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Want to retire at 55? Here’s what to do

Want to hang up your work boots and retire young? The obvious thing to do is save, save, save… and invest.

Now I’m not blind to the costs of everyday life, to the constant demands on our cash, and how hard it can be to actually start saving. But I’ve traveled a lot and have friends in other countries who have saved, have invested, and are heading for decently comfortable retirements… while living a significantly more frugal life than many of us have come to expected here in the UK.

An expensive mobile phone plan, a TV package that you’d have to watch 10 screens, 24 hours a day, trainers with the right designer names…? Too many people see those as necessities.


I’m not going to start on the “When I was young” line. No, actually, I am… When I started my first job, I went from being a penniless student to having more money every month than I’d ever seen in my life.

At that stage, it’s relatively easy to save a significant portion and if you stash away, say 20% of your pay the moment you get it, that’s money you won’t miss because it’s money you never had. Keep doing that throughout your life and put the money into a good long-term investment, and I reckon you’ll be well on your way to an early retirement.

Today’s reality doesn’t quite go like that for most. According to the BBC, more than half of all people in their 20s in the UK don’t have a penny in savings. And of those who do, 40% have £1,000 or less stashed away. And for me, what adds to my disappointment, is the huge number of savers who just keep their money in a savings account earning a pittance in interest.


I was in a bank yesterday and they were proudly advertising saving rates of 1.45%. That’s below the rate of inflation, so the banks are effectively saying “save with us and we guarantee you’ll lose money.” Oh, and if you put it in a Cash ISA, you won’t pay any tax on your loss!

Starting young is the real key. But if you haven’t started yet then you obviously can’t begin any sooner than now. It might be too late to take the “20% of first salary” approach, but there are plenty of ways to improve your financial management today by following the savings habits of millionaires. But what do you do with the cash when you’ve saved it?


The average take-home salary in the UK is around £1,800 per month, and if you can save 20% you’ll be stashing away £360. If you put it in that 1.45% savings account, it will take 30 years to get up to £160,000 — and if inflation stays ahead of interest rates, the real value of that would be significantly reduced.

But if, instead, you put your money into FTSE 100 shares the way millionaires do, I reckon achieving 6% per year should be a reasonable target (with a decent chance of doing better).

At 6% per year, instead of £162,000, after 30 years you’d have £350,000. Manage 8%, and you’ll be looking at a cool half million. And if you invest 20% of a higher salary, you could do a lot better.

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Views expressed 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.