Could you really retire in middle age?
As a quarter of millennials fear they’ll face a lifetime of labour, a new generation of aggressive savers are quitting work early. Closer investigates…
Mary Okoroafor lives in a semidetached M house in the commuter town of Dartford, Kent, with her husband Ken and their two sons, Joshua, five, and Elias, three. They drive a secondhand car, shop at Aldi on a £50 per week budget and don’t own the latest gadgets.
But Mary and Ken, both 34, don’t struggle for money. In fact, when they got married seven years ago, the pair started putting half of their £40,000 combined salary into savings. They’ve used their money to invest wisely, meaning they’ll continue to make returns into their old age. In fact, they’re building up such a hefty nest egg, they could even retire.
BIG SACRIFICES
Mary, a marketing manager, says, “We have to cut back on the simplest of pleasures – we have a takeaway ban and I rarely go clothes shopping. But now we have the luxury to choose to go to work, although we don’t have any plans to quit our jobs as there’s value in work, too.”
Mary and Ken are part of a new wave of middle-earner millennials who are following the Financial Independence Retire Early (FIRE) formula. It advises followers to save between 50 and 75 per cent of their salary each month, before investing into property and low-risk shares. And experts have revealed that thousands of people, some as young as 30, are able to leave work with no mortgage and £25,000 a year to spend.
Jasmine Birtles, money expert and founder of Moneymagpie. com, says, “One in four British adults have no savings, so what Mary and Ken are doing is amazing. But they’ve committed to making big sacrifices, which may not be realistic for many of us. The average family of four will need at least £600,000 in their savings if they wish to retire at 40. They could invest this, making a return of about 5 per cent a year and giving them a £30,000 income. However, you can still save towards a comfortable retirement, later in life, by putting 20 per cent of your salary aside each month, and always opt into a pension – employers are required by law to offer one. Also, think about investing your money into ISAS. The Money Advice Service offers free and impartial advice.”
Mary was taught to be thrifty by her mum. “I’m one of four children, so my mum knew how to stretch her budget,” she explains. “I’ve saved since I got a paper round, aged 15. As I got older, I lived at home, so I didn’t have many outgoings. By the time I was 25, I had around £20,000.”
In November 2009, Mary met Ken, 34, an accountant, on a property investment course.
Mary says, “When Ken told me he’d been saving half of his annual salary since 2006, I was impressed. We started dating, but we’d go for meals out and trips to the cinema. So when we got engaged a year later, we decided we’d have to start aggressively saving for a stress-free future. We set a strict £50 food budget, and rather than socialising in restaurants, we hosted dinner parties. Thankfully, our families helped us out with our wedding, and we asked for money and practical items as gifts, which saved on the cost of setting up a home together.”
After their wedding in August 2011, Mary and Ken cut costs by moving out of London. They picked Dartford – still commutable to the city, but with low housing prices. They were able to overpay £500 a month on their mortgage.
EXTREME BUDGETING
Even after having children, they continued to budget.
Mary says, “I breastfed the boys for health benefits, but it saved on formula too. And Elias gets Joshua’s hand-me-downs. They also don’t have ipads, and we get them small gifts for their birthdays, like Lego. If they receive birthday money, we’ll invest it. They both have stocks and shares, so they’re already making money for their futures.
“If we want to go on holiday, we budget for that too. And for
❛IT HASN’T BEEN EASY BUT NOW WE HAVE THE LUXURY TO CHOOSE TO GO TO WORK❜
any unforseen emergencies, we dip into our savings.
“We also have a gift budget for family and friends. We spend £10 for children under ten, and £20 for children under 15. Other relatives have a fixed budget, too. We’ve never had any negativity about our budgeting – most of our loved ones are just curious.”
Now, Mary and Ken can stop working and, within four years, will pay off their mortgage. Their savings and investments mean they are unlikely to ever run out of money. Mary says, “When we turn 40, we’re going to travel around the Caribbean. It’ll be strange to spend money for a change, but I can’t wait.”