Early-retirement wannabe

atush

Cheapest places to buy property in high % rental occupation are in the Stoke area, The valleys in Wales and the NE. Hard to get decent yields in London (catford might be the best now).

the most lucrative areas are in University towns with HMOs.

TheTracker

kidmugsy wrote: »

But at least he's not as thin-skinned as one of the posters at Monevator, who's always complaining that people don't worship at his feet, and threatening to block them from comments. He must be a delight to work for.

The other posters there seem grown-up though.

edinburgher wrote: »

I think you must be thinking of 'The Investor'. I think his heart is in the right place, I can imagine that it must be a PITA running a blog that's full of generally excellent advice, only to have running battles with one or two dedicated smartarses who try and pick fault with whatever point he's making.

Response "I’m also thin-skinned and awful to work with, apparently. (But thanks for understanding edinburgher, if you’re listening"

settingsun

Hello all.

I have spent the last few weeks reading this fantastically useful thread, and finally I have my own plan developed enough to post where I am with my thinking.

Current Age 53 and a half (both of us), want to retire by 55 (18 months time) or 56 (in 30 months), OH will carry on till 60 earning about 18k pa before tax
Home: £450k value, interest only mortgage £250k outstanding
Savings: £125k, Isas and cash
Pension Pot : £475k (mostly mine, about 35k OH), expect to add £30k a year while working . Target is to get this pot to £600k
Holiday home in Florida: $200k (need to subsidise by about £5k PA), no mortgage.
BTL home: £650k, mort is 360k, this was my previous family home where we lived for 10 years and we rented it out for 10 years. £1500 income per month
Final Salary pension of about 7k pa from age 60
State pension due at 67
2 kids at last year at uni, last kid at college.
Current combined income after tax and pension payments and including rental: 6k per month, all gets spent (about 1k pcm on mortgages and about 1k on kids). Need about £40 -£45k in retirement

So if you are still with me my dilemmas are:

1. Do I wait till 56 and keep going for an extra year, or go in about 18 months? I am thinking i need to get the Pension Pot to 600k, so need to do the extra year. My spreadsheets and firecalc tell me i am fine, but in some scenarios I run out of money in my 80's (eg many years of high inflation plus low return on investment).

2.What do I do with the BTL, keep it going, or sell? If I sell do I use the spare money to pay my home mortgage, or do i keep my own home mortgage going may be covert it to a repayment . Thinking I keep the money as a contingency for a few years.

3. The Florida home is a drain on finances, we struggle to make it work. We like having it and going over 2 or 3 times a year and when retired want to have extended 2 month stays. May be if i was retired i would be able to market it more and reduce the loss. We could sell and leave the money there and rent other peoples homes, we would have enough money there to rent for about 15 years at 10 weeks a year).

4. How do I fund the period when i am retired and wife is working (56 to 60). I can sell the BTL, or I can live off the ISA's or I can take my pension 25% tax free sum. There may be tax advantages or the optimal ways to minimise my risk of running out of cash.

Any thoughts on any of this from you wise folk would be good!

Thanks all.

mania112

settingsun wrote: »

Hello all.

I have spent the last few weeks reading this fantastically useful thread, and finally I have my own plan developed enough to post where I am with my thinking.

Current Age 53 and a half (both of us), want to retire by 55 (18 months time) or 56 (in 30 months), OH will carry on till 60 earning about 18k pa before tax
Home: £450k value, interest only mortgage £250k outstanding
Savings: £125k, Isas and cash
Pension Pot : £475k (mostly mine, about 35k OH), expect to add £30k a year while working . Target is to get this pot to £600k
Holiday home in Florida: $200k (need to subsidise by about £5k PA), no mortgage.
BTL home: £650k, mort is 360k, this was my previous family home where we lived for 10 years and we rented it out for 10 years. £1500 income per month
Final Salary pension of about 7k pa from age 60
State pension due at 67
2 kids at last year at uni, last kid at college.
Current combined income after tax and pension payments and including rental: 6k per month, all gets spent (about 1k pcm on mortgages and about 1k on kids). Need about £40 -£45k in retirement

So if you are still with me my dilemmas are:

1. Do I wait till 56 and keep going for an extra year, or go in about 18 months? I am thinking i need to get the Pension Pot to 600k, so need to do the extra year. My spreadsheets and firecalc tell me i am fine, but in some scenarios I run out of money in my 80's (eg many years of high inflation plus low return on investment).

2.What do I do with the BTL, keep it going, or sell? If I sell do I use the spare money to pay my home mortgage, or do i keep my own home mortgage going may be covert it to a repayment . Thinking I keep the money as a contingency for a few years.

3. The Florida home is a drain on finances, we struggle to make it work. We like having it and going over 2 or 3 times a year and when retired want to have extended 2 month stays. May be if i was retired i would be able to market it more and reduce the loss. We could sell and leave the money there and rent other peoples homes, we would have enough money there to rent for about 15 years at 10 weeks a year).

4. How do I fund the period when i am retired and wife is working (56 to 60). I can sell the BTL, or I can live off the ISA's or I can take my pension 25% tax free sum. There may be tax advantages or the optimal ways to minimise my risk of running out of cash.

Any thoughts on any of this from you wise folk would be good!

Thanks all.

