Can I retire now? (age 40)

Ibrahim5

Marcon said:

If you are wondering if your assets are likely to be sufficient to let you retire at 40, why not take some proper (paid for) financial advice? Nobody here has the full picture of your situation, attitude to risk etc.

You definitely won't have enough if you pay financial advisors. Would lose thousands of £. LOL.

ent_moot

You don't reach retirement at age 40 by wasting money on financial advisors, trust me.

>Neither of those will be a constant, you need to understand the effects of sequence of returns and sequence of inflation.  Modelling constant values for investment returns and inflation will give you a much more optimistic picture than the likely reality.

Interesting hypothesis, but also incorrect.  

I've modelled £600k with 32k annual drawdowns , on a monthly time-step, with constant rates of 5% interest and 2% inflation, versus fluctuating rates.

As one would intuitively expect, fluctuating rates are as likely to be beneficial as detrimental. 

I published the simulation here, if you want to play with it yourself. https://ent-moot.github.io/ 

So constant returns are not inherently "more optimistic" than fluctuating returns.  Though it would be true to say that the worst-case scenario for fluctuating returns is worse.


 

ent_moot

QrizB said:

coyrls said:

ent_moot said:

>Is that 5% real (above inflation) or nominal?

I assume 5% nominal.  I model for inflation by increasing my outgoings by 2% a year.

Neither of those will be a constant, you need to understand the effects of sequence of returns and sequence of inflation.  Modelling constant values for investment returns and inflation will give you a much more optimistic picture than the likely reality.

For the benefit of the OP and the interest of everyone else, I plugged his numbers into cFIREsim. It uses US numbers (which are typically more optimistic than UK ones). Links take you to the models.

If £900k (savings plus pension less house move) were accessible from day 1, we see 100% success to age 100 and no failures.

With £500k (savings, no house move) accessible, we see 80% success in getting to 2053 without running out of money.

With £300k (savings less house move) accessible, we see 18% success.

(If OP were 50, those 80% and 18% become 100% and 96% respectively.)

Excellent, thank you. This is really interesting. 

Storcko14

Aylesbury_Duck said:

ent_moot said:

>2) Your child is -  say 10 ?    If university beckons  still on your hands for another 12 years - uni cost £20k/year

True, I've not factored this in. I imagine she'll get a student loan to cover tuition fees, and then accommodation would be <10k? 

Highly unlikely unless she lives at home.  Even cheaper student accommodation is around £160 p.w. now, for 40 weeks.  Much of it is over £200 p.w.  in eight years' time it's going to be higher still and you haven't even considered her food and travel costs.  You can't assume your savings will appreciate at 5% p.a. and expect costs like student accommodation to get cheaper in real terms.

I think your plan is far too marginal.  You need absolutely everything to come in on its upside to get close to it being viable.  Even relatively modest and foreseeable costs like a new boiler or needing to replace a car sooner than expected puts a dent in your plans, whereas a much more resilient plan could absorb them easily.

Tend to agree about child costs.  I thought I had it cash-flowed with a large safety margin but ended up slightly short.  Even aside from Uni costs (and there will be unexpecteds along the way), not all take flight immediately upon graduation.  It's a tough jobs market just now - and arguably for the foreseeable.  Ours (arts grad with a first from a top uni) had a couple of years back at home travelling and working in cafes etc before getting a grad level job with commensurate salary to enable moving out.  

Cobbler_tone

It’s not really ‘retirement’ at 40. You’d hope (health permitting) you have another 30 years to pick up paid work should you need/want to. Jack it in and see how you get on.

Notepad_Phil

ent_moot said:

...I've modelled £600k with 32k annual drawdowns , on a monthly time-step, with constant rates of 5% interest and 2% inflation, versus fluctuating rates....

I'm not sure if I've missed something but when I go to that link and choose the Random Yearly option then you seem to have chosen to fluctuate between 0 and 30 and to average 5% over the long term. Hopefully we might get 5% over the long term but changing your other values to choose values between -30 and 30 gives a much less rosy picture. 

ent_moot said:

...As one would intuitively expect, fluctuating rates are as likely to be beneficial as detrimental. ...

