How I plan to retire early using the FTSE 100

Rupert Hargreaves explains his plan to make a million with the FTSE 100 (INDEXFTSE:UKX) and retire early.

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Retiring early is the dream for many investors but, unfortunately, many struggle to reach this goal. The primary reason why so many fall short is they make silly mistakes. These can be as simple as overlooking the fees charged by investment managers, or as severe as losing all of their money on some high-risk mining stock.

I believe the best way to reduce the chances of making mistakes like these is to outsource your investing strategy.


When I say outsource your investment strategy, I don’t mean pay someone else to manage your money for you. Instead, I think the best course of action for many investors is to buy a low-cost tracker fund and let the market do all the hard work.

Even the world’s best investor, Warren Buffett, advocates this approach. Back in 2013, he revealed that, upon his passing, he had instructed the trustee of his wife’s inheritance to put 90% of her money into a very low fee stock index fund and the remaining 10% into short-term government bonds.

Buffett’s approach is supported by cold hard numbers as well. Over the past 100 years, the S&P 500 has produced an average annualised return for investors in the region of 8%. Meanwhile, over the past three decades, the average investor’s portfolio has returned less than 3%.

Using the FTSE 100

The S&P 500 is an American index, but we do have a similar investment index here in the UK. The FTSE 100 is its UK’s alternative and the returns for this index over the past 10 years have been equally impressive. Since 2009, the UK’s leading blue-chip index has produced an average annual return of around 7%, including dividends.

That’s why I plan to use the FTSE 100 to help me retire early. I calculate that I will need around £30,000 per annum in income in retirement. According to my calculations, this means I will need to build a pension pot of between £750,000 and £1m before I can quit the rat race.

Making a million

A million-pound pension pot is quite a lofty target, but it’s possible to achieve. Assuming an average annual rate of return of 7%, I calculate I’ll need to put away £1,500 a month to hit this target in 23 years. It will take 30 years with a monthly contribution of £1,000.

So that’s how I plan to retire early using the Footsie 100. By using this leading blue-chip index to grow my money rather than investing myself, all I need to do is make sure I’m saving enough every month. Then, I just have to sit back relax and let the FTSE 100 do the heavy lifting.

This simple process might seem too good to be true, but as I’ve tried to show in the numbers above, it’s possible to make a million with the FTSE 100 and retire early if you are patient and save enough every month.

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves owns no share mentioned. The Motley Fool UK has no position in any of the shares mentioned. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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