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  • FIRST POST
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 2:17 PM
    • 59Posts
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    Gen_Y_Saver
    Early retirement advice - how would those who have done it do it today?
    • #1
    • 15th Jun 17, 2:17 PM
    Early retirement advice - how would those who have done it do it today? 15th Jun 17 at 2:17 PM
    Hi all,

    Iím a long time lurker, first time poster, in this section of MSE! So please be gentleÖ

    Iíve read lots of posts over the past year or so and gained a basic understanding of what is required to achieve early retirement. In particular, Iíve been inspired by lots of peopleís threads as it has helped me believe I may be able to retire before I keel over at my desk age 67.

    I just wondered if you learned posters/investment heads could give a bit of advice to those a bit younger in their journey? What would you do if you were 29 and could do it all again? What do you reckon to my plan set out below?

    Iím 29. Iíve acquired a net worth of c£200K with my partner. Most of this is tied up in my property. I set myself a challenge about two years ago to pay off my mortgage in 2-3 years. I became mortgage neutral recently.

    I am now focussing on investments. My aim is to generate enough passive income to live a relatively simple life. I aim to live on 20K per year. I understand I will need a portfolio of £500-660K to generate this amount, depending on whether I subscribe to the 3% or 4% rule.

    Me and my partner have been investing in the Vanguard Lifestrategy funds (VSL 100 and VLS 80). My partner is 27.

    We are saving 50-60% of our net income. I have cut all expenses to the bone (cycling to work, no car, home cooked meals etc).

    Is there anything you guys suggest I could do to optimise my approach (other than a side hussle, earning more etc).

    All the best

    Gen_Y
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
Page 1
    • dunstonh
    • By dunstonh 15th Jun 17, 2:26 PM
    • 89,566 Posts
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    dunstonh
    • #2
    • 15th Jun 17, 2:26 PM
    • #2
    • 15th Jun 17, 2:26 PM
    . I understand I will need a portfolio of £500-660K to generate this amount, depending on whether I subscribe to the 3% or 4% rule.
    Forget model rules. They dont matter in the real world as there are nuances and scenarios that will happen that cause you to adjust these things. They are a guide but do not be religiously attached to it.

    However, do not forget tax. Some assets may be tax free. Some within your personal allowance. However, some may be above your personal allowance and subject to tax.

    We are saving 50-60% of our net income. I have cut all expenses to the bone (cycling to work, no car, home cooked meals etc).
    Dont take it too far. I am in my 40s and there are things that I wish I had done in my 20s and 30s that I didnt. It is about finding balance.

    Me and my partner have been investing in the Vanguard Lifestrategy funds (VSL 100 and VLS 80). My partner is 27.
    Within what tax wrappers?
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • atush
    • By atush 15th Jun 17, 2:39 PM
    • 16,333 Posts
    • 10,081 Thanks
    atush
    • #3
    • 15th Jun 17, 2:39 PM
    • #3
    • 15th Jun 17, 2:39 PM
    I agree, are you using pensions and ISAs?

    You seem to going well, but I agree do set up a leisure budget and have a little fun as well.

    You could be run down by the no12 bus after all?
    • Malthusian
    • By Malthusian 15th Jun 17, 2:39 PM
    • 3,294 Posts
    • 5,004 Thanks
    Malthusian
    • #4
    • 15th Jun 17, 2:39 PM
    • #4
    • 15th Jun 17, 2:39 PM
    Dont take it too far. I am in my 40s and there are things that I wish I had done in my 20s and 30s that I didnt. It is about finding balance.
    Originally posted by dunstonh
    Agreed but I bet none of those things were "driving to work" or "eating more ready meals" Assuming the OP isn't going hungry or risking his life on a 20 mile commute on main roads, cycling to work and cooking for yourself is an end in itself, the money saved is a happy coincidence.

    In particular, I’ve been inspired by lots of people’s threads as it has helped me believe I may be able to retire before I keel over at my desk age 67.
    What makes you think you'll die 13 years before the statistical average? Even 80 is a very conservative target given that your statistical cohort includes 29 year olds with genetic disabilities and terminal illnesses that you don't have.
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 2:45 PM
    • 59 Posts
    • 62 Thanks
    Gen_Y_Saver
    • #5
    • 15th Jun 17, 2:45 PM
    • #5
    • 15th Jun 17, 2:45 PM
    Thanks for all of your replies

    We are saving into ISAs. I also contribute the max into my employer's scheme (I put in 5% and they match 5%), as does my partner.

    What Malthusian said; the things I love doing generally don't cost that much cash. I like cycling, painting, sports, walking, reading etc. However, I enjoy a drink just as much as the next guy!

    Point is: I don't want to wait until I'm 67 to chose what to do with my time. Its about freedom. Maybe that includes working a bit, but the option will be mine.

    Keep the pearls of wisdom coming. Much appreciated.

    Gen_Y
    Last edited by Gen_Y_Saver; 15-06-2017 at 2:50 PM. Reason: typo
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • dunstonh
    • By dunstonh 15th Jun 17, 3:03 PM
    • 89,566 Posts
    • 56,030 Thanks
    dunstonh
    • #6
    • 15th Jun 17, 3:03 PM
    • #6
    • 15th Jun 17, 3:03 PM
    I also contribute the max into my employer's scheme (I put in 5% and they match 5%), as does my partner.
    You are on £400,000 a year each income?

