FIREside Chats

gallygirl

@listoflists (great name!!!!) I'm a bit confused.....

You want 34k a year - you have 33.2k (which is basically 34k IYSWIM) so you are covered going forward.

You need an extra 20k for the next two years. To fund that 40k you have 130k plus 60k so that still leaves you with 150k.

Then you have your DC pots of 160k and 95k. At what age can you take these? I assume at least hubby can take his? So you could raise a further 40k (25% lump sum) from that, plus almost 24k from yours when the time comes. Then you have the residual pots to draw on.

And presumably state pension in the years to come (unless your existing pensions are the type to drop when that becomes payable). Have you both paid enough contributions?

So you could retire now with your required income, including the extra 20k for two years, have 214k in savings and still have 190k in pension pots to draw on when you want to.

If I've interpreted it correctly my notice would be in today!

Suffolk_lass

I've just read another 13 posts on this thread and a couple of things occurred to me as I was reading:

Gifting money to your children is taxable - gifting them property isn't - although circumstances have changed, buying a second property accrues stamp duty liability at a higher rate, but CGT (Capital gains tax) could be avoided if you are tenants in common and gift your share to your child(ren) for the cost of the legal change - and, if you live for seven tax years after that, you legitimately avoid inheritance tax liability. Everyone knows their children better than virtual friends on here so worth looking for yourself and taking advice if you need to. Be aware of LISAs (theirs) and FTB denial options, for example. I think that may have been @Cornish_mum  so tagging them.

Taking occupational pensions earlier than NPA (normal pension-scheme age) - I have been talking this through with my cousin. His would normally pay out at 65 (he took redundancy) and he will be 63 in two weeks time. He said with some smugness that he is living on his self-employed gardener income plus his savings "because his pension is index-linked, and earning more than his savings". I suggested he go away and do the maths and also review in light of his partner moving in with him last month - they are not married. In my view he needs to look at whether he would receive his contributions to dependent benefits back when he takes his DB pension (he was married at one time) and if not, consider marrying his partner so that her financial situation is secured. He also needs to consider whether income or lump sum are going to be more important - and most importantly - look at the cost of taking it early (actuarily reduced by approx 5% per year) versus the benefit of taking it early, receiving it for (up to) two years longer and the costs v benefits of having that money early.

He (like me) is projected to get his State Pension at 66. Unlike me, he has an extra tax (contribution) year to consider as his birthday is one side of the tax year, in April, while mine is in March - so April to March when I am 65 does not count for me.

ruby_eskimo

Hi all, can I just sit over here in the corner and let your combined wisdom wash over me please? 

I've only really started thinking properly about the future in the past 12 months, when a new job and the switch to working from home gave me a bit of extra cash.  FIRE was a concept I'd come across before but was majorly put off by the over-zealous and this thread and some others on the forum have helped me realise it doesn't have to be like that.

I'm another public sector worker (NHS here!) and have been since I left uni at the end of 2008, so we're on the 13th year of service and I've made pension contributions throughout that time.  I always knew the NHS scheme was pretty good but didn't really look into it until recently when I realised they hadn't taken into account 3 years of service which has now been updated.  But that was it, I was putting all my eggs in the NHS and the state pension basket.  

When the pandemic kicked off last year and we switched to working from home, I found I had extra cash due to no longer commuting into London coupled with finally paying off my student loan.  I took the decision to start overpaying the mortgage and opened a LISA but think I could be doing more to make sure we're financially stable in the future.

My current pension age is 68 and I really don't want to be working till then, maybe 60 at the latest, which is 26 years away, so lots of time to try and do *something* - no idea what though.  My DH is very reluctant to talk about money as he had a lot of debt a while ago that he's worked hard to pay off, but he saw that as his "problem" and therefore wouldn't let me know the details.  We need to sit down and hash it all out but I need to have a plan to present to him as that's how he works; he's ok when you give him a list of options to discuss but a blank slate is kind of his worst nightmare.  He's also a public sector worker and has 2 pensions from the different sectors he's worked in, but no idea on what those entail really (again, I know we need to sit down and talk about it...🙃)

Our budget isn't horrendous, we definitely don't have a taste for the finer things in life, basics are just fine with me.  We do like to do a big international trip every other year so budget accordingly but other than that we're simple creatures who don't really like using credit and try and save for the things we need.

