Early-retirement wannabe

Marine_life

Glad to see people are enjoying and making full use of the thread.

Of course health issues are important and its very easy to make statements like "you can't take it with you" or "enjoying it today - you could get hit by a bus tomorrow" but consider this - how much does a years delay really cost? what if an additional year could deliver an extra quarter million to your pot? Of course there is the school of thought which says simplify your life - keep costs low....but when I retire I want to travel and that costs money.

Secondly I still haven't figured out what I want to do with my life - what do I want to achieve? Of course there's no need to achieve anything but at the moment I can't see a retirement of gardening.

So 774 days to do on my countdown clock and still so much to think about.

racing_blue

Been thinking about this again. If I was sure of:

1) being able to fund certain parts of my children's early adulthood.
2) a certain net income, index linked, forever.
3) outright ownership of a suitable house.
4) a suitable contingency pot of £££

Then I'd feel I could potentially retire. Or at least, if I chose to carry on working, it would be for some higher reason than simply funding life!

If I could calculate 1, 2, 3, and 4, could I add them together to come up with a figure: the target net worth to allow early retirement?

And then play around with a formula:

(Target wealth) - (Wealth now) = (Retirement age - Age now) x (Necessary annual increase in wealth)

All figures would be rebased to 2012 £ so I'd assume annual increase in wealth to be driven by the gap between net all-source income and total expenditure. And could draw targets for those based on a range of retirement ages.

I probably haven't explained that well??? But has anyone been down this route?

cyclonebri1

There is 1 thing that's changed my perspective over recent years.
I suppose I am old school in thinking that it was always the done thing to leave as much in the pot for the kids as possible.

I am/was wrong in that respect.

Both my daughters have said to us that they don't want or expect anything to be saved for them. They are both now married, with a handful of kids between them.

Now my position may be different to most, I can only relate to my own situation, but it's not just a case of they don't want from us, they actually don't need from us, not in monetary terms anyway.
They are both married to professionals, each of which earns over twice the amount I ever did:T:T:T

It was simply something I hadn't considered, and certainly changed the perspective somewhat in out case.

But human nature is what it is, there will be a little pot left for each of the grandkids:D


PS I do realise that it can go the other way and parents end up supporting their families for an extended time, but again that's life I'm afraid, you never know which way the dice will roll.

Marine_life

racing_blue wrote: »

Been thinking about this again. If I was sure of:

1) being able to fund certain parts of my children's early adulthood.
2) a certain net income, index linked, forever.
3) outright ownership of a suitable house.
4) a suitable contingency pot of £££

Then I'd feel I could potentially retire. Or at least, if I chose to carry on working, it would be for some higher reason than simply funding life!

If I could calculate 1, 2, 3, and 4, could I add them together to come up with a figure: the target net worth to allow early retirement?

And then play around with a formula:

(Target wealth) - (Wealth now) = (Retirement age - Age now) x (Necessary annual increase in wealth)

All figures would be rebased to 2012 £ so I'd assume annual increase in wealth to be driven by the gap between net all-source income and total expenditure. And could draw targets for those based on a range of retirement ages.

I probably haven't explained that well??? But has anyone been down this route?

You have developed a decent mathematical theory:

1. When do you think you will die?
2. What sort of NET returns do you expect on your investments (i.e. what risk level will you accept)?
3. What might be the pattern of your expenditure over time?

Essentially therefore that comes down to a question about attitude i.e. if you think you could drop dead at any minute your answer will be very different if you think you will live past 100!

My feeling is that you need to divide your retirement aspirations between:

1. The base income level you need to survive - not poverty but not luxury (by the way having a full sky TV package does not fall in this bucket).
2. The "on-top" balance that provides a level of luxury (regular holidays, good car etc)

Once you have exceeded 1. when you actually retire then depends on a lot of things like whether you fund the kids, how p1ssed off at work you feel, what the opportunity cost is of working (od you work at a desk but would really like to be a landscape gardener?).

If you can factor all that into a mathematical model then well done!

Gatser

Totally agree with Marine Life in that everyone has a different formula for their retirement plans and aspirations.

Many people set themselves very high income expectations in retirement, to "maintain my standard of living"
They are often the ones that are still working beyond 65.

