Musings by the FIRE-side

chile_paul2

Hi all,

I’ve been a long time follower of these forums, but for some reason having been away for a few months, my account seems to have been lost, so I’m starting from scratch with a new profile.

I’ve got a big decision to make over the next couple of months and, aside from finding that writing these things down always helps me to work through and reach the right decision, I also really appreciate and value the input and opinion of all of you.

My situation is that having worked hard and after following the advice of people on these forums as well as advice from my parents I invested from an early age into both S&S ISA’s (index trackers) and pensions and as a result I have a decent nest egg that has built up.

In brief summary, I'm 42 and my wife is 39 and between us we have:

-        O/standing mortgage of £186k

-        DC pensions pots of £84k (myself) and £10k (DW)

-        DB pension from previous employer providing £12k from age 65, indexed to CPI (Transfer value of £330k)

-        S&S ISA of £200k

-        Cash savings (emergency fund) of £30k

-        Savings (split 30/70 between cash and S&S ISA’s) specifically for when the 2x children want to go to university / buy a house etc of £27k

Clearly, whilst we still have a mortgage, that is an active choice to keep it (on a low interest rate) whilst keeping money invested in our S&S ISA in the expectation that it will grow at a higher rate than the interest we’re paying on the mortgage.  

I’m currently working in a very well paid role, earning circa £90k. My wife doesn’t earn a salary, her hands are more than full working incredibly hard, looking after our 2 children. Whilst not being particularly frugal we don’t spend a huge amount – on average our outgoings are circa £24k a year (not including mortgage payments), we tend to prefer holidays in the UK and our hobbies are low cost (thankfully I’ve never caught the golfing bug). Whilst we bought a new car 3 or 4 years ago, we don’t tend to go top of the range and have no desire to replace every 3 years. We’re very happy where we live in our current house and won’t move whilst the kids are still at home.

Net take home pay after tax, national insurance and pension deductions is circa £4-4.5k, so we’re saving circa £2k per month. I find it quite hard to work out how my peers can be spending anything like that much month on month!

For a number of years I’ve been actively pursuing FIRE and planning that I would have reached a comfortable FIRE position with 5-6 years with a combined DC and S&S ISA position (over and above the DB pension) of £450k.

There are a number of things that I want to do with my life, that I just don’t get time to do with work. Whilst I enjoy my job, I don’t feel fulfilled by it. I’m not achieving anything other than making a decent return for some shareholders and I don’t want to look back on my career when I’m 60 and be questioning what it was all for. I always get to the weekend absolutely exhausted and with two young kids, I feel that I’m not giving them 100% as a result. In addition, my dad has been diagnosed with prostate cancer this year and whilst he is still healthy at the minute, I want to take the opportunity to spend more time with him and my mum.

Having said that, if I went full scale early retirement, I think I’ll be bored fairly quickly – so instead I’ve been considering talking to my employer about reducing my hours to 4 days a week. That would keep me interested in work, whilst still allowing me to spend more time with my family and explore some of my other interests outside of work. Other options that I’ve considered are to take a sabbatical for 6 or 12 months, or leave my current employer and take contract opportunities for 6 or 9 months at a time with long, extended breaks. However my current thinking is that the safe option is to reduce hours and would be easy to reverse in time if it isn’t working for me.

Of course that’s not what society expects of you is it, and I imagine work will be really shocked if I suggest it? It seems to be a bit of a taboo for men, dare I say it, to suggest that any of us might not want to work 5 days a week? Work actually want me to take a promotion at the minute and do even more – and you know what, part of me is tempted by that – the increased status, feeling ‘wanted’ and ‘needed’, having more influence, the promise of more money to accumulate even if I haven’t got anything to spend it on, the ‘what if’ I need that money in the future. In reality, I know full well that the company doesn’t care about me at all and just want to extract my sweat and tears and will then forget about me the day after I’m gone, be that in a month or a year, or in 20 year’s time.