The biggest concern is the residential mortgage - £250k is a big chunk of money when moving into retirement. Currently, this debt isn't decreasing. I would also suggest continuing work until the kids can fend for themselves.

Seems like the BTL is the key to paying for mortgages, but i'd imagine the £1,500 pm isn't enough to cover both if you convert the IO into a repayment? So there's an effective shortfall. It's a bit worrying going into retirement with £500k+ in mortgages, but you do have solutions should it become stressful or financially tight.

if you like Florida I wouldn't sell that - one of those things where the happiness it brings outweighs the expense. From 60, let's say the Final Salary pays for Florida?

So you're left with pensions and ISAs to fund retirement income. £150k tax free lump sum - clear off some debt if you have any, or some chunks out of your mortgage.

Values:
£450k pension
£125k isa

Income:
£28,750 is 5%
£16k state after a few years (assuming full NIC, and then only a guesstimate)

It might be wiser to draw from your pension while you're a low (nil) rate tax payer between leaving work and receiving state pension/final salary. The only income I see you receiving is rental income. The ISA is tax free on withdrawals no matter how much you earn so you can save this for when your income is higher.

Bootsox

Will anticipated rule changes not destroy your BTL income stream?

http://www.spectator.co.uk/2016/02/buy-to-let-investing-just-became-a-very-very-bad-idea/

Can you sell off the Florida home at the first available opportunity and just look for good deals on holidays in Florida, or anywhere else for that matter (you'll have plenty of time on your hands)?

If you intend to sell the BTL (depending on the actual capital gains position), you may need to investigate the main household "flipping rules" (the ones our MPs [STRIKE]abuse[/STRIKE] use).

EdSwippet

Bootsox wrote: »

Can you sell off the Florida home at the first available opportunity...

If you sell a home in the US, watch out for FIRPTA. This means you'll pay US income tax on the home's capital gain since purchase. Income tax rates are invariably higher than capital gains tax rates.

Triumph13

settingsun wrote: »

Holiday home in Florida: $200k (need to subsidise by about £5k PA), no mortgage.

....
We could sell and leave the money there and rent other peoples homes, we would have enough money there to rent for about 15 years at 10 weeks a year)

A better way of looking at it might be that you could sell it, invest the proceeds and then the income from that plus the £5k pa costs you avoid would pay for your 10 weeks a year for ever.

atush

I would sell the BTL and pay off/reduce your mtg.

I agree with the above who say you are carrying far too much debt.

I too would work until all 3 are out of school and working. Shouldn't delay your retirement too long.

In the meantime while working, do whack as much into pensions/Isas as possible (if the ISAs are S&S ones).

And personally, as one who owns a FL house, i would not sell that. I would wait until you retire and have your first 2/3 month vacation. Then see how you go.

kidmugsy

Does the cost of heath insurance for visiting the US get heavier with age? Should that be included in your considerations? You'd get EU/French health cover if you went to somewhere like Reunion presumably.

settingsun

Thanks guys for the advice. lots of really useful points.

My favoured approach is to carry on for a bit longer, till 56 so another 30 months. By then the kids should be well on the way to being settled (one doing primary pgce in london, other finishing degree this year but wanting to travel, third looking for apprenticeships in IT area). Another 2.5 years should see them being a little more settled.

Regarding my debt and the btl, everyone seems to agree I am carrying too much debt!

I have a remortgage due later this year. The tenants have been there ever since we moved out partly because we don't charge top rent. Its in West London ( probably one of the cheapest areas), so just keeps rising in value hence the reluctance to sell till now. I will have to get advice on capital gains. Various online calculators which take into account my having lived there and sharing the gain with my wife work out a cgt payment of around 5 -15k each. I don't know if we can go and live in it again for say 6 months and if that makes a difference.

The spectator article was a sensible piece. Many tax reasons to get out. I will only be earning rental income during the first phase of retirement so I will be a low rate tax payer (use up isas or tax free 25% for the other 25k or so a year).

I am thinking of converting my home mortgage into a repayment at next re-mortgage in about a years time. Problem is that the repayments are really high if I say I want to repay in 10 years. I could see if I can get repayment over 20 years (ie till about age 75), don't know how the mortgage companies would react to that in terms of the rates i would get. I could put a lump sum down (from pension 25% or from sale of btl) to get the LTV less than 50%

Last week I decided that I would speak to the family and say i was selling the florida place in about 6 months when the current rental bookings all go through. Over this weekend I am thinking I should not do that. We really should enjoy it during the first few years of retirement before selling. I now think we should try and hang on for a bit and can pretty much sell if we get into difficulties as a plan B.

On the capital gains in Florida. My understanding is that you can take your losses off against the capital gains over there. We have made combined losses of about $10k per year, plus that's academic as I don't expect it to sell for much more than we bought it for 15 years ago. Not a great investment, but we have had fantastic holidays and breaks over that time. I would do it again but never recommend it as an investment.

We want spend a couple of months a year exploring and hiking the US, places such as the rockies, yosemite, grand canyon, smokey mountains..... Thinking was that we would top and tail with a week or so in our home, to prepare and recover. We could just rent somewhere but there is nothing like being in your own place.

On the health cover, I think its fine as long as you dont start to get serious problems. I guess thats what early retirement is about so you can enjoy those things before problems develop (ie between 55 and 65). I am not aware of the EU health cover at Reunion.

cheers folks.