) can still FIRE" was a bit long...

      I will challenge you on the £85k though for the type of person I describe. I know quite a few people, who admittedly have made some sacrifices for career, but not to the extremes I have pushed, who are at middle management level in roles that require experience and a good educational background who are earning this and more after reasonable periods of work. I picked the £85k number specifically as I've seen it achieved first hand multiple times by people who work hard but haven't sold their soul to The Man and at the same time would maybe be controversial. Remember that £85k is salary, employer pension contributions and any bonus which might be paid. It's also been achieved after 20 years of work in productive industry. I'd be interested to hear other readers views on this peak earnings figure as I do believe it's possible but I'm just one person?

      Of course it's not someone flipping burgers at McDonald's with no degree, even for 20 years, but I never said it was.

    2. Hi RIT, yes £85k is reasonable for the few who have the innate abilities.

      I guess a compromise which would cover more of the population could be as James below points out, to use the higher tax rate level as a reasonable peak earnings for Mr or Mrs Ordinary.

      For example, the median salary for a supermarket store manager is apparently £39k (according to, which is pretty close to the higher rate bracket.

      Reaching Store Manager is probably doable for a graduate working hard in a supermarket for 20 years.

  2. Excellent article. The spending figure of c.£24k seems low if he has a Davelet though. If Mrs Dave is taking time out or working part time £2k per month won't stretch far. £1k rent or mortgage, £400 for bills and food, £300 on the commute (think some squalid Hampshire town to Waterloo), the rest on clothes, the odd holiday, meal out etc. Difficult.

  3. I dont think 85k is unreasonable to include - I know a number of people who would fall into that category after approximately 20 years of working their way along, and some who have gone even higher (ok, some havent gone as far...) but to be fair you could model this for years with all sorts of scenarios, but would be interesting to see how it looks for someone who maxes out at say 35k...

  4. I agree the peak earnings are very high.

    I'd suggest using the upper limit of basic rate tax payer as a more realistic "Jo Blogs" (notice I used the form Jo, which could be male or female).

    According to data here:

    There are ~ 24 million basic rate taxpayers, and only ~4.5 million higher rate.

    An alternative may be to equal earnings to age. e.g. 20 years old = £20k, 50 years old = £50k.

  5. It think just neatly illustrates that you need to be pretty well off to consider early retirement

    According to the institute of fiscal studies achieving an income of £85,000 a year puts you in the top 2% of earners if you are single and in the top 92% of income if its for a couple with two kids

    Link here:

    The message is simple; early retirement is largely a rich man's game

    1. Yes. Only the rich need apply. This article is approaching the realms of the artful troll I feel

  6. As ever, a fantastic post. However I think you under estimate the challenge faced by millennials.

    You have achieved a 3% real return on your assets, why do you assume Dave can achieve a return of 5%? Even 3% will be pretty good. 50 year index linked gilts currently have a real yield of -1%, which implies future growth and returns are likely to be very low. What wealth could Dave expect if he “only” achieves a real return of 3%?

    Could you give more details about the assumptions you made about the interest rates on the student loans you assumed in your simulation? It looks like it’s 3% real for the first 7 years, which makes sense. But I can’t work it through after that. The real interest rate on student loans for people earning more than £41k is 3% + RPI. This is equivalent to 3.7% + CPI. What happens to your simulation if you assume a real interest rate of 3.7%? It adds an extra £10k in repayments.

    If the expected real return on assets is 3%, and the real interest rate on his student loan is 3.7%, should Dave make any investments before paying off his loan?

    You also assume that Dave’s real earnings will increase by 6% every year. This overstates graduates’ earnings growth, e.g. see this from the ONS.$ They found that graduates’ earnings grow by ~4.8% between the age 21 and 40. In absolute terms they rise from £14.3k to £34.8k. So your earnings growth assumption is around 25% higher than actual, and your figures for the level of graduate earnings are around twice what the average graduate can expect. How does your simulation look if you use average figures from the ONS?

    Furthermore, earnings growth has collapsed since 2008, so it’s not clear whether today’s graduates will experience comparable earnings growth to previous cohorts. On average across the workforce nominal earnings growth has fallen to around 2%, from around 5% in the past. What happens to your simulation if earnings grow at only 1-2% rather than 6%?

