Early retirement calculations help

crv1963

Well that link didn't work so I've bumped the thread back up the board!

Thrugelmir

sluisdejesus wrote: »

Yes I have had that thought but with mortgage rates as low as they are it doesn't seem worthwhile to overpay for now.

There's no guarantees that investing over the next 15 years will prove worthwhile.

Sea_Shell

jimi_man wrote: »

To put it into context, another poster on here Seashell who is fairly well regarded as being particularly frugal, (look at the thread about ‘squirrelled nuts’) spent around £11k last year. However she stated that once all the costs were added in like depreciation and capital expenditure then the true figure would be closer to £20k. With no kids and no mortgage and probably twice the amount of funds as you might have.

Hi there Sluisdejesus

As mentioned I have a thread running about my foray into early retirement. I’m 48.

We arrived at our current position from a very different place to you, but like you, we always knew that it was something we wanted to aim for.

You are still so young, and it’s admirable that you’re thinking about this already, but you need to be realistic, especially with 2 young children, which will have a huge drain on your finances over the next 15-20 years. So much can happen in life…and usually will.

My advice would be to keep saving, but don’t let it overtake your life.
Review your savings/pension pots every 6 months, and keep a “totaliser” of your progress.
Know what your annual spends are, don’t guess! Keep tabs and see how your averages go over the next 10 years.

For some insight, this is how we arrived where we are now.

DH had a good career and was a higher rate taxpayer for many years. Topping out at about £60k.
We don’t have kids.
We paid our mortgage off by the time DH was 40. 13 years ago.
We then saved , living off my salary and basically putting DH’s salary away each month.
DH also has 2 DB pensions to come at 65, which will give c. £8000 in today’s money.
We are VERY modest spenders, and even we’ll need about £20k p.a. to include capital expenditure, as they crop up.

Even with all that...we would not have been able to both give up work by the age of 40, and TBH we wouldn't have wanted to.

So my message would be, don’t give up on early retirement as the goal, but to do it by 40 is a stretch too far IMO. Maybe set your sights on 50 or 55, then it may be within your grasp.

Good Luck.:beer:

Suffolk_lass

crv1963 wrote: »

Well that link didn't work so I've bumped the thread back up the board!

here is the link

kangoora

1. Great that you are thinking about this now and making moves towards early retirement.
2. I think there is a snowball's chance in hell you will be able to retire in 15 years time based upon what is effectively the median income in the Uk for one persons earnings.

Your outgoings calculated must be about equal to incomings but I see no holidays, car replacement, presents, household repairs/replace white goods and countless other expenses that could potentially appear. You appear to be proposing to live for the next 15 years scrimping and scraping just so you can spend the next 40 years in retirement scrimping and scraping by (my opinion).

Having said that, by all means plan on the basis of retiring early and monitor progress over the next 15-20 years. Potenitally career changes/promotions may help you on your journey.

Just don't forget we only get one life and remember to have some fun, spend some money and make some memories along the way, even if it may mean you can't achieve your goal of retiring very, very early.

Gin_and_Milk

I don't have children, but to me, £150 seems a bit low? Is the cost likely to increase - for example, will they want driving lessons when older, and if so, would you be prepared to pay for those?
If you can take out a mortgage sooner rather than later, that would be good for all sorts of reasons, however all maintenance costs etc,will have to met by yourselves, not a landlord and this can come as a bit of a shock to people who are used to renting . Yes, interest rates are low at the moment, but they have been ridiculously high in the past (10% in the nineties). I'm not what the chances are that they will increase so much or when, but they definitely rise, and you will need to consider how much that will affect your position.
A recent think tank has also raised the issue that the SPA needs to increase, and for those born after 1977, the SPA proposed is 73. Now this government might not increase it, or increase it by so much, but if this government doesn't do it, another one probably will.
Sorry to be pessimistic, it's great that someone your age is already planning for retirement, it gives you a really good head start, but what will help you determine a comfortable early retirement age, is being more realistic about your financial situation. Planning early will likely mean you can retire early, but what sort of retirement do you want?

I agree, The NUMBER thread is really useful and makes for very enlightening reading!

thickasabrick

Using the figure from this Which article "How much will you need to retire?"
£215,450 is how much you need in your pension/investment portfolio to get £12000 a year from income drawdown at normal retirement age.
Increase the pot amount if aiming for earlier as opposed to age 67

Using the “how much you need to save per month” on that article estimates £824 (17 years to retirement no savings). Your figures (400 + 300 + 300) are pretty ambitious. Remember to also live life as well so don’t stress yourself too much if it takes a little longer to achieve your financial independence goal. e.g. car capital costs, holidays, children, hobbies etc will eat into the budget.

