When Can I Retire?

Hi folks....so when can we retire?

Well, I had this exact discussion with a work colleague yesterday. Here is a rough transcript of that conversation:


Phil:  Hey Sam

Sam: Hey Phil....um, I wonder if I can ask you a question about retirement?

Phil:  Yeah sure Sam - but hey I'm not a qualified finance guy or anything  - you know that?

Sam: Yeah, that's alright. How do I figure out when I can retire? Like...the simple version (grins). Do you know how to do that math?

Phil:  Yep - so the simple answer is when you have enough invested to cover 25 times your yearly expenses....you can retire.

Sam: (Chokes on his biscuit) What??!

Phil: So yeah, just say your yearly expenses are say $60 thousand dollars, then times that by 25 and you would need $1.5 million dollars invested to retire and live off that drawing down $60 thousand dollars a year.

Sam:  I will never be able to save up that much!!  (expletive). Well, OK then, what percentage of my wage will I need to save to retire in ....say... 9 years.

Phil: (raises eyebrow incredulously) To retire in 9 years at least 70% of your wage needs to be pure untouched savings Sam.

Sam: OK, OK (snorts) well what about if I wanted to retire in 15 years - just being a bit more realistic.....?

Phil: Then that would require pretty close to 50% savings mate.

Sam: Strewth! Well, what about retiring in 30 years, would that mean 25% savings?

Phil: Nope - only about 20% actually......and 10% savings would be needed if you were to retire in 45 years time.  Look, I'll jot it down for you on the back of this envelope (I scribble on the envelope)

(What I Scribbled Down For Sam)

25 x your yearly expenses (lump sum invested)

Years to retire / net pay savings rate:
45 years - 10% savings
30 years - 20% savings
15 yrs - 50% savings
9 yrs - 70% savings

Sam:  But hang on, work pays us 9.5% into Superannuation so.....(scratches head trying to do the mental arithmetic)

Phil: Yep.... so we'll see you retiring in about 49 years using that percentage alone. (pauses with spoon poised dramatically whilst giving Sam 'the look') (side note...Mr HM has conspiracy theories about Superannuation, but spares Sam that conversation)

Sam: Oh no!!  So if I just rely on my Super' I'm gonna have to work for a lifetime.

Phil: Yup (stirs coffee nonchalantly) pretty much.

Sam: Are....are....are you sure you are doing the math right?

Phil:  Yep. I'm sure.

(long pause as this all sinks in ....)

Phil: (quietly) So....what are you going to do about that Sam? (me now feeling nervous...am I prying too much??  But I can't let this conversation finish unresolved like this)

Sam: Gee Phil -  all of of sudden reducing my expenses is really important - that way I will not need to save so much - Yeah?

Phil: Spot on Sir!

Sam: ...and, and, and earning some more but not increasing my spending also looks pretty important too ..... like, so I don't have to wait so long - Yeah? (looks at me hopefully)

Phil: Right again.

Sam: (sounding more hopeful now) ..... and I'll have to get a grip on how to invest and all that jazz so I get reasonable returns on my savings.

Phil:  Absolutely.....but learning how to invest is actually the easiest bit.

Sam: So in a nut shell (uses his fingers to tick off each item...) 1. Reduce my expenses ..... um, 2. Increase my earnings and, um..... 3. Invest wisely. Yeah?

Phil: ....... and do all three in equal measure. Each of those three is as important as the other. Like a triangle approach.

Sam: Got it. Good chat Boss

Phil: Y'welcome Sam. No more chatting but.... now go do it.

Sam: (smiles broadly) Yup.


Now can we see why the math is important folks?

Boring - but important.

Take care folks and stay nice.



  1. I suppose it does also depend on work pensions and here in the UK, government pensions. Since being retired we have continued to be frugal and from one work pension and one old age pension, still manage to save anywhere from £50 to £150 at the end of each month, as well as a similar amount each pension day. We want to be able to pay for help as and when we need it.

    1. I'm not really up on how UK pension accounts work but my guess is that you contributed to these either directly or indirectly during you lifetime over a long period of time. Sam at work was a young chap who will have to have his finances sorted as pensions will be non-existent here in Australia in the not too far distant future and all of us will be self-funded. In Australia the aged pension is quickly becoming viewed and treated as a charity payment rather than a earned payment to aged folk.

    2. Same here for some people entitled to pension credit but won't take it as they view it as charity. DB was in the Forces for 35 years so he has the pension, not huge at all, we just work hard at reducing expenses all the time. I am now having to pay into my government pension for another 5 years, from our savings we make, as I retired then they said I couldn't have my pension for another 5 years. No work pension for me as I moved too often:(

    3. Not sure if this site can help trace some work pensions you might still have from moving so often https://www.gov.uk/find-pension-contact-details

  2. Replies
    1. Ha! I think if this type of math were introduced when I was at school I may have pricked up and ear

  3. Sam certainly went to the right person, you always give out good practical and realistic advice, love your posts.

    1. I think these simple conversations can be a real wake up call for some.

  4. Expensive!!! I will set down and do the math...I doubt I will be buying a Lamborghini anytime soon

    1. The less you spend the less you will need and the quicker it can be saved up :-)

  5. Do you have a line up outside your office door, Mr. HM? With financial advice like that, offered for free and with kindness, I'll be surprised if there isn't one! Meg:)

    1. Ha ha Meg - some days I do get lots of questions and I publish a weekly "frugal Friday" email for my staff which they love.

  6. Luckily, my husband and I aren't the retiring type. I think we would go bonkers if we didn't have something to "work" on. They will have to pry the tools, from our cold, dead, hands. ;)

    1. That's real funny Chris - the visual there is a little too vivid! ha ha

  7. Well I am retired now, Mr.HM. Thankfully we had our old house paid off in the 1980s and have lived on the smell of an oily rag since then so have no debt. Good advice you have given your colleague.

    1. Your blog has always been a go-to for me since pretty much day one. The simple living community is so generous with their time and information.

  8. Good morning Phil,

    I always find posts such as this completely sobering!! Like you I am 50, and for the last almost 10 years I have been a sole parent. In other words, not a spare penny to put away in my (very small) super fund. However, from next year I will be in a better position to start putting money away - looking at the maths it had better be some serious money!

    I met an interesting couple yesterday who have started farming sustainably - that's what they want their main gig to be. But they have these other income streams - he's also an electrician and has just done a course on installing solar, they cut and sell wood from their property and he also does some handy man stuff. Multiple income streams right there!

    Have a great day,


    1. Excellent that you are entering a better time.....there is still plenty of time left to get that nest egg happening but it needs focus and determination - both of which you have bucket loads of! Yes, multiple income streams are vital - I'm working on mine that's for sure.

  9. HAPPY BIRTHDAY!!!! I hope all your dreams come true! :)

    1. Thanks Jennifer. To be honest all of my dreams have come true I suppose - a lovely family, a great job, old paradigms shifted and a bright future.

  10. It's interesting to read the formulas. I have a pension, and will receive Social Security. I plan to keep running my Etsy shop as long as I can. Some people in California sell their homes, and downsize. My cottage is paid off, and I have always lived very frugally. This little house is now worth four times what I paid for it. Some people in this area are cashing out now.


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