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How far off am I.

Including Financial Independence and Retiring Early (FIRE)
Spet0789
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Re: How far off am I.

#563551

Postby Spet0789 » January 23rd, 2023, 7:17 pm

banjocountry wrote:
Spet0789 wrote:A few observations.

1) You’re certainly there at FI. Whether you RE is entirely up to you and how you want to spend your time. You certainly don’t need to work.
2) It seems you didn’t put the max £40k into your ISAs. Why not?
3) Why so much cash? Get it into Pensions / ISAs / Pay off mortgage debt.
4) If your BTL value has risen so much, for heaven’s sake sell it! It’s yielding a measly 3.1% and it’s very concentrated. You can earn more in gilts (though that’s not what I would recommend).

More broadly, well done!


2 - I set up a SSAS pension last year and most of my extra funds went in there. I had to cash in part of the ISA's to get the required funds in the pension. I've since topped up the ISA to the max allowed for me and my partner.

With the SSAS I now have a commercial property in a pension wrapper. I know it's yet more property and I know I need to diversify but I seem drawn to it as it's what I know and I can see a regular cash flow. The commercial property is now bringing in £30,000 per annum but I can't access this until I'm 57 as it stays within the pension :(

Plan now is to top up the ISA's where possible and then pension/trading account. I need to try to balance the porfolio as it's now very heavily in to property.

3 - I had kept the cash in hand to buy another property but I've decided against this as I'm already too much in to property. Need to put this in to an index fund but was holding on as I've just bought £40k with the ISA's recently and another £30k in the pension. That's £70k of index funds in January alone. Thought I'd spread out my purchases just in case this is the "high" and I regret investing all in the same month.

4 - Capital gains tax would be a big hit on these sales. I could sell in small batches (1 or 2 a year) but nothing this tax year as I used up my capital tax allowance on the share options I received from work.


2. Makes sense
3. Agreed
4. Understood, but in that case you should subtract your CGT liability from your net worth. Make the investment decision on that basis - should you diversify or not?

Hariseldon58
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Re: How far off am I.

#563580

Postby Hariseldon58 » January 23rd, 2023, 10:15 pm

BTL is not a popular asset these days with the politicians and being a residential Landlord about as well regarded as Prince Andrew….

Index funds work out over time, as long as you can be patient between now and then…

Property can be a significant tie and it seems unlikely that the CGT regime is going to get any easier for you, I’d get out asap within the confines of the tax system.

Alaric
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Re: How far off am I.

#563587

Postby Alaric » January 23rd, 2023, 11:37 pm

Hariseldon58 wrote:BTL is not a popular asset these days with the politicians and being a residential Landlord about as well regarded as Prince Andrew…..


I suppose it just happened, but why is BTL such a cottage industry? Housing associations aside, where are the trusted brand names? Not to stop investors in domestic property they don't live in but why cannot they invest collectively through a REIT or similar structure?

Hariseldon58
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Re: How far off am I.

#563637

Postby Hariseldon58 » January 24th, 2023, 12:08 pm

Alaric wrote:
Hariseldon58 wrote:BTL is not a popular asset these days with the politicians and being a residential Landlord about as well regarded as Prince Andrew…..


I suppose it just happened, but why is BTL such a cottage industry? Housing associations aside, where are the trusted brand names? Not to stop investors in domestic property they don't live in but why cannot they invest collectively through a REIT or similar structure?


I suspect the reason that the big names have not got involved is a mix of cultural, fear of invasive regulation and a negative view of renters, there are some listed landlords eg Grainger, a little under 10,000 homes and 6,000+ in the pipeline but the investment performance is not exciting.

SalvorHardin
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Re: How far off am I.

#563665

Postby SalvorHardin » January 24th, 2023, 1:44 pm

Alaric wrote:
Hariseldon58 wrote:BTL is not a popular asset these days with the politicians and being a residential Landlord about as well regarded as Prince Andrew…..


I suppose it just happened, but why is BTL such a cottage industry? Housing associations aside, where are the trusted brand names? Not to stop investors in domestic property they don't live in but why cannot they invest collectively through a REIT or similar structure?

If you're prepared to invest overseas, there are a lot of residential REITs in America. Unlike Britain, America doesn't have a culture where residential landlords are routinely despised (and picked on by the government); an attitude which is nowadays supported by all major political parties.

At the moment I own shares in just the one; Equity Residential (EQR) which specialises in apartments for higher earners (EQR's average tenant household has an income of 180% of the American average). 3.5% yield before withholding tax.

https://seekingalpha.com/symbol/EQR/

A few others on my watchlist are BRT Apartments, Camden Property Trust, Essex Property Trust and NexPoint Residential. Once the Manchester United takeover situation is resolved, most of whatever money I get by selling my shares will be going into a selection of American residential and mixed-use REITs.

