Donate to Remove ads

Got a credit card? use our Credit Card & Finance Calculators

Thanks to johnstevens77,Bhoddhisatva,scotia,Anonymous,Cornytiv34, for Donating to support the site

FIRE

Including Financial Independence and Retiring Early (FIRE)
StepOne
Lemon Slice
Posts: 668
Joined: November 4th, 2016, 9:17 am
Has thanked: 195 times
Been thanked: 185 times

Re: FIRE

#10345

Postby StepOne » November 30th, 2016, 12:02 pm

swill453 wrote:
scotview wrote:4 We had thought my wife would receive her State Pension at 60, but she has missed the cut-off date and will not receive her pension until she is 66.

As I understand it, it wasn't a simple "cut-off date", but actually spread over 4 years, wasn't it?

Scott.


And it was announced in 1995, so there was plenty of warning.

swill453
Lemon Half
Posts: 7962
Joined: November 4th, 2016, 6:11 pm
Has thanked: 984 times
Been thanked: 3643 times

Re: FIRE

#10375

Postby swill453 » November 30th, 2016, 12:42 pm

StepOne wrote:And it was announced in 1995, so there was plenty of warning.

Going off-topic a bit, I do have some sympathy for those who didn't hear the "warning". Many people are not financially literate, don't read the press, and don't have (relevant) conversations with those who are/do.

So for Doris, born in, say, 1954, sitting comfortably in her job expecting to get her State Pension in 2014, when exactly would she have been directly told that she wasn't going to get it till 2019 or 2020?

Scott.

gadgetmind
Lemon Pip
Posts: 91
Joined: November 25th, 2016, 10:30 am
Has thanked: 3 times
Been thanked: 2 times

Re: FIRE

#10735

Postby gadgetmind » December 1st, 2016, 10:16 am

We're hoping to retire in 2018 when we'll both be 55.

We'd like an income of £60kpa after all taxes but could easily get by on less. It might mean downsizing though as while we're mortgage free(1), our current pile consumes about £7kpa in rates+utilities+insurance and repairs etc. probably add another £5k pa.

We have no DB pensions (2) but should both get full single tier SP in 2030 (my wife may need to do some Class 3). We're therefore reliant on ISAs, DC pensions, and unwrapped investments. I'm hoping that this pot at retirement will be worth about £1.6m - it's close to that now, and we're still accumulating, but you know how the markets can be.

My spreadsheet (which models for tax) shows that we'd need to withdraw 4.3% pa between 2018 and 2030 and then we could drop to 3.3% assuming the pot hasn't been depleted too much by the 4.3% withdrawal. This isn't anything like as safe as I'd like, but we could spend less, some share options could do better than expected, another company that I'm investing into could take off, I could probably pull in £1kpcm by commercialising some of what are currently hobbies, and there is always the downsize option. House is worth around £1m and we could pick up (or build!) something for £500k if we're happy to be further away from the city centre.

Overall, things are going to plan, but only because we've been pouring money into pensions and ISAs since the late 80s. Things would have been easier if my wife hadn't taken a 20 year career break (and she's part time on close to minimum wage now) but this made others things easier, so no regrets there.

(1) - We're actually not as we borrowed against it so we could loan daughter money to buy a house, but the money she pays us covers interest and a bit, plus she can borrow in her name once she's working.
(2) - Again, not strictly true, but wife's LGPS will come to about £750pa if that and won't come along until 2030.

thebarns
2 Lemon pips
Posts: 220
Joined: November 4th, 2016, 12:56 pm
Been thanked: 126 times

Re: FIRE

#10764

Postby thebarns » December 1st, 2016, 11:11 am

Gadgetmind,

That all looks very good, well done.

I note that you lent money to your daughter to help her buy a house and effectively she covers your interest, maybe not the capital element.

I had also thought about this for a similar situation that will arise but thought there may be tax issues with the interest you receive from the relative.

gadgetmind
Lemon Pip
Posts: 91
Joined: November 25th, 2016, 10:30 am
Has thanked: 3 times
Been thanked: 2 times

Re: FIRE

#10775

Postby gadgetmind » December 1st, 2016, 11:29 am

thebarns wrote:Gadgetmind,
I note that you lent money to your daughter to help her buy a house and effectively she covers your interest, maybe not the capital element.


