FIREside Chats

hugheskevi

LadyWithAPlan said:

Do you other FIRE experts have Interest only or maybe offset mortgages more then repayments?

I deliberately started out with an interest-only mortgage, at that time planning to pay it off via DC pension.

Then interest-only mortgages fell in popularity, so on remortgage I increased borrowing and changed to repayment but set term to be as long as possible to keep payments as low as possible.

I do recall an amusing conversation on the subsequent renewal - by this time I had amassed a decent ISA and the mortgage was now relatively small as house prices boomed and investment returns were strong. The lender had a very scripted conversation which heavily focused on what you would do if your income changed, lost job, etc. I recall the answer to about 6 similar questions in a row was "I would take the money from my ISA and pay off the mortgage"

I did find the mortgage was a good thing to keep the focus on expenditure discipline - pension and ISA took lion's share of money, so the mortgage was just picking up crumbs of over-payments here and there in the early years, mostly from money borrowed on 0% interest and fee-free credit card borrowing. But that meant playing around with other income sources such as Matched Betting, Stoozing and setting up my own small consultancy had quite an impact, as although they were small in comparison to the love being shown to pension and ISA contributions, income from this additional stuff generally found its way increasingly to the mortgage over time.

So although my original plan was to repay mortgage from pension, things changed, and the mortgage ended-up being cleared after 11 years from normal repayments along with ad hoc over-payments here and there, and finally by a small inheritance to finish it off.

edinburgher

Interest only mortgages are less and less common these days. When we went to remortgage, we were told that our broker (busy national firm) had processed something like 6 IO mortgages out of his last 1200). We were also told that we would either need £100k income, or £150k? (I think) in equity!

powerspowers

One small pensions task completed today- finally got the log in details for my work pension. However, they’ve got my start date as six months after I actually started so I’ve queried that- so one task is replaced with another 🤷‍♀️ 

Still not sorted increasing AVCs or getting log in stuff for that account. 

I’m someone who works well with short deadlines so find pension admin quite tricky as have decades to get it sorted 😂 come on powers! 

greenbee

Thanks for the reminder... I've got the login details for my pension, but haven't looked at it since. And I need to get the app set up and start looking at whether I can take it out of the default funds or not. I may also look at transferring my last work pension into one of my SIPPs. 

Grogged

Hopefully @powerspowers it will be quickly sorted.

saver-j

I think I've been lurking reading this thread long enough and its time to join in to keep a bit more focus.  I used to read the forum a lot, and MFW in particluar, when we were paying down our mortgage, but after having a baby, while the big picture goal of freedom never went away, I lost focus on the details of how we would get there amid the sleep deprivation (ongoing zzzz) and time it takes to raise a small person.

So looking at the initial questions...

Why?

I don't like my job. I know the answer to that may be to change it, but I don't think it's a question of just moving somewhere else doing the same job, although that may be a short term fix. I did move a few years ago and it seemed an improvement but my firm's approach during the pandemic has been to under resource meaning I've had to put in considerably more hours than I'm paid for, and from next week it's going to be mandatory for me to return to my prepandemic working pattern of being in the office.  So many other places in my sector are offering more flexibility than that so I think the answer has to be a move.  If that hadn't been the case (and we were only told last week of the requirement) my plan had been to continue along for another year or two then when LO is in school to use my week day I currently have with her to look at retraining.  I haven't decided what to yet though!

How much?

Still deliberating and tracking expenses to work that out.  Will depend on the FIRE date, multiplicand and SWR.  Looking like between £600,000 - £999,990, although if we had to we could do it for a lot less.

How will I achieve it?

I think we achieve a 50% savings rate.  Since earlier this year I've been tracking our expenditure to get a better picture.  I know what our fixed outgoings are but it's those other bits and pieces that add up I need to account for.  We definitely spend within our means though so I've no concerns in that respect it's just a case of maximising our savings.

We already have a pot of cash / S&S in ISAs which we've been building for a while.  But I'm fairly risk averse, and was even more so when I was younger so we have more in cash than is optimal for increasing our position.  It pains me to think of the gains I lost by not investing more earlier.  I know I still have too much in cash, but need to work out how much I'm comfortable with holding back, and get led into analysis paralysis.  Need to work on this.

We also have DC pensions.  I need to move one as the fees are too high, otherwise they are in workplace schemes which have decent fees. 

No DB to fall back on.

How long to get there?

As soon as possible!  I went down to 4 days a few years ago and won't be going back FT.  I think 15 years is a fairly realistic target, but 11 is what I'm really hoping for.  It would be amazing to go sooner. 

If we lived really frugally (and we are pretty frugal already) never moved house and limited our holidays we probably could go sooner, but I think we probably will move, and to somewhere a little bigger, and I want to go back to having amazing holidays.

Retireinten

Welcome to the thread saver-j!

I sympathise with your work situation. It sounds similar to mine to be honest, in that we're woefully understaffed for what the company wants us to achieve and although I like most of the people I don't like the politics or the stress that goes hand in hand woth my job level. I used to thrive on it but not any more. 

I sway from sticking it out because the pay and perks are helping to pave the way to FIRE AND I've done the job move a few times to 'fix' things and it just doesn't seem to work for me.  I need a change of profession or at least a job downsize, not just a similar job elsewhere, to improve things.