I'm using the "The Millionaire next door" formula as an easy to understand method for tracking net worth. Useful to tell if you are accumulating assets !
Target net worth = (Age – 27) x Annual pre-tax income / 5

sluisdejesus wrote: »

It looks like you're serious about these calculations... perfect! (now on laptop, replying is much easier)

Following the MSE budget sheet I'll break things down further - costs are current as we are renting but almost have enough deposit to buy current rental property at 160k.

Rent- £750
Council tax - £156
Gas and Electricity - On key meter averaged over 12 months (taking last 4 years into account) £70
Water and sewerage - £43
Car insurance, tax, fuel - £150
Food - £250
Phone, internet, mobiles - £90
2x ISA (for house deposit) - £400
Loan payment (and overpayment) - £300
Home education and associated costs £150

Husband income 18.2k basic (plus around £200 pcm bonus)
My income £6k (maternity leave) then back to £10k
Child maintenance - £2.6k
UC top up £500 pcm
Matched betting - around 1k per month WE DO NOT RELY ON THIS

By my calculations when we manage to buy the property we will have lower mortgage payments than the rent but the surplus will be taken up by insurances etc

The money currently being paid into ISAs and loan payment can then be used to invest into POT1 and we will then have to find £300 pcm for POT2.

UC top up will disappear when we are no longer renting but I will be back to work by then.

Thoughts?

sluisdejesus

Sea_Shell wrote: »

Hi there Sluisdejesus

As mentioned I have a thread running about my foray into early retirement. I’m 48.

We arrived at our current position from a very different place to you, but like you, we always knew that it was something we wanted to aim for.

You are still so young, and it’s admirable that you’re thinking about this already, but you need to be realistic, especially with 2 young children, which will have a huge drain on your finances over the next 15-20 years. So much can happen in life…and usually will.

My advice would be to keep saving, but don’t let it overtake your life.
Review your savings/pension pots every 6 months, and keep a “totaliser” of your progress.
Know what your annual spends are, don’t guess! Keep tabs and see how your averages go over the next 10 years.

For some insight, this is how we arrived where we are now.

DH had a good career and was a higher rate taxpayer for many years. Topping out at about £60k.
We don’t have kids.
We paid our mortgage off by the time DH was 40. 13 years ago.
We then saved , living off my salary and basically putting DH’s salary away each month.
DH also has 2 DB pensions to come at 65, which will give c. £8000 in today’s money.
We are VERY modest spenders, and even we’ll need about £20k p.a. to include capital expenditure, as they crop up.

Even with all that...we would not have been able to both give up work by the age of 40, and TBH we wouldn't have wanted to.

So my message would be, don’t give up on early retirement as the goal, but to do it by 40 is a stretch too far IMO. Maybe set your sights on 50 or 55, then it may be within your grasp.

Good Luck.:beer:

Thanks for your insight (and your wonderful posts - certainly very good food for thought)

How did you track your expenses so accurately? Pen and paper? Spreadsheets? Apps?
I've been tracking for a few months using a combination of the above but I think there are things we're missing that definitely could do with including!

crv1963

sluisdejesus wrote: »

Thanks for your insight (and your wonderful posts - certainly very good food for thought)

How did you track your expenses so accurately? Pen and paper? Spreadsheets? Apps?
I've been tracking for a few months using a combination of the above but I think there are things we're missing that definitely could do with including!

Some people use spreadsheets, I use a notebook and pen. When mysons were small we had various pots of money we saved into each month- Emergency Fund, House Repairs, Family Holiday, School Expenses (so the letter saying the school wanted x pound for school trip etc wasn't a huge hit on income), ISA, Children Activities etc. Mrs CRV does it all in her head and can tell you to the penny how much she has in her account at any given time!

We currently have a pot for vet bills and major works.

Sea_Shell

sluisdejesus wrote: »

Thanks for your insight (and your wonderful posts - certainly very good food for thought)

How did you track your expenses so accurately? Pen and paper? Spreadsheets? Apps?
I've been tracking for a few months using a combination of the above but I think there are things we're missing that definitely could do with including!

I use Excel spreadsheets. One tab for outgoings, one lists all our accounts/balances and another tracks our DC pension pots.

It's a hobby for me (some may call obsession!) as I update these all on an "as we go" basis. Pensions monthly.

I also have an overall gross worth sheet, which totals DC pensions, ISAs, cash, so we know our total pot and can compare over time. I have a corresponding graph too!! This is where the totaliser comes from.

However, I have the time (inclination) to do this.

With a young family you might not want to be so OCD about it!! However, like many things in life, you get out what you put in. More data you have the easier choices become.