As the American market is so large, there are a lot of regionally focused residential REITs.

Spet0789
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Re: How far off am I.

#563697

Postby Spet0789 » January 24th, 2023, 3:39 pm

banjocountry wrote:
Spet0789 wrote:A few observations.

1) You’re certainly there at FI. Whether you RE is entirely up to you and how you want to spend your time. You certainly don’t need to work.
2) It seems you didn’t put the max £40k into your ISAs. Why not?
3) Why so much cash? Get it into Pensions / ISAs / Pay off mortgage debt.
4) If your BTL value has risen so much, for heaven’s sake sell it! It’s yielding a measly 3.1% and it’s very concentrated. You can earn more in gilts (though that’s not what I would recommend).

More broadly, well done!


2 - I set up a SSAS pension last year and most of my extra funds went in there. I had to cash in part of the ISA's to get the required funds in the pension. I've since topped up the ISA to the max allowed for me and my partner.

With the SSAS I now have a commercial property in a pension wrapper. I know it's yet more property and I know I need to diversify but I seem drawn to it as it's what I know and I can see a regular cash flow. The commercial property is now bringing in £30,000 per annum but I can't access this until I'm 57 as it stays within the pension :(

Plan now is to top up the ISA's where possible and then pension/trading account. I need to try to balance the porfolio as it's now very heavily in to property.

3 - I had kept the cash in hand to buy another property but I've decided against this as I'm already too much in to property. Need to put this in to an index fund but was holding on as I've just bought £40k with the ISA's recently and another £30k in the pension. That's £70k of index funds in January alone. Thought I'd spread out my purchases just in case this is the "high" and I regret investing all in the same month.

4 - Capital gains tax would be a big hit on these sales. I could sell in small batches (1 or 2 a year) but nothing this tax year as I used up my capital tax allowance on the share options I received from work.


You should mentally haircut your net worth by the CGT you owe on the BTL. Then make the decision as to whether to sell or not. Also, bear in mind that CGT rates are only likely to go in one direction!

bdr1000
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Re: How far off am I.

#569620

Postby bdr1000 » February 20th, 2023, 8:33 am

vrdiver wrote:
kempiejon wrote:what are you going to do with all that money...?

What will you fill those 50 or so hours a week that work currently soaks up?

That was my thought on reading the OP.

When I was planning for retirement (I quit at 50, never regretted it) I made two budgets. The first was easy - what I currently spent; the second a little harder - what I planned to spend in retirement.

The second budget was the important one because, without it, I had no way of knowing if I had enough.

My retirement budget included:
    daily expenses
    holidays and other annual expenditure
    capital replacement (car, roof etc)
    Retirement toys fund (I had some stuff I wanted to try out!)
    cash reserve
    margin (I wanted excess income so as to be able to reinvest or to replenish the cash reserve if I'd needed to use it)

So, for you to know how far off you are, you need to plan what you want to do when you get there!

VRD


Would you be happy to share the numbers for your retirement budget? i.e. what you budgeted for
    daily expenses
    holidays and other annual expenditure
    capital replacement (car, roof etc)
    Retirement toys fund (I had some stuff I wanted to try out!)
    cash reserve
    margin (I wanted excess income so as to be able to reinvest or to replenish the cash reserve if I'd needed to use it)

vrdiver
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Re: How far off am I.

#570773

Postby vrdiver » February 24th, 2023, 11:52 am

bdr1000 wrote:Would you be happy to share the numbers for your retirement budget? i.e. what you budgeted for
    daily expenses
    holidays and other annual expenditure
    capital replacement (car, roof etc)
    Retirement toys fund (I had some stuff I wanted to try out!)
    cash reserve
    margin (I wanted excess income so as to be able to reinvest or to replenish the cash reserve if I'd needed to use it)


I understand the question, and the desire to see real numbers, but my reply is "no".

That's not because I don't want to show them, but because I think it would be misleading. Why?

Simply because you don't know me, my family or my lifestyle and what is "normal" for me, all of which may be different for not only you but also for any other readers (I know, big assumption!)

What I consider a fair price for a lunch out or a weekend break, or to spend on a car or new carpets etc. etc. etc. might be far less than you, the same, or more. If you take comfort from my numbers, you may find yourself disappointed with your budget when you come to spend it; equally, if my numbers depress you, you may end up working longer than necessary. My lifestyle, hobbies etc. will be different, so not only how much we consider reasonable to spend, but also on what we spend on will not be the same.

