Planning for Early Retirement – Part 1

I love my current job but I don’t want to be part of the daily grind until I’m 68 (probably older by the time I get there!) so I want to build my financial independence so that I have the option to retire early. That doesn’t mean necessarily never working again or spending all my time drinking Pina Coladas on a beach so perhaps a focus on financial independence is more appropriate i.e. opening up a world of options.


There are three steps to planning for early retirement or financial independence:

  1. How much will I spend once I’m retired?
  2. How big a pot will I need to service my retirement spending for the rest of my life?
  3. How long will it take me to generate that pot?

In this first part of three posts, I’ll be looking at how much I estimate I will spend once I retire.

I’m assuming that I will have paid off my mortgage and loans by the time I retire so these expenses will not be included. In 2017, I spent £21k excluding mortgage, credit cards and loans. Although I did save £5k of the £21k, these funds were already allocated to be used in the short term on travel, annual expenses or unexpected expenses and by the end of the year I’d used this up.

I’d also want to add in annual budgets for:

House maintenance – £1,250 based on 1% of £125k purchase price

This is based on the current house I live in and although we may move in the future I’m not planning to buy anything much bigger or more expensive. We also tend to undertake house repairs and updates ourselves so expenditure will largely be restricted to materials without the more expensive labour costs. So many friends and family pay others for basic maintenance such as painting and decorating (and full disclosure – I used to do this too!) where the labour cost is very expensive and the outcome is not often better quality than what you can do yourself.


Car maintenance – £400 based on 5% of £8k purchase price

This is based on the Auto Trader recommendation and is purely for ad hoc repairs. Other car related costs – insurance, fuel, service and tax – are already included in my current expenses.

Car replacement – £800 based on £8k purchase price and 10 year life

This is to account for saving for when a replacement car is required. The average age of a car when it is scrapped is 13.9 years based on the 2017 Automotive Sustainability Report from the Society of Motor Manufacturers and Traders. It seems reasonable to assume then that I will be able to buy a 2 year old car and keep it for 10 years before requiring a new one.

Children – £5,300 averaged over 21 years


We currently have no children so this estimation is based on very limited evidence! The UK average cost of one child over 21 years in our area is £222k which is huge! I’m banking on developing our frugal ways to halve this and with a maximum of two planned children reuse what we can from the first child so that additional expenditure is minimised. We are in a potentially lucky situation in that there are a lot of young children within our family and we may benefit from a lot of hand me downs and free baby sitting (which we will obviously reciprocate!). Childcare is a major cost so when we get to this stage, we will need to review what the best option is for us. It’s likely that we wouldn’t need to include this expense post 61 assuming I have no more children after the age of 40. There are lots of assumptions in this section so I will be reviewing this annually to update.

That takes my required retirement income to £28,750 but I like round numbers so I’ll take that to £29k.

I think that covers all the bases (but feel free to comment below if you think I’ve missed anything!). I’ll be looking at the next step of planning for early retirement in part 2 of this series coming soon.



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