Is this the secret to retiring at 40?

WITH a rising state pension age and stagnating living standards, most workers would consider early retirement out of reach for all but the richest.

But a growing band of frugal employees are joining a movement that claims even modest earners can quit work for good in their 40s.

So-called ‘strong-willed super-savers’ hold back up to 75 per cent of their salaries and resist spending a single penny for five days a week – all while making shrewd investments.

Those behind the plan say anyone can ‘go from broke to never needing to work again’ within ten years if they follow the Financial Independence Retire Early (FIRE) formula – an idea born in the US.

But the mathematics require a person to have a nest egg equivalent to 25 times their annual spending – meaning huge cutbacks. That includes only taking cheap holidays, no expensive cars and never shopping for leisure. The leftover cash must also go towards the mortgage, ideally on a modestly sized home.

Anyone wanting £25,000 a year to live on will need to build up £625,000 in savings and returns from investments or buy-to-let properties and only draw out a ‘safe’ 4 per cent a year when retired.

The formula takes inspiration from the 5:2 diet, which allows dieters to eat whatever they like for five days in a week as long as they fast for two. However FIRE savers are only allowed to spend money on two days.

Accountant Barney Whiter, a married father of three from Farnham, Surrey, walked away from work at 43 by restricting his family to just £24,000 a year in spending.

He then invested the salary he saved in low-risk stock market funds and shares over two decades. Mr Whiter told The Times: ‘If you can save 50 per cent of your take-home pay, it will take 19 years to go from broke to never needing to work again. If you can save 75 per cent, it will take seven to eight years.’

More than 100,000 people globally are now said to be following blogs by FIRE proponents, including Mr Whiter. Golden Retirement Guide – Page 49