My advice, should you wish it, is to start with your work-life budget; look at what changes you want to make when retired and consider the consequential costs (or savings). Think about what it costs you to work, but also what work provides that you will need to pay for when work stops. Think about the life changes you want to make, and cost them up (rough is a good start - you can finesse the numbers when you have decided what's "in" and what's "out").

One example I will share with you; I wanted a motorhome when I retired. I am not a mechanic, so needed to buy something reliable (I ended up buying new, simply for the warranties). My budget planning included the capital cost of the vehicle (retirement toy), the estimated annual running costs over the planned ownership period, and a depreciation cost so that I could replace it when the time came.

When I account for my monthly spending, I take my monthly income (which is a smoothed annual amount, as much of it comes from dividends) and transfer the appropriate amounts to different savings pots (the relevant one here being "Motorhome depreciation") so that my savings grow at the same rate as my accrued future expenditure.

Good luck with your own FIRE plans. it is definitely worth the effort!

VRD

banjocountry
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Re: How far off am I.

#607346

Postby banjocountry » August 6th, 2023, 9:51 am

So 2 years on from my original post. I didn't retire in the end.

Main delay in retiring has been a "disagreement" between me and my partner. I think we're good to stop but she wants a bigger house. She's looking at properties in the region of £700k at the moment. If we went ahead with that we'd have a £400k to £500k mortgage to accommodate and put's FIRE on the back burner for sometime.

Anyone else in this situation? We're at an impasse.

Thought I'd do an update on where I am now financially versus where I was when I did the original post.

August 2021 v now

2021 - Annual expenditure = £27k.
2023 - Annual expenditure = £30.5k

This includes residential mortgage but not the buy to let mortgages.

Assets:

2021:
£68,000 - Cash
£10,000 - Trading stocks account
£72,000 - ISA
£414,000 - Pensions
£734,000 - Equity in buy to let property (£740,000 mortgage against £1,474,000 total value).

£23,000 per annum - Revenue from BTL

£132,000 - Equity in residential property (£177,000 mortgage against £309,000 total value).

2023:

£135,000 - Cash
£0 - Trading stocks account
£84,000 - ISA
£711,000 - Pensions (note £420k of the pension is a commercial property). Rest is conventional assets (e.g. stocks and shares).
£773,000 - Equity in buy to let property (£847,000 mortgage against £1,621,000 total value).

£36,000 per annum - Revenue from BTL. However I'm mainly on long term fixed rates. If all my mortgages became due together this would drop to £8,300 which is a big drop.

£176,000 - Equity in residential property (£165,000 mortgage against £341,000 total value).

Still too much in to property and need to look to reduce this where possible.

Urbandreamer
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Re: How far off am I.

#607381

Postby Urbandreamer » August 6th, 2023, 12:37 pm

banjocountry wrote:So 2 years on from my original post. I didn't retire in the end.

Main delay in retiring has been a "disagreement" between me and my partner. I think we're good to stop but she wants a bigger house. She's looking at properties in the region of £700k at the moment. If we went ahead with that we'd have a £400k to £500k mortgage to accommodate and put's FIRE on the back burner for sometime.

Anyone else in this situation? We're at an impasse.


I do hope that this is not a stupid question, but why does she want a BIGGER house. I might understand a more expensive one. For example she might want a bigger garden, or a different location. However is she expecting more children and hence to need more bedrooms?

I'm fortunate that my wife disagree on very little, though she would have preferred me to not retire. Not for financial reasons, but to keep me out from underfoot.

kempiejon
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Re: How far off am I.

#607384

Postby kempiejon » August 6th, 2023, 1:07 pm

banjocountry wrote:2023:

£135,000 - Cash
£0 - Trading stocks account
£84,000 - ISA
£711,000 - Pensions (note £420k of the pension is a commercial property). Rest is conventional assets (e.g. stocks and shares).
£773,000 - Equity in buy to let property (£847,000 mortgage against £1,621,000 total value).

£36,000 per annum - Revenue from BTL. However I'm mainly on long term fixed rates. If all my mortgages became due together this would drop to £8,300 which is a big drop.

£176,000 - Equity in residential property (£165,000 mortgage against £341,000 total value).

Still too much in to property and need to look to reduce this where possible.


You say you have too much property, I see a big slug of cash too, and doubled since the earlier report. Is this is in preparation of a major purchase, like another property deposit? We hear about the high inflation eating cash. Is it sheltered or will you be taxed on any interest?
I wouldn't want a large mortgage and illiquid assets like property but I think being a landlord is a job and I wouldn't want one in retirement. Presumably you've been doing this for years and could wind down when you fancied it.

