Will you be able to Completely Retire in 10 Years?

We all dream of retiring as soon as possible. Some of us want to retire in as little as 10 years.

By investing in accounts such as ISAs, we can do so by withdrawing our money before age 57.

But the question is, using maths, will my ISA last until I can withdraw money from my pension?

The first step is to calculate how much your ISA could potentially be worth in 10 years’ time.

You also want to see how much your pensions could potentially be worth in 10 years’ time.

You then want to calculate how much you think you’ll be spending per month in 10 years.

Finally, you want to subtract your spendings from your ISA a year and see how long it lasts.

In this article, I’ll be going through an example: a 30 year old couple trying to retire in 10 years.

Their plan is to be able to withdraw from their ISAs age 40 and then their pensions at age 57.

I see if their ISAs last them through to 57 and if their pensions last them through retirement.

Step 1: How much will their ISA be worth in 10 Years?

The first step is to figure out how much their ISA could potentially be worth in 10 years’ time.

We’ll assume this couple save into the same ISA as they don’t exceed the £20k per year limit.

To see how much they could have, we’ll use the MYB Early Retirement Calculator (with Yield).

We’ll make a few assumptions: £5,000 invested, 10% growth, £1000/month, and 1.66% yield.

Plugging these numbers in, we can see that in 10 years they could have a sum of £227,050.

Note: this doesn’t take into account fees, but if they invest in index funds, they will be low.

This also assumes that they will be contributing £1,000 a month for 10 years – consistently.

It also assumes there’ll be a 10% annual rate of return: some years more, some years less.

However, this calculator gives a rough estimate of what their ISA could be worth in 10 years.

In fact, for simplicity, let’s say that this couple may have around £250k in their ISA in 10 years.

Step 2: How much will their Pensions be worth in 10 Years?

The next step is to calculate how much their pensions combined could be worth in 10 years.

We’ll assume that both members of this couple are working and each paying into a pension.

We then use the MYB Realistic Pension Calculator to calculate what their pensions could be.

Some assumptions: £45k starting salary each, 10% annual growth, and 4% contribution each.

Based on these inputs, we can see that each person could have around £69,576 in 10 years.

This calculator doesn’t take into account fees but again if invested in index funds fees are low.

This also assumes their salaries will increase 3% a year and investments will grow 10% a year.

Employer contributions are quite low in this example, some match or double your payments.

However, we will assume that in 10 years, each person will have a pension of around £70,000.

Collectively, we’ll say that this couple would have accumulated a combined pot of £140,000.

Step 3: Will their ISA get them through to Pension Age?

The next step is to determine whether their ISA would allow them to fully retire until age 57.

This is because 57 is when they can start to withdraw from their pensions (for now at least).

So we said that by the time they reach 40, they would have accumulated an ISA of £250,000.

Sounds good right? But we need to determine how much they’d need to spend in retirement.

Let’s say that they currently spend around £3,000 a month or around £36,000 a year.

However, 10 years from now when they’re 40, things will not cost the same due to inflation.

Therefore let’s say that in 10 years from now, they’ll need £4,000 a month or £48,000 a year.

So will £250,000 be enough for the couple to fully retire at 40 until they access their pension?

As you can see from the above calculator the answer is no: £250k would not last until age 57.

This may not be what the couple expected but at least they can prepare for a better outcome.

Step 4: Will their Pension Last them throughout Retirement?

So £250k wasn’t enough for this couple to fully retire until they could access their pension.

But the question is: at retirement age, will their pensions last them for the rest of their lives?

At age 40, we said that this couple could have a combined pension pot of around £140,000.

Let’s say at 40, they stopped working i.e. stopped contributing, and let it grow for 17 years.

As you can from the previous image, their pension pot may be around £912,825 by age 57.

That’s great but would this be enough for them to live on £900,000 for the rest of their lives?

Let’s assume by age 57 they have paid off their mortgage so expenses are still £4000 a month.

However, pensions are taxed, so they must now withdraw £58k a year instead of £48k a year.

As we can see in the image, £900,000 is enough for them to last throughout all of retirement.

Not only that but their pensions would even continue to grow every year, even with inflation.

How to Not Run out of Money

It was great to see this couple’s money would not run out once they access their pensions.

However, it’s unfortunate their ISA would not last them until they can access their pensions.

What can this couple do to resolve this dilemma? Well, there are a few options they can take:

1. Delay retirement: if they are willing to wait a few years after 40, they could retire at say 45.
2. Semi-retirement: they could work part time after 40, and the rest would come from their ISA.
3. Side hustle: if they’re 30 now, they have 10 years to work on a side hustle to bring in income.
4. Mini-retirement: they could take a few years off entirely, and then go back to work until 57.

As you can see, there are many paths they can take, as well as any combination of the above.

What matters is they start saving and investing as much as possible over the next 10 years.

10 years is a long time, who knows what’ll happen, maybe they’ll be able to retire completely!

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If you’re interested to find out more about early retirement, check out: Quit Like a Millionaire.

In the book, the authors talk about how they were able to retire completely in their thirties!

To find out more on investing and retirement, check out my investing and retirement articles.

I talk about early retirement strategies, which funds to invest in, and which accounts to have.

Are you on your way to early retirement? Are you investing? Let me know in the comments!