So, first of all, well done if you’ve made it through this very long opening post – thank you!

What do you think? Have I massively over-estimated the health of my portfolio? Do I need to keep my nose to the grind stone for the next 10/15/20 years? Am I mad to be considering turning down a promotion and a potential salary of £110k / £120k?

For those of you who have taken the step of stepping back hours, how has it gone? Did it make a difference to you? What about the option of sabbaticals or contracting to give a better work / life balance? Do you think I’d be better going full speed for the next 5 /6 / 7 years to hit a safe number before jacking it all in?

El_Torro

A few points that jump out at me from your post:

While you have a good chunk in S&S ISAs your DC pension seems pretty small. Especially if you’re earning £90k a year you should really be making the most of the tax relief. Of course if you plan to retire completely long before you reach age 55 this doesn’t help you so much. 

You spend a lot of your post justifying why you want to retire / reduce your hours / not accept a big promotion. If you’re doing that to clear your own thoughts then fine, no need to justify it to us though Especially on this board there are plenty of people who are planning to do similar, or at least would if they had the chance.

You ask whether you should work full pelt now to save enough to retire young or to reduce your hours. I’ve been asking myself the same question, and the answer depends on who you are and what you want. I will say though that as we get older job security becomes less certain and getting a new job becomes less easy. For that reason I would only reduce my hours if I was sure I was already in a comfortable financial position.

chile_paul2

You spend a lot of your post justifying why you want to retire / reduce your hours / not accept a big promotion. If you’re doing that to clear your own thoughts then fine, no need to justify it to us though Especially on this board there are plenty of people who are planning to do similar, or at least would if they had the chance.

Ha! I think that's very astute - I think I'm having to justify it to myself, I don't know why.

On your point on the DC pension, I've only been with this company for 3 years and have been maximising pension contributions, including AVC's of £40k last year. I've actually stepped back my contributions (although still at the point where I'm getting the maximum company contribution) because I was worried about investing in my pension at the expense of the S&S ISA and therefore potentially locking funds away until I'm 55 (or 57, the minimum age to drawdown is going to go up isn't it?) and not having sufficient funds to bridge the gap.
Before that I was still in a DB scheme with my previous company and so all of the pension savings were going into that.

Thrugelmir

chile_paul2 said:

Clearly, whilst we still have a mortgage, that is an active choice to keep it (on a low interest rate) whilst keeping money invested in our S&S ISA in the expectation that it will grow at a higher rate than the interest we’re paying on the mortgage.  

The shorter the investment time horizon. The less risk and correspondingly the less volatility you should expose yourself too. With a £186k outstanding , personally I use part of that free cash that's available every month to start to overpay the mortgage. Will provide some insurance against the unexpected. Optimisation as opposed to maximisation in these uncertain times. 

DT2001

It is a difficult balance time/income. How transferable are your skills? If you ask to reduce hours and are told you cannot, what do you do as by then you’ll have decided what you want?
My DW and I have been self employed for 25+ years and have made sorted work around what we wanted to do with our 4 children. I only work from home and fairly minimal hours so allows OH more flexibility. We could have been in a FIRE position earlier but have travelled and educated, at times, abroad. I think our children have benefitted considerably and so have we. The key is working out what is important to your family and then finding a way of doing it. With the skills to earn 90+k the opportunities are there although not always the easy option.

tacpot12

I agree that part-time working for men is somewhat frowned upon, but this is only because in times gone by people had to work five days to make ends meet. My 28 year old son recently went reduced his hours to 4 days a week, his mother was very anti this, but he had worked out that he could live well on his salary, and still have enough going into his pension; he was keen to do this because he was finding work stressful.

So your choice is between a promotion paying £20K more, but having more stress and no opportunity to work 4 days a week, or remaining at your current level and taking a £18K pay cut to go down to 4 days a week.  Once tax is taken into account, the difference financially seems to be about £1600 pcm, that you could be investing. 