    You’ve forgotten to add interest to the student loan whilst the student studied. This is accrued at 3% +RPI for the three years of study. Which could add another £5k on the outstanding loan debt. This change alone adds another couple of years to Dave’s repayment and costs him £13k.

    Finally - what proportion of graduates have a pension scheme which offers to match their contributions up to 5%? What proportion of those can invest in an efficient low-fee pension scheme? Relatively few I suspect.

    I don’t think your historical experience of the labour market is representative of the graduate labour market in 2016.

    - A champagne swilling millennial

    $ Figure 9.

    1. Well I think this reply demonstrates that millenials are economically disadvantaged but no less smart than their elders

    2. I admire what you have achieved RIT but the comments here are not surprising.

      In many ways this post strikes me as evidence of just how hard it will be for the millennial generation to achieve the same. 28 years is a very long time, and much can happen over that timespan to upset these calculations, such as redundancy, divorce, childrearing, or illness, even before we address some of the assumptions about income and expenditure. I do think £85k is achievable after 20 years in most professions - it is just above the salary of a Chief Superintendent, full University Professor, or average Secondary headteacher - but most won't reach those heights. The expenditure assumptions are also peculiar - in London/SE England one would have to live a fairly monastic lifestyle to keep within those assumptions, particularly with a family or in London where the average 3 bed house rents for almost £2k per month. Dave might live in a cheaper part of the country, of course, but his earnings potential would also then be lower.

      In the earlier days of this blog you quite prudently refused to divulge your income or wealth, presumably because you thought it would be a distraction from your main message if readers discovered you were in the top 0.5% of earners (the IFS places gross incomes above £160,000 in that bracket, which I would hazard is a minimum from which to save almost £100,000 last year as declared in one of your other posts). The same problem beset Mr Money Mustache when he revealed that his early retirement was fed by an annual household income of $250,000+ . These are truly outlier incomes and it will be very difficult to persuade people otherwise.

      For millennials I think there is a high chance we will face a retirement poverty crisis in about 30 years, which makes this Government's endless meddling with pension benefits look even more reckless.

  7. cookoo land pay mate, most these kids today wont get £20k a year...

  8. Inflation plays a key role in future income and expenses.

    In the past we had high inflation in wages and the cost of goods. Over recent history we have had deflation in cost of living goods (food, fuel) which can allow higher saving rates.

    85K in 30 years time inflation adjusted may really be worth 40K into days money. This seems fair for a mature worker in my opinion.

    Demographics are changing where the baby boomers are coming up for retirement - hopefully the higher paying jobs are then passed down the chain. This could also provide a welcome relief to housing costs as people trade down \ move out of the job areas.

    Further "opportunities" arise from
    1. a second income from a spouse super charging the savings rate.
    2. work harder with a job outside of the day job that may grow into something much bigger
    3. be very selective with spending avoiding value and capital traps - avoid paying too much for rent (research locations and options to share the rent), phones (pay as you go and avoid contracts), cars (the entire cost of ownership based on your personal driving habits), food (cut out expensive meat and unneeded junk food), clothes (avoid designer brands)
    4. Plan to move somewhere vastly cheaper to live (buy a property) when you retire or even now and have a job that you can work from home.

    Without starting to save aggressively a person will never put themselves in a position to retire early. It may seem an impossible dream at first but you have to start.

    If they do try and decide that it is not working for them they can just go with the flow instead. Hopefully in a much better financial position with less debt and a bit of additional investment income.

  9. But I dont think the expenses have been adjusted for inflation so I think that's 85k salary in today's money effectively

    1. Don't worry RIT - rest assured that you are an outlier - no question. Don't pretend to be anything else.

      Your response 31/1/2016 @ 9:06 reveals an example of this " but a £5M vs a £90M win would make no difference to me" and again 31/1/2016 @ 18: " Saving £100 here and there means I don't need £5M let alone £90M to FIRE and be happy "

      I agree that there is a certain satisfaction to saving - but not so religiously as you (and your family?) must do . You are obsessed.

      I see that your figures above do not include mortgage payments - so your example will end up in the same situation as you are now in - not being a house owner.

      FIRE in itself does not mean that much unless it leads somewhere that you and your family want to go . You still don't seem to have much idea about that .