So apologies for the waffle but that's where we are: just starting to dip our toes into the FIRE water and hoping to make a good go of it in the next few months.

edinburgher

Welcome to all the new posters - lovely to see you

We have had to cancel a summer holiday, so I've shuffled the budget and paid £20 of this into my Vanguard SIPP (£25 after tax relief).

@Suffolk_lass - good point re. taking occupational pensions early. I have a former colleague who insisted they wanted to do this, but they're young 40s and I couldn't see the value in this for the life of me. I could only focus on the "lost" money. Longevity is a big part of the puzzle - a 50% reduction doesn't look nearly as bad if you retire at 58 and live to 88 vs retiring at 68 and living 'til 88. Despite being a relatively epensive way to do it, it would also allow you to smooth your income in a fairly straightforward manner.

QueenJess

I love that in these threads everyone has a plan with dates in mind etc. I am doing my best to invest in pensions etc, but have no set plans for the future yet.

I am on maternity leave for a year, but am contemplating going back part time only for the foreseeable future (if that is even possible). Also considering the possibility of a career break. Would also like to retire early (not sure when) and I refuse to keep going to work when DH is retired (he is 6 years older than me). DH also might retire early.

So really, no particular plans... So far I smashed my mortgage down to get into the lowest category LTV and to a position where we are able to pay the bills and survive on a single salary. I'm now smashing my pension as much as possible.

Why investing? Options and flexibility.

How much do I need? Really depends on what I actually do... For retirement I am guessing £20-40k a year (min to luxury retirement).

How am I getting there? As above, I've given myself options by making the mortgage affordable on one salary. At the same time I've been taking advantage of my company's generous match on the DC scheme. Now I am making smaller mortgage overpayments and prioritising pension & ISA/LISA investing. I have a company pension and a SIPP (mainly because it is easier to invest more into a SIPP than my company pension). Tried to "catch up" my pension last financial year to a level I think it should have been at (although actually done originally as I was expected to be out of work this year).  Attempting to pay in 25% of my salary as salary sacrifice this year (including company match) to stuff as much in there as possible so I can maximise my options when I have to think about returning to work.

SIPP is with Vanguard and I have a mix of index tracker funds which balance bonds/shares as well as giving me global exposure. I have set percentages I rebalance to when I pay in (nothing planned for this year though). I chose this over a lifestrategy fund as I could get the same sort of thing with lower fees.

How long do we have? Who knows... I am 39 now though.

SuperSecretSquirrel

What an excellent idea for a thread, I love how much traction it has gained already Thanks for getting the ball rolling Ed, and thanks everyone else for all your interesting contributions! 

I tend to go on a bit, so apologies in advance for the length of this post...

Why am I investing?

I want security for me and my family, and I want the luxury of choosing how I spend my time.

First we aimed for mortgage neutrality - if we lost our jobs, we wouldn't lose our home. Next we aimed for mortgage freedom - a reduced "monthly nut" and flexibility to reduce hours and spend more time as a family. Now we're aiming for financial independence - ultimate freedom to work as much or as little as we like.

OH dropped down to working 3 days a week after our eldest was born. I dropped down to 4.5 days a week when we paid off the mortgage, and dropped down to 4 days a week more recently. OH is currently working 0 days a week (due to redundancy at first, but now it's more a case of being a pragmatic way to deal with child care and sporadic school closures), but is hoping to get a part time job from September.

I'm 37 now, and am quite happy with my current work-life balance, but I would like to have the option to stop working much sooner than is considered respectable  It would be nice to be "Barista FI" in my 40s and only have to work just enough in a part time job to boost my state pension qualifying years (I need another 13 years for the full state pension). It would be nice to not have to work at all in my 50s I'm pretty sure I'd end up doing something in my free time that would almost certainly result in money being earned, but I'd like for the money to be a happy side effect of doing something I love, rather than the impetus behind grinding it out. OH never intends to work a full time job again, working 3 days a week from now until around 60ish would suit her fine.

