Early-retirement wannabe

gallygirl

Dh6 said:

We stayed in at the “ evergreen lodge “ in Yosemite national park. I have seen some fantastic sights in my 34 years on this planet but the view of the half dome and Yosemite valley from glacier point is the best bar none! 

Stargazing on a clear night in Yosemite  is absolutely immense with no need for a telescope or binoculars. 

We were looking forward to stargazing in Death Valley......... it was cloudy and it rained..........

I like optimisation, even at trivial levels - if my last day of service was Friday 10th June, I would get paid 10/30=33% of my monthly salary. Setting my last day of service as Monday 13th June means I get paid 13/30=43%.

I wasn't quite brave enough, finished on a Tuesday but with same rationale!

Gary1984

I recently decided to actually track progress towards my early retirement so I'll be able to check if I'm on track for hitting my target at 50. So I now have a spreadsheet with all financial assets such as pensions, ISAs and so on vs liabilities. Liabilities are 25 * £50k desired income (based on 4% rule) less adjustments for state pension plus mortgage and a notional fund for my son to pay for education and perhaps contribute to a flat deposit.

Dividing assets by liabilities shows I'm 17.5% of the way there at age 37. But I now have a target of where I should be based on exponential growth of the 17.5% to 100% at age 50. I can produce similar curves for any target age so might be interesting to see if I can aim for 50 or earlier.  Once I accumulate more assets and liabilities decrease the percentage should ramp up quicker, hence the thinking of the exponential target curve.

ex-pat_scot

Gary1984 said:

I recently decided to actually track progress towards my early retirement so I'll be able to check if I'm on track for hitting my target at 50. So I now have a spreadsheet with all financial assets such as pensions, ISAs and so on vs liabilities. Liabilities are 25 * £50k desired income (based on 4% rule) less adjustments for state pension plus mortgage and a notional fund for my son to pay for education and perhaps contribute to a flat deposit.

Dividing assets by liabilities shows I'm 17.5% of the way there at age 37. But I now have a target of where I should be based on exponential growth of the 17.5% to 100% at age 50. I can produce similar curves for any target age so might be interesting to see if I can aim for 50 or earlier.  Once I accumulate more assets and liabilities decrease the percentage should ramp up quicker, hence the thinking of the exponential target curve.

Be careful in your modelling of keeping apart the assets with different tax status. 
For example you note your requirement for £50k income.
There's a difference in the money required to generate that from a SIPP (and you wont be able to access until 55/57) and an ISA or unsheltered savings account.

Gary1984

Yes, I know I need to refine for tax at some point and will do so when I'm getting a bit closer. At this stage I just wanted a broad measure I can track and have 'allowed' for tax by aiming for a very generous 50k income at the moment. 

Secret2ndAccount

@hugheskevi, be sure to travel by car from SF to LA, or at least from Monterey to LA.
Also, if you don't visit Florida or New York, you can't say you've 'done' USA. You can tick off all the sights of New York City in a couple of days - there are good bus tours, or you can walk around Manhattan - it's tiny. But Upstate New York is underrated. An hour or so out of the city and you have beautiful green areas with waterfalls and small towns.
I've needed to get from Quebec to New Jersey on a couple of occasions, and I chose a leisurely drive both times.
Surprised your plans don't include Cuba

hugheskevi

Secret2ndAccount said:

@hugheskevi, be sure to travel by car from SF to LA, or at least from Monterey to LA.
Also, if you don't visit Florida or New York, you can't say you've 'done' USA. You can tick off all the sights of New York City in a couple of days - there are good bus tours, or you can walk around Manhattan - it's tiny. But Upstate New York is underrated. An hour or so out of the city and you have beautiful green areas with waterfalls and small towns.
I've needed to get from Quebec to New Jersey on a couple of occasions, and I chose a leisurely drive both times.
Surprised your plans don't include Cuba

Cuba is on the list, with Havana and Bay of Pigs noted as places I want to visit - as I get closer to each place I research in more detail and add in other locations to visit.

That all means the places further north have most detail, and those furthest south have least research. The trip map as it currently stands is:

I am increasingly thinking that from Alaska we will head down from Seattle to Eugene, Oregon and then cut inland to see the National Parks in Wyoming, on to Mount Rushmore and then turn south, down through Colorado and on to the south-west USA and then into Mexico. I think all that can comfortably be done within the 3 months ESTA period (I could get a visa for longer, but I don't really want to spend too long in the States anyhow).

That would leave all of the east coast to see later, heading up through the Caribbean into Florida and on up at some stage, either after leaving Central America or after seeing South America.

Leaving date is still intended to be May or June 2022. Budget for trip is 3 years and £63,750 per year (increasing by forecast UK earnings growth each year) but I think we may well only travel for 2 years.

