FIREside Chats

edinburgher

We all know MFW is great, a friendly meeting place for folk who are all very different but a little bit similar, in that they're trying to provide stability for them and theirs by achieving something that is pretty hard work   I'm not sure if it's the demographics of the board, but I've noticed a lot more posts in the last year or so about people who are investing for their future with almost as much enthusiasm as they are paying down their mortgages. I'm the world's worst MFW, but I do get excited about (legal) tax avoidance, ISAs and pensions to a degree that bores even my closest friends and loved ones

So I thought an "investing on MFW" thread would be good fun, an outlet for those of us boring people in the real world with finance chat and a bit of a safe space and a sounding board for people who can't face the zealous optimisation, million pound portfolios and occasional snark on the real investing/pensions boards. Zealous optimisation and a million pound portfolio doesn't (of course) mean you're not welcome to post. The title is just a wee tongue in cheek reference to the fact that most of us might like to retire slightly earlier than state pension age (financial independence retire early). It's not intended as a savings thread, we have quite a lot of those already.

I thought it might be fun to use an introduction to say what you're investing for, how you're doing it and when you're hoping to achieve it by (completely optional). After this, hopefully the thread will just descend into updates on whatever frequency you think fit, general chat and encouragement 

• Why am I investing? - Mrs E and I would like to retire early and are likely to carry a mortgage into retirement as houses where we stay are either very small or out of our price range. We are happy to move somewhere cheaper in retirement. We are fairly spendy (for me, part of the journey will need to be cutting our expenses).
  
• How much do I think I'll need? - If you use the oldish chestnut of being financially independent if you have 25x your expenses saved, we would currently require a horrendous investment pot of £956,931 to draw on. The picture, however, is not that clear.
  
• How am I going to get there? - I am stupendously lucky in that I have two defined benefit (DB) pensions. Both of these are small (£2,500-£3,000/year), but I am a current member of one that is currently accruing at the rate of c. £850/year. Mrs E and I also have £105,000 or so in defined contribution (DC) pensions, Vanguard SIPPs for both of us and a Scottish Widows workplace pension for Mrs E (which is a salary sacrifice arrangement). We will also have made sufficient contributions to have full state pensions by the time we turn 50 or thereabouts.
  
• How long do I have? I turned 38 yesterday and would like to retire at 58 (twenty years time). We're probably about £300,000 away from our goal
  

FloraandFauna

Nice idea!

I'm a ditherer - every month payday I'm like a pheasant trying to cross the road between mortgage OPs and pensions.

Why? I'm investing in a SIPP because I would like to retire at 60 (SPA 67). My job's not bad, but Christ, there's so much other stuff I would like to be doing before my limbs seize up.

How much? A SIPP pot of anywhere between £133k and £160k will make this achievable (depending on how early I take DB2). This will be need to be substantially less if I manage to pay off my mortgage by 60 - currently, there'll still be about £30k to pay at 60, so will need higher end of SIPP (hence dithering point above). That's for a comfortable (for me) income with around £800 to £1,000 spare per month for fun, DIY etc - more than I've ever had when working!

How to get there? A deferred DB of about £6.5k (NPA of 60); taking massive reduction on DB2 (NPA 67) to about £5.5k, then top up with another roughly £12k a year from SIPP until state pension at 67. Also, OP'ing £100 a month (I know!) because reasons. Emotional, whatevs.

How long? Don't make me cry. Am 49 this year, so just 11 years to go from current SIPP pot of about £6k... Putting in £500 per month may or may not achieve this, depending on projections/parameters used, but it's all I can afford at present which does at least simplify the choices a bit. Will reassess every time budget/income changes.

FloraandFauna

Although I will say the pensions board have been a godsend for me - had such help over there on things I didn't understand, and a LOT of patience from some posters while I went round in circles.

edinburgher

FloraandFauna said:

Although I will say the pensions board have been a godsend for me - had such help over there on things I didn't understand, and a LOT of patience from some posters while I went round in circles.

