What is your current FIRE / Live off assets for life number?

michaels

MY job is looking insecure so I plugged all our assets and likely future income streams (assuming no more earned income) into cfiresim.org and asked it how much we would be able to live on in real terms to age 95 (see below for assumptions). [Ignoring whether I can actually draw my pension yet and tax]

We get about £29k in current money terms, this compares to current annual expenditure of about £32k.

Assumptions - savings are in 75% equity 25% bonds rebalanced annually, fees drag 1%. 99% chance of success to age 95. State pensions for both of us payable at 67, current value 9k pa index linked (note no triple lock in cfirsim). Using Gyton-Klinger rules to set a spending floor makes little difference, the initial safe withdrawal value over such a long term is only about £800 higher. Housing equity is ignored. Inheritance if any is ignored.

bluenose1

Will your expenses go down when you have retired? From what I have read they tend to. I am hoping mine do as I currently pay to park, tea clubs, lunches, collections etc.
If you are not far short could you consider a little part time job to top your income up? If you won't be using your £12,500 tax free allowance could you put £2,880 into your pension to make £3,660?
Plus will you get redundancy to factor in?
I am just about financially ready to retire in 17 months at 55. Though if there was a redundancy scheme I would be very tempted to go now.

michaels

bluenose1 wrote: »

Will your expenses go down when you have retired? From what I have read they tend to. I am hoping mine do as I currently pay to park, tea clubs, lunches, collections etc.
If you are not far short could you consider a little part time job to top your income up? If you won't be using your £12,500 tax free allowance could you put £2,880 into your pension to make £3,660?
Plus will you get redundancy to factor in?
I am just about financially ready to retire in 17 months at 55. Though if there was a redundancy scheme I would be very tempted to go now.

So if you were to go tomorrow how much would you get pa in constant real terms?

SRP seems to be capped at 20 years service £525 per week or max 15,750 which is pretty much a rounding error.

bluenose1

We would have approx £35,000 per annum net, mostly DB pensions. Though my pension contribution as part of that that will only be £13,000 per annum.
I suppose it depends on how much you want to spend in retirement as some people seem to happily manage on less than £20,000 per annum. Though we have a 16 year old still at home, so more expensive.
I have crunched our numbers and think we can comfortably get by on less than £35k though it certainly won't be a luxury retirement.
Saying that I am that tired and stressed with work I am willing to make financial sacrifices to finish ASAP.
For us from 67 when our SP starts we will be very comfortable, so trying to bridge the gap between 55-67.

michaels

bluenose1 wrote: »

We would have approx £35,000 per annum net, mostly DB pensions. Though my pension contribution as part of that that will only be £13,000 per annum.
I suppose it depends on how much you want to spend in retirement as some people seem to happily manage on less than £20,000 per annum. Though we have a 16 year old still at home, so more expensive.
I have crunched our numbers and think we can comfortably get by on less than £35k though it certainly won't be a luxury retirement.
Saying that I am that tired and stressed with work I am willing to make financial sacrifices to finish ASAP.
For us from 67 when our SP starts we will be very comfortable, so trying to bridge the gap between 55-67.

So I guess with your db provision you can't just work out a flat 'rest of life' income including state pension etc. Out of interest, what are your options to try and smooth income pre and post state pension, take db early and is there a lump sum option? We have an offset mortgage so can use this to smooth against DC entitlement age etc.

bluenose1

michaels wrote: »

So I guess with your db provision you can't just work out a flat 'rest of life' income including state pension etc. Out of interest, what are your options to try and smooth income pre and post state pension, take db early and is there a lump sum option? We have an offset mortgage so can use this to smooth against DC entitlement age etc.

My husbands DB pension is already in payment as he has retired from the police.
I have saved enough into a DC pension to give me £13k income between 55-60.
From 60 I will have a DB pension of £10k and will use my lump sums up to make it £13k per annum.
So our income will be more or less £35k until 67, then with state pension will increase to approx £50k.

An offset mortgage is a great way to smooth the gap out, especially if interest rates stay low.

bostonerimus

My annual spending is well below the 99% success annual spending that drops out of cfirsim. That's because DB, state and rental income cover my spending. This helps me stay invested and sleep at night as I'm not sure how valid Cfiresim projections, that use historical data, are anymore, particularly when it comes to the bond component. But it's the best we can do.

Thrugelmir

What are your bond holdings invested in? Bergen used US Treasuries for his study. Deviation may have a considerable impact on the eventual outcome.

bostonerimus

Thrugelmir wrote: »

What are your bond holdings invested in? Bergen used US Treasuries for his study. Deviation may have a considerable impact on the eventual outcome.

average 7 year duration US Treasury and investment grade corporate bonds. I have roughly 20% in them, but bond returns for the next 10 years might be challenging.

Thrugelmir

bostonerimus wrote: »

average 7 year duration US Treasury and investment grade corporate bonds. I have roughly 20% in them, but bond returns for the next 10 years might be challenging.

You're not exposed to currency fluctuations though.

itwasntme001

How old are you? Anything more then about a 30 year time horizon is just going to increase the margin of error at any given confidence level. This error also does not rise linearly with age but non-linearly so be very careful if your time horizon is much greater than 30 years.


Add that to the fact that we have had very good returns in both stocks and bonds over the last 40 odd years that almost certainty will not be repeated for the next 40, and you will now have realized the very real risk of cfiresim giving you a completely misleading result.


I do not think the next 40 years will be pretty for financial assets due to inflation - everyone seems to be so complacent about inflation.