The Lemon Fool

I've been aiming for early(ish) retirement for a long time and over the weekend I finalised my retirement date: 1st September 2022, it's possible I can bring that back to 1st June 2022, but not committing to that yet.
My Plan (changed many times over the years) is to have the following by that date:

Float
1. 1 Year spending as a float, divide this by 12 and that's our monthly income, taken from the float.
2. Refill the float during the year (dividends, pensions, etc) and then at the end of the year go back to step 1 and repeat forever (this is a very simple process).

This adjusts our future "salary" in line with any dividend cuts/increases automatically and requires no spreadsheet magic to calculate each year.

Reserve
1 Year income reserve, because you never know.

Safety Margin
Low to begin with (9%), but my SIPP kicks in 2.5 years after I retire increasing the SM to 50%.
I'm happy with that risk, I'd rather be retired then do anything to mitigate it further (Freedom over Employment).

My wife is older, so around 5 years after I access my SIPP, her State Pension increases our SM to 75%.
When I eventually get my State Pension it will take the SM to over 100%.

Future Investing
I'm currently building the float, the reserve next, then will increase income if needed before I pull the trigger.
Salary sacrifice through work helps grow my SIPP further in the meantime.

After retiring I plan to carry on investing some of the safety margin into more Investment Trusts, which is my preferred investment style, again attempting to keep it simple.

I invest mostly for income, but we also have some growth trusts.
All other excess income will be spent/enjoyed.

Summary
I'm happy with these numbers and just have to get there now!

Once I have the float/reserve, we'll live off our investments for a little while to test the process - I was planning a year originally but I believe 6 months will be enough testing.

I love spreadsheets as many here do, but I've kind of had enough of tweaking mine, so it's done, I have a simple retirement plan that should see us through the rest of our lives.

Most importantly, this whole process is simple for my wife to understand and kind of takes care of itself.

regards
Darka

By safety margin, do you mean income beyond the annual cost of your "needs", or income beyond your current annual spending?

Spet0789 wrote:By safety margin, do you mean income beyond the annual cost of your "needs", or income beyond your current annual spending?

I use the same definition as Gengulphus, which is (and I quote him here from an old post):

"Is calculated as the percentage by which actual income is over income needed, not the percentage by which income needed is below actual income.
For instance, if someone needs £20k of income, actually has £25k income and takes it all to spend the extra £5k on extra comforts / luxuries that they could do without if they had to tighten their belts, in my terms they have a 25% safety margin - the percentage excess of £25k over £20k."

So in the first instance when my SIPP kicks in, we'll have 50% more income than we need.
E.g with made up numbers: if income needed is £20k we'll have £30k coming in (i.e. the extra £10k being 50% of the needed £20k)

That didn't take long to change

After revisiting the math, and being happy with enough rather than keep working to build excess....

I'm committing to my new retirement date of 1st June 2022 so I'll be handing in my notice in 1 Yr, 6 Mnth, 12 Days - not that I'm counting....

no more changes..............

Darka wrote:That didn't take long to change

After revisiting the math, and being happy with enough rather than keep working to build excess....

I'm committing to my new retirement date of 1st June 2022 so I'll be handing in my notice in 1 Yr, 6 Mnth, 12 Days - not that I'm counting....

Me neither. My spreadsheet does tell me however that there are just under 1000 days to my retirement.

bluedonkey wrote:Me neither. My spreadsheet does tell me however that there are just under 1000 days to my retirement.

I think having that countdown can be very motivating, especially if under appreciated at work...

Good luck Darka. I like simple straightforward plans and yours sounds very workable. Obviously it will need to be adapted (I think they all do), but you sound a flexible sort of guy, and it will be fine.

Dod

Darka wrote:That didn't take long to change

After revisiting the math, and being happy with enough rather than keep working to build excess....

I'm committing to my new retirement date of 1st June 2022 so I'll be handing in my notice in 1 Yr, 6 Mnth, 12 Days - not that I'm counting....

no more changes..............

Watch out for changes though. Last year I was ready, my pot was throwing off enough to keep me in sherbets. Christmas 2019 I calculated that I was financially able to give up full time work but wanted to top up my cash reserve to just over 3 years of expenses. I thought I would revisit the question in April and in the meantime squirrel away cash. In February work asked all of us for expressions of interest if anyone would consider a reduction in hours or voluntary severance. I said yes please consider me, I'd take a cheque to leave and they said they'd get back to me. That was in February. Now, I'm pleased to have a job, I'm going to stay employed for at least the coming months

kempiejon wrote:That was in February. Now, I'm pleased to have a job, I'm going to stay employed for at least the coming months

Completely agree, won't jump until ready and I too am very happy to have a job at the moment.

Dod101 wrote:Good luck Darka. I like simple straightforward plans and yours sounds very workable. Obviously it will need to be adapted (I think they all do), but you sound a flexible sort of guy, and it will be fine.

Dod

Thanks Dod, appreciate it.

Darka wrote:

kempiejon wrote:That was in February. Now, I'm pleased to have a job, I'm going to stay employed for at least the coming months

Completely agree, won't jump until ready and I too am very happy to have a job at the moment.

It is a good feeling to think you're just about at Freedom from employment.

