As a teacher, how can you reach early retirement?

Today we are focusing on the actions you can take to retire early. Carly, a teacher from the South East of England, would like to tell us about her journey to FIRE’ing early. The information in this article relates to any career that you are pursuing or wish to pursue.

If you reached this page, you’re most likely a teacher looking to reach financial independence and retire early. The traditional retiree retires between 60 to 65 but not the early retiree.

Anything you can do to retire before 60 makes you an early retiree.

If you take action and do just some of these things that we’re going to be talking about, you can move that date up even sooner.

Carly was on that road to financial independence for eight years; she quit her public service-funded job and her husband and retired to Spain. She now lives in Spain, enjoying that early retirement.

One thing that you need to do is calculate your fire number or their financial independence number. Luckily you could do that on this page here. This number is the amount of money you would need in assets to call yourself financially independent.

Those assets cover your expenses in retirement.

Calculate your savings rate

Savings are the engine to creating your net worth. If you have never done this, it could blow your mind how much you’re saving compared to what you think you’re saving. Your savings are the engine to your investments, and these will lead your way to clear any debt and ignite your FIRE journey.

With this savings rate, you can estimate when you will be able to retire. So your savings rate considers how much money you’re making, how much you’re saving, how much you’re spending, and that extra money you’re making to reach fire early.

Her savings rate was 70% for Carly, and she reached that rate. She didn’t start at that rate, she worked her way up to it, and this is very important for you to work your way up to a high savings rate to retire early.

What goes into your savings rate:

It is any money left over after your mortgage, food, bills, childcare expenses etc. It’s the money you have BEFORE any investments are subtracted, even before your pension, because your pension pot will help you retire early and set you up for when you reach 55 ( the minimum age to withdraw from most pension pots).

Create an investment plan

investing money for early retirement, you must have an investment plan in place. Carly and her hubby had a goal to invest very aggressively to hit their goal of retiring before 40 years old.

She was saving 70% per cent of her money. That means that 70% of her income was going towards investments; she was pouring it all in. One of the areas that she focused primarily on was her retirement accounts.

When you’re on this journey towards financial independence, it is essential to maximize your tax advantage accounts such as Sipp, ISA, Lisa etc.

Now, of course, you don’t want to stop at those tax-advantaged accounts. If you want to speed up your retirement date and retire early, the idea is to max out those accounts and then move on to a general investment account, GIA, through a broker.

The more you can invest, the more you can save the earlier you can speed up that early retirement date. Most people who traditionally retire put away 10%, maybe 15% of their income, to retire by 60 or 65, which is very near retirement.

But imagine if you can save more than 10 – 15%, the math makes sense; you can retire early.

Understanding your withdrawal rate

Or withdrawal plan. During early retirement, this is very important because you’re socking away all your money and your investments into your investment accounts.

You need to know how you’ll access that money; it’s an essential component to understanding how you can retire early.

I love this point because you should know well in advance how you will access the money you are saving and investing. Knowing your drawdown strategy and how you will withdraw that money when you achieve financial independence is critical. Typically, this is around 4% due to the market’s delivery an average of 8% per year. It’s found to be used as a rule of thumb, but if you have a reason to use a different withdrawal rate, you should use that instead.

Some important things to keep in mind are that you will be living just primarily on your brokerage accounts. These are all things that you have to understand, and you have to understand them before actually pulling the switch and retiring.

It’s a process to understand where you’re going to be putting your money and how you’re going to be pulling it out to live off of in early retirement.

Drawdown strategy

It’s to develop a phased plan as most people will have multiple income streams when they retire at the traditional age. The typical retiree could have the following: Pension income, Sale of company stock, dividend income, ISA account dividends / Capital gains etc.

All of these things are a part of your retirement plan, so you need, as an early retiree, a plan to draw your money down.

Maybe you’re starting first with your pension lump sum, brokerage account, then you’re moving to your ISA and then your cash reserves, and finally, when you’re at the ripe old age to access your state pension, that money kicks in.

It is a holistic, comprehensive approach to an early retirement plan. Don’t just think about it when you retire at 40; think about all the different phases of your life and how your phased retirement plan will kick in.

Plan for the worst-case scenario

I know when you’re on this fire journey, you’re always looking for these great things to happen so that when you retire, you can have all this extra time you get to do the things that you enjoy.

But, things can happen, and you have to plan for them. That means having proper insurance. There is nothing worse than not being correctly prepared on your fire journey and having a disaster happen and then having it wipe out all of the progress that you made.

You want to make sure you’re adequately insured; you want to make sure that you have an adequate emergency fund before you start investing, for example. These are the types of things you want to take into account along your fire journey because that will help secure the assets or the portfolio you have been growing to retire early.

Write these all down in a plan.

Know them before you encounter them because another thing to keep in mind is assessing all of your future responsibilities.

The money you’re going to need in early retirement will impact your fire number, so you do not want to have a fire number that’s calculated too low because you do not want to run out of money.

Create a side hustle

I know this will cringe a lot of my readers as I repeatedly make this point. It would help if you had a side hustle, especially in this day and age. Your main hustle cannot be your only hustle.

There is only so much money you can save, so the more money you can make, the more money you can invest on your road to financial independence.

I’ve got plenty more articles about side hustles HERE.

Get your money mindset right.

On this journey, your mindset is vital, and if you believe that you will not achieve financial independence, you will not achieve it.

You will encounter challenges and limiting beliefs, but your mindset will help you get through them. We are firm believers in positive thinking and surrounding ourselves with positive people who all support your mindset

It helps you think creatively, so thinking of ways to solve problems, so those are our nitty-gritty tips on how you can retire at an earlier age now. If you’re interested in learning more about investing and financial independence, please take a snoop around the blog for more great articles.

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