    I assume you didnt mean that you were paying in the maximum or you dont realise what the maximum is as if you are earning £400k p.a. each then you must have some big monthly expenditure and I doubt early retirement on £20k-25k a year would be desirable.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 3:06 PM
    • 59 Posts
    • 62 Thanks
    Gen_Y_Saver
    • #7
    • 15th Jun 17, 3:06 PM
    • #7
    • 15th Jun 17, 3:06 PM
    Hi dunstonh!


    Apologies. I meant I am contributing as much as I currently can into my employer's pension scheme. I can contribute a max of 5%, which is matched by my employer.


    Thanks
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • dunstonh
    • By dunstonh 15th Jun 17, 3:14 PM
    • 89,566 Posts
    • 56,030 Thanks
    dunstonh
    • #8
    • 15th Jun 17, 3:14 PM
    • #8
    • 15th Jun 17, 3:14 PM
    Hi dunstonh!


    Apologies. I meant I am contributing as much as I currently can into my employer's pension scheme. I can contribute a max of 5%, which is matched by my employer.


    Thanks
    Originally posted by Gen_Y_Saver
    Is that the actual maximum you can pay in via the scheme or the maximum you get matched contributions on. (often you can go beyond the matched level). Even if you cant use the employer scheme, you can still have an individual one.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.
    • Triumph13
    • By Triumph13 15th Jun 17, 3:20 PM
    • 1,104 Posts
    • 1,355 Thanks
    Triumph13
    • #9
    • 15th Jun 17, 3:20 PM
    • #9
    • 15th Jun 17, 3:20 PM
    What would you do if you were 29 and could do it all again?
    Originally posted by Gen_Y_Saver
    The main thing we'd have changed is to have had our kids earlier! Are you planning to have any and if not are you sure that won't change?


    I would echo the concerns of other posters about your phrase "I have cut all expenses to the bone "
    There are no prizes for making life a misery, just to be able to stop working earlier. The question shouldn't be 'how little can I spend ?', but 'what's the most efficient way of managing my finances to maximise lifetime happiness?'. It's great to find ways to cut back that don't decrease your happiness (or even increase it like cycling and good home cooking), but when it starts to really hurt you need to find a creative solution or stop cutting.
    • AnotherJoe
    • By AnotherJoe 15th Jun 17, 3:20 PM
    • 7,591 Posts
    • 8,191 Thanks
    AnotherJoe
    To answer the question you asked, what would I do differently ;
    I'd get a bigger house so I could downsize with a big tax free sum.
    I wouldnt obsess about paying off my mortgage to the extent that I had a poorer lifestyle, I'd put the money in my pension instead, especially if I was a high rate tax payer.
    Instead of messing about with individual shares (as I did) I'd do as you are already, a few high quality global funds, plus a small gamble with perhaps 5-10% each in some funds I thought might do better than average with an eye on the long term, healthcare and emerging markets for example.
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 3:22 PM
    • 59 Posts
    • 62 Thanks
    Gen_Y_Saver
    Hi Dunstonh


    You're very quick to reply. Thanks!


    Re: employer's scheme. I can only contribute a max of 5% at present. After a couple of years service, I can contribute more.


    Re: setting up a SIPP or PP - I have considered this. But my present thinking has been just to put money into ISAs. I understand the tax benefits of SIPPs, but I don't like (a) that I can't access until 55 and (b) worried government may increase the age I can access by the time I reach 55!


    I was thinking of ploughing 20K a year into ISAs. If I do that for 20 years and average 5% I should be sitting on around 694K. And a mortgage free house and employer's pension.


    I'm not sure. You guys are the experts. That's why I posted here. What approach would you guys go for if you were in my situation? Purely academic discussion. I was just interested in hearing different views.
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 3:25 PM
    • 59 Posts
    • 62 Thanks
    Gen_Y_Saver
    Thanks anotherjoe and triump13 - you are both right; a balance needs to be struck. I go on holiday twice a year and do treat myself. I just think, overall, all our lives are pretty awesome (all things considered) and lots of materalise shiz isn't going to make me that much happier.
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • OldMusicGuy
    • By OldMusicGuy 15th Jun 17, 3:26 PM
    • 164 Posts
    • 278 Thanks
    OldMusicGuy
    You are Mr Money Mustache and I claim my £5!

    Seriously, if you haven't already (and I suspect you have), read these blogs:
    http://www.mrmoneymustache.com/
    https://theescapeartist.me/

    You seem to be following their advice pretty well.