Rather than sell my London house I'm now seriously considering renting it out, given the economic uncertainty and particularly inflation risk. A few years of 5-10% inflation and house prices rising similarly would not be a good time to be out of the property market. Given we will not be taxpayers whilst traveling that is another attraction to renting it out.

There is also an irritation I have discovered about how my DB pension scheme calculates pension entitlement between age 50-55 when you use a protected minimum pension age, all to do with how revaluation is applied. I need to do some careful calculations to see if it is worthwhile, or whether the calculation is just too penal. Fortunately, if I do conclude the reduction is too large to justify, if I rent out house I keep a lot more options open with regard to using a mortgage to increase funds available for the 50-55 period.

hugheskevi

Eleven and a half years after my first post on this thread, I can say with a high degree of confidence that this will be my last full-year update before retirement

Myself and my wife are now 44, have no children and live in a mortgage-free house in London. The plan initially formed in 2009 was to work for about 10 years, then go traveling. COVID rather got in the way of the plan, so we ended up working longer than planned,

In 2021/22 our spending was a bit higher than the preceding years at just over £32,000, but consistent with longer-term expenditure levels. The chart below shows what our income each year has been used for, and shows that since 2017/18 the strategy has been largely unchanged.Prior to 2017/18 there was a greater focus on pension contributions, which then shifted to ISA contributions to build up resources for the period before pensions come into payment.

This has produced the following balance sheet (at household level):

In preparation for travel I have been paying off all debt over the last year, bringing to an end years of abuse of 0% interest, nil fee credit card balance transfer offers. Hence we are now debt-free as our mortgage was paid off a couple of years ago.

The (slightly revised) plan from now is to work until September, then head off traveling for 2 years. This will start with the Americas, spending about 15-20 months seeing the entire continent starting in Alaska and working down the west side of the continent then coming back up the east side. We then plan to visit Malaysia, Indonesia, Australia and New Zealand. There could be more areas depending on how long is left and what we want to do.

Funding sources

The 'Other cash' in the table above along with rental income on our property (a bit under £2K per month before costs) and earnings (about £45,000 net) until September should cover the travel costs and take us to age 46. Then the ISA is to fund between age 46-55, with DB pension starting at age 55, DC at 57 and State Pension at 68 (I assume the current age will increase). Our pension income is evenly spread so no danger of either of us paying higher rate tax or not using Personal Allowance once DB pensions start.

We plan to sell our house on return, and move to somewhere in Wales or Shropshire. The money from the house sale will be used to fund the new house purchase, as well as the moving and furnishing costs. Based on current prices, I'd expect to spend about £425,000 - £450,000 on the purchase price of our new house. We can also use income and savings if necessary too.

The funds allocated for travel are £60,000 p/a with inflation increases. I can't really see us spending that much but want to be cautious. I think about £45,000 - £50,000 is more realistic given only about a quarter of the travel will be in developed countries.

Income between age 46-55 will be about £45,000 p/a net, increasing to £60,000 p/a net from age 57. This should be plenty, given we have never spent more than £40,000 in any year, and usually only a bit over £30,000. These figures are based on today's values, so implicitly assume investment returns after costs match inflation.

Pension issues

Over the last year multiple pension issues have emerged. The increase to minimum pension age is very frustrating - I was planning to move DC pension to a protected arrangement but then HMT brought forward the deadline in November. Therefore I have more in DC than I need, but could remedy that by taking a mortgage on new house and repaying it from DC funds after age 57. That is quite attractive to smooth income.

The Lifetime Allowance has suddenly become an unwelcome issue. Currently I have 68% Lifetime Allowance used (based on taking DB pension at age 55), but with DB pension likely to increase by about 7-8% (CPI) next year and the Allowance frozen until 2026, things are probably going to get quite tight. My wife should be okay though. I have a couple of avoidance plans specific to my situation and pension scheme if it does become an issue, although they may not work at all or only partially if they do.

It will be very frustrating that a likely scenario will be that I use a big chunk of my Lifetime Allowance taking my DB pension which will not have any lump sum, which then means I can't take a full PCLS from the DC pension due to lack of available Lifetime Allowance. There isn't a huge amount I can do about that other than keep an eye on things and try the couple of avoidance plans. If the Allowance increases after 2026 things should be fine, but a continued freeze would hurt.

Risk management and strategic improvements

Given the uncertain times, I changed my plan from selling house to renting it out to protect against house price inflation over the next few years.

My wife and I will also be taking unpaid leave from work for the 2 years of travel rather than resigning. I think it quite likely we will return to full-time work, but not for very long. That is because we will have entirely unused tax allowances at the point we return, so a short period of work is quite attractive financially. I am thinking of something like working between September 2024 to about August 2025 so as to use Personal Allowances and get State Pension qualifying years whilst avoiding higher rate tax in both years, as well as buying and selling house in the optimal Spring period.

