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Reassurance Sought

Including Financial Independence and Retiring Early (FIRE)
UpTheIron
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Reassurance Sought

#275459

Postby UpTheIron » January 6th, 2020, 9:37 am

Hi All.

Long first post, so apologies in advance. Just looking for some opinions and some reassurance please. I've only just stumbled upon this forum so I apologize if this has been asked 100 times before and I can see I'm going to be spending a lot of time here!

So... January blues firmly kicking in. Currently in a job that I enjoy (just about!) however the commute and the bums on seats office-based culture is killing me. Most of my roles over the last decade have been much more home based/flexible and perhaps this one was a mistake. I plan to have a frank conversation with them but I don't hold out much hope for a better working pattern.

So that's my motivation for FIRE, although it's been something I've been working towards for some time. Or at least the FI part, simply by saving wherever possible and looking to build a decent passive income. What I'd really appreciate is some help/advice what the below could achieve in terms of an income. I've previously plugged the numbers into Firecalc and also have my own spreadsheet and both look reasonably positive.

Income/Portfolio:

Rental Properties (value approx £800k), mortgage free, generating around £30k net profit (after income tax)
Approx £600k in a mix of cash, tracker funds (inside ISA) and VCT's (approx 8%)
SIPP currently £400k
Good but not full basic state pension if I get there (6 years short of full but could top up)
Zero debt, including family home.

I'm 44.

My thoughts:
Property brings in around 30k after maintenance and income tax. Obviously there will be void periods and exceptional maintenance items but all have long term tenants currently.

£600k could bring in £18k at 4%, although I could dip into the capital as I near 57 (when the SIPP kicks in). The SIPP will hopefully produce a similar income.

So... if I sacked off working at the end of the month and had a well earned break then *if* I never worked again what sort of income might I achieve? I've run various calculations but would appreciate some second opinions!

Many Thanks
Paul

Joe45
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Re: Reassurance Sought

#275463

Postby Joe45 » January 6th, 2020, 9:58 am

You might have a look at the Portfolio Visualiser website, although as with, Firecalc, it does not give the option of modelling the return from UK BTL property.

When using Firecalc, try selecting the Bernicke spending pattern which models withdrawal rates on the (justifiable) assumption that you'll spend less as you enter old age. This gives a much higher starting value.

I found that "Beyond the 4% Rule" is a book worth reading.

nmdhqbc
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Re: Reassurance Sought

#275464

Postby nmdhqbc » January 6th, 2020, 10:11 am

UpTheIron wrote:£600k could bring in £18k at 4%, although I could dip into the capital as I near 57 (when the SIPP kicks in). The SIPP will hopefully produce a similar income.


Perhaps you could just view the circa £1m(SIPP and non-SIPP) as one portfolio and live off the income of it all. Simply pay yourself the SIPP dividends by selling an asset outside the SIPP and buying it inside the SIPP for the amount of dividends you have in the SIPP. The only issue is if the Non-SIPP gets run down to zero by the time you can access the SIPP. You would be losing the ISA tax shelter though if all that £600k is sheltered. The extra tax may or may not be worth it to have more cash to spend when you're younger and possibly more able to enjoy it.

swill453
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Re: Reassurance Sought

#275469

Postby swill453 » January 6th, 2020, 10:37 am

I'd guess you're probably paying higher rate tax on the property income because it's on top of your salary. Remove the salary and it's more likely the property income will be at (on average) less than basic rate.

Hence it'll be worth more to you.

Scott.

UpTheIron
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Re: Reassurance Sought

#275478

Postby UpTheIron » January 6th, 2020, 11:21 am

swill453 wrote:I'd guess you're probably paying higher rate tax on the property income because it's on top of your salary. Remove the salary and it's more likely the property income will be at (on average) less than basic rate.

Hence it'll be worth more to you.

Scott.
It's a good point, but sadly one I've already taken into account. Mentally I look at it using my basic rate allowance currently. I know that it isn't actually assessed that way but the end result is the same.

nmdhqbc - exactly how I am looking at the bigger picture and my sums suggest my non-SIPP element will easily last.

Joe45 - thanks, will give it a go.

flyer61
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Re: Reassurance Sought

#275498

Postby flyer61 » January 6th, 2020, 12:38 pm

Is there a Mrs Uptheiron?

UpTheIron
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Re: Reassurance Sought

#275511

Postby UpTheIron » January 6th, 2020, 1:22 pm

flyer61 wrote:Is there a Mrs Uptheiron?
There is, and two teenage stepchildren.

She works and we're pretty independent financially - good job and own B2L income too. It is obviously a consideration though. She's happy for me to do what I need to do (as long as it stops me moaning!)

I'm sure we could live just off her income if it was necessary but I wouldn't want to be in that situation, likewise I think I could pay all the bills alone if she wasn't working. Things like University bills might become more of a struggle but if necessary we would find a way between us, people manage on less.

UpTheIron
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Re: Reassurance Sought

#275514

Postby UpTheIron » January 6th, 2020, 1:24 pm

Taking advice from some of the other threads on here I think what I need to do is firm up a plan; that is set a target date and work towards it - knowing I've only got a 6 months/a year/whatever would possibly help motivate me to put a little more in the pot.

ursaminortaur
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Re: Reassurance Sought

#275538

Postby ursaminortaur » January 6th, 2020, 2:48 pm

UpTheIron wrote:Taking advice from some of the other threads on here I think what I need to do is firm up a plan; that is set a target date and work towards it - knowing I've only got a 6 months/a year/whatever would possibly help motivate me to put a little more in the pot.


