Early-retirement wannabe

Pennysmakepounds

nicknameless wrote: »

Or in other words "I'm not listening" :rotfl: ?

LOL.


I never said that


But i've fully committed to my way of retirement planning and gone past the 'Point of No Return' and its working pretty well for me if i'm honest.


Its can be hard work at times juggling work and maintaining properties.


Having to work weekends and evening till 10/11 at night to renovate houses to make then ready for renting, but i'm managing for now.


TAX wise, yes I probably have paid a little more then I should/could have but I'm comfortable with that, given the situation I am in now.


My next goal is to become cost neutral -
What I mean by that is I want my monthly outgoings (as they stand today) to be matched by the net rental income I generate from he properties.


I'm 60% of the way there so far.

ams25

Pennysmakepounds wrote: »

I'm not disagreeing that there are some good options out there.
But i've decided to go down the property route for the bulk of my retirement planning.

Yes - that does mean that i have to pay 40% TAX from the business profits, and the situation is made even worse now with the 7% tax on dividends.



However, even with all that I still think its better to invest in property and make the income off rental.



It may not be everyone’s cup of tea but it works for me.

if it works for you then that's good for you. I have a rental property and have probably made a decent total return over the last 10 years or so, but will be happy to sell it now. True returns after all costs (void periods, repairs, fees, taxes etc) are not so great plus the hassle factor and inflexibility (you can't sell a bedroom) imho make a diversified portfolio around equities including REITs more attractive (and even before you take tax reliefs into account).

And if you look at equity vs property returns over the long term they are very close so you do need to look at the whole picture. From memory equities are more volatile but result in slightly higher returns.

I'd say property has a better place in early retirement but looking after property and tennants (even with help) in your late 60 and 70s (let alone 80s) seems very unappealing.

seems to be a common view on main street that equities (in pensions) are often perceived as gambling / bad value and property is as safe as houses. Seems a shame that so many miss out by this imho distorted view.

DairyQueen

Sorry to sound caustic OP but, boy oh boy, you must be off your trolley.

Let's do a quick comparison:

SIPP:
- Investments purchased free of income tax.
- 25% tax free on the way out.
- remaining 75% can be flexibly drawndown to optimise income tax
- capital gains free of tax
- investment income free of tax
- 1000s of investment choices
- liquid
- completely free of IHT and income tax for beneficiaries if you die < 75
- income tax at marginal rate imposed only at point of drawdown to beneficiaries if you die 75+
- no void periods, or costly maintenance, or time spent painting, fixing and cleaning
- no hassle from tenants
- no calls in the wee hours complaining about the broken-down boiler
- no legal fees to recover unpaid income
- investment protection up to fixed amount
- politically friendly landscape
- a couple of hours every six months required to manage the investment.

BTL:
- Investments purchased from post tax income
- income subject to harsh tax treatment
- capital gains subject to tax
- investment income subject to tax
- no investment choices
- illiquid
- subject to IHT
- subject to void periods, costly maintenance, time spent painting, fixing and cleaning
- hassle from tenants
- calls in the wee hours complaining about the broken-down boiler
- legal fees to recover unpaid income
- no investment protection
- politically unfriendly landscape (and pray that Corbyn never gets into government)
- hours/days each week required to manage the investment.

I exited BTL and am delighted to be free of the hassle. It was only made worthwhile by the previous tax-friendly treatment. Now, it's not worth the risk or the bother.

However, I thank you on behalf of all UK taxpayers for your ongoing commitment to paying tons of unnecessary tax for no more long-term return than a well-diversified pension portfolio:beer:

Pennysmakepounds

DairyQueen wrote: »

However, I thank you on behalf of all UK taxpayers for your ongoing commitment to paying tons of unnecessary tax for no more long-term return than a well-diversified pension portfolio:beer:

But hang on -


The TAX MAN keeps telling that paying 000's in TAX every year (About 85/90% of ANY money you make in real terms:) ) is a good thing for the economy and country and helps support the lazy wasters - sorry I mean the unemployed - must be politically correct at all time .


Mind you, Never really saw it that way myself. I mean why would I want to pay the DOLE for the bums, but who am I to argue with the establishment

Joking aside, I can see your point of view


BUT consider this for a moment.