She takes in lodgers (and her income is within "Rent a Room" allowance) and can therefore pay off some capital. However, that's not the intention currently as she's a student, but should soon qualify as a Doctor. Once she does, she should be able to get a mortgage in her name as outstanding amount should be within 3x JD's income, and LTV should be <70%, though switching to a repayment mortgage may be a bit much for her! Lots of options.

I had also thought about this for a similar situation that will arise but thought there may be tax issues with the interest you receive from the relative.


Loan is done via a Promissory Note in my wife's name, and this extra income on top of her part time work doesn't push her beyond her personal allowance. There may be ways to avoid tax for those earning more but it wasn't something we had to investigate.

thebarns
2 Lemon pips
Posts: 220
Joined: November 4th, 2016, 12:56 pm
Been thanked: 126 times

Re: FIRE

#10821

Postby thebarns » December 1st, 2016, 1:29 pm

Gadgetmind,

Thanks for that, I follow now, a judicious and quite proper use of the personal allowance to avoid the potential income tax issue.

I am aware that there are income and inheritance tax issues involved in lending, interest free or not, or indeed gifting sums of money to offspring to assist in a house purchase or indeed for any other purpose and something i will need to examine in greater depth as the time approaches.

For those with children, it can play a part in FIRE, although your daughter looks as though she will be carving out an admirable career herself and one in which she should not need as much medium to long term financial parental support as some others.

Hariseldon58
Lemon Slice
Posts: 834
Joined: November 4th, 2016, 9:42 pm
Has thanked: 124 times
Been thanked: 513 times

Re: FIRE

#11815

Postby Hariseldon58 » December 4th, 2016, 5:45 pm

Very interesting thread, lots of good info from personal experiences. i thought I would add a few more ! 9 years in I have changed my approach which was more akin to those who are still planning but I found whilst the earlier methods worked, they can evolve.

I went FIRE in late 2007 with a largely Equity portfolio and no significant pensions to come. I was working on living off the natural yield , circa 4% of a largely Equity Income Portfolio with a large dollop of International Investment trusts and HYP individual equities.

Talk about sequence of returns risks ! I was mentally prepared for a 50% drop in the markets at some point in the future, I had seen heavy declines in 2000-2003 but I was pretty surprised to say the least that such a situation should occur almost immediately.

I chose to dump the HYP in the spring of 2008 and this proved to be beneficial. ( I did a little analysis earlier this year to see what would have happened if I had stuck with the portfolio as of 2008 to 2016 against what I had actually done)

Since then I have moved to a more passive approach but still largely equities.

I now ignore the natural yield ( it is just over 2%) I concentrate on overall returns and live off what ever cash is in the bank account, it is topped up by a mixture of investment income, some part time work , asset sales occasionally by top slicing prior to reinvestment. I find this a very sensible method, it suits me personally as I fairly relaxed about money and risk, others clearly prefer the structure of a reliable income flow.

I now find myself with nearly twice as much capital in real terms as when I retired, despite living comfortably and travelling. Total return does matter...I am very tolerant of large movements in the value of a portfolio and have significant confidence that it will come right ( this may be misguided but its a much more pleasant way to live than to be worried about it ! )

I am now 58 but see little virtue in the eternity portfolio, its likely that I will leave a significant sum to family but they should not rely on it and it may not be really beneficial to them as regards quality of life. The eternity portfolio is likely to be too cautious and lower the standard of living until you realise its too late to spend it all.

The approach of the poster with expertise in inflation and targeting a1.5% drawdown is I think too close to his specialist subject and unduly pessimistic, experience so far is that spending is broadly similar to previous years, some major expenditure on travelling is now much cheaper by using 'last minute deals' due to changes of practice by the companies I use and having the freedom to travel whenever, is great.