A likely improvement to the plan would be a mortgage (either 10 year fix or a fully offset mortgage) on our new house, and taking both my own and my wife's pension later so as to fully use up Lifetime Allowances. This would also provide additional funds in case of need in the period before pensions are in payment. To do this, we would need to be in employment, so again returning to work may be desirable.

Working for a short time would also mean I could smooth out income  in the future, and manage the financial uncertainty connected with a move to a new house. It would be reassuring to have purchased, furnished, made any improvements required to a new house and moved in before leaving work.

Also, taking unpaid leave might result in a redundancy payment at some point whilst traveling. Obviously that would just be a huge bonus to the plans should it be offered.

On the other hand, there is a big risk that we would be working unnecessarily, so the emphasis is more on keeping options open than committing to any particular direction.

DT2001

hugheskevi said:

Eleven and a half years after my first post on this thread, I can say with a high degree of confidence that this will be my last full-year update before retirement

Myself and my wife are now 44, have no children and live in a mortgage-free house in London. The plan initially formed in 2009 was to work for about 10 years, then go traveling. COVID rather got in the way of the plan, so we ended up working longer than planned,

In 2021/22 our spending was a bit higher than the preceding years at just over £32,000, but consistent with longer-term expenditure levels. The chart below shows what our income each year has been used for, and shows that since 2017/18 the strategy has been largely unchanged.Prior to 2017/18 there was a greater focus on pension contributions, which then shifted to ISA contributions to build up resources for the period before pensions come into payment.

This has produced the following balance sheet (at household level):

In preparation for travel I have been paying off all debt over the last year, bringing to an end years of abuse of 0% interest, nil free credit card balance transfer offers. Hence we are now debt-free as our mortgage was paid off a couple of years ago.

The (slightly revised) plan from now is to work until September, then head off traveling for 2 years. This will start with the Americas, spending about 15-20 months seeing the entire continent starting in Alaska and working down the west side of the continent then coming back up the east side. We then plan to visit Malaysia, Indonesia, Australia and New Zealand. There could be more areas depending on how long is left and what we want to do.

Funding sources

The 'Other cash' in the table above along with rental income on our property (a bit under £2K per month before costs) and earnings (about £45,000 net) until September should cover the travel costs and take us to age 46. Then the ISA is to fund between age 46-55, with DB pension starting at age 55, DC at 57 and State Pension at 68 (I assume the current age will increase). Our pension income is evenly spread so no danger of either of us paying higher rate tax or not using Personal Allowance once DB pensions start.

We plan to sell our house on return, and move to somewhere in Wales or Shropshire. The money from the house sale will be used to fund the new house purchase, as well as the moving and furnishing costs. Based on current prices, I'd expect to spend about £425,000 - £450,000 on the purchase price of our new house. We can also use income and savings if necessary too.

The funds allocated for travel are £60,000 p/a with inflation increases. I can't really see us spending that much but want to be cautious. I think about £45,000 - £50,000 is more realistic given only about a quarter of the travel will be in developed countries.

Income between age 46-55 will be about £45,000 p/a net, increasing to £60,000 p/a net from age 57. This should be plenty, given we have never spent more than £40,000 in any year, and usually only a bit over £30,000. These figures are based on today's values, so implicitly assume investment returns after costs match inflation.

Pension issues

Over the last year multiple pension issues have emerged. The increase to minimum pension age is very frustrating - I was planning to move DC pension to a protected arrangement but then HMT brought forward the deadline in November. Therefore I have more in DC than I need, but could remedy that by taking a mortgage on new house and repaying it from DC funds after age 57. That is quite attractive to smooth income.

The Lifetime Allowance has suddenly become an unwelcome issue. Currently I have 68% Lifetime Allowance used (based on taking DB pension at age 55), but with DB pension likely to increase by about 7-8% (CPI) next year and the Allowance frozen until 2026, things are probably going to get quite tight. My wife should be okay though. I have a couple of avoidance plans specific to my situation and pension scheme if it does become an issue, although they may not work at all or only partially if they do.

It will be very frustrating that a likely scenario will be that I use a big chunk of my Lifetime Allowance taking my DB pension which will not have any lump sum, which then means I can't take a full PCLS from the DC pension due to lack of available Lifetime Allowance. There isn't a huge amount I can do about that other than keep an eye on things and try the couple of avoidance plans. If the Allowance increases after 2026 things should be fine, but a continued freeze would hurt.

Risk management and strategic improvements

Given the uncertain times, I changed my plan from selling house to renting it out to protect against house price inflation over the next few years.

My wife and I will also be taking unpaid leave from work for the 2 years of travel rather than resigning. I think it quite likely we will return to full-time work, but not for very long. That is because we will have entirely unused tax allowances at the point we return, so a short period of work is quite attractive financially. I am thinking of something like working between September 2024 to about August 2025 so as to use Personal Allowances and get State Pension qualifying years whilst avoiding higher rate tax in both years, as well as buying and selling house in the optimal Spring period.

