Early-retirement wannabe

settingsun wrote: »

I am not aware of the EU health cover at Reunion.

Wikip: "Reunion is one of the overseas departments of France. Like the other four overseas departments, it is also one of the 18 regions of France, with the modified status of overseas regions, and an integral part of the Republic with the same status as those situated on the European mainland. Reunion is an outermost region of the European Union and, as an overseas department of France, a part of the Eurozone." You could also think of the overseas parts of Spain, Portugal, Netherlands ... I don't know which count as fully part of the home nation, though obviously Madeira and The Canaries do.

Why aren't you retired already given that your potential income is far above your upper retirement target?

settingsun wrote: »

BTL home: £650k, mort is 360k, this was my previous family home where we lived for 10 years and we rented it out for 10 years. £1500 income per month

That's just 5% yield gross on the £360k, even worse on the whole £650k. If you're going to do BTL you need to be dumping this one and getting a bigger portfolio of cheaper properties with higher yields. With the leverage from mortgages you should be able to do way better than you are on this.

A less hassle approach would be looking into P2P lending, where rates of 10%+ are quite readily available. On the whole £650k you should be able to get an income of around £65k a year, £5,416 a month even after bad debt, assuming you have a mixture that includes a fair bit at 12% and up. Of course you don't have the whole £650k if you sell because you have to clear the mortgage, this para is just to compare what you're getting with what can be had elsewhere for the same sum.

Also worth looking at VCTs with say the Albion VCT paying 10% tax free with 30% of the purchase price refunded by HMRC, capped at income tax actually paid during the year, has to be repaid if sell within five years, 100% asset-backed. Or their Crown Place VCT paying about 11.1%, not fully asset backed. Not necessarily best VCTs, good if prioritising income and security.

settingsun wrote: »

Home: £450k value, interest only mortgage £250k outstanding

Good. Since you can make more from investments it makes sense to keep this.

If you continue to do BTL you should know that you can borrow for BTL by increasing this mortgage and reducing the BTL mortgage. The BTL business can pay the interest on the increase, talk with your accountant. Useful because BTL mortgages tend to be more costly than residential. The property used as security doesn't matter, the purpose of the borrowing does.

settingsun wrote: »

Savings: £125k, Isas and cash

I hope you're not using just current accounts and savings accounts for a lot of that, given what you can get with P2P these days.

settingsun wrote: »

Pension Pot : £475k (mostly mine, about 35k OH), expect to add £30k a year while working . Target is to get this pot to £600k

Why the £600k target? Not that it's bad, I'm just wondering how you got to that number.

settingsun wrote: »

Current Age 53 and a half (both of us), want to retire by 55 (18 months time) or 56 (in 30 months), OH will carry on till 60 earning about 18k pa before tax
...Final Salary pension of about 7k pa from age 60
State pension due at 67
Need about £40 -£45k in retirement

So assuming you sell the BTL and when you're 55 you have:

£475k + (650k-360k) + £125k = £890k.

Using the P2P 10% that's £89k a year of income. Using a common drawdown method that's saying 6% or so it's £53.4k a year. Using the 4% rule instead it's £35.6k. With another 15k or so on top from one state pension and work defined benefit pension to take even the 4% rule to £50.6k a year. I assume another 8k or so from her state pension? Find out for both of you.

Not using P2P for it all, of course, it looks as though using the 6% drawdown method you have a sustainable income of at least £68.4k a year and as though using some P2P you could start taking that today.

settingsun wrote: »

1. Do I wait till 56 and keep going for an extra year, or go in about 18 months? I am thinking i need to get the Pension Pot to 600k, so need to do the extra year. My spreadsheets and firecalc tell me i am fine, but in some scenarios I run out of money in my 80's (eg many years of high inflation plus low return on investment).

Retire already. You can clearly afford it with large safety margins when you do things like using P2P with higher returns and lower volatility plus adding small cap stocks to the mix.

Do ensure that you add your state pensions and DB to the Firecalc calculations starting at the appropriate times, guaranteed income like that significantly helps to reduce volatility and failure or reduce income level. Firecalc doesn't support the Guyton and Klinger drawdown rules that I suggest you use, modified to keep one year of planned spending from investments in cash because that improves the safe withdrawal rate by about 0.5% or decreases failure rates. You appear set to have fully 51% of your maximum specified retirement income coming from state pensions and final salary pension, which hugely reduces your worst case potential.

settingsun wrote: »

2.What do I do with the BTL, keep it going, or sell? If I sell do I use the spare money to pay my home mortgage, or do i keep my own home mortgage going may be covert it to a repayment . Thinking I keep the money as a contingency for a few years.

Why throw money away by paying of your home mortgage when you can get more from investments? Pointless, keep it as long as the lender will allow and boost your investments.

BTL is more hassle and you're clearly not running it as a proper business at the moment because you're not getting anywhere close to what's achievable. Ditch it and invest seems to better suit your desires. If not, diversify into better returning properties in cheaper areas.

settingsun wrote: »

3. The Florida home is a drain on finances, we struggle to make it work. We like having it and going over 2 or 3 times a year and when retired want to have extended 2 month stays.

It's an affordable luxury given your income potential.

settingsun wrote: »

4. How do I fund the period when i am retired and wife is working (56 to 60).

Use P2P for a fair bit and deliberately drain capital. Your wife clearly doesn't need to work if she doesn't want to. Up to you two to decide what to do. Maybe she wants to work.

settingsun wrote: »

Any thoughts on any of this from you wise folk would be good!

Learn about P2P, get invested and retire ASAP. You have the money, you aren't using it particularly efficiently, your procrastination seems pointless, get on with it and use some of the extra time to up your returns.

Wow!

Thanks Jamesd, you have given me so much to think about. I was hoping you would find time to comment based on your previous posts on this thread over the years.

I think I was just impressed that the house of the BTL had gone up from £300 to £650 that I ignored the yield and what else I could do with the capital.

I will go through and think about what you said on each item over the week.

One thing that puts me off BTL is the difficulty in finding good tenants. If you have them already, that might alter the balance of advantage. However, people have been bragging so loudly and so long about the advantages of BTL that the Chancellor has it firmly in his sights. Even good tenants can't change that.

But: the new penalties for BTL landlords are going to hit those who pay higher rate tax and who have a mortgage on the BTL property. So one approach would be to reduce that BTL mortgage as quickly as conveniently possible. For example, sell or mortgage the Florida property, increase the mortgage on the owner-occupied, and use the capital released to reduce that BTL mortgage. Finally wipe it out using the TFLS from your pension in 18 months. Whether you really want such an upheaval just to retain good tenants is for you to judge.

Alternatively, swap the role of the two houses and wipe out the smaller mortgage. If the bigger mortgage is swapped to owner-occupied terms it should become cheaper.

Or even aim for you both being basic rate taxpayers in 18 months time, so that much of the penalising of BTL landlords will pass you by anyway. Still, you have an awfully large proportion of your wealth in residential property. Is that wise?