      But - carry on - your posts are of interest - they help me to focus on what my priorities are and to what lengths I am prepared to go to make that happen . But - it is driven by the intended outcome - not the process itself .

      Just accept that you are a complete outlier - but that does not make your posts any less interesting .

    2. Agreed 85K in today's money is a very large salary for one person.

      A combined salary of 85K is a very real prospect for mature graduates / professionals in the SE after 10 years in work. Less income tax paid on it when split between two people!

      What about a very crude calculation with lots of holes in it:-)

      Assuming after tax income per month is around £4,400. With 10% (5% by an employer) already paid into a pension(£850 per month), £1,200pcm rent, bills of £1000 gives total savings per month of around £3,000.

      25 times living costs to provide an income = 300K = 8.3 Years

      Add on cost to buy a property somewhere reasonable 200K?? 5.5 years

      A total of around 13 years. Add on how many years you need to work to earn 40K+ each say 10. In 23 years you could have the possibility to take early retirement in this hypothetical example....issues to consider

      1. Pension is "tied up"
      2. No investment gain is considered. Compounding gains will dramatically impact the numbers.
      3. No parental help
      4. No work bonus
      5. Future living costs

      There are many holes in this example, whatever is used is hugely dependent on personal circumstances and risk tolerances.

      For instance it is possible to make large gains from in work benefits such as subsidized share save schemes. Investment gains from one off payments like Vodafone, Amlin etc.

      A large stream of additional dividend income can be built up tax free in an ISA which could increase your income to a much higher level than your earned income alone.

      Clever investing and a good dose of luck could get a large stash of money quickly....from a much lower savings rate (salary)

      Likewise investing can lead to large losses :(

      Good luck to all

    3. @stringvest

      To be fair to RIT he does have a fairly worked out plan for his early retirement so your accusations are bogus

      With elements of sacrifice, hard work, arse licking and luck the maths set out here are achievable for a proportion of the people who try to do this

      Not many will succeed but all of them who make the effort will have a tidy sum of money to weather the misfortunes life throws at them

    4. is there a hint of survivorship bias to the RIT story - how many others focused in on working hard and earning top dollar but didn't, for whatever reason, end up earning 6 figures within a few years? Maybe they got disillusioned and looked elsewhere for their kicks?

      i have also noticed the *marked* contrast in clarity of thought between RITs process and his end-goal. This is very interesting and I really hope he keeps the blog up so we can see what transpires

  10. I think the calculation would work better with the Daves as a unit, with say £90k peak household earnings (assuming the earning potential reduced by the Davelet) and 2 student loans.

    I suspect the Daves will only be able to retire when they inherit a house from one or other parent in their 50's

  11. So to summarise, can a millenial do a RIT? Yes! And they only have to get into the top 2% of earners rather than the top 0.5%. But they will have to slog it out for an extra decade. Well that's that one put to bed then.

    1. A nice summary of the outcome of the analysis +1

  12. RIT - no-one could ever denigrate or dismiss your own achievement but £85k is way, way above what a hard working graduate, even Masters achiever could bank on earning (I'm one myself and I have a son there too.) Hard work and intelligence does not always equal high earnings and vice-versa (in spades) - thank goodness actually - we need some people for whom what they do matters just as much as how much they get paid and how soon they can stop. As always full respect to your take on this and the path you've taken :-)

    1. I was earning more than £85k in my mid-twenties more than 20 years ago with no post-grad qualifications

      It is entirely possible to make more money than this example, but:

      - you have to be totally focused on money
      - you have lots of competition for you job

      Can someone anyone do the example above; yes

      Could many people do the example above; no

    2. are you michael lewis?

    3. @Anonymous 2

      Read preceding RIT post on "Victims" m8

    4. ok - second guess is bank robber?

  13. As a regular reader, I think the real problem with this calculation is not the earnings, it's the real yield. Financial repression has collapsed real yields and it's hard to see this changing at any point in the reasonable future. I am close to a FIRE situation (probably already there to be honest) but am now assuming nominal yields of 2% and real yields of 0% in my forecasts for the future. I don't see this as conservative, just a mid point.

    1. A further problem is the overoptimistic assumption about pension contributions. This Government's attack on pensions is likely to result in i) the end of salary sacrifice for pensions, ii) a cut in higher rate tax relief on pensions, iii) a rising of the age when you can actually access that pension to 58 and beyond. So not only will Dave have a significantly lower pension than assumed here, but it certainly won't be of any use to him at age 50.

