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How far off am I.

Including Financial Independence and Retiring Early (FIRE)
Dod101
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Re: How far off am I.

#434702

Postby Dod101 » August 14th, 2021, 9:51 am

Thanks for your response. To be honest I think you could probably be advising some of us! Obviously you have a well thought out plan and I think the main point has been covered, that you would probably be well advised to broaden your investments out into stocks and shares but really what works for you is what matters.

Dod

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Re: How far off am I.

#434725

Postby looneytoon » August 14th, 2021, 11:46 am

You are not ready to retire.

You clearly have enough money, and its not hard to work that out

but you are asking an internet discusion forum - ergo, not ready.

banjocountry
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Re: How far off am I.

#434766

Postby banjocountry » August 14th, 2021, 2:54 pm

Dod101 wrote:Thanks for your response. To be honest I think you could probably be advising some of us! Obviously you have a well thought out plan and I think the main point has been covered, that you would probably be well advised to broaden your investments out into stocks and shares but really what works for you is what matters.

Dod


Must admit it's been a roller coaster 5/6 years for us.

We changed a lot of things in 2015. We used to "flex" the cash so to speak e.g. I drove a Jag and my partner was in a Mercedes. Our net worth was a lot lower.

In 2015:
£60k in my pension
£16k in my partners pension
£70k equity in residential property
£40k in savings

Total net worth approx. £186,000.

We've made a lot of changes and haven't looked back. Sometimes I feel a little embarrassed (e.g. I drive an older car now) and I 100% don't get sucked in to keeping up with the Jones or extended family with expenditure. For example my brother laughs and my older generation phone/tablet whereas he upgrades pretty much every year. When I feel like that it does help to remember what we've achieved over the last 5 - 6 years.

I'm not a know it all and do appreciate the feedback on the forum. Main takeaway for me is to not necessarily push more in to BTL and look to de-risk and go in to stocks and shares. I do think this makes sense but would need to do this in stages to avoid a big tax bill.

looneytoon wrote:You are not ready to retire.

You clearly have enough money, and its not hard to work that out

but you are asking an internet discusion forum - ergo, not ready.


It's a good point you make. I must be honest I wasn't 100% sure I had enough so it's encouraging that others think I have. I always wanted to cover my "opex" expenditure via the buy to let income and dip in to the capital for one offs but the strategy here seems to be different. i.e. use your savings to cover you through until you get your private pension and then spend through that until you die (ideally with nothing in the bank). I quite like it and it's nice to get a different take on things.

I do think there is a physiological element to this. I think you're right. I might not be ready mentally. I need to get myself in that headspace and push that button!

swill453
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Re: How far off am I.

#434786

Postby swill453 » August 14th, 2021, 5:38 pm

banjocountry wrote:We've made a lot of changes and haven't looked back. Sometimes I feel a little embarrassed (e.g. I drive an older car now) and I 100% don't get sucked in to keeping up with the Jones or extended family with expenditure. For example my brother laughs and my older generation phone/tablet whereas he upgrades pretty much every year. When I feel like that it does help to remember what we've achieved over the last 5 - 6 years.

I sometimes took a bit of a ribbing from colleagues for driving older cars while they had new Audis and BMWs. I'm sure they're still happily doing it. Meanwhile I've been retired for 7 years...

Scott.

TUK020
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Re: How far off am I.

#434810

Postby TUK020 » August 14th, 2021, 7:37 pm

swill453 wrote:
banjocountry wrote:We've made a lot of changes and haven't looked back. Sometimes I feel a little embarrassed (e.g. I drive an older car now) and I 100% don't get sucked in to keeping up with the Jones or extended family with expenditure. For example my brother laughs and my older generation phone/tablet whereas he upgrades pretty much every year. When I feel like that it does help to remember what we've achieved over the last 5 - 6 years.

I sometimes took a bit of a ribbing from colleagues for driving older cars while they had new Audis and BMWs. I'm sure they're still happily doing it. Meanwhile I've been retired for 7 years...

Scott.

My Toyota diesel has 235k miles on the clock, and is over 16 yrs old.
I retired 2.5 weeks ago. :D

monabri
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Re: How far off am I.

#434927

Postby monabri » August 15th, 2021, 3:09 pm

2001 Mondeo.

Hariseldon58
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Re: How far off am I.

#434937

Postby Hariseldon58 » August 15th, 2021, 4:47 pm

@banjocountry
I had a relative in a large town/small city in North America, they had a swathe of property bringing in a good income. A major employer had a problem and collapsed, city struggled and the property empire became a problem, hard to let, falling rents, combined with general financial woes...

