How much is enough - what's your number?

 A big question in life and for those who are considering retiring early. I guess at the end of the day there is no right or wrong answer to this one as it depends on what sort of person you are and what sort of lifestyle you want to lead. Obviously some entrepreneurs are driven and always looking for the next deal or to accumulate more so they can keep up with a Branson or a Jones or whoever it is they aspire to be. If however, you have more modest ambitions and would just like to take it easy and be free to spend you time how you like - how much would you need? As someone who has done this I obviously know what my figure was and what sort of lifestyle I'm comfortable with but everybody will be different.

In deed talking of different there was a programme on Channel 4 in the UK recently called - How to retire at 40. So it seems that this might be a topic which is going mainstream? I did however have some reservations about this programme as some of the participants like the young guy making £23,000 a year from a few hours selling personalised potatoes and the lady turning over millions from selling cakes, didn't seem to have retired and might only have been aspiring to? While some of the others seemed like they were enjoying themselves on the beach or in their camper vans, apart from talking about saving money by budgeting, they were a bit vague on how they were funding their lifestyle. There was however one "expert" they had on there who was an accountant and he quoted the 25 times your required income as the figure - which is the pretty standard 4% "safe" withdrawal rate for retirees so they just run out of money before they die!

Now that may be conventional wisdom for normal retirees, but personally I think it may well be poor advice if you are going to retire in your 40's given increasing life expectancy, the ever receding date for state pension entitlement and therefore the number of years that you would potentially have to fund yourself and your lifestyle for. I also came across a useful website recently thanks to twitter and the always useful the7circles website for UK investors, which put me onto one that is called Early Retirement Now - although it is more US focussed I believe. They have however done some awesome research on the subject of safe withdrawal rates for early retirees. If that is of interest you can see an extract and download a copy for free here.

This raises some interesting points and generally pours cold water on the validity of the safe 4% withdrawal rate generally and in particular for early retirees. Their bottom line if you can't be bothered to read the paper (although I'd recommend it) is that 3.25% to 3.5% is a more suitable safe rate for early retirees depending on how much if any capital you want to have left at the end. Personally I prefer to be more conservative than that but I suggest 3% withdrawal rate might be a safer figure to work with which gives a number of 33 1/3 times the income you require as the sum of money you would need to retire early rather than the 25x quoted by the "expert" on the TV show mentioned earlier. Easy to remember too for older folk like me who like their music and who remember vinyl records which you had to play at 33 1/3, although I gather they are all the rage again now - what goes around comes around - you spin me right round baby right round like a record.... no stop it (see video at the end if you must).  So for example if you say wanted or needed an income of £30,000 then you would need to accumulate an investment fund of £1 million.

Now if that disappoints you, don't be discouraged because as I said everyone is different and their circumstances and requirements will vary. Indeed the Joseph Rowntree Foundation have done lots of work on this and define each year how much people need for A Minimum Income Standard (MIS) for the UK with the latest report for 2017 available to download here. They suggest a single person needs just under £18,000 a year for a MIS while a couple with two children would need £20,400 each I think. You can also take a short three question quiz from them here to define what your own requirements might be if that is of interest, but don't forget this is a minimum income standard so you might want to aim for more than the figure it suggests, depending on how you want to live your life.

Any way talking of living life, I've spent too long on this already - so I'm off now to get on with my life. I hope this might help you with setting your number if your are thinking of obtaining financial freedom too. Oh yes and here's some music as threatened 33 1/3 & all that!