    The main advice I can give is save as much as you can from as early as possible, and you seem to be doing that. Secondary advice is to decide what you want to do with your life. Do you want a high paid job in the corporate world (which means you will be able to save a lot more in future years) or do you want to enjoy life focusing on hobbies and interests, doing a few side gigs? You sound like you are more the latter, so be clear on what your goals are, and make sure your partner shares the same goals as well. And also ask if things will change if you have a family. That will significantly increase your expenses and you need to be sure you aren't "imposing" your lifestyle choices on your kids (if you have any). Or if you do choose to live that lifestyle with kids, make sure you both agree it's what you want to do.
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 3:31 PM
    • 59 Posts
    • 62 Thanks
    Gen_Y_Saver
    OldMusicGuy - yes, love those blogs. Stumbled across MMM and TEA a while back and it genuinely did change my perspective on life. I feel very liberated from certain pressures (flash cars/houses/lifestyle). I am genuinely a lot happier. Weird considering we spend almost of entire youth being bred to want a lot of things that aren't really neccessary.


    Note: i understand that not everyone agrees with the above etc!


    Peace and love all


    Gen_Y
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • bostonerimus
    • By bostonerimus 15th Jun 17, 3:35 PM
    • 1,120 Posts
    • 628 Thanks
    bostonerimus
    You are doing all the right things......well done! But don't become inflexible. Life happens, you might have kids or your goals might need to be changed, but if you can do that within a simple and frugal lifestyle you'll do well.

    Have a look at this blog by a famous early retiree.

    http://www.mrmoneymustache.com/

    The key to financial independence is to have an income requirement that can be met by your sources of unearned income.....pensions, rent, investment returns etc. So the lower your income requirements the lower the size of the portfolio required. If you can be frugal while you're earning and save a large proportion of your income into a sensible portfolio that will compound over the years.

    I retired early at age 52 (4 years ago) by doing much the same as you.

    I started investing at age 25 and contributed to a company pension and also saved extra income to a regular investment account. I made it a goal to save at least 20% of my gross income and set up automatic deductions from my bank account; I used Vanguard mostly (I'm in the USA). I have a budget to track my spending and food and housing are always the biggest items so I save on those. I cook and bake a lot and DIY there instead of buying pre-made meals and cakes saves me a lot. I also DIY on invetsing and use a passive indexing approach with rebalancing that keeps fees to a minimum. I like your use of VLSxx!

    Back in 1997 I bought a two family house. I rent out the downstairs apartment and live upstairs. I split my investable money between Vanguard index funds and extra mortgage payments. I paid it off in 2007 and now get a nice rental income and some capital appreciation. Once the mortgage was paid off I ploughed that money into investments. I'm also lucky enough to have spent 10 years as a government employee and get a final salary pension which with the rent more than covers my spending needs......so I don't actually withdraw anything from my investments, they just continue to compound.

    So if you can couple sensible investing with a plan to reduce your income needs I think you'll do really well.
    Last edited by bostonerimus; 15-06-2017 at 3:41 PM.
    Misanthrope in search of similar for mutual loathing
    • bostonerimus
    • By bostonerimus 15th Jun 17, 3:38 PM
    • 1,120 Posts
    • 628 Thanks
    bostonerimus
    ....also check out this site.....lots of people who have retired early in the US. There is a strong passive indexing contingent, but also lots of active stock picking and esoteric investing discussions.

    http://www.early-retirement.org
    Misanthrope in search of similar for mutual loathing
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 3:44 PM
    • 59 Posts
    • 62 Thanks
    Gen_Y_Saver
    Thanks for the tips, bostonerimus - I'll check out ER.org! And congrats!!!
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • kidmugsy
    • By kidmugsy 15th Jun 17, 3:59 PM
    • 9,848 Posts
    • 6,641 Thanks
    kidmugsy
    Restricting your pension contributions to the 5% seems pretty wise to me. You might want to increase them if (i) you become a higher rate tax payer, or (ii) you get access to a salary sacrifice scheme.

    Filling your ISAs also seems wise: I can't imagine the £20k p.a. limit surviving under a marxist government. But then your savings might not survive anyway unless you'd found a way to hold some of them abroad. In fact I wish I knew something about that myself.
    • BLB53
    • By BLB53 15th Jun 17, 4:00 PM
    • 1,154 Posts
    • 932 Thanks
    BLB53
    Me and my partner have been investing in the Vanguard Lifestrategy funds (VSL 100 and VLS 80). My partner is 27.

    We are saving 50-60% of our net income. I have cut all expenses to the bone (cycling to work, no car, home cooked meals etc).
    This looks good to me and if you continue you should be on track to reach your target in around 15 years. Keep it simple, low cost and diversified and most importantly, keep it going through the inevitable market pullbacks. Good luck and keep us posted with progress.

    BTW I assume you will be familiar with Retirement Investing Today site?
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 4:08 PM
    • 59 Posts
    • 62 Thanks
    Gen_Y_Saver
    Thanks BLB53. Lets hope so!


    Yes, familiar with RIT. I find the writing quite techy, but he is obviously a very clued up guy. I really like TEA as his style of communication is very clear for an amateur like myself.


    RIT seems to have a much more hands-on approach to managing his portfolio to me (as does TEA). I am just sticking with VLS for now. I may add Vanguard's All-World EFT at a later date to minimise some of the UK bias.


    Still learning lots!


    Thanks for all of your help. Its great to connect with people who think about stuff like this. Haven't met many people my age that interested...


    Gen_Y
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
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