Semi/Early Retirement at a young age

atush

Congratulations!!!

And yes, I knew your tune would change once the little one arrived re work. Looks like all that planning was fortuitous.

Have fun being a Dad, and look after your wife.

C-dog

Just over a year since I last posted, so thought I'd give an update. Everything is doing swimmingly. Plans have all stayed on course and our little woman is doing great.

We spent just shy of a month abroad earlier this year and the business continued to flourish. While everything conspired against us to make this a disaster (airbnb host cancelling apartment a few days before we arrived being the highlight), we made it a complete success. So much so, we're booked again for next year.

Our savings have been dialled in all year and the only really big expenditure has been our travels. Current projections see us as FI next August, but really that's a baseline expenses covered. Maybe a little bit of travel. We've been keeping track of expenditure mercilessly. My discretionary daily spend is quite a chunk of our daily proposed budget in FI, so i've been bringing this down as much as possible to keep things in check. I imagine 80% of it will be removed when not working as it's mostly costly lunches and breakfasts. Packed lunches have been welcomely received.

Around Christmas this year, I'm going to trial a 4 day week. It's part of my withdrawal from day to day business operations, focusing on the bigger picture elements. I'm planning long weekends away or swimming with the family. Maybe a lot of time in the garden too.

Anyway, we're staying the course and continuing the save.

C-dog

Posting twice in 12 months. Sure I'm a regular on here again.

The current market highs combined with my aggressive saving have put me a stones throw away from FI, so much so, if everything remains constant, I'll be financially independent around next years ski holiday in January. I'm disinvested in my taxable VUKE.L holding completely and thats a 30% chunk of my target figure, as I'm really not comfortable with such a home bias and where this big ship we call the UK is being steered over the next 12 months.

Brexit....don't get me started, but thankfully we hold EU passports.

As I'm coming close to my target and market highs I'm getting the fear of it all. The what if's are creeping in as is doubt. I intend to continue working and earning for the long term, so I know this is unfounded. I also appreciate I'm in a wonderful position financially, but does anyone ever feel fully financially secure? Any thoughts would be greatly received.

Skibunny40

I can't offer any financial knowledge, but just wanted to say well done!

C-dog

So last year was pretty good in business, the markets were favourable and home life took a great turn for the better through more time with the family. In business, I'm now working 4 days a week, generating +20% turnover with 80% of the effort. This is a sizeable win and the result of serious focus on productivity and the efficiencies we have gained from implementing new processes. I'm pretty concerned about the next few years in business with brexit and a market downturn, but with the above planning and focus we will be in a better position than our competition. However.....

On a financial front, I hit my comfortable financial independence figure. Annual Expenses x25 puts me in a financially independent zone. But not at a value I'd retire on. If sh*t hits the fan, where neither of us can work again, we'll live comfortably and still enjoy 2-3 foreign breaks a year. So yeah, we're financially independent. Big wow (it really was an anticlimax, but satisfying nonetheless).

I only include my invested assets in the above figure, not my rental property, my home value or my business, so the picture is even rosier.

This week however, we'll exhaust our Entrepreneurs Relief that we were afforded when we sold the business. We're back to salary/dividends/pensions and this is where my question lies.

There are 4 shareholders in our business and our profit last year was north of £300k. I'm trying to decide upon the most efficient way to draw as much of this from the business as possible.

Here's my current plan, but it doesn't include pension contributions which we'd probably like to ramp up again.


Both I and the wife have full allowances from last year and all four of us have this years contributions. There is also the option of opening a company SSAS for the 4 shareholders.

Your thoughts and insight would be greatly appreciated.

Oh, just in case you were wondering, daughter is doing brilliantly and daddy here is loving the opportunity to spend more time with the family.

enthusiasticsaver

C-dog wrote: »

Posting twice in 12 months. Sure I'm a regular on here again.

