WEBVTT

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Hey everyone, Eric from Time to Retire here.

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So today I want to talk about something that

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has people terrified. I get messages on my website

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occasionally from people. Now here's what I've

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got here. So it says, Eric, I'm 50 years old

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and I'm separated from my partner. I've got zero

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in my work pension. I've got no ISAs. I've got

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nothing but debt. Is it over for me? Now this

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is the kind of common belief that if you've not

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started saving by the age of 30 then you've missed

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the boat when you hear about compound interest

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and you think well i don't have 40 years for

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my money to grow therefore i must be finished

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now i'm here to tell you that that is absolutely

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complete rubbish however You do need to be realistic.

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You can't use the same strategy as a 20 -year

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-old. You don't have the time to make the mistakes.

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You don't have time to just figure it out. You

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need a strategy. It's going to be pretty aggressive

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and mathematical. Quite frankly, it can be painful

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if you approach it with the wrong mindset. So

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today I'm going to break down what I think you

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need to go from zero at the age of 50 to a six

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-figure pension pot by the age of 67 simply by

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becoming a spending control machine. Now for

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many the state pension will not be enough. How

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many people in the UK think It's fine. The government

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will look after me. I've paid my national insurance.

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But let's look at the numbers. The full new state

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pension is currently less than £12 ,000 a year.

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Now, can you live on less than £12 ,000 a year?

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Think about your council tax. Think about your

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energy bills, which seem to go up every time

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you blink. Think about food prices. Same. If

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you rely solely on a state pension, you're not

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really looking at a retirement of holidays in

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Spain and playing golf. You're looking at a retirement

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of heating or eating. Now, this is a harsh reality,

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but there is good news. Let's say you're 50.

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In the UK, state pension age is currently rising

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to 67. That means you've got 17 years. Now, 17

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years is not a lifetime. But in the world of

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finance, 17 years is enough time to build a fortress.

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If, and only if, you stop bleeding money. The

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biggest problem for 50 -year -olds in the UK

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is not usually income. Usually at 50, you're

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potentially earning the most you've earned in

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your career, probably the most you ever will.

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The problem is lifestyle creep. You feel like

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you deserve nice things. You work hard. So what

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do you do? You finance a car. The UK is addicted

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to PCP finance. Personal contract purchases.

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It is the single biggest destroyer of wealth

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I see. Now, you see your neighbour Dave. Dave's

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50. Dave drives a brand new Audi Q5. You think,

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I need a new car too. So you sign a contract.

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You're paying £450 a month for the car. Then

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you pay your insurance. Then you pay for your

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fuel. That £450 a month is not just a car payment.

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It's your retirement fund leaving your bank account

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and driving down the motorway. So let's run through

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the maths. Now, if you took that £450 and invested

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it... into diversified index fund return into

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an average of seven percent a year and in 17

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years that single car payment would be worth

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a hundred and sixty six thousand pound now ask

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yourself this would you rather drive a shiny

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new car now for three years or have 166 000 pound

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in cash when you retire now at 50 you don't need

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to keep up with dave next door Buy a used Ford

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Fiesta, buy a Toyota Yaris, drive something that

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gets you from A to B, costs you nothing. Now,

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let's talk the small stuff. Coffee. Now, people

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laugh and say, Eric, enjoying a coffee is not

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why I'm broken. Well, in isolation, you're right,

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but it's never just a coffee. It's the meal deal

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culture in the UK. It's so easy. You go into

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Tesco or Sainsbury's or Boots and you grab a

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sandwich, a snack or a drink. £3 .50, maybe you

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go to a Pret or a Costa. It's £8 or £10 for lunch.

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Let's say you spend £10 a day on convenience

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food and coffee during the work week. That's

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£50 a week. That's £200 a month. Then let's talk

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about the pub. You're out for a few pints on

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a Friday, maybe out for Sunday roast. That's

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another £50 a week easily. Now we're at £400

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a month on food and drink that you've consumed

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or forgot about instantly. Now at age 50, zero

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savings. You don't have the luxury of these conveniences.

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It's completely possible. to fall in love with

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the packed lunch. Meal prep isn't just for bodybuilders.

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It's for future millionaires or normal retirees.

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Making a sandwich at home costs about 50p. Buying

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it costs £4. That's an 800 % markup. Now, if

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you stop that convenient spending, you reclaim

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£300 to £400 a month. You'll say, Eric, that

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sounds miserable. Well, you know what is miserable?

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Being 70 years old, unable to afford to turn

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the heating on in January. That is miserable.

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Now, making a sandwich is just being smart. Now,

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let's talk about a self -invested personal pension.

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So when you earn money, the government taxes

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you. But the government wants you to save for

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your retirement. So they'd have to support you

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when you get older. So they offer you a bribe,

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and it's called tax relief. Now, if you're a

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basic rate taxpayer, every £80 you put into your

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pension, the government adds another £20. Instantly,

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that's a 25 % return on your money before you

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even invest it in the stock market. Now, if you're

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a higher rate taxpayer, earning over £50 ,270,

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then it's even better. claim back even more tax.

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So let's go back to our savings. We cut the fancy

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car, £450 saved. We've cut the meals and the

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pub trips, £350 saved. We've cancelled Sky Sports

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with Netflix. We used Freeview instead. We've

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saved another £50. Now that's £850 a month, found

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simply by controlling spending. But because of

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the tax relief, You put that £850 into a self

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-invested pension. The government tops it up

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to £1 ,062 going into your investment pot every

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month. Now, this is the part you need to remember.

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If you're 50 and you start with zero, you need

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to start living frugally. You embrace that minimalist

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lifestyle. You invest that £1 ,062 a month, which

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only costs you... 850 out your net income. You

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invest it in a low -cost global index tracker

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fund like the FTSE Global All Cap. We assume

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a historical average rate of 7 % after inflation

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and by the time you're 67 you have approximately

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£394 ,000. Nearly £400 ,000 plus your state pension

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of £11 ,500 a year. Now, if you're using pension

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drawdown then, you can continue to invest that

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pot even after you retire. So let's say you decide

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to take £20 ,000 a year from your £400 ,000 of

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private pension, plus £11 ,500 from the state

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pension. Now, that's a total retirement income

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of £31 ,500 a year. Now, that's more than many

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people earn working full -time, and you did it.

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all in 17 years, simply by deciding that financial

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freedom was more important than a leashed Audi

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or a Pret sandwich. So no, it's not too late,

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but the window is closing. Every month you wait,

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that final number drops. If you wait until you're

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55, the maths gets much, much harder. So you

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do have to become a bit obsessive about your

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outflows. Print out your bank statement from

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the last three months. Get a highlighter pen.

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Highlight everything that was not essential for

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your survival. It's going to hurt. You're going

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to feel embarrassed by the amount of money that

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you've wasted. And good, use that emotion. Channel

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it into your SIP, your Self -Invested Personal

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Pension. Channel it into an ISA. You can retire

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with dignity then. But you need to start today.

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See you guys next time.