In my last post, where I shared my 2016 goals, I set myself a task to create a "FI before 50 Roadmap" containing the steps I need to take to become financially independent before reaching the age of 50 (giving myself just over 9 years to achieve FIRE). This is because my ultimate goal is to:
"Gain the freedom to choose what I use my time for, removing the necessity of doing work that does not inspire me simply because it pays the bills"
In today's post I lay out the roadmap I have created. As with all good plans, I'm sure that changes may be necessary along the way, so I'll revisit the roadmap to make adjustments if I feel that something is not working to get me to my ultimate goal.
I would like to begin with defining what I mean by Financial Independence. Here's a quote from wikipedia which describes it more eloquently than I would be able to:
"Financial independence is generally used to describe the state of having sufficient personal wealth to live, without having to work actively for basic necessities. For financially independent people, their assets generate income that is greater than their expenses."
In order that I can stop working at age 49 (just over 9 years from my starting point in Feb 2016), my strategy will be to save and invest money over the next 9 years 3 months into a mix of:
- My Freedom Kitty - comprising personal saving and investment accounts (Stocks & Shares ISAs, high interest savings accounts etc)
- My Personal Pension
Just before my 50th birthday I will be able to consider myself Financially Independent. This is because I will be able to use my Freedom Kitty to support me for the 7 years until I reach age 57 when I'm permitted to start drawing my Personal Pension. In doing this I will effectively be depleting the Freedom Kitty (it won't be large enough to support an income from the return on investments), but this approach will satisfy my ultimate goal of early retirement and is more achievable than trying to build the Freedom Kitty up sufficiently to generate enough income to allow it not to be diminished when I start withdrawing.
By age 57 my Personal Pension will be large enough that it can cover my annual expenses from the return on investments, so I can enter into Income Drawdown without depleting the underlying funds.
FI Before 50 Roadmap
In order to achieve my goal of retiring before 50 I need the following financial targets to be met:
Freedom Kitty must reach £209,590 by Jun 2025 (age 49)
- I anticipate achieving this by saving £1,554 per month
- I anticipate achieving this by saving £1,180 per month
This results in a total monthly saving goal of £2,734
This plan assumes that any mortgage commitments are paid off by my age of retirement (57).
The most difficult part of this plan will be achieving the saving rate of £1,554 per month into the Freedom Kitty. I am only just starting on my journey to FIRE in some respects, I have not yet learned how to achieve a high savings percentage so this will be my biggest challenge.
The pension savings target is definitely achievable for me, I am saving more than this per month at present (£3,000 per month). This is possible because I have been freelancing with my own business for 4 years and have built up a pot of funds in my company account which I am using to max out my pension contributions. However the ability to pay this much into my pension depends on the frequency of contract assignments I work on and the rate I am able to charge for this work.
Do you have a strategy and roadmap to get you to a FIRE goal? Do you have a similar situation to mine, where you already have significant funds in a pension pot which you'd like to factor into your FIRE calculation? I'd love to hear of your FIRE plan!