A likely improvement to the plan would be a mortgage (either 10 year fix or a fully offset mortgage) on our new house, and taking both my own and my wife's pension later so as to fully use up Lifetime Allowances. This would also provide additional funds in case of need in the period before pensions are in payment. To do this, we would need to be in employment, so again returning to work may be desirable.

Working for a short time would also mean I could smooth out income  in the future, and manage the financial uncertainty connected with a move to a new house. It would be reassuring to have purchased, furnished, made any improvements required to a new house and moved in before leaving work.

Also, taking unpaid leave might result in a redundancy payment at some point whilst traveling. Obviously that would just be a huge bonus to the plans should it be offered.

On the other hand, there is a big risk that we would be working unnecessarily, so the emphasis is more on keeping options open than committing to any particular direction.

It just shows even with such detailed planning an unforeseen change - inflation rates and change in minimum pension age - can create difficulties. I’m sure it will only be a minor hiccough at worst.
Your plans for travel look brilliant however what will you do from 46 onwards? It is quite a change from London, world wide travel to rural (?) Wales/Shropshire. Linked to that, how did you work out your budget for 46 onwards although you seem to have more than enough?

Good luck.

hugheskevi

DT2001 said:

It just shows even with such detailed planning an unforeseen change - inflation rates and change in minimum pension age - can create difficulties. I’m sure it will only be a minor hiccough at worst.

It shouldn't be serious - it is nice to start from a comfortable position and then just work on moving things around. Starting from an already tight position would have been far more difficult.

Your plans for travel look brilliant however what will you do from 46 onwards? It is quite a change from London, world wide travel to rural (?) Wales/Shropshire.

After 46 we will be enjoying living rural life with a couple of dogs - probably located in a small village about 30 minutes drive from somewhere like Chester or Shrewsbury would be ideal. We will both be very active in a local running club and parkrun, perhaps volunteering to work at an osprey centre or something similar for a day or two a week. For me there will be lots of running, swimming and cycling, and wasting time with computer games. For my wife there will more music-playing in a local orchestra and more cooking from scratch. We should also hopefully have friends visit us for a week-end or a few days quite regularly. I also look forward to having time to do things such as ancestry research, and generally anything that I feel like doing. Plus, things like house maintenance and gardening are much more enjoyable when not forced into a very specific time period. I'll probably also take up playing the card game bridge again after a couple of decades away from it.

Which I think can be summarised as doing more of everything I enjoy now and have enjoyed in the past

Linked to that, how did you work out your budget for 46 onwards although you seem to have more than enough?

I didn't really. I have always had a natural preference for 'value' strategies (probably from spending too long playing strategic computer games in my youth!), ie, maximising efficiency and resources, so from early on ensured I avoided higher rate tax with either unpaid leave to travel or pension contributions.

Doing that just naturally accumulated a pension income which should be plenty. At the same time I've kept annual accounts of spending and investment to determine needs, and given the surplus, don't really need to be concerned about budgets. I'm also naturally not given to wasteful spending so have never spent to available resources so don't envisage any big change there.

There will however be a few big differences - most notably making voluntary Class 3 National Insurance contributions (but can mostly do this after age 57 so pay for them from DC pension), heating costs (recent inflation plus bigger house), house maintenance cost due to bigger house, council tax (higher band, and away from London), and car (shift to bigger car rather than our 10 year old battered Nissan Micra we use as a London runabout!) Against that, living away from London and the south-east will generally reduce costs. Even taking these into account on top of usual spending pattens there will still be plenty.

So essentially, I didn't budget, rather, just efficiently built a pile of assets that will be more than sufficient.

ex-pat_scot

hugheskevi said:

Eleven and a half years after my first post on this thread, I can say with a high degree of confidence that this will be my last full-year update before retirement

Myself and my wife are now 44, have no children and live in a mortgage-free house in London. 

On the other hand, there is a big risk that we would be working unnecessarily, so the emphasis is more on keeping options open than committing to any particular direction.

Fab update! Another success story from a regular.
Please continue to keep us updated, to show the great results of your long term planning and execution.


I think I have two more full years, but a very different set of spending priorities and life choices.

I'm hanging on at work (and at life) at the moment. 
In 2 years' time, school fees should finally be over, with only 2 at uni to support.
Market collapse aside, I should be above the LTA. Only a small amount of this is DB.
We have chosen to have lots of children; to support them in very expensive activities (music, dance, drama) and some private schooling (local school only runs to 16). As with many here, we are also partially supporting through uni, to the tune of about £500pm to cover accommodation, as their ability to get student loans is restricted by my income.