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Re: How far off am I.

#607391

Postby banjocountry » August 6th, 2023, 2:36 pm

Urbandreamer wrote:
banjocountry wrote:So 2 years on from my original post. I didn't retire in the end.

Main delay in retiring has been a "disagreement" between me and my partner. I think we're good to stop but she wants a bigger house. She's looking at properties in the region of £700k at the moment. If we went ahead with that we'd have a £400k to £500k mortgage to accommodate and put's FIRE on the back burner for sometime.

Anyone else in this situation? We're at an impasse.


I do hope that this is not a stupid question, but why does she want a BIGGER house. I might understand a more expensive one. For example she might want a bigger garden, or a different location. However is she expecting more children and hence to need more bedrooms?

I'm fortunate that my wife disagree on very little, though she would have preferred me to not retire. Not for financial reasons, but to keep me out from underfoot.


She wants more space. We also have a disabled son who we're not planning to move out for a while. He currently hogs the lounge and spare room downstairs so her thinking is something with more space/rooms to give us a bit of space/sanity.

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Re: How far off am I.

#607393

Postby banjocountry » August 6th, 2023, 2:40 pm

kempiejon wrote:
banjocountry wrote:2023:

£135,000 - Cash
£0 - Trading stocks account
£84,000 - ISA
£711,000 - Pensions (note £420k of the pension is a commercial property). Rest is conventional assets (e.g. stocks and shares).
£773,000 - Equity in buy to let property (£847,000 mortgage against £1,621,000 total value).

£36,000 per annum - Revenue from BTL. However I'm mainly on long term fixed rates. If all my mortgages became due together this would drop to £8,300 which is a big drop.

£176,000 - Equity in residential property (£165,000 mortgage against £341,000 total value).

Still too much in to property and need to look to reduce this where possible.


You say you have too much property, I see a big slug of cash too, and doubled since the earlier report. Is this is in preparation of a major purchase, like another property deposit? We hear about the high inflation eating cash. Is it sheltered or will you be taxed on any interest?
I wouldn't want a large mortgage and illiquid assets like property but I think being a landlord is a job and I wouldn't want one in retirement. Presumably you've been doing this for years and could wind down when you fancied it.


Cash is in an offset account against the main residential mortgage so whatever is in there I don't pay interest on. As such no extra tax for this. Has worked quite well. We've historically let this build up and then buy a BTL but this time round my partner has designs on buying a bigger place for ourselves.

At the moment being a landlord doesn't take up much time. Sometimes it can be busy but then you can go a year with very little to do. If there is any repair work I get a tradesperson in to do it. Just ring round and find someone. Aside from that it's viewings and inspections. Although it's not strictly passive I don't think it would be too onerous to carry this in to retirement.

kempiejon
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Re: How far off am I.

#607399

Postby kempiejon » August 6th, 2023, 3:03 pm

banjocountry wrote:Cash is in an offset account against the main residential mortgage so whatever is in there I don't pay interest on. As such no extra tax for this. Has worked quite well. We've historically let this build up and then buy a BTL but this time round my partner has designs on buying a bigger place for ourselves.

At the moment being a landlord doesn't take up much time. Sometimes it can be busy but then you can go a year with very little to do. If there is any repair work I get a tradesperson in to do it. Just ring round and find someone. Aside from that it's viewings and inspections. Although it's not strictly passive I don't think it would be too onerous to carry this in to retirement.


Well I have to say you do seem to have it in hand. Now compromise with the wife and get on with the next chapter. It looks like you have "enough" capital plus a passive income.

Although my approach is different I think I'm about at financial independence, I'm soon to look at using pensions as income, but just now I have a job and have begun accumulating some cash, SO is talking about a bigger house we do not need though I'm keen to have a bigger garden.

scotview
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Re: How far off am I.

#607403

Postby scotview » August 6th, 2023, 3:41 pm

banjocountry wrote:So 2 years on from my original post. I didn't retire in the end.



Have you still got your share options and did/will you pay tax on them if you sell them in one lump ? Would dividends also be taxed on these ?

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Re: How far off am I.

#607444

Postby banjocountry » August 6th, 2023, 6:50 pm

scotview wrote:
banjocountry wrote:So 2 years on from my original post. I didn't retire in the end.



Have you still got your share options and did/will you pay tax on them if you sell them in one lump ? Would dividends also be taxed on these ?


Cashed in my share options. Ended up paying very little tax on them. Split them between me and my partner and cashed in half just before the tax year end and the other half just after the tax year end. We also heavily put in to pensions due to the commercial property purchase so got a lot of tax back as result of that.


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