Turning off the tap

Snakey

The thing that concerns me is the timescale. I'm eyeing (albeit still from a distance) very early retirement by 2017 standards, which means a long time to live off investments.

When you are trying to guess what position the various factors will be in, say, 2060... where do you even start? Who can say, for instance, what the NHS will look like? What elder care will look like? Whether there will be a State pension? What technology will be able to do? Whether cures will have been found for things? Maybe we won't need to worry about dementia care but we'll have to stretch our savings to age 115. Maybe the Government will provide free housing to OAPs instead of money... in twelve-bed dormitories next to the motorway.

With most careers that pay enough for early retirement, once you've been out for a couple of years you're probably out for good. I don't feel I can count on a blithe "oh, I can always just pick something up a couple of grades below where I used to be" as if any firm would consider themselves lucky to get such a good bargain. I've seen what happens to people in their fifties and sixties who get culled in recessions, and I don't see that retiring and then changing your mind puts you in a better position than that.

I suspect you will see a difference in caution a) between people who are a "we" and people who are an "I", and b) between people who are sitting pretty on a final salary pension high enough to cover a reasonable lifestyle and people who have to trust their luck to the stock market.

If I had, say, a guaranteed index-linked £30k waiting for me at age 60, or a spouse who was planning to carry on working, I'd be a lot more chilled about packing it all in at 50 on the dot.

As it is, I'm thinking hmm perhaps I'd better wait to see what Brexit does, before pressing the self-destruct button on my earnings capacity. Imagine what two decades of hyper-inflation right at the start would do to somebody on (effectively) a fixed income.

ermine

Snakey wrote: »

When you are trying to guess what position the various factors will be in, say, 2060... where do you even start?

You don't - nobody knows these things. Your equity based investments will track some of them, but unless you have a good crystal ball these imponderables will lead to analysis paralysis. There's just not enough signal in the noise. Some things are inherently unknowable given the current state of knowledge, you have to do the best you can. After all, people take on a 25 year mortgage not knowing how their career will pan out, mostly it seems to work out.

Even assuming a 4% SWR on returns from the stockmarket backtesting on things like firecalc is based on a small slice of history, though at least longer than a human lifetime now

Snakey wrote: »

I suspect you will see a difference in caution a) between people who are a "we" and people who are an "I", and b) between people who are sitting pretty on a final salary pension high enough to cover a reasonable lifestyle and people who have to trust their luck to the stock market.

In some ways a fellow on stock market investments is better set to ride out hyperinflation than the DB pensioner, because DB pension inflation indexing is often capped, and there is a hidden counterparty risk in the case of no cap. If the price of offering the pension is too high then the pension will go bust, and in the hyperinflation scenario the PPF ain't gonna cut it.

Also looking at what Brexit has done for my ISA, many equities rose in nominal GBP value, because a lot of the value is in foreign assets which kept their value while the £ tanked, thus increasing in £ nominal value.

But you have a fair point - in many jobs retiring is a one-way ticket out. And a single person has less income diversification than a couple, though perhaps there's some solace to be had regarding retiring after 50 as there is a rise in people divorcing at that age, presumably after children have flown the nest and the challenge of the empty nest raises tough questions about self-actualisation.

Linton

Snakey wrote: »

.......

When you are trying to guess what position the various factors will be in, say, 2060... where do you even start? Who can say, for instance, what the NHS will look like? What elder care will look like? Whether there will be a State pension? What technology will be able to do? Whether cures will have been found for things? Maybe we won't need to worry about dementia care but we'll have to stretch our savings to age 115. Maybe the Government will provide free housing to OAPs instead of money... in twelve-bed dormitories next to the motorway.

.......
As it is, I'm thinking hmm perhaps I'd better wait to see what Brexit does, before pressing the self-destruct button on my earnings capacity. Imagine what two decades of hyper-inflation right at the start would do to somebody on (effectively) a fixed income.

You must plan as it is only the results of a plan that can give you any level of confidence about the future if you havent been granted the powers of Mystic Meg and Russell Grant. You should plan based on factors that seem pessimistic - I used 3% inflation and an investment return of 1% above inflation. You must invest significantly in global equities rather than anything too cautious as it is only equities that provide a good chance of matching or exceeding inflation in the long term. And then you have to understand that you wont be able to handle all the possible disaster scenarios that may arise - the most you can do is to be in a better position than most other people, a much easier task

Waiting for Brexit to resolve itself is a sure way of never retiring. Well before the final signature is added to the Brexit settlement there will be other things to worry about. There will never be a time when the future looks risk free. By investing globally you can protect yourself from most potential Brexit outcomes except one - that Brexit is a brilliant success and the £ outstrips all other currencies. A risk I am prepared to take.

green_man

The psychology of actually making the jump is an interesting one. Just read Marine-life's thread and see how easy it is to just keep on working as obviously you will always be better off. I started reading Marine-life's thread before I retired but seriously thinking about it.

