Early retirement , hints tips and any advice!

kuratowski

What happens if your wife dies first?  There are no guarantees in life.

kinger101

Nick9967 said:

kinger101 said:

Nick9967 said:

kinger101 said:

Downsizing won't release quite as much money as you think.  EA fees, legal & professional and SDLT will eat a large chunk. 

As for drawing 16% annually, inflation aside, the chances that this will last 20 years are very slim.   

Hi 
downsizing would give me net at least 120 cash which is enough i think.
the 16% is the tax&NI i'd pay (very roughly) not the drawdown %, my fault not the prettiest sheet i know!
14,400 pa out of an original pot of 200k is only around  7.2% and all the calculators I've used give me plus/minus 20 years of that if everything is "middling" that's a gamble but a reasonable one.  

OK - just shows how basic your spreadsheet is.  Even at £14,400 with no annual increase, you need a growth rate after inflation and fees of 4% to achieve this.  At the same time, you'll have to reduce the equity allocation of your pot to avoid sequence of returns risk (i.e. bad luck in the stock market too early in retirement for capital to recover).  This will constrain growth. 

And not factoring an annual increase in pension is also a huge mistake.  If CPI is just 2% over a decade, that means that £14,400 becomes worth £12,049 by year ten.  

You could well be right kinger101, that's why I'm posting , why is it though that all or at least most of the calculators if set at pessimistic rates give it 20 years , are they wrong ? should i seek alternative calculators ?  

You just need to be more flexible
(a) save more if you can
(b) review the situation annually rather than setting a retirement fixed date
(c) use a flexible withdrawal rate (i.e. tighten belt if necessary during years of poor returns) that factors in CPI increases

There is certain calculator (cfiresim) which says $14,000 flexible withdrawal from $200K has a 95% chance of success rate based on historic data over 20 years for a 50/50 portfolio.  The problem is, this is based on US equities, which have outperformed other markets.  And that should not be read that it means that rate will have a 95% chance in the future.  Nobody can know, but £14,400 from £200,000 seems too risky to me.

Nick9967

kuratowski said:

What happens if your wife dies first?  There are no guarantees in life.

You hit the nail on the head really, i have spend the last 10 years watching people around me , a few of which were not much more than 60 , die far too early after being relatively healthy previously.
I'm not too morbid a person , but when someone says i have a 50% chance of living to 80 something i figure that i would much rather have a good 20 years chilling and living well whilst fit, than be thrifty thinking i'll live to 90 and not spend it !
You're right my wife may go first, if that happened i would sell up, make sure my kids were sorted and rent whilst spending ! no doubt what so ever, if nothing else the current situation has told me what I've just said makes absolute sense! 

jamesmorgan

It can be possible to retire early (I know I've done it) but you do need suprisingly large amounts of money.  If you want £26K pa income net, that equates to £30K gross.  If you want a low risk approach, you would buy an annnuity.  Current annuity rates for a 60 year old, single life, index linked is approx £2000/£100K.  This would mean you would need a fund of £1.5 million.  An alternative approach is to take account of state pension of approx £9K at age 67 so you only need £21K from the annuity at this age (fund of £1.05 million).  If you wanted to retire at age 60 with this annuity of £21K you would need an extra £9K for 7 years (ie £56K), so overall total of around £1.1 million.
Most people will decide that current annuity rates are too low and opt instead for drawdown.  A reasonably safe assumption is to use a 4% drawdown rate.  This would mean you would need a fund of £750K.to get £30K income, or a fund of £525K for £21K income + £56K to cover shortfall from age 60 to state pension age.
So broadly I would be looking to get total funds (pensions, house downsizing, inheritance etc) of around £600K to be able to retire at 60 with your desired income.  This number could be reduced further if you take into account your wife's pension (esp her state pension 8 years further on)
Free calculators can have their uses, but I would rather own the calculations myself and create my own spreadsheet.  Early retirement is a big decision and you need to make sure that you are comfortable with all the assumptions within your model.  As a minimum I would do a formal risk assessment with approprate mitigation strategies.  The big risk at the moment is clearly the financial impact of COVID-19.  Having an index linked annuity capped at 5% is no use if we enter a period of excess inflation..

Nick9967

All good advice, thanks , i can see that 200k over 20 years seems to have everyone thinking no way! it seems that if i use more like 225-240 in the Which calculator that gives me the 20 years i want give or take a couple, being relatively pessimistic, a big part of this is my wife will still be on a salary , so essentially we're doing a 50/50 on the income needed more or less, flexibility , perhaps you're right, maybe 59, maybe make the drawdown pot 250, etc etc!
what i can see here is there are possibilities and one thing is for sure i will not be working a full time standard job at 60!

fred246

So basically you haven't saved enough. Say you took a job paying £100k a year but spend the same as you do now. That would give you loads of savings and let you retire early. The less you earn the harder it is to save and the harder it is to retire early.

Durban

Nick9967 said:

atush said:

What pension arrangements does your wife have?  
If hers come online when yours are depleted, then maybe your plan could work.  But really, id double your savings between now and your projected date at least.

She wont have masses probably 25 years of local education authority TA pensions , and a fe bits and pieces 

Nick9967 said:

atush said:

What pension arrangements does your wife have?  
If hers come online when yours are depleted, then maybe your plan could work.  But really, id double your savings between now and your projected date at least.

She wont have masses probably 25 years of local education authority TA pensions , and a fe bits and pieces 

Would that be the LGPS pension or similar?  If so , 25 years of a DB pension is very valuable.  Inflation linked and secure.

Durban

kuratowski said:

What happens if your wife dies first?  There are no guarantees in life.

kuratowski said:

What happens if your wife dies first?  There are no guarantees in life.

If she has an LGPS or similar pension there will be a survivor pension.  If she is still working , there will be a death in service payment as well 

Nick9967

Durban said:

Nick9967 said:

atush said:

What pension arrangements does your wife have?  
If hers come online when yours are depleted, then maybe your plan could work.  But really, id double your savings between now and your projected date at least.

She wont have masses probably 25 years of local education authority TA pensions , and a fe bits and pieces 

Nick9967 said:

atush said:

What pension arrangements does your wife have?  
If hers come online when yours are depleted, then maybe your plan could work.  But really, id double your savings between now and your projected date at least.

She wont have masses probably 25 years of local education authority TA pensions , and a fe bits and pieces 

Would that be the LGPS pension or similar?  If so , 25 years of a DB pension is very valuable.  Inflation linked and secure.

yes for my wife it will be 

Anonymous101

Nick9967 said:

Durban said:

Nick9967 said:

atush said:

What pension arrangements does your wife have?  
If hers come online when yours are depleted, then maybe your plan could work.  But really, id double your savings between now and your projected date at least.

She wont have masses probably 25 years of local education authority TA pensions , and a fe bits and pieces 

Nick9967 said:

atush said:

What pension arrangements does your wife have?  
If hers come online when yours are depleted, then maybe your plan could work.  But really, id double your savings between now and your projected date at least.

She wont have masses probably 25 years of local education authority TA pensions , and a fe bits and pieces 

Would that be the LGPS pension or similar?  If so , 25 years of a DB pension is very valuable.  Inflation linked and secure.

yes for my wife it will be 

I can imagine a scenario where one had a much younger partner and in that case the DB aspect would be incredibly valuable.