It's the unexpected/unanticipated/unknowns that get you.

Steveam
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Re: How far off am I.

#434944

Postby Steveam » August 15th, 2021, 5:37 pm

I don’t think anyone has mentioned health issues. While I know the OP is very young stuff happens. I retired when I was a little over 50 because I knew I’d won the game and wasn’t really enjoying the job anymore but what kicked me over the edge was suffering for a few months with kidney stones. This wasn’t life threatening but made me think about what I wanted to do over the next 10/20/30 years and how these activities would be impacted by poor health.

I retired and although I did bits and pieces of “work” (a non-exec directorship, sitting on a tribunal) my real pleasure was seeing more of friends and family and making the quality of the time spent much better - no more visiting with half my mind on work. I also started doing much more travelling and enjoying it more as I wasn’t time pressured.

Ten years after “retirement” (age 60) I found myself in hospital with every chance of a disastrous outcome (I had a brain tumour which, fortunately for me, was non-malignant) and I kept being happy that I’d enjoyed 10 years of friends/family/travel. I made a full recovery but can’t help thinking that I might have died and not had those years - yes I’d have been much richer but to what end?

I’ve kept in touch with my former colleagues and am aware of two having serious health issues before they’d retired.

I really don’t know whether the OP has enough as that will depend on (future) lifestyle decisions and security requirements - I knew I’d need a high income and would want lots of (business class) travel and large security buffers (and with thoughts of private medicine and care home costs). I’ve now been retired for 20 years and financially things have gone well but I accept that I’ve been overweight equities and the environment has been relatively benign.

Best wishes,

Steve

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Re: How far off am I.

#434945

Postby scrumpyjack » August 15th, 2021, 5:43 pm

Yes and it's not just your own health but that of your nearest and dearest. That can be devastating, as I have found, and totally rules your life, so do retire early and enjoy yourself while you can.

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Re: How far off am I.

#435028

Postby banjocountry » August 16th, 2021, 7:11 am

Thanks for the replies.

I'm going to hang on for the share options as a minimum. They're due next April/May.

My thoughts are to use this money to pay some in to my pension and the rest to deleverage the BTL portfolio.

I've decided to keep the current 8 BTLs but not to purchase anymore. Instead any spare cash will also go in to pensions or deleveraging the portfolio.

I have a 3 month notice period at work so will hand in my notice Jan/Feb 2022 unless I get cold feet. Scary thought.

My partner has said they want to continue working for at least another year so we'll still have an income albeit a smaller one (they earn approx. £25k per annum).

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Re: How far off am I.

#435123

Postby Gan020 » August 16th, 2021, 12:29 pm

I think it might be helpful for you to construct and worst, mostly likely and best case scenario, with the three scenarios constructed around property prices, because you have such concentrated assets.

My personal view is that the property cycle is at it's peak. Interest rates have fallen from 15% to 0%, creating greater affordability and I think this likely to reverse. This is an opinion of coruse, but I think it unlikely interest rates will progress to -15% over the next decade.

I would point to history over the property cycle. I bought my first 3 bedroom house for £61k, the couple I bought it off told me I'd got a bargain as they'd bought it for £81k only 3 years earlier. I sold it 4 years later for £47k and actually I couldn't even sell it for that, I'd spent 6 months trying to and in the end that's what we got for a company relocation package.

If, the economy keeps trundling along, house prices and rent income is stable you have enough to retire. I do wonder though about the £27k expenditure. You are going to have lots of time on your hands and doing things costs money. It seems low to me. If you bump that up to £35k, the numbers look alot tighter to me.

Personally if I were you I'd think about doing a couple more years. Another 2 years or £180k would allow you to explore and enjoy some things you can't do on £27k. That's a lifestyle choice of course.

Kantwebefriends
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Re: How far off am I.

#435128

Postby Kantwebefriends » August 16th, 2021, 12:38 pm

[/quote]
My Toyota diesel has 235k miles on the clock, and is over 16 yrs old.
I retired 2.5 weeks ago. :D[/quote]


Our diesel has 202k miles on the clock, and is over 16 yrs old. You win by a short head.

DrFfybes
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Re: How far off am I.

#435705

Postby DrFfybes » August 18th, 2021, 3:55 pm

monabri wrote:2001 Mondeo.


1990 Carina. :)

Oh, and 2016 Avensis, 2006 BMW, and a 2006 Maserati until last month (probably our only major and unecessary expense).

However, dragging back to the OP...

