FIREside Chats

Merlin's_Beard

Cornish_mum said:

I am sticking to our plan, luckily we are ~15-20 years out from draw-down, so I am in the fortunate position of treating this as a learning experience of how to handle SWR risk. I am expecting at least 2 cycles before we enter retirement. 

I am also downshifting when I can to maintain our savings rate as far as possible but it’s only possible to trim so much. I feel incredibly lucky to have started our MFW journey a few years ago and not too be living like we used to (without budget wiggle room). CM

I'm probably 20-25 years away from drawdown so I'm taking a similar approach to you; just trying to maintain the balance of saving for the future vs spending to have a life and home now, while everything is getting squeezed from every side.

Trying to think of it as buying cheap rather than losing money - at the end of the day the state pension will be the only DB portion of my retirement so I can't afford to not be bold over a long timeframe.

edinburgher

@FlacosFloozie - our pension pots situation has been a bit of a tale of two cities. I have a slightly larger SIPP than my wife but make only relatively small payments into it (c. £100/mth), I have a decent DB pension scheme. I've dropped from an all time high of c. £70k to c. £64k after new money in. My wife, on the other hand, looks like she is doing better but her balance is flattered by the fact that she continues to pay in 26% of her wages to a DC scheme, we're invested in the same funds.

Looking to go in 18 myself, plan is to use PCLS for 2 years until wife can draw her pension, then use her PCLS and LISAs that we're yet to open for another few years until drawing my DB pensions at c. 62-63. Who knows what will happen between now and then - I just keep making SIPP payments when I have a wee bit of spare money and hope for the best

FlacosFloozie

@edinburgher I think the old saying 'plan for the worst and hope for the best' probably applies here. If you're popping extra in when you can you're already doing more than most.

rara32

@ElmoR I have been reviewing our plans recently however like most others have decided to just continue with the plan as it is in terms of money going in to s&s ISA and my sipp. I don't like the constant volatility so have decided that only tracking at specific points works better for me. Think covering eyes with hands and  then peeking through my fingers...not perfect but makes me feel slightly less scared 🙂.

I've changed my thinking on what we'll do at retirement. Previously the focus was taking our DBs as close to Normal Retirement Age as possible but from reading the pensions forum and calculating our specific circumstances we've decided taking these early could be better for us.  If all things stay the same to Jul 24 i.e. payments in, salary levels etc then we should be at our comfortable pension level even if nothing else was added which allows us to look at other areas.

My DH is working again after a 2 year career break and the plan is to rebuild the immediate current account savings/slush to 6 months outgoings and then focus on the mortgage. Our 1.99%  fixed rate ends beginning of Oct 23. The plan is to get mortgage to at least 180k and then look at whether to use a proportion of our long term savings to pay off a larger lump sum before going on a higher rate. Depending on the deals available on savings and mortgage rates we may also move to OPing more to reduce this quicker... we'll see though and I predict a lot of spreadsheeting in my life over the next 6 months.

Thanks for posing the question though Elmor as it spurred me on to review in more detail and take stock of how far we have come since putting plans on this thread when it first started.

powerspowers

powerspowers said:

AVC snapshot for the end of the year
start date - feb 2019
contributions £1650
plan value £2022 as of 29/12/21
22 years to go 🤨 

And for the end of 2022…
contributions £3554
plan value £3802
At least 21 years to go. 

Just keep plodding. With my higher contributions now it should be double by this time next year, still feels a long slog though 😬

Retireinten

rara32: current plan is take 

my DB at 60 as it provides me a bit of protection against actuarial reduction, but most importantly my DB at this age plus 2x state pensions gets us to a comfortable retirement income figure. This means any remaining DC funds will pay for some luxuries at SPA as opposed to it being a necessary addition to our retirement income. Leave my DB to 68 and I'll have to work longer to generate income I just don't need in my later years...erm, no thanks!

My dilemma is whether I take my DB at 57 instead of 60... I take a bigger actuarial hit but the potential for some very healthy inflation linked increases this year and next could give my DB enough of a boost to make this a more viable option.  

