Early-retirement wannabe

jamesd

ratraceout wrote: »

quick question - if u are earning 3000 per month today at current interest rates then your pot must be big enough to draw down without ever using up. how does that work? did u make over 10 million?

More like £600,000 to pay that much, assuming 6% income level from a mixture of investments and savings accounts.

The sort of funds that might be used and their yields include:

9.6% Marlborough High Yield Fixed Interest
7.9% Newton Global High Yield Bond
7.2% Newton Higher Income
6.6% Invesco Perpetual Monthly Income Plus (pays monthly)
6.2% Invesco Perpetual Distribution (pays monthly)
3.9% Invesco Perpetual Income

Those yields are historic and not guaranteed. The capital value varies, by as much as 40% in some of them. You'd use many different funds, not just one. Sticking £300,000 in Marlbororough High Yield Fixed Interest alone would be a bad mistake due to lack of diversification. Assuming 6% growing with inflation is a more reasonable assumption, though 4% would be prudently cautious long term to allow lots of room for the capital value to grow.

Annuities can also pay out more than savings accounts, with the income from them depending on age and health.

You couldn't take any income at all if you just used savings accounts and had to preserve the capital after inflation. But bendix might be using cash in places that are paying higher interest rates than the UK.

Marine_life

Nic43 wrote: »

I am confident that if we can get to £1 m with no mortgage then I can retire at 50.

I've only recently started contemplating early retirement. Always worked hard but can't say I ever enjoyed it much. Over the last twelve months my modest investments and business seem to have done well by my standards . I now find myself largely surplus to requirements in the office. Happily divorced, aged 52 with kids nearing the end of their very expensive private schooling.

I have found this thread incredibly inspiring but more than a little confusing. Just how much do you need? I see people here with generous final salary arrangements still afraid to take the plunge. If if sell up I could probably muster about a £1m (including £500K SIPP & £100K PEP) plus an unmortgaged family house. Seems like a lot to me but is early retirement really an option or am I just dreaming?

You know, it sounds like a lot of money but I think the thing that delays most people is that, unlike say making a bad house move, making a retirement decision is a huge - and in most cases - one time step. So you need to be pretty sure that you are going to get it right.

A lot of course will depend on how much you want to spend in retirement. Certainly if you are happy to manage on the national average salary (around 26,000) then you are all set as, even with a relatively lowly return, your million will generate in excess of that.

However, you mention private school, well what about university thereafter? And do you want to help the kids get on the property ladder?

For me - I have my eye on a retirement which includes building a house, some relatively lengthy holidays, nice cars etc. etc. All-in-all I am estimating that i will need an income of around 75-80,000 to live the lifestyle I want to live. Of course there is (as written above) a back up plan which allows me to retire anytime soon - but it won't be as pleasant as retiring with a stack of cash! :T

gfplux

to paraphrase a song.
"Should you go or should you stay"

That is certainly a big question about early retirement. However I think those who are asking this question should take heart from people on this forum who have made the jump.
I am pretty sure very few will say they have made a mistake. I know this thread is self selected but has anyone regretted early retirement?

I certainly have not.

cyclonebri1

I was about to post something similar, ie, I've yet to hear a single person, and that's here and also in "real life", say retiring early was a mistake.

How have however heard then say on frequent occaisions;

"Why didn't I do it earlier"


I know won't apply to all but it really is suprising how little you need to live on when the mortgage is paid, you've got past the depts, the kids have moved out, (that one's open to debate;)), and particularly you are no longer banging everything you can into pensions and savings.

All in comparison to lifestyle whilst at work of course. If you want 3 months abroad every year, well it will get expensive;)

Marine_life

I think that is the key for me - its very personal.

Of course there is the famous phrase that nobody when lying on their death bed ever said "I wish I had spent more time in the office".

I think there is a blance to be achieved between a life of retirement luxury and sitting in a draughty bedsit nibbling on a crust of stale bread.

I only have to look at myself and my wife. We have a vacation appartment with no motgage in a beautiful village in Austria. For me it represents the perfect retirement pad - but my wife thinks different - she dreams of a nice little chalet, nice garden etc. etc. You know who is going to win that argument

At some point there will be a tipping point, where the benefits of work (mostly in the form of financial reward) are outweighed by the desire to be............somewhere else.