    2. Wouldn't "Dave" just use his other savings until he can access his personal pension?

      in respect of tax relief "Dave" doesn't pay higher rate income tax until 40 so he would benefit if there is a better rate for basic rate tax payers in the budget

      There is a big dose of "victim" in your post...

    3. What rubbish - pointing out facts is now 'victim' mentality? You come across as the archetype of a smug boomer.

      Removal of salary sacrifice (and therefore NI relief) would mean that even if a BR earner gets 30% relief he/she will be worse off. Dave becomes a HR taxpayer after about year 8 so the majority of his contributions will be affected by the tax relief reduction. In terms of accessing that pot it is unlikely to be as soon as 58 - employer pensions (which is assumed here) are increasingly linked to the State Pension age (likely to be at least 70 in 28 years time). Pensions will soon look very unattractive for someone in Dave's position.

    4. All done to keep the promise of no income tax increases in this term? The solution: raid everywhere else.

  14. To defend RIT: Firstly this is a PF blog, it's reasonable to expect the relevant parties to be above average in intelligence and to prioritize their earnings. Secondly, though some estimates may be optimistic, others (like the ludicrous 2.7% SWR) are pessimistic. It will probably balance out. Could everyone retire at 50? No. Could YOU retire at 50. Yes if you do the work.

  15. Isn't this the problem with compound anything?

    In saying that - peak earnings of £85k will probably not buy much in 20 years time.

    1. All the calculations exclude inflation

    2. If I'm understanding the model correctly, it excludes inflation when measuring wealth, but still assumes returns and salary increases similar to those in an inflationary world? How is this valid? How could you draw a conclusion from it?

    3. in the notes "real" means excluding inflation, i.e. Dave increases his earning by more than inflation and his investment generate "real" returns over and above inflation

  16. You are an outlier RIT - look at the SWR assumption! :)

    Why would you look at a post like this and pick apart all the, supposed, inaccuracies in the assumptions instead of thinking about the possibilities. It's preeeeeeeetty unlikely that one set of assumptions are going to align with you as an individual, the generic individual or with how the future unfolds. It's just a simple model, to illustrate a point. This FIRE stuff is real :)

    Is early retirement a rich man/womans game? Rich might be pushing it a bit, but earning more than the national average has to help. No one's stopping you from earning more, there's no sign above your head saying "No, not this one". It might be harder/easier for some, but not impossible. Besides, it's just one way to look at happiness, which is what it's all about. Freedom, from work using investments, eventually bringing happiness. Other people will find happiness in different ways. If you're working in a field that doesn't pay £85k a year but you are truly happy, what's the beef with that? Yes, £85k is higher than the national average, but it's also not astronomical. (Besides, if you slashed the SWR to 4% you could reduce the wage to £57k ish).

    It's a self fulfilling prophecy in many ways, chasing FIRE. Cut your expenses back to find your happy medium. Then to speed up the journey you look for a way to increase your income as it's the obvious avenue and variable to attack. You have a purpose and a defined long term goal. So it eventually happens, the rise in your income.

    But I suspect it's RIT's outlook that would make him an 'outlier', rather than an arbitrary number like a wage. (In the same way that readers of this good blog or Monevator are as well).

    Mr Z (not a nutter)

  17. Is it a good time to sell Australia?

  18. Cheers for the mention, RIT. My friends think I'm a nutter when I mention early retirement! I do think you are an outlier, but I continue to learn and be inspired by your blog. I hope to show that people on modest incomes can retire early too.

  19. Mate, your assumptions are ridiculous.

    Someone who wants to retire early, who can't be bothered to save like he means it?

    This is a tale of a lucky man bailed out by high earnings and strong returns.

    I do believe that people on much more modest incomes can retire, but it wouldn't look like your numbers imo. It would involve going at the saving much more hardcore in the early days.

    As a mid-20s, I'm already lagging Dave's salary, but beating his Net Worth. Only time will tell if I can (and keep wanting to) retire particularly early, but I really don't see why not. It's just that you're showing how stellar earnings make it possible to do it without breaking a sweat. Everyone in the comments bitching about how difficult it is to earn 85k p.a. are forgetting that you can work harder on savings as well as earnings, and that's more doable for most people.