On average yes, but a couple of early negative values can really cause issues. After changing the return values from -30 to 30 I only clicked the randomize button a few times before it started to run out of money and only a few more clicks before it ran out of money in your 15th year.

QrizB

Aylesbury_Duck said:

ent_moot said:

True, I've not factored this in. I imagine she'll get a student loan to cover tuition fees, and then accommodation would be <10k? 

Highly unlikely unless she lives at home.  Even cheaper student accommodation is around £160 p.w. now, for 40 weeks.  Much of it is over £200 p.w.

Not wishing to get bogged down in details, but I've got two spawn at university right now.

One's in university-owned accommodation in south Wales and is paying £135 a week including bills, which is about £5400 for 40weeks. The other is in private accommodation in the west Midlands and is paying £75 a week plus bills, which comes to about £5k for 52 weeks.

ent_moot

Notepad_Phil said:

ent_moot said:

...I've modelled £600k with 32k annual drawdowns , on a monthly time-step, with constant rates of 5% interest and 2% inflation, versus fluctuating rates....

I'm not sure if I've missed something but when I go to that link and choose the Random Yearly option then you seem to have chosen to fluctuate between 0 and 30 and to average 5% over the long term. Hopefully we might get 5% over the long term but changing your other values to choose values between -30 and 30 gives a much less rosy picture. 

ent_moot said:

...As one would intuitively expect, fluctuating rates are as likely to be beneficial as detrimental. ...

On average yes, but a couple of early negative values can really cause issues. After changing the return values from -30 to 30 I only clicked the randomize button a few times before it started to run out of money and only a few more clicks before it ran out of money in your 15th year.

You may have hit a great depression. Unlucky. 

Aylesbury_Duck

QrizB said:

Aylesbury_Duck said:

ent_moot said:

True, I've not factored this in. I imagine she'll get a student loan to cover tuition fees, and then accommodation would be <10k? 

Highly unlikely unless she lives at home.  Even cheaper student accommodation is around £160 p.w. now, for 40 weeks.  Much of it is over £200 p.w.

Not wishing to get bogged down in details, but I've got two spawn at university right now.

One's in university-owned accommodation in south Wales and is paying £135 a week including bills, which is about £5400 for 40weeks. The other is in private accommodation in the west Midlands and is paying £75 a week plus bills, which comes to about £5k for 52 weeks.

They're very reasonable rates, and appear to outliers .  The current mean across England is £216 p.w. with typical contracts being 44 weeks.  That's skewed by London universities, some of which have very expensive luxury accommodation usually taken up by international students, so the modal rate is probably more appropriate, and that is £175-205 per week.

OP's child would have to restrict her choice of university to keep her annual living costs under £10k.

noitsnotme

ent_moot said:

I'm planning to retire in the next few months, and wanted to sanity-check that it sounds reasonable, given my situation: 

Equity: 
- house worth ~500k 
- ISA & cash, and shares  ~500k
- private pension ~600k (not accessible for 17 years)
- state pension (not accessible for 28 years)

(not guaranteed)
- mum owes me 50k
- inheritance of ~60k 
- wife might work part-time for ~min wage for a few years

Debt:
- nothing, but we are planning to buy a house worth ~700k - so would spend £200k from ISA & cash to close the game between the value of our current house.

Lifestyle: 
- We live a relatively frugal lifestyle. We have 1 child.  We plan to live on a little below the average UK household income , at about 32k (obviously will adjust for inflation in the future).  I'm assuming this should be comfortable since we have no mortgage to pay.

I have modelled it all in a very sophisticated spreadsheet, but would appreciate someone sanity checking that I've not 

Thanks in advance,

I’m 10 years older and have more in the war chest but still don’t think I’m ready to push the retirement button!  I’d probably be ok but I’m repeatedly suffering from “1 more year” syndrome.

If you really hate working, even part time (I run my own business and have cut hours to the equivalent of 2 to 3 days a week), then just give freedom a go.  You’re young enough that you could get another job if it doesn’t work out.

I get proper planning is prudent but looking back with a few regrets is a b!tch.