Nic43

Marine_life wrote: »

Nic43 wrote: »

I am confident that if we can get to £1 m with no mortgage then I can retire at 50.


You know, it sounds like a lot of money but I think the thing that delays most people is that, unlike say making a bad house move, making a retirement decision is a huge - and in most cases - one time step. So you need to be pretty sure that you are going to get it right.

A lot of course will depend on how much you want to spend in retirement. Certainly if you are happy to manage on the national average salary (around 26,000) then you are all set as, even with a relatively lowly return, your million will generate in excess of that.

However, you mention private school, well what about university thereafter? And do you want to help the kids get on the property ladder?

For me - I have my eye on a retirement which includes building a house, some relatively lengthy holidays, nice cars etc. etc. All-in-all I am estimating that i will need an income of around 75-80,000 to live the lifestyle I want to live. Of course there is (as written above) a back up plan which allows me to retire anytime soon - but it won't be as pleasant as retiring with a stack of cash! :T

Just to complicate matters I am undecided as to where I want to retire. Not the UK for sure. Greece looked good once as did Mexico but things change.

I guess its a personal decision but has anybody here found their perfect Place in the Sun? Alternatively has anybody had a bad experience with a new life abroad?

Marine_life

Nic43 wrote: »

Marine_life wrote: »

Just to complicate matters I am undecided as to where I want to retire. Not the UK for sure. Greece looked good once as did Mexico but things change.

I guess its a personal decision but has anybody here found their perfect Place in the Sun? Alternatively has anybody had a bad experience with a new life abroad?

I had long harboured a desire to live in the sun and particularly Australia. After much discussion and, it has to be said, argument, we moved there at the beginning of 2008. I won't go into the details here but what I can say is that the grass is certainly not greener. In November 2008 we left Australia and I look back now as if it were a dream (nightmare?).

Retiring abroad will depend on whether your priority is to minimise tax (Cyprus, Belize etc), be close to other Brits (Spain, Portugal) or leave a very frugal if very foreign experience (Thailand).

For those thinking of trying it I would recommend thorough research first and then probably rent to start off with to really get a feel for the country. Oh yes, if its a non-English speaking country, go with a commitment to blend in.

cyclonebri1

Marine_life wrote: »

I only have to look at myself and my wife. We have a vacation appartment with no motgage in a beautiful village in Austria. For me it represents the perfect retirement pad - but my wife thinks different - she dreams of a nice little chalet, nice garden etc. etc. You know who is going to win that argument

At some point there will be a tipping point, where the benefits of work (mostly in the form of financial reward) are outweighed by the desire to be............somewhere else.

Actually that hits the spot regarding the only issue we've had.

I retired through ill health at 55, a year later the good lady found she had to work to 64 not 60 for her pension:o:o:o:o

Marine_life

I am busy following the true early retirement wannabe path this week.

I wrote to my previous employer for an estimate of the expected payout on the final salary scheme which I left about 10 years ago. Current projection is just over 20,000 which starts at age 63. Ok, so inflation will seriously erode the real value to around 50% of that but its a good foundation stone.

In addition I put the maximum I could into my deferred compensation scheme, so that now has a balance of just over 350,000 which I can start drawing age 60.

Tomorrow I have a meeting with a financial advisor to talk about investment strategy over the next 5-10 year.

Plans were firming up ........and then I saw the pictures of the new McLaren MP4 ..........:p

Marine_life

The question often comes up "How much money do I need to retire" and I though the attached article was quite interesting.

http://money.usnews.com/money/blogs/On-Retirement/2011/02/16/how-to-set-a-retirement-savings-goal--

Of course everyone likes to have a nice clear number to aim for and I like the simplicity of the 4 times expected annual expenditure.

The other factor to take into account is, of course, the impact of inflation. I think it is better to look at how much is in the pot in today money terms and then apply an inflation factor i.e. it is no good looking at an income goal of 25,000 if you are still 15 years away from retirement. By then you will likely need around 35,000 to get the same spending power.

I am gradually refining my retirement income goal at around 75,000 per year in todays money. My two main pension pots in todays value (assuming no further contributions) would fund around half that once I take into account my state pension. That means I will need savings of around 937,000 to make up the difference (37,500 x 25).

I think I am on track to get there but the numbers are still big and scary!