How much do I think I'll need?

A lot less than most of the posters on here it seems. So much so that it almost has me doubting my figures! Realistically, in today's money, we would need 18k per year to live what we feel is quite a nice life. Right now 12k would be sufficient, but life as it is right now isn't exactly normal... I guess we are cheap dates!

In addition, I would like a hefty ring fenced fund to cover large and lumpy expenses. This includes a substantial (but not too massive) contribution to help our children transition into adulthood (be that help funding university or a house deposit or starting a business etc). I'm a great believer in making your own way in life, and too much handed on a plate can sometimes do more harm than good (I've seen this first hand, a few examples in fact) - but a small leg up is definitely something we'd like to be able to offer. The fund would also cover large expenses like car replacements and home repairs. These last two are actually factored into the 18kpa figure, but having an accessible slush fund would allow us to essentially "loan" ourselves some money if we have a particularly expensive year, and "repay" it over time. The exact value of this slush fund is something we haven't really considered too carefully yet, though I feel in today's money it would certainly be in the five figures range (admittedly that's a huge range!).

So in all, I think we're aiming for a modest home owned outright (already covered), plus 450k in what I label "interest accruing assets" (essentially cash and stocks and shares in ISAs and pensions), plus a XXk slush fund. For now let's call it a round 500k joint net worth excluding the value of our home

How am I going to get there?

No such defined benefit pension luck here... We have DC pensions, I've shovelled a fair amount into mine, OH far less so. I've scaled back my pension contributions and am now only paying in what's necessary to get the maximum employer contribution. I've created a very simplistic (0% inflation 0% growth) spreadsheet to model our future years, scooping living expenses from various pots as and when they become accessible (assumes personal pension at 58 and state pension at 69), even with minimal pension contributions we're not eating dog food until we're in our 150s, and realistically we're more than likely to be worm food by then

Full state pensions would cover the vast majority of our spending once we're old enough to start receiving them. All things remaining equal, my personal pensions are already at a sufficient level to cover half of our spending between age 58 and 69, and my ISAs are sufficient to cover half of our spending from 43 to 58. OH intends to earn enough from a part time salary to cover half of our expenses up to age 60ish, then personal pension and ISAs cover from 60ish to 69.

Current strategy is to invest £500pm in a S&S ISA (VLS80), send £500pm to a cash savings account, and invest £200ish pm in my pension. Although we have shared goals and a shared long term vision, OH and I do keep fairly separate finances, so I can't say for sure what her plans will be once she starts working again, but from recent financial discussions we've had I would say it's very likely that both her pensions and ISAs will see a boost soon.

Me wanting to be theoretically FI nice and early, and OH wanting to work part time up to a fairly normal retirement age does mess with the calculations somewhat. It might seem strange that we track everything separately, but with such differing strategies (but pretty much the same underlying values, drive, and reasoning) it's quite necessary. In the last section I threw out a ballpark target figure of 500k plus a mortgage free house. Right now we're sat at approximately 235k plus a mortgage free house, not to be sniffed at, but it looks like we're a zillion miles away from FI, not even 50% of the way there (if we ignore the house). Splitting the target in half and conveniently assuming OH's monthly cash flow will be sufficient to cover half of our expenses (plus save towards her slightly earlier than normal retirement) means we are more than 80% of the way there.

Finally, OH and I have discussed the subject of BTL many times. I'm not entirely sold on the idea (but certainly not entirely against either), OH is firmly against. I have recently been thinking a lot about potentially buying a very modest property (think small 2 bed terraced house or flat in a safe and pleasant area), and renting it out at a fair to low rent, then once the children are of an age where they are ready for some independence they could have the option of living there as housemates, either rent free or for a token rent (to help prime them for the reality of the costs of "adulting"). Later we could sell up and split the proceeds between them, forming the aforementioned house purchasing deposit "leg up". It feels like a reasonable idea to me, but OH remains unconvinced.

How long do I have?