I can't tell whether your original plan to have c£450k over and above the DB pension is sound because you haven't said how long the mortgage has to go before it is cleared or what your state pension entitlements are for both of you. In a worst case scenario, your current plan looks tight. I think you need c£400k over and above the DB pension after the mortgage is paid off. 

Sea_Shell

How old are your children?    The drain on the Bank of Mum and Dad could be substantial as they get older.

We took the final plunge (July 2019) with a nest egg of c.£500,000, plus DH's final salary of similar size to you (expected to be £12,000 in 10 years time), and no mortgage.   We don't have children.    Our spends are VERY modest.   We're planning approx. £15k per year, and only managing to spend about £11,500 of that!!!

As for how it's going, I have a thread if your interested in a "real life" FIRE story.    Look for my Squirrelled Nuts thread.   Although it's running for a good few pages now!!   Great cure for insomnia!! 

chile_paul2

Sea_Shell said:

How old are your children?    The drain on the Bank of Mum and Dad could be substantial as they get older.

We took the final plunge (July 2019) with a nest egg of c.£500,000, plus DH's final salary of similar size to you (expected to be £12,000 in 10 years time), and no mortgage.   We don't have children.    Our spends are VERY modest.   We're planning approx. £15k per year, and only managing to spend about £11,500 of that!!!

As for how it's going, I have a thread if your interested in a "real life" FIRE story.    Look for my Squirrelled Nuts thread.   Although it's running for a good few pages now!!   Great cure for insomnia!! 

I’ve already been following your thread and gleaning a lot from it. I think our spending levels would be much closer to yours if it wasn’t for the kids 😀
The kids are 5 and 9, so plenty of time to get far more expensive than they already are - which is why we’ve got the savings put aside specifically for them - we are putting an additional £100 a month into those accounts / investments for each of them, but I’m well aware that is only the start.

L9XSS

Ok, without getting into the detail of your pension portfolio (others will pour over that and give you constructive feedback) I thought I would give you my view in the “work life balance question”. Like yourself I was in a very well paid career, similar salary 6 years ago. I questioned the same aspects you have. Ultimately I requested 4 day week which was granted and haven’t looked back. At 55 I have taken a less demanding role and more enjoyable job (albeit lower salary) and feel semi retired. I finish work on time, I’m less stressed, I have time with family etc. I now feel if I want to I can work on till I’m 60, ultimately I could retire now, but am enjoying work and the life balance so it’s a win/win.
I think staying with your employer would be the smart move at the moment and requesting 4 days (as I did) will give you that balance. Good luck.

HHarry

I’m currently on a 4 day week and can highly recommend it - the extra free day makes all the difference.  On a Friday I can cross off a load of chores leaving all weekend free for fun stuff.
 For a while I was on a 3 day week and that’s my goal again when things are less busy.  More leisure time than work is the future!

The only pitfall with a shorter working week is getting 20% less work assigned.  My Wife regularly works 40+ hours in a week, despite only being paid for 32.

michaels

Op I feel without putting you approx age you make it very hard for us to figure out what sort of timescales and thus what sort of pot sizes and potential fire/retirement ages might be possible.

My kids are about 7 years older, I would definitely recommend spending more time with the now, as mine have become more teenage they are much less interested in parental support or indeed even input and much more interested in material things, your choice as to whether you decide to indulge these wishes. I don't on environmental grounds but this makes me the worst meanest dad in the world.

I have worked part time for about 4 years from mid 40s, it seemed to reduce stress more at the start than it does now but I don't have a brilliant employer so my part time ends up being full time for several months in a row and then a month or two off but it does mean during the breaks DW can go and look after her aging mother. It hasn't made me more enamoured of my work though as I was hoping and actually not really being interested or considered for in advancement has made it even more of a chore and I certainly still feel close to burnout.