Pensions:-
You work 40/45 years of your life and pay religiously at a rate of say 8% of your income into a pension. Over the term you will have paid 000's into the pension pot. - (Let’s forget about the TAX benefits and government contributions for a minute, I’m simply talking about what you put in in terms of real money.)


At the ripe old age of say 55/60/65 you decide, enough is enough - I’m going to retire and draw my pension and enjoy my OLD age.


That means that for 40/45 years you will have contributed 000's without seeing a single penny back from the 8% you have been paying EVERY year.


Unfortunately, the day after you retire you get hit by the proverbial RED bus and die - This means that YOU got NOTHING back from all that investment. (Yes your partner may get something - but YOU will have got nothing)


IF on the other had you survive for 'X' number of years you get an annual return of 'X' amount and a lump sum - Which may still be less then what you put in depending on how long you live.

Let’s take a look at property investment.
Yes, I pay 'More' TAX, BUT I get a return year on year on my investment AND I have something to leave for the kids (and the way things are going with property. This may be the only chance they have of ever owning a property.)


I appreciate this does not work for everyone and you have to have money to make money as they say.


In my opinion:
The PENSION route is better for people who have a fixed income all their lives and can only to afford to put 'X' amount into a pension but don't ever have large sums of money to play with.


Property works better if you have the capital to be able to invest in several properties. 1 is not worth it. This gives you a return year on year, even when you are still working.


This will allow you to have a nice cash reserve built up at the point of retirement as well as income from the rent.


As you get older and you cannot manage the properties you can always employ someone to do it for you or get your kids to take over the day to day running of the properties.

DairyQueen

Pennysmakepounds wrote: »

But hang on -


The TAX MAN keeps telling that paying 000's in TAX every year (About 85/90% of ANY money you make in real terms:) ) is a good thing for the economy and country and helps support the lazy wasters - sorry I mean the unemployed - must be politically correct at all time .


Mind you, Never really saw it that way myself. I mean why would I want to pay the DOLE for the bums, but who am I to argue with the establishment

Indeed. Why would you?

Pennysmakepounds wrote: »

Pensions:-
You work 40/45 years of your life and pay religiously at a rate of say 8% of your income into a pension. Over the term you will have paid 000's into the pension pot. - (Let’s forget about the TAX benefits and government contributions for a minute, I’m simply talking about what you put in in terms of real money.)

Forgetting about this negates all of the advantages of saving via a pension so let's not forget about this.

Pennysmakepounds wrote: »

At the ripe old age of say 55/60/65 you decide, enough is enough - I’m going to retire and draw my pension and enjoy my OLD age.


That means that for 40/45 years you will have contributed 000's without seeing a single penny back from the 8% you have been paying EVERY year.

Very short-sighted of you. I can assure you that we have paid much, much more than a measly 8% into our pensions. For example, in early 2016, OH paid £72,000 into his pension using previous year's allowances. The tax relief added to that investment was £18,000. A further £18,000 was received when he completed his tax return later that year. That pension investment of approx £90,000 is now worth approx £120,000. Plus we have invested the additional £18k. With interest our total return on that £72k investment is now worth in the region of £120k + £19000 = £139k. All free of CGT and IHT.

Pennysmakepounds wrote: »

Unfortunately, the day after you retire you get hit by the proverbial RED bus and die - This means that YOU got NOTHING back from all that investment. (Yes your partner may get something - but YOU will have got nothing)

You miss the point. Pensions are about delayed gratification. The chances of me (or OH) being hit by that red bus are minuscule. The chances of us reaping the rewards of investing in our pensions are very short odds.

Pennysmakepounds wrote: »

IF on the other had you survive for 'X' number of years you get an annual return of 'X' amount and a lump sum - Which may still be less then what you put in depending on how long you live.)

No, missed the point again. You obviously haven't a clue about how flexible pensions are these days. We don't get a 'lump sum' or 'X amount'. We will use our pension like a bank account and withdraw amounts flexibly in order to optimise our tax position.

