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  • FIRST POST
    • Gen_Y_Saver
    • By Gen_Y_Saver 15th Jun 17, 2:17 PM
    • 57Posts
    • 61Thanks
    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,

    I’m a long time lurker, first time poster, in this section of MSE! So please be gentle…

    I’ve 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, 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.

    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?

    I’m 29. I’ve 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 2
    • Triumph13
    • By Triumph13 15th Jun 17, 4:45 PM
    • 1,005 Posts
    • 1,186 Thanks
    Triumph13
    Thanks anotherjoe and triump13
    Originally posted by Gen_Y_Saver
    I'll forgive you stealing my 'h' - just so long as you don't take the 'i' as well!
    • Malthusian
    • By Malthusian 15th Jun 17, 4:54 PM
    • 2,386 Posts
    • 3,307 Thanks
    Malthusian
    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.
    Originally posted by kidmugsy
    Holding a globally diversified portfolio of equities and other assets is easy. And there is no need to have the administration of the portfolio done abroad. In the event of a Marxist takeover of the UK, all the assets you own abroad will still exist. In the age of cloud computing the electronic records of what you own will probably already be out of the UK Government's reach. Your most pressing concern will not be your savings but ensuring that you get a boat or plane ticket and follow them abroad.
    • bostonerimus
    • By bostonerimus 15th Jun 17, 5:40 PM
    • 501 Posts
    • 248 Thanks
    bostonerimus
    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?
    Originally posted by BLB53
    That RIT site is fun, it must take quite a commitment to post so much detail on the portfolio and the calculating return spreadsheet. I also have a large spreadsheet that I used to track my budget and account balances that I use mostly to test different combinations of inflation rates, spending levels and investment returns. But if I want to quickly see my portfolio's performance I just log onto Vanguard.
    Misanthrope in search of similar for mutual loathing
    • Chickereeeee
    • By Chickereeeee 15th Jun 17, 7:23 PM
    • 394 Posts
    • 236 Thanks
    Chickereeeee
    Well, I bought my last (previous) house cash (without a mortgage) when I was 40. I kinda wish I had bought an (even) bigger house with a motgage. in retropsect....
    • Gen_Y_Saver
    • By Gen_Y_Saver 16th Jun 17, 10:19 AM
    • 57 Posts
    • 61 Thanks
    Gen_Y_Saver
    Great advice all, keep it coming!


    And apologies Triumph13!


    Thanks again everyone.


    Gen_Y
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • Snakey
    • By Snakey 16th Jun 17, 10:31 AM
    • 975 Posts
    • 1,185 Thanks
    Snakey
    If I were 29 and could do it all again knowing what I know now, the main thing I'd do differently is buy the most expensive property I could afford, a whole lot earlier than I did. (Whether that would be the right advice today rather than in 2001, who knows.)

    I'd also, contrary to the above consensus, spend less than I did on lifestyle. I am naturally frugal in the sense that the things that make me happiest don't cost much, but I was in a relationship with a spender and ended up doing a lot of things that, while fun, weren't really worth the extra money - OK so I didn't miss out on anything, but if I'd invested it instead I'd be sitting a lot prettier now.

    What I did do that has absolutely set me up is:
    1. Paid the maximum into my pension for 15 years.
    2. Not have kids.

    I'm 45 now, and concentrating on non-pension savings plus paying off the mortgage. If things go according to plan I'll be giving up work at 50.
    • Linton
    • By Linton 16th Jun 17, 10:37 AM
    • 7,955 Posts
    • 7,755 Thanks
    Linton
    To answer the question in the title:

    I wouldnt change what I (we) actually did to retire at an average age of 54:
    - Be a couple: two can live nearly as cheaply as one but with double the income.
    - maximise savings into pensions and in the latter stages TESSA's and ISAs. At the time the maximum pension contribution one could make was 15% of gross income. And then you got employer's contrbution on top of that.
    - Increase standard of living at a much slower rate than increase of income. Save the extra money.
    - Make and track financial plans so we knew how much money we needed to retire.
    - Make personal plans so we knew what we wanted to do once we had retired
    - Take VR as soon as the numbers are right
    • Bravepants
    • By Bravepants 16th Jun 17, 1:12 PM
    • 214 Posts
    • 235 Thanks
    Bravepants
    If you're in the 40% tax bracket, pay into an AVC or SIPP. I started doing that once I was earning enough.