Yes they have enough capital to retire, and as they admit they are very concentated in property, and with a lot of debt. Rising property prices appear to have been the main driver of net worth, and given the high leveraging that could be dented quite easily. At 1.2M net worth and 1.8M exposure to property a 10% house price dip would wipe out 15% of net worth, and an increase in interest rates could make a big dent in the rental yield with increased BTL rates as the LTV goes up. Add in that their pensions are untouchable for several years and the situation becomes much less secure.

It is interesting to see their shift in spending 6 years ago put them in the current position and made such a massive change in their circumstances, it is remarkable. For us it was 2004, when we were just about to move and the sale of the old house fell through. We got a bridging mortgage at 6% for over 4x joint salary, the interest was about the same as my takehome. After 6 months we sold the house, and realised we hadn't really missed out on anything, and after another 15 years of saving my salary (and more as we earned more) I stopped work and MrsF went half time. But look at the OP - they are living on 25% of their income. That is an incredible level of restraint.

To the OP - you still have a job, managing a fleet of BTLs. To many that is a job in itself.

For us removal of debt was a big deal - whilst salary isn't guaranteed, not having to pay a mortgage means you can weather storms a lot better. Once you stop work you will be a non taxpayer, so any tax benefits of the BTL loans are reduced. Deleveraging rather than increasing the portfolio would help me sleep better. I narrowly missed the 1990s property crash by moving in 1989 and going into rented in Guildford (MrsF did get caught in it) and I can still remember the pain some owners were suffering several years later when I bought a flat in Brighton.

We have found the hardest shift has been going from "saving" to "spending". After years of watching our spend, tucking cash away whenever possible and working towards growing reserves, the mental switch to spending them is quite hard. We can cope with the natural dividends, but it is the part that we have put in Vanguard "Lifestrategy"" style accumulation funds that we would then sell to top up income that was a hurdle. I put 180k non ISAd in a 70/30 mix and have an automatic £600/month coming out, and we haven't drawn on the rest yet but once MrsF retires completely (with the lockdowns there was little point of more free time) we will need to take some from her savings (or more likely increase my drawdown first as hers are ISAd).

Good luck with it.

Paul

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Re: How far off am I.

#563243

Postby banjocountry » January 22nd, 2023, 9:50 am

Thought I'd do a quick update. A year on and we didn't retire. Thought it would be interesting to see how my figures have changed since I last posted. They currently look as follows:

Was - 48 and partner 46. Now 49 and partner 47

Household spend was £27k living "normally". Is now £38k (This includes residential mortgage but not the buy to let mortgages). Big jump due to cost of living and mortgage increases.

Luxury/FAT fire budget was £42k. Now £51k

Assets to nearest thousand:

Cash. Was - £68k. Now £165k
Trading stocks account. Was £10k. Now £0
ISA. Was £72k. Now £80k
Pensions. Was £414k for both of us. Now £664k
Equity in buy to let property - Was £734k. Now £822k

Post buy to let mortgages, expenses and tax income. Was £23k per annum. Now £26k per annum.

Equity in residential property. Was £132k. Now £169k.

Spet0789
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Re: How far off am I.

#563257

Postby Spet0789 » January 22nd, 2023, 11:37 am

banjocountry wrote:Thought I'd do a quick update. A year on and we didn't retire. Thought it would be interesting to see how my figures have changed since I last posted. They currently look as follows:

Was - 48 and partner 46. Now 49 and partner 47

Household spend was £27k living "normally". Is now £38k (This includes residential mortgage but not the buy to let mortgages). Big jump due to cost of living and mortgage increases.

Luxury/FAT fire budget was £42k. Now £51k

Assets to nearest thousand:

Cash. Was - £68k. Now £165k
Trading stocks account. Was £10k. Now £0
ISA. Was £72k. Now £80k
Pensions. Was £414k for both of us. Now £664k
Equity in buy to let property - Was £734k. Now £822k

Post buy to let mortgages, expenses and tax income. Was £23k per annum. Now £26k per annum.

Equity in residential property. Was £132k. Now £169k.


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!

monabri
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Re: How far off am I.

#563265

Postby monabri » January 22nd, 2023, 12:16 pm

banjocountry wrote:Thought I'd do a quick update. A year on and we didn't retire. Thought it would be interesting to see how my figures have changed since I last posted. They currently look as follows:

Was - 48 and partner 46. Now 49 and partner 47

Household spend was £27k living "normally". Is now £38k (This includes residential mortgage but not the buy to let mortgages). Big jump due to cost of living and mortgage increases.

Luxury/FAT fire budget was £42k. Now £51k

Assets to nearest thousand:

Cash. Was - £68k. Now £165k
Trading stocks account. Was £10k. Now £0
ISA. Was £72k. Now £80k
Pensions. Was £414k for both of us. Now £664k
Equity in buy to let property - Was £734k. Now £822k

Post buy to let mortgages, expenses and tax income. Was £23k per annum. Now £26k per annum.