Definitely agreed - for every butting of heads there are 10 helpful posts!

We budget from the first and I have a personal challenge where I'm trying to increase the amount we invest by 0.5% of salaries each month (only 2% this month). I have paid this into my SIPP and have also paid in about £120 from an ISA to keep me from temptation   £184.64 (topped up to £230.80 by the gummint)

FloraandFauna

That's an interesting point.

I'm still settling down into what works/the numbers/how I feel about it, two years into the big job change and taking on a mortgage. And your £184.64 payment just made me realise I have no compunction whatsoever about transferring random, tiny amounts (£3.74, £6.59, etc) multiple times a month into my mortgage account, giving the bank endless work to sort it all out. But I'm a little afeared of the grown-up finance people in pension providers, so I transfer a respectable round sum just once a month by DD.

Mentally curtseying as I do so. 

I think I'm worried they'll tell me to eff off and bother someone else if I keep waving my £3 at them, colossi of global investing that they are. Do you just chuck them a quid whenever you can, or is that not the done thing? 

edinburgher

As well as my % challenge, I transfer 50% of any windfalls (this includes tiny lottery wins, gifts and some things that aren't technically windfalls, like (infrequent) work bonuses, or the money I get from the feed in tariff (FIT) for the energy generated by our solar panels and transferred to the grid. Yes, these can be absolutely tiny, but I keep making them TT style. It will depend on whether or not your provider is ok with that - Vanguard seem to accept anything over about £1 - your provider may vary. The one tip I have is to make sure that your payment is divisible by 4 so as to maximise the "free" money from the government (£1 good, £1.02 loses you a penny) This will vary if you're one of them there fancy tax payers...

Edit: Had a quick check over the last couple of months - I've made at least one payment of less than £3

FloraandFauna

Oh, now that IS good/to be pondered news, thank you!

I'm not a fancy tax payer, I'm an awkward one - 21%...

jennystarpepper

@edinburgher I think what you have written will resonate with many of us, especially the '  Zealous optimisation '.  

In no particular order.

Mr Pepper and I are 49 and 50 and hoping to retire at 61 latest, although Mr Pepper has said he will work a bit longer to go travelling for 6 to 12 months when we want to retire, which will be business class backpacking and Xmas in Straya. 

We have no debt other the mortgage.  Did pay off just over 11k of debt in under 12 months last year, we now have 'spare' funds to being child maintenance free and not feeding 2 children who eat the same as 4 adults!  We have no hobbies but we do like a holiday at Christmas and a few glasses of booze.  No memberships to anything, no mobile contracts (Mr Pepper spends about £10 a year on his PAYG), we have one car which is old but very reliable and will replaced when we have to.  I don't 'shop' and neither does Mr P.    Takeaway food is about once every 3 months,  because we either CBA to go out or get very pickled off if bad / cold / greasy food arrives, hate using hard come by money for !!!!!!.    But we do have fun... honestly, lol.   

We are looking at the next 10 to 12 years as the 'final push'.  Aim to be MF in 5 years or less.  Work pension has been increased by 2% since January.  Trying to top-up other pots as we go along, which are shares, Vanguard account, emergency fund, premium bonds and general savings which covers house / holidays and extra spends.  

We (I mean me but Mr Pepper is happy with what i do), also send / share our little windfalls off to our various pots.  Clothes do get bought new as Mr and myself never had 'new' clothes growing up, his were sometimes about 6th hand me down!  I shop in the sales and buy good quality which is looked after, (TBF I am not of a size who can just walk into a charity shop and find something that fits).  

As for what we will need, it is a work in progress, I am ok with how we are doing, 

jennystarpepper

FloraandFauna said:

I think I'm worried they'll tell me to eff off and bother someone else if I keep waving my £3 at them, colossi of global investing that they are. 

LOL.   Ditto. 

edinburgher

@jennystarpepper - it sounds like you have a very nice life, I wish I didn't live near so many nice takeaways! 

Cornish_mum

Great idea Ed, will be back later to post CM