    I would also have started investing in a Global Index Tracker Fund a lot sooner instead of spending money on crap (Star Trek Videos and Lord of the Rings models! Jeez! WTF was I thinking!).


    I have my basic needs now, mortgage paid off, all the stuff I need and some great hobbies (cooking, piano, music, entertaining friends, days out, and a classic car). I travel a lot with work, but have also managed Australia for a month with my partner a few years ago. We did the Youth Hostel thing so it worked out quite reasonable!

    I started thinking of early retirement when I hit 40 - should have done it sooner by stashing as much as my cash as I could.


    You can actually do it quite quickly if you really, really want it...check this out:


    http://earlyretirementextreme.com/


    Cheers,
    P
    • Gen_Y_Saver
    • By Gen_Y_Saver 16th Jun 17, 2:22 PM
    • 57 Posts
    • 61 Thanks
    Gen_Y_Saver
    I've read about Jacob and his approach to FIRE. Seems a bit extreme for me. Interesting perspective though!


    Quick q: I went for the VSL 100. I understand that this isn't a true global index tracker. I was thinking of contributing to Vanguard's All World ETF as well. Good approach?
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • Linton
    • By Linton 16th Jun 17, 2:52 PM
    • 7,955 Posts
    • 7,755 Thanks
    Linton
    I've read about Jacob and his approach to FIRE. Seems a bit extreme for me. Interesting perspective though!


    Quick q: I went for the VSL 100. I understand that this isn't a true global index tracker. I was thinking of contributing to Vanguard's All World ETF as well. Good approach?
    Originally posted by Gen_Y_Saver
    Somewhat pointless as most shares held in one of them will also be included in the other, just in slightly different proportions.

    If you want more than one fund I suggest you look at areas which are not strongly represented in a global tracker. Small company funds is one example which has been very lucrative for many years, with much better returns than the large companies which form the bulk of any global tracker.
    • Gen_Y_Saver
    • By Gen_Y_Saver 16th Jun 17, 3:13 PM
    • 57 Posts
    • 61 Thanks
    Gen_Y_Saver
    Thanks, Linton. I've got to stop micro-obssessing over the differences between broadly similar funds (and focus on earning more!).


    Could you recommend any small cap funds?
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • Linton
    • By Linton 16th Jun 17, 3:32 PM
    • 7,955 Posts
    • 7,755 Thanks
    Linton
    Thanks, Linton. I've got to stop micro-obssessing over the differences between broadly similar funds (and focus on earning more!).


    Could you recommend any small cap funds?
    Originally posted by Gen_Y_Saver
    I hold separate small cap ( capitalisation) managed funds for the US, Europe, UK, and Japan. There are a few global funds including a Vanguard Global Small Cap Index Fund. I believe that Small Cap funds benefit from local knowledge and so am not a fan of global small cap funds nor of small cap index funds. But if your portfolio is too small for it to be worth while holding separate geographic funds they could be useful.