  20. 85k pa is perfectly reasonable in London. However 24k expenses isn't - rent of a small house in not great area alone on the outskirts would suck up all of the expenses. To get cheaper living costs would mean moving out of the SE...where earning a salaried 85k is nigh on impossible.

  21. Unrealistic and flawed calculations and projection, and not "real world" because does not factor in home and property purchase (deposit, misc costs) and assumes that almost all disposable income diverted into pensions/savings/investments.

  22. I feel the thing being missed here is that nothing goes wrong in Dave's life. Not wrong as in being wiped out by a bus, but he doesn't marry the wrong woman, or buy a house at a market high, or 'needs' to send his kids to public school, which would consume 10% of his FI/RE stash in itself...

    I had a fair amount of luck in the round and got to retire a little bit later than your Dave, at 52. I took one of those hits (the house price bit). Accepted that in high-flying jobs career progression seems to be faster these days, but an awful lot of things can go wrong for early retirement plans in thirty years of work. Real human lives have more drama IMO. Observation shows the number 1 killer of decent earner early retirement plans is divorce if there were children, and arguably if they avoid that the #2 killer of early retirement plans if people becoming the Bank of Mum and Dad because they see things going ghastly for their kids in the student debt/house price arena you describe for the Millennials. Yes, they are fuelling the very fire that is burning them, but that's the way of a tragedy of the commons.

    1. This is an interesting point. Yes nasty surprises can and do happen in life with the caveat of who knows?

      There are a few thing that can be done to mitigate problems such as:

      1. If you are planning for early retirement and it is going wrong be ready to adapt as early as possible. What do you have in place to say that you are going wrong and have to change? Do you have options on the table?

      2. If you are sacrificing your marriage for FIRE - change course quickly....perhaps you are not on the same page regarding life style choices and need to sit down and have a good discussion about what is going wrong and what you really want. We had to have frank discussions (arguments) to clear the air it sucks.

      3. Make sure your kids are equipped to succeed on their own. Instead of pandering to them challenge them to be resilient and able to stand on their own two feet. Real life experiences, failures etc can be given at an early age and they will be all the better for it. Throw out the TV etc and get them out in the real world. Ideally help them get a job and save before getting in debt. Ideally they should be taught how to live without debt.

      4. Encourage them not to buy a property until they can really afford it. If they buy too early all their income just goes to the bank (unless rooms are rented out) instead of investing and increasing their income.

      We have setup small investments for our kids with income producing funds and dividend stocks so they can see investing and compounding in action.

      We did not buy until we were ready to take early retirement (missing out on the huge run up in house prices). We have chosen to live somewhere "cheap" and nice in the SW of France making the whole thing possible.

      Unfortunately UK house prices are very expensive at the moment making ERE in the UK very difficult (hence the 85K discussion) - could you live somewhere else...

      Finally in early retirement make sure you have spare income each month and keep on saving and investing part of it for these unexpected costs (of which we have had too many already - reduction in income and house repairs).

      Good luck to all

  23. Is paying off a student loan faster optimal. It gets wiped out after 30 years and you stop paying it off when your taxed income falls below a certain level so if you invest the money you reach fire earlier and eventually a large chunk of debt evaporates.


  24. Good article, one niggle. The new student loan regime doesn't really allow for early payback. Most people will have to pay 10% of earnings for 30 years through PAYE. The only people who could pay back early will earn in excess of 100k. Otherwise you're stuck with extra tax. So students will now also have to decide if a degree will give them that little bit more.

  25. I think RIT is an outlier in his particular situation, but I think others can do it. The original post is useful if it can inspire anyone to take up the challenge, whereas the FT article headline suggests that many will not. The details of the simulation can be challenged and changed but a successful outcome is possible for some but not many.
    I think a combination of high earnings (a top 10% earner for several years), low spending (turning away from the consumer society), high saving (building up quickly to 30% of take home pay), and good investment returns (6% real after inflation returns), and a thirty-year time period might be needed. Student debt, housing purchase or rental costs, and investment sequence of returns risks would all be obstacles. A stable relationship with both partners committed and contributing to this approach, and enjoying continuity of employment, are likely to be needed.
    Good luck to those who are inspired!