Early-retirement wannabe

OldMusicGuy

ams25 wrote: »

In our case we like the house/location and are not ready to downsize or move. Extending makes sense....and would probably payback when we do come to downsize. I just like having contingency in the plan and this removes a lot of it. But we like house projects too and would both enjoy it. Swings and roundabouts....

Well, you could think of it as investing in property. If you do plan to downsize at some point, you will likely get the money back. We've always included downsizing as part of our long term planning because we will need a portion of the equity from our house as part of our pension funds. And if it's something you both enjoy then that's also good....

gadgetmind

I see downsizing as an option but have always run pensions/investment to let us retire without it being forced upon us.

OldMusicGuy

gadgetmind wrote: »

I see downsizing as an option but have always run pensions/investment to let us retire without it being forced upon us.

In our case it's more of a FIRE decision. If I carried on working for another 4 to 5 years, we could probably afford to stay here. By downsizing, I can retire earlier. But it's also part of our philosophy. We have a 5 bedroomed house which is too big for just the two of us (our son will be moving out in 2018) and we want to live a more sustainable lifestyle and a 3 bedroom house will be fine for us.

Another reason for doing this is that we plan to give our son some of the equity we release to get him on the housing ladder. Our view is that our generation has done very well out of the growth in the housing market and it's only fair to pass some of that luck on to the current generation for whom it is much more difficult to get on the housing ladder. We tell our son he is getting his inheritance upfront, as we plan on having very little left when we die. But that's our personal philosophy, YMMV.

Alexland

OldMusicGuy wrote: »

We have a 5 bedroomed house which is too big for just the two of us (our son will be moving out in 2018) and we want to live a more sustainable lifestyle and a 3 bedroom house will be fine for us.

Although it's not part of our plan to downsize we were very happy living as a couple in a 3 bed mid terrace and there were a lot less property maintenance issues to worry about. Although we are still a long way away from retirement I like the idea of sorting out our accumulated possessions and needing less space but I am not sure my wife will ever let me clear family stuff from the attic!

atush

gadgetmind wrote: »

I see downsizing as an option but have always run pensions/investment to let us retire without it being forced upon us.

Us too. We dont need to downsize, but with all 3 boys gone we wont be needing a 5 bed 3.5 bath house either. Hoping something smaller will be cheaper to run.

ognum

atush wrote: »

Us too. We dont need to downsize, but with all 3 boys gone we wont be needing a 5 bed 3.5 bath house either. Hoping something smaller will be cheaper to run.

In retirement we need our house that is that size for the space it gives and the ability to have room for hobbies and office space.

Can’t see we will ever need less space!

gadgetmind

atush wrote: »

Us too. We dont need to downsize, but with all 3 boys gone we wont be needing a 5 bed 3.5 bath house either. Hoping something smaller will be cheaper to run.

Yes, current 5 bed is waaay too big, but I need a lot of room for hobbies. A 3 bed with a *huge* workshop and a *vast* garage would do the job nicely.

marlot

I'm just about ready to go (age 54). My main concerns are around inflation and interest rates.

I'm lucky that half my pension is DB - some linked to CPI, some to CPI with a 2.5% limit, and a small amount linked to RPI up to 5%. My cashflow model assumes 2.5%.

I know how much we currently spend a month. The model assumes this rises at 4%.

Finally, I'm assuming return on savings/investments at 4% after charges. This is spread across trackers, some RPI-linked NS&I and some in building society accounts. I've comfortably beaten this for the last few years (due to the trackers) - but wanted a long-term figure.

My gut feel is that I'm being pessimistic. What do people think?

k6chris

marlot wrote: »

I'm just about ready to go (age 54). My main concerns are around inflation and interest rates.

I'm lucky that half my pension is DB - some linked to CPI, some to CPI with a 2.5% limit, and a small amount linked to RPI up to 5%. My cashflow model assumes 2.5%.

I know how much we currently spend a month. The model assumes this rises at 4%.

Finally, I'm assuming return on savings/investments at 4% after charges. This is spread across trackers, some RPI-linked NS&I and some in building society accounts. I've comfortably beaten this for the last few years (due to the trackers) - but wanted a long-term figure.

My gut feel is that I'm being pessimistic. What do people think?

I'm in a very similar situation and after years of 'creative' spreadsheets to justify company cars etc, I'm working on a pessimistic base case that my private sector DB pension goes up by half of lower of rate of inflation (as only 52% is covered by a guarantee to rise with a 5% capped CPI/RPI- and based on their track record I don't trust the company to raise anything they don't have to). DC / savings pots are calculated at a return of inflation + 1%. I'm also assuming that SP and my LGPS only rise by 80% of inflation, just to be on the safe side! On this basis I can retire (sorry, become a 'lifestyle entrepreneur') early next year, but will need to avoid world cruises in month one and adjust spending according to market conditions. Works for me! :rotfl:

westv

Don't forget to factor in a 90% drop in stock markets the same year you retire - or is that a little too pessimistic?