I eventually retired at 48 2 years ago having reached the point where 3% of my pot provided enough yearly income to live on, this was MY safe withdrawal rate. The decision is different for everyone but it's easy to fall into the trap of keeping working.

bostonerimus

For me retirement timing was easy; I did it as soon as I vested in my DB pension and retiree health insurance....as I live in the US health insurance is a big issue if you retire before 65. The psychology of income production hasn't changed for me as my DB pension and rental income cover my expenses so I still get "income" cheques every month. The bigger challenge for many people is often finding things to do. I ride my bike a lot, I volunteer at a local university helping with some astronomy research projects and do some consulting.

ewaste

Snakey wrote: »

If I had, say, a guaranteed index-linked £30k waiting for me at age 60, or a spouse who was planning to carry on working, I'd be a lot more chilled about packing it all in at 50 on the dot.

As has been said you'd maybe be thinking a bit differently with that Guaranteed £30k being capped at the lower of CPI or 2.5%.

ermine wrote: »

In some ways a fellow on stock market investments is better set to ride out hyperinflation than the DB pensioner, because DB pension inflation indexing is often capped, and there is a hidden counterparty risk in the case of no cap. If the price of offering the pension is too high then the pension will go bust, and in the hyperinflation scenario the PPF ain't gonna cut it.

I completely agree, unless said person in a DB scheme also saved into AVC's, without the uplift of salary sacrifice I would add, then in some scenarios they may be worse off. Saving into AVC's isn't as easy as it sounds considering many on final salary schemes, despite what most like to believe, weren't making huge amounts of money.

Although I would think that any run of hyperinflation would be somewhat covered by the state pension which should still exist or would otherwise require a Government to act? Is there any historical precedent or were most DB schemes uncapped in the past?

fatbeetle

Our decision was easy.

We got together rather later than most, I was 43 SWMBO was 38. In the last 16 years I've been working rostered shifts, (in a 365 day, extended hours, mental health crisis team.). Every week there would days when we'd say "goodbye" when she would leave for work at 7.45am, I'd leave for work at 11.45 am, and return home at 9.15pm. So we'd hardly see anything of each other. Our daughter is now at Uni and living with her boyfriend in a stable relationship.

We did some number crunching, with pessimism as our guide, and decided to retire when I hit 59. We'd rather have the time we've missed out on back, rather than work on out of fear of poverty later.



(OK, what does OMY stand for?)

bigadaj

fatbeetle wrote: »

Our decision was easy.

We got together rather later than most, I was 43 SWMBO was 38. In the last 16 years I've been working rostered shifts, (in a 365 day, extended hours, mental health crisis team.). Every week there would days when we'd say "goodbye" when she would leave for work at 7.45am, I'd leave for work at 11.45 am, and return home at 9.15pm. So we'd hardly see anything of each other. Our daughter is now at Uni and living with her boyfriend in a stable relationship.

We did some number crunching, with pessimism as our guide, and decided to retire when I hit 59. We'd rather have the time we've missed out on back, rather than work on out of fear of poverty later.



(OK, what does OMY stand for?)

One more year.

I know it's difficult to isolate this issue from wider life but it does make me wonder if many people just choose the wrong job to so desperately want to retire at a very early age.

For most of human history retirement would have been an odd concept, financial independence is an undeniable target that most would aspire to, but actual retirement is more of an indivdual choice.

The FI part of fire makes the second part much easier, knowing you can jack at any point makes working life a lot easier, particulalry when large companies and institutions are often so poorly run, when management have a single threat of removing employment and the indivdual is hinestly not concerned by that then their leverage is largely if not wholly removed.

Notfarfromtheborder

This will be the one of the hardest decisions I will need to make over the next few years

Currently 48, a basic drawdown model tells me we could stop now, but it'll be tight, far too tight.

I keep going by the fact each month increases our position by £8k, £3k of this is what we would spend in drawdown, £5k current savings. OMY gives us nearly £100K extra security

As has been mentioned, jumping off and trying to hop back on the gravy train would be difficult for me, that said things aren't great at work for either of us. If it was coming into spring then either of us, or both of us may be jumping off, maybe a gap year (or six months) to rethink

OH has options in her line of work for part time, unfortunately not for me as that would be a good option

We have been talking at length about this all week, one decision made is that neither of us need to do what we don't want to with regards to employment, I expect changes soon

Great thread and one I'll keep coming back to

fatbeetle

bigadaj wrote: »

I know it's difficult to isolate this issue from wider life but it does make me wonder if many people just choose the wrong job to so desperately want to retire at a very early age.

Funnily enough, this has been the best job I have ever had, reasonably well paid, rewarding and even exciting. I work with young people, 16-25 year olds who have been diagnosed with "first episode" schizophrenia/psychosis/bi-polar, with the aim of reducing hospital admission/re-admission.

If I didn't have the chance to retire early I'd be happy to stay in it.

Missing Blighty is a far bigger pull for me.

(ETA; still wondering what OMY stands for!)