Dude retired at 33.

KingKenny

Broken_Biscuits wrote: »

its quite simple maths. If by living off 25k a year you make enough to draw down 25k a year and not touch the capital you are ready to retire. Pick an amount you want to live off and save 25 times that for a 4% draw down. the less you are happy living on, the less you need.

I have never seen this before? How does this work? I am 46, so what you are saying is if I had 650,000.00 pounds sitting in the current account. Then 26k per annum drawdown allows me to retire now.


26k times by 25 = 650,000.00 pounds/100*4 = 26k/52 = 500 a week to live off very very comfortably...


What happens after 25 years, and what about inflation?


The current returns on savings is terrible without risk of capital loss?


At 71 I would be pennyless....

Eco_Miser

KingKenny wrote: »

I What happens after 25 years, and what about inflation?


The current returns on savings is terrible without risk of capital loss?


At 71 I would be pennyless....

The theory is that a reasonable investment portfolio (not a current account), will generate a return (dividends plus capital growth) of 4% plus inflation. Therefore you can draw 4% forever without reducing capital and without succumbing to inflation.

As for capital loss, with a wide spread of assets, this should be impossible unless you panic and sell during a market crash (rather than staying calm, perhaps buying more, and watching the market recover and go on to even higher things).

KingKenny

Eco_Miser wrote: »

The theory is that a reasonable investment portfolio (not a current account), will generate a return (dividends plus capital growth) of 4% plus inflation. Therefore you can draw 4% forever without reducing capital and without succumbing to inflation.

As for capital loss, with a wide spread of assets, this should be impossible unless you panic and sell during a market crash (rather than staying calm, perhaps buying more, and watching the market recover and go on to even higher things).

4% plus inflation, is that really realistic in the current environment with regards to yields?


Thanks for the post.

Ryan_Futuristics

£600k is about the point where I calculate you really don't have to work ... Of course if you're paying £2k/month rent (in a city) it doesn't go very far, so perhaps £1m total assets (with a house/flat) is roughly where you want to be aiming (or live somewhere cheaper - or use part of the investment on property and rent out a room or two)

It's a funny era because most young professionals I know around London would consider having £20k in the bank as being 'rich' ... I know stock brokers who live in squats ... Other people I know in places like Chelsea would consider London unaffordable with less than £10m

So I guess money's a very abstract concept - the difference between being rich and being poor can be a 2 minute walk in London ... There are actors and writers who get by with £30k in the bank, earning much less than they'd make on the dole - it really is about what 'you' consider a viable lifestyle ... Of course, once you get to £600k, it doesn't feel big enough - Warren Buffett probably feels the same at £60bn

KingKenny

Ryan_Futuristics wrote: »

£600k is about the point where I calculate you really don't have to work ... Of course if you're paying £2k/month rent (in a city) it doesn't go very far, so perhaps £1m total assets (with a house/flat) is roughly where you want to be aiming (or live somewhere cheaper - or use part of the investment on property and rent out a room or two)

It's a funny era because most young professionals I know around London would consider having £20k in the bank as being 'rich' ... I know stock brokers who live in squats ... Other people I know in places like Chelsea would consider London unaffordable with less than £10m

So I guess money's a very abstract concept - the difference between being rich and being poor can be a 2 minute walk in London ... There are actors and writers who get by with £30k in the bank, earning much less than they'd make on the dole - it really is about what 'you' consider a viable lifestyle ... Of course, once you get to £600k, it doesn't feel big enough - Warren Buffett probably feels the same at £60bn

You really think, me being 46, single, no kids, don't smoke, never touch drugs, never gamble, own no property. Rent in Devon and love a beer or three every night. You think I could give up work at 46, never work again.


I would love to hear your investment advice. Not that I have 600k, but a drinking buddy owns a house outright which would fetch 600k. And he is working 50 hours a week for minimum wage. He inherited the house by the way.

Ryan_Futuristics

KingKenny wrote: »

4% plus inflation, is that really realistic in the current environment with regards to yields?


Thanks for the post.

Oh yes ..

- Diversified P2P lending should currently net you a conservative 4-5% after tax and inflation

- UK equities are valued to net about 6-8% real over the next 15 years (that's on historical figures - worst case scenario is -0.1%, best case about 18)

- Slightly riskier regions, like Italy and Norway may net you about 10% real

- And further up the risk scale, Russia, China, Brazil you may be looking at 15-20% real

- Picking a good active fund (like Woodford's on past figures) you'd be looking at over 10%

- Private equity and VCTs you'd be hoping for over 10%

Say half your portfolio is in equities, 10-15% in alternatives, like P2P lending, you could afford to have a fairly safe and conservative 35-40% of a portfolio in lower risk assets and still return a reliable 5-6% real (these Yale and Harvard endowment funds I mention manage two or three times that with very low risk and volatility)

Ryan_Futuristics

KingKenny wrote: »

You really think, me being 46, single, no kids, don't smoke, never touch drugs, never gamble, own no property. Rent in Devon and love a beer or three every night. You think I could give up work at 46, never work again.


I would love to hear your investment advice. Not that I have 600k, but a drinking buddy owns a house outright which would fetch 600k. And he is working 50 hours a week for minimum wage. He inherited the house by the way.

