How Much Life Do You Sacrifice In Pursuit Of Early Retirement?

A good friend and fellow poker player recently read the blog and asked me why I hadn’t considered a concept he calls life expected value. He rightly said that a year at the age of 22 would probably be worth two or even three years at 62 based on the variety of things you can do. Although the exact calculation would be impossible to make, I generally agree with him that as we get older we’re limited by health and can’t do as much as we’d like. Having said that if you keep in good health, there’s no reason why you can’t enjoy a lot of things.

My dad, 59, travels abroad several times a year using passive income from real estate investing.

My friend continued with the often quoted phrase that he’d rather live now than save until he’s 65 in a nursing home. Spending some money on horses and going out for a few drinks is what makes him happy, and as long as he has a few thousand pounds for emergencies he’s content with work. Fair enough. But then he regularly complains that work is killing him, especially those 13-hour shifts.

It’s not that I hadn’t considered this. For sure, if we were being pedantic, we could die tomorrow and nothing matters at all but chances are most of us reading this will live beyond 65.

The first concept is that to retire early you don’t need to save until you’re 65, not even close. You only need to save enough money or create enough passive income to sustain your spending habits. So either increase your income or reduce your expenses. If I could live on £300/month I could retire right now. Unfortunately that wouldn’t even pay for my food.

If you’ve paid off your house and can live off £1,000 a month happily and comfortably, you only need £12,000 of passive income to retire. Consider the table below. The UK has historically rewarded investors a 5% annual real return (after inflation; past performance not predictor of future performance) and based on this you would only need £240,000 of invested capital to retire.

Trusted Google advises me that the average UK salary is £26,500 which is £2,208 after tax. Let’s assume it’s £2,100 after pension contributions. Using a savings growth calculator with a conservative 4% growth if you save £650/month you’ll reach the required £240,000 in 20 years. 20 years is still a very long time but if you started working at 25 you retire at 45 which isn’t too shabby.

The alternative is winning the lottery or work another 20 or 40 years after 45!

Amount Of Capital RequiredReturn On Investment (Real)Target Retirement IncomeHow Many Years It'll Take If You Save £650/month at 4% growthHow Many Years It'll Take If You Save £1,000/month at 4% growth

Can you realistically save £650/month on a £2,100 payslip? I’ve lived in England before as a single lad (one income) with bills just like the rest of us. Rent, council tax, bills easily added up to £1,000/month. Groceries are especially expensive for me as I like my smoked salmon so I could estimate £300/month, sometimes even more.

I made a conscious decision not to have to commute to work so no travel expenses. Instead of sacrificing life by not having a car I actually gained life by not being stuck in traffic all day! I was only 10 minutes away from the train station if I wanted to go into Leeds or Manchester. Although I hardly spent anything on booze I also had lots of exams and medical memberships to pay for at the time. The three MRCP exam fees alone cost me £1,495. A PACES course cost me £1,400! The GMC membership costs me £400+ every year. Not to mention the travel expenses and hotels, I could go on.

Despite huge expenses I still managed to hit that £650/month even though my monthly salary was only a couple hundred higher than the above. No sacrifice was involved as I lived and ate well and went out as much as I liked to. I just didn’t buy clothes or gadgets every month as I know these things don’t make me happy. I still managed to pay for a £2,000 holiday to Japan.

If you can live on £750/month or 9k a year in your retirement then your required capital drops to £225,000 based on a conservative 4% ROI.

In conclusion you don’t have to sacrifice any life or work until 65 to retire. The irony is that anyone who refutes this will probably have to work until they’re 165.

If you think you need to spend £2,100 or even more to attain a good life then you should ask yourself how a person flipping burgers on £1,000/month gets by. One final note – if your spending habits are too high you’ll probably never retire in a reasonable amount of time. Up your savings to a huge £1,000/month and it’ll still take 41 years to produce a retirement salary of £48,000.

P.S. I learned everything I know about finance from this book, this book and that oneamongst many others. For a more extensive list, don’t hesitate to drop me a line at If you prefer learning through listening use this link to earn a free audiobook of your choice by signing up to their 30-day free trial. Simply cancel with the click of a button if you decide later on that the service isn’t for you, no questions asked.