The current market highs combined with my aggressive saving have put me a stones throw away from FI, so much so, if everything remains constant, I'll be financially independent around next years ski holiday in January. I'm disinvested in my taxable VUKE.L holding completely and thats a 30% chunk of my target figure, as I'm really not comfortable with such a home bias and where this big ship we call the UK is being steered over the next 12 months.

Brexit....don't get me started, but thankfully we hold EU passports.

As I'm coming close to my target and market highs I'm getting the fear of it all. The what if's are creeping in as is doubt. I intend to continue working and earning for the long term, so I know this is unfounded. I also appreciate I'm in a wonderful position financially, but does anyone ever feel fully financially secure? Any thoughts would be greatly received.

Just read your thread and impressed you considering this so early (early 30s) as I did not even think about it until around 45ish when our mortgage was repaid. Needless to say we paid into pensions all that time. Having kids is expensive when you take holidays, driving lessons, cars, university and first homes into account as no doubt you will find out. Congratulations on your baby girl. We have a 15 month old granddaughter and adore seeing her grow up.

We have been considering financial independence and in fact my husband just retired at 58 and I plan to go in around one year when I will be 58. Arbitrary age but I have work commitments which take me up to that point and I only work part time so my OH has the chance to wind down for a year before I go too.

Financial security to us means our pensions (fixed income plus inflation adjustment) covers our full essential expenditure plus at least 50% of our discretionary expenditure. We set our capital needed at a figure of £250k including OHs lump sum (tax free) and we are £30k over that due to the high market at the moment. Any shortfall in discretionary spending will come from that. Just booked 2 family holidays so some of that gone already!! That allows us to feel financially secure given that our capital figure is high (for us anyway) and we have sufficient to do what we did when we were working without having to count pennies. Still got the gym membership, sky and holidays (4 booked for this year).

Daughters now financially independent and have their own homes so that helps but we do help out with paying for more than our share of family holidays and contributions to granddaughters nursery costs and junior isa. Now in process of assessing inheritance tax liabilities both for us (my mum has large estate but has gifted significant sums to me and my siblings) and the ongoing liabilities for our own estates.

atush

Gah, I am just remembering the cost of putting twins thru driving lessons. Plus a car for the 3 boys to share. extortionate.


There are always more costs than you realise lol

jamesd

C-dog wrote: »

We're back to salary/dividends/pensions and this is where my question lies. ... There are 4 shareholders in our business and our profit last year was north of £300k. I'm trying to decide upon the most efficient way to draw as much of this from the business as possible.

You're 55 or older so pension contributions by the company are an easy decision for you. Draw all that the pension annual allowance will permit in the form of company pension contributions, including any available carry-forward of allowance from the past three years. The company could even borrow to facilitate the maximum use of these use it or lose it allowances. The corporation tax, employer and employee NI and income tax benefits are significant.

I'm assuming that the pension lifetime allowance isn't a factor.

TheTracker

jamesd wrote: »

You're 55 or older so pension contributions by the company are an easy decision for you. Draw all that the pension annual allowance will permit in the form of company pension contributions, including any available carry-forward of allowance from the past three years. The company could even borrow to facilitate the maximum use of these use it or lose it allowances. The corporation tax, employer and employee NI and income tax benefits are significant.

I'm assuming that the pension lifetime allowance isn't a factor.

Post #1, 2 years ago, OP was 32yo.

It sounds like the extraction plans are tax minimising. You could potentially create different share classes for each shareholder, or incorporate the share holders interests, to more finely tune the process. Finally, do you need to extract the cash? You can invest it in place, and one day eventually either sell the assets/business or voluntarily liquidate it for further ER, indeed if it's a family business it might make it easier (tax efficient) to hand assets to your daughter in future by having her become owner. Not too many years (age 13?) before she can have 40k pa going into her pension

jamesd

Thanks, I'd used the age from the immediately previous post by someone else. At 34 a suitable bit of VCT use might be a handy addition.