I like Inv35t's idea of the portfolio being considered in liability matching terms i.e. I need £X for 10 years then £Y for 25 years, one could stash that away in a low risk investment pot and use the balance to fund growth in a riskier manner. Not that I have done that but feel I could see a 50% fall in capital and still manage, so why worry ?

Working part time is good, the financial remuneration is not particularly relevant but it provides good social benefits and some structure to one's days.

Health is taken for granted and recent experience has left us unable to travel for a year and its absence is painful.

From an investment perspective the low cost, global passive approach at very low cost is simple and effective, there are still opportunities to profit occasionally with contrarian moves and this has proved helpful to the overall portfolio growth.

mickeypops
2 Lemon pips
Posts: 200
Joined: November 4th, 2016, 2:10 pm
Has thanked: 129 times
Been thanked: 220 times

Re: FIRE

#12779

Postby mickeypops » December 6th, 2016, 9:46 pm

Interesting stuff. Me and Mrs MP are about 18 months away from our intended FIRE date, at which point I'll be 63 and she 60. Like a lot of us I guess we have multiple assets. The house is mortgage free, we are empty nesters and could downsize if we wished. We both have DB pensions which will readily cover all basic costs. We have state pensions to come and have saved up a cash lump sum to pay ourselves the equivalent until it arrives. Our DC and SIPP pensions are now invested in income producing ITs, currently yielding about 4.5%, and this is our "fun" money. I know that this yield is on the highish side, but if we leave the capital intact, as is the plan, I hope we'll be OK.

gadgetmind
Lemon Pip
Posts: 91
Joined: November 25th, 2016, 10:30 am
Has thanked: 3 times
Been thanked: 2 times

Re: FIRE

#12951

Postby gadgetmind » December 7th, 2016, 12:30 pm

Wow, thanks everyone, particularly 1nv35t . I do know that you should be heavier in bonds just before - and for several years after - retirement, but hadn't really started to think through how to do it and whether to use index linkers. Waving goodbye to 10% of the money in return for getting security and linking on the rest feels wrong in my gut but my head is telling me to look deeper into it.

One small detail of course is that I'll be paying £6.8k pa in basic rate tax on SIPP drawdowns, and had planned to leave touching the ISAs until all the unwrapped (mainly PCLS) had gone. We'll only have enough unwrapped for half of that gilt ladder, but I guess the rest can be in the SIPP as money is fungible and I'm accepting the tax hit will be there until I pop my clogs.

tjh290633
Lemon Half
Posts: 8207
Joined: November 4th, 2016, 11:20 am
Has thanked: 913 times
Been thanked: 4096 times

Re: FIRE

#13041

Postby tjh290633 » December 7th, 2016, 5:25 pm

Just one word of caution. I have looked at theoretical gilt ladders and found them to be a recipe for losing money at this time.

Comments have been made that I needed to be higher up the yield curve, but they don't tell you that, as far as I can see.

TJH

Radiccio
Posts: 7
Joined: December 8th, 2016, 5:44 pm

Re: FIRE

#13620

Postby Radiccio » December 9th, 2016, 11:42 am

Wow - arrived here late as I had slowed down my visits to the old place, but a thread that resonates with a lot of issues here...

I'm in my late forties and have been in IT since university. Not quite as techie as some here, but gradually moved away from the coal face into consultancy and now do contract project management work.

There is a niche in my area for people who are presentable, can explain things clearly and who can get things done. There will always be cheaper people but there's often a big gulf between IT and its customers (or indeed between IT and common sense) and there will always be a demand for people to bridge this gap.

I started reading the fool about eight years ago and FI is still five to eight years away. Like others, after fiddling with HYP or individual shares, I've settled on a basket of ETF's and trackers which seems to be plodding nicely (although I'm not sure of the bonds any more - see my other posts).

I see the RE part of the equation as having the option not to work: long holidays, going abroad over the winter maybe but if something interesting comes up, then why not?

