Planning for early retirement

cns06

Lrimas wrote: »

Another one here who is working towards timelines similar to yours. I would like to retire at 40 but I realise that time is (very quickly) running out so it might have to go up a few years.

I have less savings than you do (I started being sensible with money much later in life) but a much higher income which should help me finish at around the same time.

Most of the people I speak to about my plans assume that I am either mad or extremely rich. I once approached a financial adviser with a question about transferring part of my pension (as I'm considering immigrating when I retire) only to be told by him: "I think you should work much longer". He didn't even bother answering my question (or offer to assist me with my plans). Due to this I've mostly stopped talking to people about my plans. Maybe we should keep this post alive to help and support each other (like Marine Life's retirement thread) - I've noticed a few people mention they are working towards similar timescales.

What I've done for my mortgage is to extend it as long as possible. That gives me a few years after 58 (when I'll have more money available) to continue paying it off. It's important to be with a sensible bank (who tends to have good rates and allows you to switch easily when your deal expires) as you will be unable to change banks once you retire (or if you are close to retirement). There is off course the risk that interest rates will increase drastically but you don't retire in your early 40s unless you are willing to take a few risks. You can always revisit should this happen (and the worst thing that can happen is that you will have to find a part time job. Considering that most people work full time at that age you are still better off than most)

I'm also 100% equities right now. Considering going 90% (or maybe even 80%) just before retirement. Should we get a drop right before I retire I will have to work a bit longer. I won't be happy about it, but once again retiring at 45 instead of 43 is still better off than most

My one tip for you would be to try to increase your income. Every pound that you earn more now is a pound you can save. I was on a similar income as you at the end of last year but decided to quit my job in order to become a contractor - something I could really only do because I had the funding to support myself for a few months (uhm, years) if needed. Thanks to that my goals should now be much easier to reach and I'm also able to upgrade my house (we are moving next month )

Good luck with your journey! Keep me updated on how things go.

Join the Mr Money Moustache forum... if not already.


As for discussing it with others, I would say its a bad idea. Most people cant understand it. The only people its worth discussing with are people who are also saving for the same goal.


The MMM forum has helped me loads and we have really started to solidify our plans and put some real numbers into the xls sheets. It starts to seem a lot more real. The last 2 years we have doubled our NW. Crazy and satisfying at the same time. We are on track for FIRE at 42, maybe 43 if returns are <4%. Even if we run over to 45 we will be happy.

Lrimas

cns06 wrote: »

Join the Mr Money Moustache forum... if not already.


As for discussing it with others, I would say its a bad idea. Most people cant understand it. The only people its worth discussing with are people who are also saving for the same goal.


The MMM forum has helped me loads and we have really started to solidify our plans and put some real numbers into the xls sheets. It starts to seem a lot more real. The last 2 years we have doubled our NW. Crazy and satisfying at the same time. We are on track for FIRE at 42, maybe 43 if returns are <4%. Even if we run over to 45 we will be happy.

I have to admit that I haven't considered joining the MMM forums. While I am an avid reader of his blog I just don't feel frugal enough to join them (I tried extremely frugality for a while but I ended up having to choose between that and my relationship with my partner .

I will reconsider though as it will be nice to speak to more people with similar objectives.

cns06

There is a UK sub forum now. HTH.

k6chris

cns06 wrote: »

There is a UK sub forum now. HTH.

Link? (I am having a lazy day.....)

cns06

https://forum.mrmoneymustache.com/uk-tax-discussion/

Terron

NumberMan wrote: »

I know some people have done well through property but it isn't my area of expertise and I am wary of horror stories of people thinking property was an easy way to make money and getting bad tenants or excessive building repairs. I think it is fine for you, but not for me.

I agree it is not for everyone. One book I read suggested pausing after 2 properties to see how it felt. I paused after three but it was working so I continued. I am currently dealing with my first bad tenant, though he was fine until he broke up with his partner.



Since I am investing for the income from rents rather than capital growth I am not that bothered if house prices should fall. Since I have a low LTV interest rate rises are not much of a worry either. There are much higher risk ways to invest in property that could make more but I am fairly risk adverse.

Lrimas

cns06 wrote: »

https://forum.mrmoneymustache.com/uk-tax-discussion/

Thanks - I've signed up and I going through some of the journals. Seems like I was completely wrong that it would just be a group of extremely frugal people (telling me off for my spend thrift ways )

NumberMan

MK62 wrote: »

It's not so much disagree or think it's unrealistic - it's just that you have little margin for error.

If things go that way and your ISA investments do average 3-4% above inflation for the next 8 years, and you continue to put 20k in each year, then that £23k pa from 45-58 may well be possible.......but what if they don't do 3-4% pa......what if it's only 1%?.....or less?
As someone said earlier, if you are happy to work on past 45 if things don't go the way you've planned, then that would at least be something of a safety margin in the run up to retirement, but you still can't discount it all going pear shaped say 5 years in......your £300k has become £200k (after 5 years of withdrawals and some investment growth), and then suddenly, at 50, your £200k becomes £120k......uh-oh!!!!

For the pre-58 period, I accept that I may have to work longer if investments perform particularly poorly, but equally, I may work less if investments do particularly well. An investment return of 1% above inflation for eight years is possible, but I would argue about as unlikely as returns 7 or 8% above inflation.

Similarly, your post retirement scenario would indeed be a big problem, but five years of virtually zero return followed by a crash of 40% would derail most retirement plans. In practice, I would need to get another job which would be a disappointment, but I don't think working three or four years more than I need to just to self-insure myself against a marginal risk is worth it.

NumberMan

cns06 wrote: »

Its just a vehicle the timing is the key when you can *get* the money, tax is always due one way or another at one time or another.. Read the comments about market wobbles. SIPPs are actually not the best idea for people who want to FIRE in their early 40s... IMHO.

Can you explain this more? My point was that pension is hugely tax-efficient for someone in my position (40% relief on the way in, less than 15% tax on the way out due to the 25% tax-free lump sum and personal allowance - I am expected to fall just short of the Lifetime Allowance otherwise this would complicate the tax position). Thus, the ideal strategy seems to be relatively clear - to plan to run down ISAs to nothing (other than a safety margin) by minimum pension age and then to take the pension thereafter. I am surprised that this is a point of contention.

NumberMan

Lrimas wrote: »

My one tip for you would be to try to increase your income. Every pound that you earn more now is a pound you can save. I was on a similar income as you at the end of last year but decided to quit my job in order to become a contractor - something I could really only do because I had the funding to support myself for a few months (uhm, years) if needed. Thanks to that my goals should now be much easier to reach and I'm also able to upgrade my house (we are moving next month )

I agree with pretty much everything you said. The only area where we differ is the above where I have taken the exact opposite approach. 5-10 years ago I was working hard and successfully climbing the corporate ladder and retirement at 40 looked much more realistic than it does now. However I made the decision around 5 years ago that I would scale back work in order to give myself more time to enjoy now even if it meant ultimately delaying retirement.

With a relatively short work horizon, I think the rewards of working 40-50 hour weeks and playing the political game for the chance of getting a promotion which will only last a couple of years is not a trade-off which looks attractive. Thus, I am currently much happier in an environment where I have no anticipation of a 25% raise from a one-off promotion but can still count on a few percent above inflation raises while maintaining a positive work-life balance. Scaling back by going part-time if my plan is running ahead of schedule is also an attractive thought.