I'm naturally cautious, so aim is to fund much of our later years from guaranteed income streams but time it right so we don't work more years than we need to for a retirement income level we don't need.

rara32

@Retireinten it sounds like you are in a great position with a pretty much guaranteed plan for what you need at 60 already in the bag. Great too that future increases give you a choice between going earlier or having more at 60. It's a nice dilemma to have and one that I am hoping I get to share in the next 18 - 24 months 🙂

chile_paul2

chile_paul2 said:

Hi all, nice to find this thread with some other people heading towards FIRE and I like the idea of a safe space and a souding board to share progress and test out ideas.

I'm always quite self conscious about posting as I do appreciate I'm in a very fortunate position and there are many others on these boards and others that are struggling, especially in the current times - so I hope my post is taken in the right way. I always used to have my Dad to run ideas passed and to check I wasn't doing anything really crazy but he died last year and I do miss that sense check. I'm regularly asking myself what he would say but other friendly advice would be gratefully received.

Why am I investing? 

For freedom; to be able to do what I want without worrying about the financial consequences for me or my family. I've worked for large FTSE companies for the last 20ish years and have been lucky to have decent jobs and decent salaries - often with good and supportive bosses. However more and more (and especially following my Dad's death last year) I find myself questioning what's the point? What am I achieving, other than earning money? Is my life really only about making money or value for shareholders? In the last few years we've had several changes of CEO and senior leadership team with multiple reversals of direction and strategy, which just makes it worse as we repeat the same old arguments and decisions and don't materially move forward.

Whilst I think I will still work in some form when I've reached financial independence I'm seriously considering moving into the (significantly lower paid) charity or not for profit sector looking to use my skills to help fix some of the very serious challenges that we face as a society / planet.

I've previously considered going part time (and have previously posted on here to that effect) but in hindsight don't think that would remove my frustrations - equally I think it's very hard to do this effectively in the corporate sector without the work creeping into your days off.

How much do I think I'll need?

We don't consider that we have a particularly extravagant lifestyle - as a family of four (kids aged 6 and 10) we typically holiday in the UK and don't have any expensive hobbies - despite this we still somehow manage to spend on average £43k per annum, (that's including major capital purchases i.e. we had to have our boiler replaced this year)

On the basis of being financially independent if you have 25x your expenses saved, we would currently require an investment pot of £1,075,000 to draw on. Eek! The real picture is probably slightly better than that as once the kids move out expenses are likely to drop.

How am I going to get there? 

Having been bought up to save and invest from an early age (thanks again Dad!) and thanks to the advice from Martin L and people on these boards over the years we're in a good position.

My Financial Independence fund (net worth excluding equity) is just over £700k:
- I have a defined benefit (DB) pension worth circa £14k per annum payable from 65 (which I've valued using a CETV of £325k in the net worth calculation above)
- DC pensions in mine and DW's name of £133k
- S&S ISA's in both names of £237k
- Cash savings of £16k

Equity in our house (which I don't count in my FI fund) is £235k

How long do I have? 

That's a big question isn't it - how long do any of us have!

I'm currently 42. Based on my current saving rate I should hit my target FI fund in 5 years. If I jump ship earlier and move to a different role outside the corporate sector the magic of compounding should still work, but it would take closer to 8 years to hit my target.

Friendly thoughts and feedback welcome

6 months on, I thought I'd update this post and give a bit of an update.

From a financial perspective, the updated position is as follows:

- Mortgage, which I failed to mention last time is now £173k (down from £186k), fixed for 4 years at 1.25%
- DC Pensions are £120k (£84k) for myself and £17k (£10k) for DW
- DB pension unchanged should provide indexed income of £14k from age of 65
- S&S ISA's of £236k, flat since July despite investing additional £400 per month
- Cash savings of £20k
- Savings for when children go to university etc. £37k (£27k)

From a work perspective the situation at work continues to frustrate - in addition to the points I made originally we're now in a significant industrial relations dispute which is risking the future survival of the company. As a result the environment is pretty toxic and we can't get any major decisions made whilst the expectations on us to continue to deliver become more and more unreasonable by the week.

I had been offered a job in the charity sector at the back end of last year but ended up turning it down - it would have been an amazig opportunity working for an international charity, but it was only a 1 year contract, it was a significant pay cut and they wanted me to cover the costs for travelling to London once a fortnight - ultimately it was a step too far at a time when the cost of living rises were at their worst.

