Is a million enough for early retirement?

Thrugelmir

MaxiRobriguez said:

bostonerimus said:

Do a detailed budget to see exactly what you will need. Then include all income streams to see what your investments need to generate. Remember that if you go into retirement entirely debt free you will take a lot of pressure off your investments. Use a conservative rate of return (or better still use several to see the various scenarios). Most importantly set your mortality to be well beyond the average. Don't forget to include inflation, taxes and one time large costs like a new car or a new roof on the house.

As a rule of thumb I'd say you could plan for one million to generate an inflation linked 40k/year for 30 years and have a high probability of not exhausting your money.

In terms of forecasting I believe I've been conservative enough, forecasting a combination of 6% growth, 2% inflation,

The net of those is around the very long term average before fees. 

MaxiRobriguez

Thrugelmir said:

MaxiRobriguez said:

bostonerimus said:

Do a detailed budget to see exactly what you will need. Then include all income streams to see what your investments need to generate. Remember that if you go into retirement entirely debt free you will take a lot of pressure off your investments. Use a conservative rate of return (or better still use several to see the various scenarios). Most importantly set your mortality to be well beyond the average. Don't forget to include inflation, taxes and one time large costs like a new car or a new roof on the house.

As a rule of thumb I'd say you could plan for one million to generate an inflation linked 40k/year for 30 years and have a high probability of not exhausting your money.

In terms of forecasting I believe I've been conservative enough, forecasting a combination of 6% growth, 2% inflation,

The net of those is around the very long term average before fees. 

Yeah, then wrap in the other two factors mentioned to make the overall projection more conservative. 

But as per previous post, it feels like the sum may not be enough so will have to do some re-calibrating.

zagfles

Thrugelmir said:

MaxiRobriguez said:

bostonerimus said:

Do a detailed budget to see exactly what you will need. Then include all income streams to see what your investments need to generate. Remember that if you go into retirement entirely debt free you will take a lot of pressure off your investments. Use a conservative rate of return (or better still use several to see the various scenarios). Most importantly set your mortality to be well beyond the average. Don't forget to include inflation, taxes and one time large costs like a new car or a new roof on the house.

As a rule of thumb I'd say you could plan for one million to generate an inflation linked 40k/year for 30 years and have a high probability of not exhausting your money.

In terms of forecasting I believe I've been conservative enough, forecasting a combination of 6% growth, 2% inflation,

The net of those is around the very long term average before fees. 

Indeed - and assuming low total fees of 0.5% that gives a net real return of about 3.5%. If fees are higher eg using active and/or adviser then that reduces the real return further - and that assumes you're entirely in equities.

So the assumptions definitely aren't "conservative", they are optimistic. Very common mistake by investors is to look at recent returns, eg last 5-10 years, rather than longer term for future projections

Albermarle

I'd also like to pay to pay off as much of our children's university debts and also fund a deposit for their house after. That's likely to be for two kids.

That is also looking at a kind of worst case scenario/over generosity from the Bank of Mum and Dad.

Firstly one or both may not even go to Uni, and in any case paying off student debt is only sensible if the student is destined to be a high earner . In which case they can probably afford to pay off their own debt.

Helping with a house deposit is a more likely scenario though .

My own experience is that although some support is gratefully received ,  they do not all like being over supported , preferring to make their own way in the world as far as possible.

MaxiRobriguez

Difficult to forecast month-to-month spending as our first child is due in a couple of months so that may be a bit of a gamechanger. 

Take others point about being more conservative with growth targets. I'll start adding more scenarios rather than just having one base case.

JustAnotherSaver

Yes 1M is enough no problem.

I earn around 25k so whatever that is after taxes. Say 20k round figure. I've 30 years work ish so again roughly that's 600k. Obviously inflation and wage increase (ha!) are factors but roughly speaking. Your cash doesn't sit earning 0% though either.

If I was to buy a 100k car, go on monthly holidays etc then no probably not.

If I was to live as I do now then yes. 

coyrls

MaxiRobriguez said:

Difficult to forecast month-to-month spending as our first child is due in a couple of months so that may be a bit of a gamechanger. 

Take others point about being more conservative with growth targets. I'll start adding more scenarios rather than just having one base case.

You're basing your figures on expeniture with no children?  I think you'll be making some radical revisions in a few years time.

MallyGirl

In that case you have 18 years + for the kids - I'd look at a S&S JISA with 80/100% equities (at least at the beginning) for putting a bit away for their uni days or house deposit. 

MaxiRobriguez

coyrls said:

MaxiRobriguez said:

Difficult to forecast month-to-month spending as our first child is due in a couple of months so that may be a bit of a gamechanger. 

Take others point about being more conservative with growth targets. I'll start adding more scenarios rather than just having one base case.

You're basing your figures on expeniture with no children?  I think you'll be making some radical revisions in a few years time.

My forecast includes additional spending for both a house move and child costs, but obviously the confidence level on the spending due to kids is quite low, hence the comment.

[Deleted User]

Planning the date of early retirement is a little premature given your kids haven’t been born.  You need to plan on funding the nursery before you plan to pay for their houses.  And focus on living and your career rather than this spreadsheet