You seem to be concentrating on what your portfolio will bring in each year. The one thing you haven't mentioned is how much your current lifestyle costs you ?
What you currently have would probably allow most people to retire without any problems but it all really depends on what outgoings you have. Do you have large private school fees, are you supporting your parents' costs in a care home, do you go on lots of expensive holidays etc etc ?
So I'd suggest trying to work that out first and seeing how that compares. If it is too close for comfort would you consider any changes eg less expensive holidays ?

xxd09
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Re: Reassurance Sought

#275552

Postby xxd09 » January 6th, 2020, 3:36 pm

You seem to have done the hard work -created a large enough pile-critical mass achieved!
A fly in the ointment is the children’s university costs for 3+ years in s few years time
A practical example for you re my experiences-relevant?
I am now 73-17 years retd
Made enough-like you?
Portfolio is made up of SIPPs and ISAS-wife and I
30% Vanguard World Index Tracker Fund plus 65% Vanguard Global Bond Index Fund hedged to the Pound and 5% Cash for day to day expenses
Simple ,cheap easy to run and understand
I take 3.7% pa -portfolio continues to increase in value
At 44 you might work again at something you like -nearer home which would take some pressure of your savings
Take some time to do some reading re finance. This board is good,Monevator.com plus Lars Kroijer,s web site and videos plus his book-Investing Demystified
xxd09

Dod101
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Re: Reassurance Sought

#275555

Postby Dod101 » January 6th, 2020, 3:53 pm

The fact is that the OP has apparently got £1.4 million in 'free' assets plus another £400,000 in a SIPP which he cannot access for another 13 years or so. The family home is paid for. He also has a wife who appears to be financially independent.

Invested in equities, that would or should provide about £56,000 before tax. He would need to work out the tax liability on that if he is no longer working. BtL is all very well and I have done it in the past, but there is hassle and I certainly prefer to have the assets in the stockmarket

For me, that would certainly give financial independence for the family in general but as has been said it depends on his lifestyle. I do not think that he should be doing a job that is a drudge on the basis of his current assets.

Dod

JoyofBricks8
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Re: Reassurance Sought

#275557

Postby JoyofBricks8 » January 6th, 2020, 4:05 pm

Up the iron: I think you have already won the game: with £1. 8 million in assets and a paid off home, work really is optional.

If you looked at the assets as a whole, at a reasonably sensible 3.5% safe withdrawal rate you might hope to be able to draw in 63k a year pre-tax: I think that is very achievable, and really one hopes that should be plenty to live off as you have no housing to pay for.

A play with the parameters at the excellent calculator website below will allow you to see what the true risk is: You are going to run out of life long before you run out of money.

https://engaging-data.com/will-money-last-retire-early/

Edit: I plugged a rough set of numbers in for you here:

https://engaging-data.com/will-money-la ... &flexpct=0

Caveat: I am not qualified to give financial advice to individuals. DYOR, etc.

UpTheIron
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Re: Reassurance Sought

#275565

Postby UpTheIron » January 6th, 2020, 5:00 pm

Thanks all. Some of the numbers... 3.7% and £56k as examples are in the same sort of ballpark as I'd researched/calculated so that is reassuring.

Lifestyle wise, it's a fair point and we're pretty sensible and could adjust accordingly but can't see we'd need to. If anything I've been living well within my FI means already.

One thing that hasn't been mentioned here but is a theme on plenty of threads is whether I'd adjust mentally... I think I've got this covered - I have plenty of things on the "to do" list to keep me busy, and some ad hoc work isn't out the question.

Part of why I need to do is look into myself and try and understand why I work. I enjoy what I do, but not the time it consumes. Over the years I've not taken enough time out for fear of not getting back in. In hindsight ridiculous but still a real fear, and probably more relevant now than 10 years ago.

The sensible step I think at some point is to have a conversation with my employers. They already know I find the commute painful but I anticipate they won't be able to accommodate what I'd want (and I don't disagree with what I expect their reasoning will be). As long as I'm comfortable with a "worst case" outcome from those discussions then there is no harm in asking :D

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Re: Reassurance Sought

#275569

Postby monabri » January 6th, 2020, 5:19 pm

UpTheIron wrote:The sensible step I think at some point is to have a conversation with my employers. They already know I find the commute painful but I anticipate they won't be able to accommodate what I'd want (and I don't disagree with what I expect their reasoning will be). As long as I'm comfortable with a "worst case" outcome from those discussions then there is no harm in asking :D


Start looking for alternative employment now so that when they say "no" , you have another option.

xxd09
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Re: Reassurance Sought

#275589

Postby xxd09 » January 6th, 2020, 7:15 pm

It might be quite relaxing for you to have your escape plan secure in your mind before you go in for that possibly final interview
Puts you in the best frame of mind for negotiating terms-ie you have a functional plan B
Get your ducks in a row before you go into the ring!
Good luck
xxd09

UpTheIron
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Re: Reassurance Sought

#275593

Postby UpTheIron » January 6th, 2020, 7:36 pm

monabri wrote:
UpTheIron wrote:Start looking for alternative employment now so that when they say "no" , you have another option.
Cheers - I've got a couple of irons in the fire, neither pay as they are *very* part time much but they tick all the other boxes.

tjh290633
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Re: Reassurance Sought

#275698

Postby tjh290633 » January 7th, 2020, 10:57 am

UpTheIron wrote:
monabri wrote:
UpTheIron wrote:Start looking for alternative employment now so that when they say "no" , you have another option.
Cheers - I've got a couple of irons in the fire, neither pay as they are *very* part time much but they tick all the other boxes.

I wouldn't worry about that. Are you going to enjoy doing it? Job satisfaction is important.

It sounds more like self employment, where you could have several clients, and there are tax advantages.

TJH


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