    If you want to research funds I suggest you become familar with trustnet which has details of a very large number and the facilities to compare them. There is little point in recommending specific funds as the ones I hold were chosen to meet my particular objectives.
    • MallyGirl
    • By MallyGirl 16th Jun 17, 4:10 PM
    • 1,761 Posts
    • 6,066 Thanks
    MallyGirl
    Some way off early retirement here - and I am thinking of retiring at 60 as early. DD will be 25 by then and standing on her own 2 feet. I am 50.
    In some ways I wish I had gone into S&S earlier and paid more into pensions. I have always paid the amount required to get max employer contribution but only started doing sal sac AVCs recently. I focussed on paying off the mortgage (or at least offsetting it all) even though it was under 4%. But then I remember at the beginning it being 14% so that is probably why. Fully owning the roof over your head is also an emotional thing. I am now fully offset on a house worth £1 million or so and will downsize when I no longer need to live in the Thames Valley for work. I pay my max into S&S ISA, as does DH, and pay about 25% of high rate salary into pension via sal sac with employer adding 10%, the rest is cash in multiple high rate bank accounts/reg savers.

    I think that starting early with S&S is a good move for you - there are plenty of years to weather the inevitable storms and come out smiling.
    • Terron
    • By Terron 16th Jun 17, 4:47 PM
    • 20 Posts
    • 3 Thanks
    Terron
    I effectively retired at 54 (I lost my job and my skills were largely outdated).
    I have a pre-tax income of about £25k mostly from investing £420k in property so yout £5-600k to generate £20k seems overly cautious to me.
    On the other hand I have not yet drawn on any of my pensions which will add about £20k pa in a couple of years.
    • swedespeed
    • By swedespeed 18th Jun 17, 11:29 AM
    • 4 Posts
    • 9 Thanks
    swedespeed
    Dear Gen_Y_Saver

    I am not in retirement, but am in a remarkably similar position to you which seems quite unusual amongst our age group! Reading this thread with interest.

    We're a little older than you (I'm 32, my partner is 34) but we've worked hard to pay off our mortgage earlier this year and start the process to early retirement.

    I thought it might be helpful to share my own plans, and I am very open to critique from other members! As it's an anonymous forum I am also happy to share earning details, although as a newbie I'm not sure it's the done thing.

    I am currently on a salary of £60k, My partner is on a salary of £30k plus bonus which is usually between £5k and £10k per year. After deductions - including workplace pensions - we have about £5.5k to spend every month.

    We try not to be too frugal, but are not naturally big spenders. We live on an average of £1800 a month leaving, some £3,700 spare. I hold back about £700 for non-regular spending (short-term savings, holidays, etc.) leaving me with £36k a year to invest/save.

    My work place pension is defined benefit and in today's value, would be worth about £28k a year assuming I continue to accrue service and leave work at 55, but don't opt to take my pension to 68. This, in theory, would be sufficient for us to live on on its own.

    Therefore, my strategy is being able to generate enough savings and investments that I can live on between my anticipated age of retirement and 68.

    The £3k per month is currently invested in the following split:

    £18k a year into SIPPs. I could do more, but the way the annual allowance is calculated for DB schemes means that investing much more is likely to give me a tax liability. Our SIPPs are with Hargreaves Lansdown and are invested into a range of funds worldwide; there is a reasonable amount of risk at present which I will change the closer we get to retirement. The £18k invested receives tax relief of 40/20%.

    £8k a year into a Lifetime ISA for each of us (£4k each) . This then makes us both eligible for the maximum £1k yearly 'bonus'. These are held with Hargreaves Lansdown too and are invested in a range of funds.

    £6k a year is invested into a S&S ISA with Fundsmith. I've had this for a number of years and it has performed very well to date.

    The remaining £4k is saved into a mix of Regular Savers and Peer-2-Peer lending with the balance sitting in a cash ISA.

    My admittedly over-complicated financial modelling shows that I should have enough cash/readily accessible funds to live on between 55 and 60 at which point I will have access to funds held in LISA and will begin draw-down of my SIPP.

    My DB pension will begin at 68 which point we will in theory have far more than we actually need, although in reality I am sure there will be plenty to do and spend it on.
    • jamesmorgan
    • By jamesmorgan 18th Jun 17, 2:50 PM
    • 341 Posts
    • 328 Thanks
    jamesmorgan
    In terms of investment, I would invest mainly in property (own house) and passive global index funds. Rest (10-20%) in bonds. Keep it simple, minimise costs (including tax) and don't try to time the market.