It really is down to your personal cash flow and how you manage money

You'd be amazed how little some people actually earn in the arts, journalism, while trying be authors or pop stars, even living in very expensive cities ...

I hated having to have a day job, but I don't think it's healthy to want to retire and do nothing in your 30s-40s ... You'll probably either be watching a lot of TV, or spending a lot of money ... So I think perhaps if you've got a passion you want to pursue - like trying to write a novel, or long-distance running - it gives your life so much structure and direction which doesn't really cost anything ... That might be the trick, and why some people manage so much better


I know someone in London who inherited a £600k-ish property, and does the same - just lives in it and works all the hours

In his situation I'd either downsize and invest some capital, or annex it and turn create two inexpensive flats you can rent out, or turn it into a B&B

I think the mistake is working for money, when it should really be your assets (like a £600k house) earning money for you ... I've always seen money as something that makes money for you; some people seem programmed to think that money has to be earnt through working (I've always seen work as a luxury you can pursue when you've got enough money ... If that makes any sense at all)

Gadfium

KingKenny wrote: »

You really think, me being 46, single, no kids, don't smoke, never touch drugs, never gamble, own no property. Rent in Devon and love a beer or three every night. You think I could give up work at 46, never work again.

Possibly.
How much do you spend on a "beer or three every night"? £15 per night is £55K over 10 years. Or £63K with compounding interest at 3%.

And there's the rub. The guy in question lives frugally. His single biggest purchase in the whole of 2013 (IIRC) was something like $350. He pares away at his tax so he is paying a minuscule amount.
I don't get the digs at him, BTW. His lifestyle isn't for everyone, but you can't knock the money that he's accrued in a short space of time.
More power to him.

gallygirl

atush wrote: »

dont like to disagree wit you Gally, but there are limits. Esp as If I took my bike everywhere where I live I'd be dead already. Dangerous and too wet windy and cold.

Alot of people on his site are fanatics as he was. And so fanatical others with less extreme view cannot post.

there is money saving, and being wise and there is lunacy.

You're speaking to someone who has never even ridden a bike with gears so I'm not really going to disagree with you , but if I lived somewhere that had a decent cyclepath structure I'd consider it - the cold wouldn't bother me so much (within limits!) but I wouldn't be out in wind and rain.

You're right - there are fanatics on there. But also a lot of others in their 20's & 30's finding their own way, reassessing their lives and working towards a very early retirement that doesn't consist of knitting your own yogurt . BTH, the bits I find most interesting on there are about day to day life - being paid every two weeks, a lot of people still paid by cheque etc. Same language(ish), different world in many ways.

ggb1979 wrote: »

Had this chat with some guys in work yesterday, he's having a new kitchen fitted, I spent the weekend caving with my son. If we each got hit by a bus this week I'll think how glad I am I spent my last weekend with boy. Will he be thinking he's so pleased he got that new kitchen?

Exactly :T.

I think the mistake is working for money, when it should really be your assets (like a £600k house) earning money for you ... I've always seen money as something that makes money for you; some people seem programmed to think that money has to be earnt through working (I've always seen work as a luxury you can pursue when you've got enough money ... If that makes any sense at all)

Perfect sense. I know it's considered a bit old hat and simplistic, but the Rich Dad, Poor Dad books made a big impact on me, especially with regards to passive income - which I'd been working towards without really thinking about it. The Money Quadrant in particular made sense - and also made me determined not to be my own boss - why work when you can get others to do it for you .

I've just given up work at 53 - moving abroad with OH, but I was retiring in 6 months anyway as my retirement would then have been fully funded by rental income. My overall portfolio (am including own house as that is going to be let, but not home in Spain where we'll end up as that is non-income generating) is 'only' worth around 650k but will generate a gross income of 33k. Or we could have bought a fabulous house and I'd have carried on working till I was 60+.

The chap on minimum wage in a 600k house will actually be worse off than if he sold it, bought one for 200k and just put the 400k under his mattress. The running costs, maintenance etc will really eat it int his meagre salary. He could sell up and buy three properties like this http://www.rightmove.co.uk/new-homes-for-sale/property-50984303.html?showcase=true&premiumA=true - one to live in and two to rent - and have a nest-egg in the bank. It's a no brainer when you actually sit down and think about it - but many people have no experience of people doing anything other than the norm.

Broken_Biscuits

KingKenny wrote: »

I have never seen this before? How does this work? I am 46, so what you are saying is if I had 650,000.00 pounds sitting in the current account. Then 26k per annum drawdown allows me to retire now.


26k times by 25 = 650,000.00 pounds/100*4 = 26k/52 = 500 a week to live off very very comfortably...


What happens after 25 years, and what about inflation?


The current returns on savings is terrible without risk of capital loss?


At 71 I would be pennyless....

if you can accept that 4%+ returns are acheivable then all that's left is to accept you can live off your current wage for the rest of your life (or the amount you are basing your 25 times rule on) ... You could have a cash buffer too in case there are periods returns are below 4% so not to eat into capital and of course when you reach retirement age the (reduced) state pension will kick in to top up your income.


if you enjoy working but love weekends, save 5 or 10 times your salary and have yourself a permanent 3 or 4 day weekend.