Pennysmakepounds wrote: »

Let’s take a look at property investment.
Yes, I pay 'More' TAX, BUT I get a return year on year on my investment AND I have something to leave for the kids (and the way things are going with property. This may be the only chance they have of ever owning a property.)

So do we. We just choose to reinvest it rather than take it as income right now. Of course, from the age of 55 we can do whatever we please (and we are both now over 55). Plus all of our pensions (unlike yours) will be inherited by our beneficiaries completely tax-free if we die < 75.

Pennysmakepounds wrote: »

In my opinion:
The PENSION route is better for people who have a fixed income all their lives and can only to afford to put 'X' amount into a pension but don't ever have large sums of money to play with.

Total BS.

Pennysmakepounds wrote: »

Property works better if you have the capital to be able to invest in several properties. 1 is not worth it. This gives you a return year on year, even when you are still working.

More BS. Not interested in capital investment in an illiquid asset when we can invest much more tax-efficiently in liquid assets via a pension.

Pennysmakepounds wrote: »

[This will allow you to have a nice cash reserve built up at the point of retirement as well as income from the rent.

We can create a 'nice cash reserve' without having to resort to tax-inefficient vehicles such as BTL. We also don't need 'income from rent' gained at such a high cost in tax ta very much.

Pennysmakepounds wrote: »

As you get older and you cannot manage the properties you can always employ someone to do it for you or get your kids to take over the day to day running of the properties.

Good luck with that . I am a generation older than you and, guess what?, your kids are highly unlikely to be inclined to want to manage your investment properties. Plus agencies are likely to rip you off unless they are monitored.

You really do need to understand the tax (and other) advantages of pensions over BTL.

enthusiasticsaver

Pennysmakepounds wrote: »

The way I see it, I'd rather have control over my money and leave something for the kids. Rather then invest in a pension.


I realise its not the most TAX efficient route but each to their own.

I think you are misinformed about the new pension freedoms.

The only reason DH and I were able to take early retirement at 58 was due to the fact we overpaid into our various pension pots. They are tax efficient, well diversified and flexible which is not the case with BTL property. We put a lot more than 8% a year in to them though and benefitted from employer contributions and tax relief. We also have full control of the DC pots although we do also have final salary DB pots which we are drawing on now. Luckily no hitting by buses so far


Each to their own though.

shinytop

Property works better if you have the capital to be able to invest in several properties.

I suspect if you are gifted or inherit a £couple of hundred k that someone else has paid tax on already then buying BTL property might, in some circumstances, be better that putting it in a pension. I still wouldn't...

Pennysmakepounds

shinytop wrote: »

I suspect if you are gifted or inherit a £couple of hundred k that someone else has paid tax on already then buying BTL property might, in some circumstances, be better that putting it in a pension. I still wouldn't...

Everyone has a preferred option.

Mine is property.

I intend to be worth a million net by the to be I retire, which will be made up of property, some investments and cash.

I have a plan and I'm sticking with it., I'm not changing my plan now.

Let's see what happens in the next 8/10 years.

If you find me on the street buy me hot drink and a meal will you please. 😂

mgdavid

Pennysmakepounds wrote: »

.........

If you find me on the street buy me hot drink and a meal will you please. 😂

No chance - because your position would be entirely self-inflicted.

AnotherJoe

Pennysmakepounds wrote: »

I'm not disagreeing that there are some good options out there.
But i've decided to go down the property route for the bulk of my retirement planning.

Yes - that does mean that i have to pay 40% TAX from the business profits, and the situation is made even worse now with the 7% tax on dividends.

However, even with all that I still think its better to invest in property and make the income off rental.

It may not be everyone’s cup of tea but it works for me.

It doesn't actually work for you since you'll be much worse off even on your own figures.

But since you dont realise that, or more likely are unwilling to understand, since it will mean you have to acknowledge to yourself you've been chucking money away for years, and could have 1.5x the capital and income in retirement than you will have (or your descendants should you get hit by that bus), thats an unpleasant thing to try and take on board.

So better to blithely say "it works for me". Maybe thats good for you in self imposed blissful ignorance but please dont try and persuade anyone else that 53% is better than 100% as a base to start a retirement plan.