However I'm now actively looking again, both corporate, not for profit and charity sector - but any new role will need to be dependant on more flexible working practices and either part time or compressed hours. I'll also be looking to negotiate a substantial break between the end of my notice period and starting any new role. I'm overdue a proper break away from work!

Retireinten

Chile_Paul2

I feel for you on the work front, I know what it's like to work in a toxic environment where in-fighting is rife and demands are off the charts unreasonable. Although I wouldn't wish my work stresses on anyone else, I think it helps to know you're not the only one suffering at work..hence my post.

I moved jobs last year to escape such a toxic environment... but I took the quick way out, not the most permanent (I moved to a subsidiary company of the company I was working for). Needless to say, I am being pulled back into the parent company politics and drama.  

I have just over five years left to work if I continue at this level. But now I'm back to considering my options. I could look for another job or, if things get really bad, just walk away and spend some time looking for something else. That job could be full-time, part-time, low paid, permanent or temporary... my current levels of FI give me the option to shift down a few gears, but I would need to work a few more years to balance things out a bit.

My subsidiary company is being insourced so I will end up officially working for my old employer in a few months...my current job will not exist in say another 12 months so there is scope for me to maneuver myself into a redundancy situation also. I'm aiming to stick it out at least to see if this is feasible (I'm hoping HR policy will work in my favour). I'm not worth a fortune but redundancy could shave a year off the five years I still have left to work).

In terms of your retirement planning your figures sound similar to ours although I think we could manage on a bit less than you annually (but with a decent lump sum for the occasional big purchase). I have a DB worth £18k at 60 or £14k at 57 and still growing. We have much less in ISAs than you but approx £100k more in DC pensions. We're also mortgage free with good scope to downsize though not banking on this. But we are a few years older than you...I'm 48 in March, hubby has just turned 47.  

If you haven't already, I would plot out your retirement income per annum from your target retirement date to see if your target retirement pot gets you what you need without running out of money. I do this in todays money because I understand it better that way.

chile_paul2

Retireinten said:

Chile_Paul2

I feel for you on the work front, I know what it's like to work in a toxic environment where in-fighting is rife and demands are off the charts unreasonable. Although I wouldn't wish my work stresses on anyone else, I think it helps to know you're not the only one suffering at work..hence my post.

Thanks for the moral support, it's appreciated

In terms of your retirement planning your figures sound similar to ours although I think we could manage on a bit less than you annually (but with a decent lump sum for the occasional big purchase). I have a DB worth £18k at 60 or £14k at 57 and still growing. We have much less in ISAs than you but approx £100k more in DC pensions. We're also mortgage free with good scope to downsize though not banking on this. But we are a few years older than you...I'm 48 in March, hubby has just turned 47.  

If you haven't already, I would plot out your retirement income per annum from your target retirement date to see if your target retirement pot gets you what you need without running out of money. I do this in todays money because I understand it better that way.

We've done some substantial modelling on this after it was suggested after my earlier post - especially given the DB income in retirement it does seem to be a more sensible way to look at it rather than calculating the total pot size and then looking at safe withdrawal rates.

Essentially I've taken my current level of expenditure then modelled for inflation, but with step downs in expenditure at major life events (DD1 and DD2 leaving home, mortgage being paid off, state pension and DB pension kicking in). I then subtract that annual expenditure from my overall FIRE pot which I've modelled growing at an assumed rate of growth.

On this model if I was to retire now, I would have depleted our funds before DD1 leaves home, so that's obviously not a go-er. The sweet spot for my FIRE seems to be between 46 and 47. At age 46 my model predicts I would run out of money by my 80th birthday. If I leave it until 47 to retire I hit exponential growth and my kids will inherit a lot when I eventually pop my clogs! Of course all of this is based on some very subjective assumptions of inflation rate and growth rates of investments, so lots of uncertainties.

What I've not yet worked out is whether I have the right amounts in the different funding pots split between my DC pensions and my S&S ISA's i.e. can I fund the 10 year gap from RE at 47 through to being able to access pensions at (probably) 57.