Hence, I am a great believer in THE NUMBER concept ... (a preacher maybe!) To set our expectations at a comfortable and modest level to facilitate (semi) retirement as early as possible and enjoy healthy time while we have it. (This philosophy is always encouraged when a close relative has had a near death experience.)

hugheskevi

The more I've planned, the more I came to the conclusion that focusing solely on the date which you can fully retire was rather misleading, or at least very limiting.

For me personally, early retirement has 4 different elements to balance, and I'd expect others to have more/different:

1. Not working at periods early in life, before you are financially independent (ie gap years, travel in 20s, etc) - that delays the earliest date at which you can conventionally retire but ultimately all it does is shift years of not working from later in life to earlier in life
2. Working less hours or at a lower grade than you may be able to achieve in your main job for higher life satisfaction
3. Doing a completely different job which you find far more satisfying (presumably at a much lower wage, else you would do it anyway)
4. Conventional early retirement

One thing I discovered from planning was that you can end up being extremely tax efficient.

When I used to go travelling a lot, I would typically leave at the point in the financial year to avoid paying higher rate tax, and return a few months into the financial year to similarly avoid paying higher rate tax in that financial year too.

In the future, I may well go down to working only a few days a week to similarly avoid higher rate tax (at the moment all higher rate tax is pensioned off - but I am rapidly approaching the point of building up too much pension so that will stop in a few years).

And once I have retired early, I will have £20,000 of tax free allowance across myself and partner. That works very efficiently with the pensions (one of which can be commenced at age 50), which I'd expect to take as soon as possible (hoping for fair reduction factors...) and get large slices of tax-free pension income that got relief at 40% on the way in.

And the final part of the plan will be much later in life (mid 50s or later) to do a job for purely lifestyle reasons. Personally I would like to work with animals, so working in a zoo or such like would be fab even if it is minimum wage.

Whilst elements of that do need things such as a flexible job, the benefits from careful planning from a young age are huge

System

Loughton_Monkey wrote: »

The absense of 'work/career stress' is an amazing relief and keeps me 100% happy..

That's what the thinking minority believe, obviously all the regular followers of MSE.

But for a great many people (men only, I think) it is only the work/career stress that keeps them going. They spend almost their whole working life thinking they are worrying, subconsciously actually drawing comfort from it, and pinning their hopes on the miraculous day when finally they are "free".

Then suddenly they have nothing to do, no interests, no daily routine, no children, have probably forgotten how to communicate with their wives.
So they go to the pub, meet other recent retirees, go to reunions, and traditionally die 5 years later.
I know that picture has changed a lot recently, but it is still an awful warning, not to merely change the sharp work/leisure interface for an equally stressing work/retirement cut-off.

Freecall

Clifford_Pope wrote: »

That's what the thinking minority believe, obviously all the regular followers of MSE.

But for a great many people (men only, I think) it is only the work/career stress that keeps them going. They spend almost their whole working life thinking they are worrying, subconsciously actually drawing comfort from it, and pinning their hopes on the miraculous day when finally they are "free".

Then suddenly they have nothing to do, no interests, no daily routine, no children, have probably forgotten how to communicate with their wives.
So they go to the pub, meet other recent retirees, go to reunions, and traditionally die 5 years later.
I know that picture has changed a lot recently, but it is still an awful warning, not to merely change the sharp work/leisure interface for an equally stressing work/retirement cut-off.

Oh dear, things are looking pretty grim then!

cyclonebri1

Clifford_Pope wrote: »

That's what the thinking minority believe, obviously all the regular followers of MSE.

But for a great many people (men only, I think) it is only the work/career stress that keeps them going. They spend almost their whole working life thinking they are worrying, subconsciously actually drawing comfort from it, and pinning their hopes on the miraculous day when finally they are "free".

Then suddenly they have nothing to do, no interests, no daily routine, no children, have probably forgotten how to communicate with their wives.
So they go to the pub, meet other recent retirees, go to reunions, and traditionally die 5 years later.
I know that picture has changed a lot recently, but it is still an awful warning, not to merely change the sharp work/leisure interface for an equally stressing work/retirement cut-off.

You have the right idea but the wrong solution;)

Your scenario is even more true for manual workers.
They work much harder physically than white collar workers, they work until they can't any more.

So they retire, or more likely are retired, and then die within a couple of years from God knows what. You can't take the change in life when over 65 easily, seen too many fail:(:(:(

The issue is that you can switch off or switch over, but unless you do that early, it can be fatal.

Just another argument in favour of the spirit of this thread:T:T:T

racing_blue

This is a really great discussion- thankyou to the last few posters