Calculating early retirement: at what age can you stop?

Most calculators ask what age you want to stop and then tell you how much you need. That's useful, but it isn't the question most people have.

The real question runs the other way: given what I have and what I set aside, when can I stop?

This article works through that calculation in five steps. By the end you'll have an age, and a view of which lever moves it most.

The five figures you need

Two of them you probably don't know offhand. Look them up before you start, because an estimate doesn't survive this calculation.

1. Your spending after your stop date. Not your current spending, but what remains once commuting disappears and your mortgage is possibly repaid.
2. Your current wealth. Everything together: savings, investments, crypto. Leave your home out unless you intend to sell.
3. What you set aside annually. Including your own contributions, excluding your pension premium.
4. Your state pension date and amount. Available from the SVB. It matters considerably whether you live alone or with a partner.
5. Your accrued pension. On mijnpensioenoverzicht.nl. Note the expected annual payment, not the accrued value.

Plus one assumption: your expected real return, after inflation. Use 4% and repeat with 3% to see how sensitive your outcome is.

Step 1: your spending after your stop date

Start with what you actually spent over the past twelve months, including everything irregular. Holidays, the dentist, broken appliances, presents.

Then subtract what disappears when you stop working. For many people that's several thousand a year: travel, clothing, convenience food on busy days, sometimes a second car.

Look separately at your mortgage. If it continues past your stop date, the payment belongs in. If it's repaid, it doesn't, and that makes a considerable difference because your required wealth is a multiple of your spending.

Step 2: what arrives after your state pension date

Add your expected state pension and your accrued occupational pension.

Note one thing that's often forgotten: stop earlier and you accrue less. At forty accrual years producing €12,000, each missed year costs you €300 a year, for life. Stopping five years early therefore means €1,500 less pension.

The difference between your spending and what arrives is your annual gap after your state pension date.

Step 3: the target for a chosen age

Pick an age to start with. The target consists of two parts.

The bridge, from your stop date to your state pension date:

Spending × annuity factor. In a spreadsheet: =PV(0.04, number of bridge years, -spending)

The top-up for the gap afterwards, discounted:

=(annual gap / 0.04) / (1.04^number of bridge years)

Added together, that's what you must hold at your stop date. The full explanation of both steps is in the article on your FIRE number.

Step 4: where your wealth stands at that age

Now the other side. Your current wealth keeps growing, and you keep contributing until your stop date.

In a spreadsheet: =FV(0.04, years to your stop date, -annual contribution, -current wealth)

Step 5: compare, and shift the age

If your expected wealth exceeds the target, you can stop at that age. Try a year earlier.

If it's lower, try a year later.

Shift until the two meet. That's your earliest achievable stop date.

If you'd rather not do it by hand, spreadsheets have Goal Seek (Data, What-If Analysis, Goal Seek). Put the difference between the two amounts in a cell and let Goal Seek drive it to zero by adjusting the age cell.

Four examples

Four situations, all with state pension at 67 and 4% real return.

Profile D stands out, and not through high wealth. D has saved less than A but starts fifteen years earlier and contributes heavily. That's the same lesson as in compound interest: time beats amount.

Profile C shows the reverse. At €150,000 and €32,000 of spending it looks tight, but because the spending is low the target is low too. C stops at sixty-two with a target of €216,432, less than half what B needs.

What moves your date most

Take profile B, who can stop at sixty and a half, and change one thing:

Two things stand out.

Spending less beats saving more. €5,000 less spending buys two years; €6,000 more contributions buys one and a half. That's because spending less works twice over: you contribute more and you need less. The same pattern appears in every calculation in this series.

Your return assumption is the largest uncertainty. Going from 4% to 3% costs you three years, more than your best saving effort gains. And that isn't a lever you can pull, it's a risk you carry.

That argues for two things: run your date at 3% as well, and treat the 4% outcome as the favourable variant rather than the expectation.

The mistake made most often

People add their pension to their wealth.

That goes wrong, because your pension isn't wealth you can draw on. It's a future income stream beginning at your pension date. Include it in step 4 and you produce a figure you can't access, and think you can stop years before you actually can.

Your pension belongs in step 2, where it narrows your gap after your state pension date. Not in step 4. That distinction is worked through in the article on the three pension pillars.

The same applies to your home. Equity is genuine wealth, but produces no income while you live there. Include it only if you intend to sell or release it.

How Gylder fits in

Of the five figures in this calculation, two are systematically misjudged, and they happen to be the two that weigh most.

Your spending. Gylder categorises your transactions automatically, with a model running entirely on its own servers, and excludes transfers between your own accounts. Your annual figure therefore rests on measurement rather than on a monthly budget with the irregular items missing.

Your wealth. Bank, broker, crypto, precious metals and your property with the mortgage underneath, totalled into one continuously updated amount.

The bridge calculator runs this whole calculation for you and saves the result as a wealth goal with your stop date attached. The projection runs on your own measured growth rather than an assumed percentage, so you can see whether this calculation still holds as the years pass.

Your state and occupational pensions can't go in. They don't belong with your wealth anyway, but in step 2 of this calculation.

What this doesn't tell you

The outcome is only as good as your spending figure. Be 10% out and your date shifts roughly a year. Measure, don't estimate.

Pension accrual is simplified. The calculation assumes even accrual across forty years. Schemes rarely work precisely that way, and your provider gives the exact figure for an earlier stop date.

Returns don't arrive evenly. The model uses an average. In reality the order matters once you start withdrawing, and a poor early stretch weighs more than a poor later one. That's set out in the article on the 4% rule.

This isn't advice. For a decision about early retirement, your own provider's calculations are what count, because they know your scheme.

Frequently asked questions

How do I calculate whether I can retire early? Compare two figures: what you need at a chosen age, and what your wealth will be worth at that age. Shift the age until they meet.

Does my pension count towards my wealth? No. It lowers what you need after your state pension date, but you can't reach it before your pension date. Count it as wealth and you're overstating your position.

What return should I use? Use 4% real and repeat at 3%. The difference between those two is around three years for most people, and that says more about the reliability of your answer than the figure itself.

Should I include my house? Only if you intend to sell. A repaid mortgage does count, because it lowers your spending and therefore your target.

How often should I redo this? Once a year, or whenever something structural changes in your income, spending or pension accrual.