I don't know, I could drop down dead tomorrow

Seriously though, I don't know. This isn't really a solid "plan", it's more a loose bunch of ideas, a series of sensible steps we can take to steer ourselves in the right direction, and a general effort to shape our lives to best suit us. It's fluid and malleable and subject to change. There's no deadline, there's no target date, in fact there isn't really a proper target amount... Right now life is pretty good. If ever I start to dislike my work, or some disaster strikes and my time is needed to deal with other things - I want the option to be able to just walk away without worrying about money. Personally, I feel like I'm nearly there. I do feel the need to overshoot a little to mitigate things possibly going wrong with OHs plan, a good sized buffer to help cover the unexpected loss of her income for a while - but so long as I enjoy my work there isn't really a down side to this.

I expect to keep working in some capacity at least until I qualify for the full state pension, so that's 13 years. It might be that I spend 10 of those years working a minimum wage job, or maybe not... Right now I'm thinking I might like to start looking into options where I work normal weeks, but for only part of the year. I quite like the idea of a solid 2-3 months off each year - far more than you could reasonably expect as annual leave from an employer, but a possibility if contracting, or running certain kinds of businesses, or even regularly switching jobs. Like I say it's all a bit fuzzy and abstract - having dropped down to 4 days a week I feel like I'm already on the "freedom spectrum", and later it'll just be a case of shifting the parameters a little, dropping down to 3 days a week, or having big gaps between full time projects, or whatever I feel like doing at the time! I'm not one for sitting around and doing nothing for too long, so I imagine always having some kind of hobby project to keep me semi-busy - if work remains satisfying and fun, that can quite happily be my "hobby" - "do what you love and you'll never work a day in your life"...

We'll just try to keep on moving in the right general direction for now. I expect the details will all work themselves out later on, they usually do

QueenJess

@SuperSecretSquirrel I'm glad it's not only me trying to drive in the right direction, but not actually have any firm plans. I read too many posts where people seem to have their whole lives mapped out and all the calculations locked down!

ajmoney

I have done a better calculation as I had realised by working out my figure based on everything I do now it included similar savings and mortgage payments which is obviously not going to happen.  My more realistic total is around £274k which would see me needing £10960 to cover all my expenses including food, fuel, Christmas etc but not taking into account holidays.  This is a more reassuring figure as it will be close to being covered by my workplace pension.  I am sure I have missed something out though, I feel quite clueless around this!

edinburgher

@SuperSecretSquirrel - I'm not sure about your "kids who are housemates" idea - it sounds doomed from the outset. Mrs E and her sister were offered a gift with reservation about 15-20 years ago (a paid for flat in an up and coming part of Glasgow, which never quite came up), but they had to live together. Teenage Mrs E and her sister refused outright 

listoflists

gallygirl said:

@listoflists (great name!!!!) I'm a bit confused.....

You want 34k a year - you have 33.2k (which is basically 34k IYSWIM) so you are covered going forward.

You need an extra 20k for the next two years. To fund that 40k you have 130k plus 60k so that still leaves you with 150k.

Then you have your DC pots of 160k and 95k. At what age can you take these? I assume at least hubby can take his? So you could raise a further 40k (25% lump sum) from that, plus almost 24k from yours when the time comes. Then you have the residual pots to draw on.

And presumably state pension in the years to come (unless your existing pensions are the type to drop when that becomes payable). Have you both paid enough contributions?

So you could retire now with your required income, including the extra 20k for two years, have 214k in savings and still have 190k in pension pots to draw on when you want to.

If I've interpreted it correctly my notice would be in today!

Thank you @gallygirl for your comments. I’m sure it’s a lot clearer to someone not in the middle of it looking out.

To answer the questions – hopefully when this 20/21 tax year shakes down and HMRC update the relevant page we will be left with 1 more year (each) of contributions to gain the maximum available state pension. MrLOL’s pensions are supplemented, so will drop about 2K in total when he gets SP. Mine isn’t.

Part of me went woo-hoo at your comments, the other part went oo-er, possibly because this feels like a one way step (over 25 years in the same organisation means I am slightly institutionalised ).  I do appreciate your workings – it’s helpful to see that what I think I want is doable.  Not to get too deep I suspect parental attitudes, upbringing and habit have affected how I (and MrLOL) see the answer to the question of how many belts and braces are needed. So thank you.