One area I am interested in is reducing my working hours. A four day week would give me some of the benefits of RE already and while it would hit my savings rate, I would happily wait a bit longer for 'full' RE...

gadgetmind
Lemon Pip
Posts: 91
Joined: November 25th, 2016, 10:30 am
Has thanked: 3 times
Been thanked: 2 times

Re: FIRE

#13645

Postby gadgetmind » December 9th, 2016, 12:51 pm

Dropping to a four day week was a no brainer for me. It took me out of personal allowance claw back and also pension taper so saved £30kpa in tax while letting me put more into pension. I now don't work Mondays. Having 20% fewer working days is good, but having 50% longer weekends even better!

Gfplux
Posts: 24
Joined: November 13th, 2016, 7:36 pm
Been thanked: 1 time

Re: FIRE

#15246

Postby Gfplux » December 15th, 2016, 10:29 am

TheRIT wrote:
kodokan wrote:Introducing myself as part of the FIRE camp.

I was a longtime Fool poster through the 2000s, but drifted away in recent years as we moved to the US so the UK financial environment became less relevant to me. A few years ago, I came across the (more active in the US) concept of FiRE, thanks to Jacob Lund Fisker's book and the blogging efforts of MMM and others.

Hubby and I are in our mid-40s so are never going to quite hit the 'early' part of ER, but we're aiming for a finish to paid work in about 7 years, to coincide with our youngest finishing schooling. Our financial planning is a little more complex than usual, as it incorporates:
- a number of defined benefit/ contribution pensions from the UK
- state pensions/ Social Security from the UK, the US and Switzerland (we lived there for a few years before moving to the US)
- US 401k tax-deferred, age-locked pension-style accounts
- taxable assets invested in US mutual funds

These varying income streams will kick in at different points between ages 55-70, in three different currencies, subject to a variety of tax regimes and cross-border agreements. I have a huge, lovely spreadsheet covering now until I'm 100 (but even the best spreadsheeting doesn't allow for things like Brexit suddenly reducing my projected UK income by 15-20% overnight).

We are also not entirely sure where we might live in retirement, once we are no longer tied to a job-based geographical location.

Consequently, I feel I have a foot in both UK and US retirement planning camps - I lurk and semi-post on a few US ones, but am glad to find this board and hopefully be part of the discussions here too.

Clearly a very well travelled couple. I know you say you don't know where you'll end up in FIRE but would be interested to know if you have a shortlist?

I ask as I'm at a critical point where where I'm between FI and FIRE and it's now time to pick our next 'home' as we no longer want to be in the South East of England. For many years we'd targeted the Med with the shortlist down to Cyprus (Paphos area), Spain (Marbella area) and Malta. We'd then been working our way to a final choice with selected visits. Then Brexit appeared and brought into question healthcare arrangements at State Pension age, uplifting of State Pensions, simply getting a visa and a big £ devaluation making a home purchase all of a sudden a lot more expensive. Since then we've investigated Herefordshire and loved it. So right now the world is about to become our oyster and we're a bit deer in headlights.


We are far, far down the road as I have been (ER) retired for 20 years however living in Luxembourg became slightly less relaxing after Brexit. We live in interesting times.

Gfplux
Posts: 24
Joined: November 13th, 2016, 7:36 pm
Been thanked: 1 time

Re: FIRE

#15248

Postby Gfplux » December 15th, 2016, 10:35 am

TopOnePercent wrote:
thebarns wrote:£5 million for FIRE and pay the children''s schooling/uni !

For 60k pa.

Strikes me as an enormous sum, well beyond the attainment of your average or indeed considerably above average investor and would put off the vast majority from ever considering FIRE !
...
I am sure many at or contemplating FIRE will be looking at considerably smaller capital sums.



Out of interest, would any posters close to or post FIRE care to divulge the minimum capital sum they'd consider necessary?


I will say it can be less than you think.

Gfplux
Posts: 24
Joined: November 13th, 2016, 7:36 pm
Been thanked: 1 time

Re: FIRE

#15252

Postby Gfplux » December 15th, 2016, 10:44 am

funduffer wrote:Thread has gone a bit quiet, but I thought I would add my experience of FIRE.

