Semi/Early Retirement at a young age

C-dog

deleted for future update

coyrls

I may have missed it but how are you accounting for inflation?

C-dog

Good point. I'm not. The investments will hedge this to an extent, but I should make reference to this. Is there a compound interest calc out there that accounts for inflation?

Also is a 4.5% return too pessimistic over the long term?

C-dog

What I believe this is:
The 220k is goodwill generated over the past few years, so when we sold the business to ourselves last month, we can claim back this goodwill at 10% tax. Not really free, but the most tax efficient way possible.

The £120k was my half of the retained profit (gross), but as we were a partnership at the time, sal/divs were not really applicable.

The above plan makes me financially independent at 40. I could essentially retire then, but I love my business and because its owned with family, I dont see me ever leaving it. Things may change and if they do, I'll be fi.

We have been advised to do as you say and keep as much profit in the company as possible until the voluntary liquidation. This is the plan bar a small wage and the drawing of the sum above.

C-dog

Thankfully my wife is very much on the same page as me with this and if full retirement comes a little later as a result of taking a longer semi retirement period, I can see that being ok by me.

I've been very conservative with all the figures, the only unknown is the valuation, but our accountants figure was higher, so I've dropped this a bit. I'll let them deal with the HMRC, they are so much better at it.

The two things I haven't really adjusted for

1) Earnings in SR / ER.
Our earnings won't drop to zero. We'll have rentals, the business and if all else fails the will to work for money.

2) Aggressive saving much above what I have outlined below.
In the last four years we have saved/invested over £300k. This will continue and puts us way ahead of my goals.

Before I started my own business we had very average salaries £25k each. Our lifestyles haven't really inflated with the income. Yes, we have nice things, but our saving rate is very high and our main goal is to be financially secure as early as possible.

After that, the world is our oyster.

mgdavid

Could family-related issues affect the plans? Children? Parents? Siblings? Health?

C-dog

mgdavid wrote: »

Could family-related issues affect the plans? Children? Parents? Siblings? Health?

Possibly. All things we have considered include:

- Having kids (very much on the cards) would not stop our SR travelling plans.
- My family member business partner has a long term illness. Not life threatening, but can restrict their ability to run a business without me. Because of this we are already implemented staffing to reduce both our actual business involvement. This will take many years to accomplish well. But should allow a step back in later years.
- Both sets of parents are aware of the plans, neither really think we'll go through with SR or even a one off extended travel plan (greater than 1 month). This is because I am what you'd term a workaholic.

They struggle to realise this is for the one and simple goal of Financial Independence. Once I have achieved that my priorities change. To a level, they already have.

Our parents are very much old school. Work until you're 60 and only then could you have saved enough to retire. They see our successes, but can't fathom we could have enough to stop working at a young age.

Thrugelmir

By all means map out a plan. However monitor it carefully and be prepared to revise it as the wind changes direction. Investing is all about timing. So yes there's wonderful statistics of 5% compound growth. However if you have have the misfortune to buy the wrong shares on the wrong day, or even the right shares on the wrong day. The result may well be very different from the statistical average. Shares or other investments may even dip just at the time you expect to cash them in.

Mr_Zombie

Hi,


Looks like you are flying!


Like others have said, inflation will eat away your returns. Always better to be prudent than optimistic in these things. 3% return after inflation should be achievable in the long term and hopefully would turn out better than this.


The amount you are able to put away, it looks like your goal of FI should be doable. A few of things perhaps worth considering;


- How stable is your income?
- More diversification with investments?
- How are you investing? Regularly or lump sum?


Good luck.

brewerdave

Its great having a plan......but make sure that you have built in enough flexibility -you are a long way out (25 years!) - I decided at 40 that I wanted to retire at 55 -very good job in a very stable industry which had been successful for the previous 100 years or so........however, things changed so rapidly over the next 15 years that I only "retired" at 59 when I was forced to due to a 3rd redundancy in 8 years!! Financially now I'm worse off than my original predictions for 2005!:(

C-dog

My income fluctuated as the business has grown, but over the past 3 years its been £100k+.

Everything is invested in VG Lifestrategy 80/100% and a few thousand in VG Emerging markets etf tracker.

We've just incorporated, so my previous saving (take drawings every month and invest) technique won't be as applicable going forward.

We are to pay ourselves a small salary and take a dividend. This is all new to me. The rest stays in the company.

Currently myself and my wife have SIPPS but I guess come April we should set up a company pension. This side of things is all very new tbf. Anyone have any experience being LTD and planning for retirement?

I guess I'm saying SR instead of ER at 40 because I'm never taken time off work, I don't know if I'll even like it and my business has always come first. If my financial plans don't work out, I'll have no issue continuing work as the longer I plan this, the more secure we'll be.