How To Retire At 50 With No Money

A Times Money Mentor reader shares her ambitious plans to retire early and the sacrifices she is making to achieve them.

Nicola Richardson, from Darlington in County Durham, has calculated that she can pay off her mortgage at 45 – and then retire at 50.

She plans to achieve this all on the joint annual income of £42,000 she shares with her husband Dave.

Nicola isn't alone. Check out Tom's story: "My stocks and shares ISA will allow me to retire at 40"

Nicola is bending the rules on Financial Independence, Retire Early (Fire) to suit her

Ambitious plans

"The numbers aren't so scary. And we're flexible – if it takes us a bit longer and we retire at 55 then that's okay too," says the 33-year-old part-time music teacher.

To retire at the age of 50, Nicola says they will need to save £306,000 to produce an £18,000 annual income between the ages of 50 and 67.

After the age of 67, Nicola will be able to start claiming the state pension, which she will add to what is left from the pot, plus their workplace pension schemes, to live on.

To build a savings pot of this size, the couple put £700 every month into their stocks and shares ISA with Hargreaves Lansdown. The ultimate goal is to build an income stream.

"I opened it five years ago and it already has £38,000 in it. I invest in individual companies and funds that pay a dividend, and reinvest any dividend payments. I was on track to get around £1,600 in 2020 from dividends – but that didn't happen due to the coronavirus crisis."

Find out more: How to retire early: the ISA trick

Following the Fire method

The couple are advocates of Financial Independence, Retire Early (Fire), an extreme saving movement that started in the US but has been gaining momentum in the UK.

It appeals to those who want to free themselves from the conventional idea of the 9-5 and retirement, putting an emphasis on investing and property ownership.

Fire ideology follows a simple calculation: multiply your estimated annual spending in retirement by 25.

So if you expect to spend – not earn – £20,000 a year, you will need a pension pot of £500,000.

Once retired, you withdraw 4% of that, or £20,000, annually from the pot.

Learn more: How to retire early using the Fire method

Adapting Fire to suit your lifestyle

The couple who have two sons – Alfie, 4, and Charlie, 2 – started their own Fire savings habit in 2015 but have adapted its principles to suit their life plan.

"We love our jobs but want freedom and choice," says Nicola. "We've estimated that if we didn't have the mortgage to pay, we'd need £18,000 a year to have a nice life.

"By Fire calculations, we need savings worth £450,000 – but we don't earn enough to realistically do that."

They came up with their stocks and shares ISA plan after sitting down to do some hard calculations and think about their spending habits.

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The sacrifices

In 2020 they did a "no-spend year": "So no clothes for us adults and only when needed for the children. There has been minimal purchasing of toys – they don't need any more!

"No meals out, no takeaway food. We don't pay for any streaming services. No books, magazines. Our food budget is £50 a week for a family of four."

She also tries to make a £185 overpayment on the mortgage on top of their monthly payment of £737. "We don't always manage it – not that long ago, we had to pay for the MOT on our car, for example."

Nicola admits that living well on less didn't happen overnight.

"I did low-spend months and days in 2018, and then in 2019 I spent no money on clothes or toys to see if I could make a mental shift from mindless spending to mindful spending in a bigger way."

After what was still an expensive 2019 – the couple spent £45,000 on a home extension – they decided to do a no-spend year in 2020.

Find out more: "Doing 'no-spend January' saved me £1,300"

Flexibility is the key

Nicola, who writes about her experience on her blog the Frugal Cottage, says people think she must be depriving herself.

"We have a lovely home, car, go on holiday, and the boys have gymnastics and football classes, swimming and soft play."

Being realistic and flexible is key: "There is always potential for surprise expenses or savings – we have saved £650 during lockdown, for example. And expenses for the boys will change.

"On the upside, I may earn more in the future if I go back to work full-time or Dave gets a promotion."

There is one spending habit she can't shake missing: "Takeaway coffee! It turns out I miss the ritual of stopping on my drive, picking up a coffee and having time on my own.

"I easily spent £600 on this a year – but after so many lockdowns I realise that budgeting for an occasional takeaway coffee is worth it."

Find out more: Guide to creating a family budget

What I did

Read about the Fire movement in 2015.
Opened and started investing in a stocks and shares ISA the same year.
May 2018, I did a low-spend month and started a no-spend month Facebook group.
In 2019, spent no money on clothes or toys, deleted lots of apps, unsubscribed from mailing lists, and avoided Amazon and eBay.
Spoke to my husband about doing a no-spend year in November 2019.
Did a budget forecast for 2020 and came up with a plan for how to cut costs and overpay the mortgage.

Find out more: Guide to a financial detox

What worked

We are both salaried employees so we know what we have down to the last penny.
I did the budget forecast and came up with a plan.
Dave and I have similar spending habits.
I still do no-spend days – it helps identify spending patterns. My danger zone, for example, is homeware and children's clothes. We have lots of tips on how to start – and stick to – a budget in Guide to budgeting
We don't buy a lot of stuff – clothes, takeaways, eating out – and try to get the children out of the habit of asking for plastic toys. We emphasis days out, picnics and making memories together. Holidays are important so have booked a cottage in Scotland this year, and want to travel abroad when the boys get older.
I read a lot and recommend The Monevator blog and also the books, 'I Will Teach You to be Rich' by Ramit Sethi, and 'Smarter Investing' by Tim Hale.
My stocks and shares ISA has slightly higher fees, but I found it the easiest of all options to navigate. I choose what I invest in and reinvest the dividends too.
I have learned from my mistakes. I had a "try and see" strategy, went in blindly and simply chose companies to invest in that I had heard of. This is not a good approach. I have a better understanding after reading and researching.
The common advice is "automate everything", but I like transferring money when I am paid as it gives me a feeling that I know what I am doing.
You have to be flexible – we have cracked during lockdown and bought takeaways to support local businesses. But it turns out it is a fun thing to do as a family.

Find out more: Best ready-made stocks & shares ISAs

What didn't work

I hadn't factored in the personal impact of giving up certain things – for example, takeaway coffee.
Be flexible; allowing yourself the odd thing is fine, especially if it brings you joy or comfort.

Find out more: "My stocks and shares ISA will allow me to retire at 40"

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