I FIRE'd at 58, which is not that young, but I would still class as retiring early. I am now 61, and live off a DB pension and my investments (mainly dividend-paying shares and IT's, mainly in ISA's). However, I thought I would mention a few non-financial aspects of FIRE:

1. Get social. Unless you have a very active social life already, you will find you miss the day-to-day office banter with work colleagues. Go and find some clubs/organisations/voluntary groups to join for the social interaction. If they are during the working week, you will find you are amongst the youngest in these groups, so be prepared to interact socially with people 10 or 20 years older than yourself. I have joined a male voice choir, and have made many new friends from this.

2. Keep active. You should have more time, so use some of it to get fitter and healthier. I now walk to many places I used to drive to, and also cycle and swim. I have lost a fair amount of weight since retiring and feel much healthier than when I worked (which was basically a sedentary job in an office).

3. Be intellectually challenged. Keep your brain active, by taking part in something that stretches your mind. This might be further education, or some club with an intellectual challange - eg discussion groups. I joined a local discussion forum, and a medical research committee, from which I have learned a lot and kept my brain active.

4. Be worthwhile. Do something to maintain/gain self-esteem, which is all part of your overall personal well-being. Voluntary work is the obvious thing here - I volunteered for the local Air Ambulance charity as a speaker, which took me to all sorts of places, and made me feel I was still being useful to society.

5. See the world. If you can afford it, go and see the world, or the country, or your local region. Do it before you get too old. Start with long haul, as your horizons will reduce as you age. I have identified about 10 places I want to visit before I reach 70.

6. Stay solvent. The biggest thing approaching FIRE is to understand what you will spend, and therefore what income you will need. I under-estimated how much cheaper it is to live after FIRE, and have generally been too cautious in my spending. I hadn't quite realised how much tax, NI and work expenses were taking from my income when I worked. Also, after FIRE,you have more time to scrutinise what you spend, and I have found I have made very large savings in what I spend simply by finding bargains, changing bank accounts, switching energy suppliers and the like. I have been so successful, I am now struggling to spend up each month without generating new savings that I do not really need. The change in mindset from saving/investing as much as possible in achieving FIRE, to spending to enhance your quality of life has taken me some time to achieve.

Overall, enjoy FIRE - I do.

FD


Excellent post, having been ER for 20 years I could have almost written the same post. ER is not ALL about money.

Gfplux
Posts: 24
Joined: November 13th, 2016, 7:36 pm
Been thanked: 1 time

Re: FIRE

#15255

Postby Gfplux » December 15th, 2016, 10:52 am

TahiPanas wrote:
TopOnePercent wrote:Perhaps I might suggest speaking to a good tax accountant? That you are relocating to the UK does not necessarily require that your assets do the same, and repatriating only what you require to spend may allow the remaining income to legally find a tax free home on some shady island.

TopOnePercent,

I will do so, thanks. However, my understanding is that UK residents are liable for their worldwide income. I have read nothing so far over the years that suggests there are any, hrmmmm...legal, loopholes. What features were you thinking of?



I am resident in Luxembourg and pay my taxes here (not much different to the UK)
To become Tax resident in another country is quite easy. You have to persuade HMRC that you truly live in your adopted country. To ensure domicile (which might be important) you would also have to cut ties to the UK which might mean no longer owning property there.

dspp
Lemon Half
Posts: 5884
Joined: November 4th, 2016, 10:53 am
Has thanked: 5825 times
Been thanked: 2127 times

Re: FIRE

#15294

Postby dspp » December 15th, 2016, 11:45 am

TopOnePercent wrote:
thebarns wrote:Out of interest, would any posters close to or post FIRE care to divulge the minimum capital sum they'd consider necessary?
I will say it can be less than you think.

If you look at my post in this thread on 10 Nov 2016 viewtopic.php?f=30&t=99&start=60#p3262 you can see that I posited a level of £200k as being perfectly reasonable, before taking into account any private pensions or other incomes which might reduce it further. It all depends on lifestyle and I set out some sums for a median lifestyle.

regards, dspp


Return to “Retirement Investing (inc FIRE)”

Who is online

Users browsing this forum: No registered users and 10 guests