At the moment I'm in sticking it out mode, but if the job comes to an in the next few months then so be it.  I'll cross that bridge when I come to it. We've set our retirement budget for us as a couple to be the same as our current spend as a family of four, less retirement and debt payments. That's £36k for us though I'm cautious so we're on target for just over £40k. I have a good DB which helps but hubby is entirely reliant on a DC pension. 

Good luck with your plans

HTB_newbie

This is a fantastic thread! As my username suggests I joined the forum 8 years ago or so when trying to work my way through the process of buying a house using the HTB scheme. We then fell into drifting by, paying our bills, raising our kids and not thinking too much of the future. I had a bit of an awakening at the end of the last year that we should get on with some financial planning for our future and actually started to look where we are financially. A step I wished I took years earlier when I found out some pension pots were depreciating over the years..

Why I’m investing

As well as realising that the passive (head in the sand) approach wasn’t working out too well, I was fortunate to have some paid time off which made me realise that if funds were there, I could happily not work!! 😁This may seem obvious to others, but it came as a surprise to me having been so career driven. My OH is older and a stay at home dad. We realised my SPA would mean he was 76 by the time I retired so I’d like to retire a lot earlier. By 60 at the latest but hopefully by 57 or earlier.

How much do I think we’ll need?

This is such a difficult one to answer and will depend on so many different factors. Somewhere between £600,000 and £800,000 is currently our best estimate. Not factoring in our holiday let.

How am I going to get there?
 

I’ve had the benefit of large salary increases in the last couple of years which by not changing our standard of living has meant we have more money to invest in our future. I accumulated all my previous work pensions into a SIPP with vanguard in the last year which is currently growing nicely and is at £155k. For the last 18 months (inc. employer contributions) £2166 pcm has been going into the active work pension and this will increase by another £500 pcm from next month. Another 13 years contributions should see this pot hopefully reach above £400k. With the other pot then we’re just about at the lower end. I’ve not factored in inflation or likely returns on the pensions into this figure, making the assumption that they should hopefully increase in line with inflation. OH also has a small DB pension of £2500 PA which kicks in at 65 and about £28,000 in a DC pension. 

We have since Nov last year been overpaying the Mortgage by £750 pcm. Once we are out of the fixed period we need to remortgage and pay out the HTB element, so would still have circa £300000 on the mortgage at that point. 😱 We’d aim to pay at a rate to pay off by the time I’m 57. 

Other than a small EMF which we need to increase we have no cash savings as we used these as a deposit for a holiday let. But we do have circa £10,000 in a separate account for our holiday let which we got as an investment. We like to keep the finances separate so that there are funds for any works that are needed and at the end of the year will put anything above £6k into the holiday let mortgage. The holiday let will either be sold and profit used to help us fund the years between when I retire and can access my pension or we will keep it on as an income during retirement.

Our obvious shortfall is in the lack of ISA’s to assist between retiring and getting access to my DC pots. So once we have built up our EMF back up, next year onwards will be to putting money into ISAs (where we can). We also need to save to help our kids with university costs. I’m also wondering if after a few years I should cut down the amount being paid into my work pension in favour of putting some into one in my OHs name…

How long do I have?

I’m now 42 so 15 years if I am able to retire at 57.

Suffolk_lass

@HTB_newbie You sound pretty organised and you seem to have your finances pretty well organised.

I think you should consider setting up a SIPP for your partner and the possibility of amalgamating his DC Pension - we kept DH's separate as it was doing OK and it gave us another 25%TFLS to draw down (which helped to clear our mortgage) - I don't remember the amount now but there is an annual allowance you can pay in, even if he is not working. I assume he is the named claimant on Child benefit (you need him to be receiving the pension credits even if you are not receiving the benefit itself, if he is not working).

You don't mention your state pension forecasts but it is well worth doing these and addressing any gaps if you can. I know I have two years missing that I don't think should be, and I need to pay for four before I reach SPA, now I have stopped work, to make up as much as I can between being opted out of SERPS in an occupational pension scheme, and maximising the new state pension (will take about 4 years to pay for itself, based on class 3 voluntary contributions).

Personally I like to keep some savings in cash, just to spread risk a little (it is my age, I guess - I still recall the impact of the 1987 crash) so maybe consider where is best to put these - premium bonds are my cash deposit of choice at the moment.

I presume your financial adviser made sure your planning took the Lifetime allowance for pensions into account.

HTB_newbie

@Suffolk_lass Thanks so much for your reply and helpful suggestions.

My OH has looked into how many years NICs he has and has enough for a full state pension. I confess we don’t have him named for child benefit purposes, as we are not entitled to child benefit I simply opted out. 

When speaking to an account about our holiday let, profit from this can be treated as income for OH, so I think we are okay on that side. I’ve not looked into my NICs but worked since I was 16 so should be on target I hope. 

I think your suggestion of a SIPP for OH is a good one. I’ve been paying into my pension as I can do this via salary sacrifice to diminish the reduction in personal allowance that would occur if I took more home.  I need to investigate if putting in OH SIPP would also be taken into consideration of earnings for determining my tax free personal allowance. I’ve assumed it wouldn’t. Might be a question to ask our accountant when we meet to sort the books for the holiday let.

I’ve not sought advice regarding lifetime pension allowance but can’t see me saving the amount required to go above it. Would rather save more pension now and lower pension payments later on by either going part time or reducing my % contribution to the minimum needed to get employers %. 

I agree we should have more cash savings and the lack of them is a worry to me, we’ll try to build those up but am reluctant to decrease my pension payments right now as £1 in the pension would give me 40p in take home (not including NIC deductions) due to the reduction in personal allowance.