    However, the most import advice is to really think through what you mean by retirement. When you are young the temptation is to view it in very binary terms. You are either working full time or free to do whatever you want. As you get older you understand more that there are many shades of grey.

    I 'retired' first when I was 41 and spent 10 years living off my investments. I say retired with some caution as much of my time was looking after my children. When my children left home I decided to seek new employment. I retrained in a completely new area and now work on something I really enjoy rather than pursuing a career with the main objective of making money. I earn about 25% of what I used to earn, topping up the rest from investment returns. Initially I was working part-time, but enjoyed it so much that I transitioned to full time.

    Even though I am now working full time, I feel as 'retired' as when I had stopped working. The key criteria is that I am free to work on what I want without feeling compelled to do things to 'advance' my career.. If 'retirement' can still include money earning activities, it is possible to be a lot more flexible in retirement planning. If you stick with the binary definition of retirement there is a risk that by the time you have accumulated enough money to do it, you are not fit/healthy enough to enjoy it to the full.
    • Gen_Y_Saver
    • By Gen_Y_Saver 19th Jun 17, 10:56 AM
    • 57 Posts
    • 61 Thanks
    Gen_Y_Saver
    Some really interesting stuff on here! Thanks again all.


    swedespeed - its great to connect with someone who has a similar outlook to me. Are you based in London as those are some decent wages! Well done! Your approach seems pretty solid to me. My only advice would be to read a few posts by the Escape Artist. His advice is invaluable and has really helped me. Best of luck!
    MFW! Original loan (Aug 2015) = £65000
    Current debt = £43000
    Interest saved so far = £13930
    • wiltshiregirl69
    • By wiltshiregirl69 26th Jun 17, 2:21 PM
    • 22 Posts
    • 13 Thanks
    wiltshiregirl69
    Hi Gen

    Interesting thread - albeit I am a bit late to post.
    I am in my late forties and not retired yet but I have to agree with some of the posts on here about houses. Instead of paying off a mortgage now - I would buy the most expensive house you could afford jointly - fix at a low rate of interest repayment mortgage for 5 years. The UK is short of housing and there is no policy which clearly addresses this issue, hence I can't see the situation changing much - houses you live in are a very good investment for the future as well as being a nice home. Also it is a tax free saving/investment pot. Then I would max out in a pension only when you hit the higher income bracket. Otherwise I would max out ISAs first.
    Friends who were comparable to us at your age saved and scrimped to pay off a mortgage quickly and hence did not move up the property ladder. They are financially worse off than us by some margin for having taken this tack even though they saved like mad from a very early age when we didn't have the spare money to save as our mortgage took most of our 'spare income'.
    We dabbled in buy to let but sold that flat off with a reasonable profit some time ago to assist in our final house move. Try and do a job you enjoy rather than concentrating wholly about freedom in retirement. The last thing I was thinking about at 27 was retiring early. I'd worked hard to find my dream job and I'm still in it now. Live life to the full, eat out, travel, have fun, meet interesting people now (because people can get boring when you are older!), concentrate on living this dream right now alongside some saving.
    • Thrugelmir
    • By Thrugelmir 26th Jun 17, 7:11 PM
    • 54,303 Posts
    • 47,095 Thanks
    Thrugelmir
    You are only 29. Plan for the unpredictable. Life is a roller coaster. While you can aim for long term goals. Whether you achieve them or not is another matter.
    “ “Bull markets are born on pessimism, grow on skepticism, mature on optimism, and die on euphoria. The time of maximum pessimism is the best time to buy, and the time of maximum optimism is the best time to sell.” Sir John Marks Templeton
    • swedespeed
    • By swedespeed 26th Jun 17, 8:46 PM
    • 4 Posts
    • 9 Thanks
    swedespeed
    Gen_Y - Not in London - but we are in the south east!
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