My mental earliest retirement date is 31 July 2022 - pushed out from Christmas 2021 due to pandemic...
No firm plans yet, but it's an aspiration...'subject to change'

AleisterCrowley wrote:My mental earliest retirement date is 31 July 2022 - pushed out from Christmas 2021 due to pandemic...
No firm plans yet, but it's an aspiration...'subject to change'

I think it's helpful to set a stake in the ground, and of course be flexible around that but for me, it really helps to have that stake.

It's the Unknown Unknowns that get you. I was made redundant a year ago with little prospect of re-employment. This was 2 years off my planned FIRE age. Fine, I thought, enough to go now with a similar plan to yourself. Then Covid occurred triggering a big market correction while still almost fully invested. After a torrid spring things have settled back for the moment, but it would be foolish to think another shock couldn't happen in the next year. During this time, I have burned through 1 of my 3 years emergency money while allowing the investments to recover. Another big shock in the Autumn may need the 2nd. years reserve or the less pleasant prospect of reducing my invested capital to live on. The only thing I take a little comfort from is that these events seem to hit the stock market once a decade. I optimistically (foolishly look forward to a decade of growth going forward!

airbus330 wrote:It's the Unknown Unknowns that get you. I was made redundant a year ago with little prospect of re-employment. This was 2 years off my planned FIRE age. Fine, I thought, enough to go now with a similar plan to yourself. Then Covid occurred triggering a big market correction while still almost fully invested. After a torrid spring things have settled back for the moment, but it would be foolish to think another shock couldn't happen in the next year. During this time, I have burned through 1 of my 3 years emergency money while allowing the investments to recover. Another big shock in the Autumn may need the 2nd. years reserve or the less pleasant prospect of reducing my invested capital to live on. The only thing I take a little comfort from is that these events seem to hit the stock market once a decade. I optimistically (foolishly look forward to a decade of growth going forward!

Agreed, I'm hoping for the best but planning for the worst.
And yes, a decade of growth going forward would be nice too.

airbus330 wrote:It's the Unknown Unknowns that get you. I was made redundant a year ago with little prospect of re-employment. This was 2 years off my planned FIRE age. Fine, I thought, enough to go now with a similar plan to yourself. Then Covid occurred triggering a big market correction while still almost fully invested. After a torrid spring things have settled back for the moment, but it would be foolish to think another shock couldn't happen in the next year. During this time, I have burned through 1 of my 3 years emergency money while allowing the investments to recover. Another big shock in the Autumn may need the 2nd. years reserve or the less pleasant prospect of reducing my invested capital to live on. The only thing I take a little comfort from is that these events seem to hit the stock market once a decade. I optimistically (foolishly look forward to a decade of growth going forward!

Wanted to say sorry about your redundancy, that's pretty rough and is something I'm mindful of myself so I'm being as careful as I can be and keeping my head down... not that that would make any difference if they chose to do the same to me.

I'm running on the assumption that it has a high chance of happening before my FIRE date, so I'm saving the reserve cash now whilst I can as fast as I can.

The risk of redundancy is also why I've bought my plans forward as much as I can.

Regards,

airbus330 wrote:It's the Unknown Unknowns that get you. I was made redundant a year ago with little prospect of re-employment. This was 2 years off my planned FIRE age. Fine, I thought, enough to go now with a similar plan to yourself. Then Covid occurred triggering a big market correction while still almost fully invested. After a torrid spring things have settled back for the moment, but it would be foolish to think another shock couldn't happen in the next year. During this time, I have burned through 1 of my 3 years emergency money while allowing the investments to recover. Another big shock in the Autumn may need the 2nd. years reserve or the less pleasant prospect of reducing my invested capital to live on. The only thing I take a little comfort from is that these events seem to hit the stock market once a decade. I optimistically (foolishly look forward to a decade of growth going forward!

You've burnt through 1 year of your reserve in less than a year? Have you been adding more cash to the market? Not drawing any of the income from the investments? I recon 3 years of expenditure could allow a halving of expected income taking 7 years to recover.

Congratulations Darka. Sounds like a simple and well thought out plan. KISS prevails.

I’m planning on 30th June 2022. 98 weeks (less 13 annual leave). Also not counting

Darka wrote:
Wanted to say sorry about your redundancy, that's pretty rough and is something I'm mindful of myself so I'm being as careful as I can be and keeping my head down... not that that would make any difference if they chose to do the same to me.

I'm running on the assumption that it has a high chance of happening before my FIRE date, so I'm saving the reserve cash now whilst I can as fast as I can.

The risk of redundancy is also why I've bought my plans forward as much as I can.

Regards,

Hi thanks for the thought. It is different for each person, depending on your financial position. I have not found it especially stressful as I had mentally left the job already, so it only needed the financial side to be reasonable. I strongly agree with you over the cash buffer, without it, I would have had to taken drawdown at the bottom of the market which would have damaging. I also learnt how psychologically unsettling a crash is when your income is entirely dependent on your investments. I had planned to remain fully invested, or close to it, and ride out any corrections as I did in 2008. But I found that gave me sleepless nights. Fortunately, the current rapid recovery has allowed me to de-risk the portfolio. Risk appetite is personal finance 101, but theres a big difference when you see your pot diminishing and there being a wage cheque at the end of the month and without one.
FIngers crossed for your job.

Darka wrote:Salary sacrifice through work helps grow my SIPP further in the meantime.

I must confess this line intrigues me - how are you managing to get that to work? Most salary sacrifice arrangements I've seen only allow payments into the company scheme?