Equity in residential property. Was £132k. Now £169k.



I might suggest you set up a spreadsheet where you consider all (1) income streams, (2) taxation on income (making appropriate personal allowance deductions) and (3) desired spend.

The issues you have..

- You are a long way from state pension and your partner has a further 2 years to wait
- You will be on the post 2016 state pension scheme...log on to your "Government Gateway" accounts to get an up to date state pensions forecast. It will show how far away you are from a full state pension.
- You will have to plan as to when you take your personal pensions and HOW you plan to take your personal pensions
- You have significant BTL assets but high mortgage outgoings (and will you want to be involved in BTL hassle when retired..I can tell you I don't)
- You are likely to have a very big Capital Gains Tax bill on your BTL properties (take advice or at least start looking into it)
- You are asset rich but it is tied up in property. It is giving you an income but your desired/required income is greater than your BTL income at this moment, I'd say you need to keep on working.


Image

You could add various tweaks to the spreadsheet as you go along - you might wish to add in a consideration of inflation for spend required, BTL income increases, state pensions increases (but you are so far away that these would be guesses), ad-hoc expenses (new car, holidays, new home, sale of BTL properties) or even if you have been left inheritances at some point in the future you could add these elements in.

The other thing....are your BTL properties rated at EPC "C" or better? I assume you are au-fait with the new regulations and possible requirements in 2025.

edit - I just noticed , I said "house running costs" in the spreadsheet...take this to mean "all outgoing costs" , spending money and monies to pay all bills (ie everything that detracts from your wealth).

edit 2. adjust BTL income as necessary for any increases. You might decide to sell in the future and this would be a very strong + increase in drawdown potential .

Snakey
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Re: How far off am I.

#563322

Postby Snakey » January 22nd, 2023, 4:46 pm

I'm your shadow self - when you were considering giving up work before deciding not to, I'd just gone and done it.

I could write an essay, but I'll stick to the basics.

As a single person, my maximum take-home pay if I avoided the 62% tax bracket was around £65k. I've picked up odd projects here and there that have covered my bills (let's say for the sake of easy maths, £15k a year). So if I'd stayed in full-time employment, I'd have around £75k more in the bank than I do.

If you gave me a choice, today, to go back in time to 1 April 2021 (the day I handed in my notice) knowing what I know now... I'd still do it. In fact, I'd worry about it a lot less than I did.

This is despite the changes of plan that might be needed as a result of the things that we didn't know about 18 months ago e.g. I now want to pay off my mortgage when my fixed rate runs out - which is going to take some juggling but the thing is, it'll still all work out OK.

There would be lots of things I'd do differently - cash in my investments before Ukraine, fix my gas and electricity for two years in August 2021 instead of one year, bulk-buy Topics before they stopped making them... but not the decision to be free. Not just for an extra £75k, not when I'm nowhere near a situation where I'm gonna starve for the lack of it.

There are some things you just can't put a price on. Don't get so hung up on watching a lovely number on a spreadsheet get even bigger that you forget that the sole purpose of that number is to be swapped for time - and they aren't making any more of that for any one of us.

(In any event, unless you're very unlucky, after a while the numbers get bigger all on their own and that's even more satisfying to watch.)

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Re: How far off am I.

#563541

Postby banjocountry » January 23rd, 2023, 6:47 pm

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.

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Re: How far off am I.

#563543

Postby banjocountry » January 23rd, 2023, 6:50 pm

monabri wrote:Image



Thanks. I have a spreadsheet right now but it doesn't analyse year by year. I just look at various scenarios now. e.g. from now to early retirement. from early retirement to 57, from 57 to 67 and then 67+

My spreadsheet doesn't allow for inflation whereas yours does. I'll have a look at incorporating yours in to mine.

Thanks again

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Re: How far off am I.

#563545

Postby banjocountry » January 23rd, 2023, 6:52 pm

Snakey wrote:I'm your shadow self - when you were considering giving up work before deciding not to, I'd just gone and done it.

I could write an essay, but I'll stick to the basics.

As a single person, my maximum take-home pay if I avoided the 62% tax bracket was around £65k. I've picked up odd projects here and there that have covered my bills (let's say for the sake of easy maths, £15k a year). So if I'd stayed in full-time employment, I'd have around £75k more in the bank than I do.

If you gave me a choice, today, to go back in time to 1 April 2021 (the day I handed in my notice) knowing what I know now... I'd still do it. In fact, I'd worry about it a lot less than I did.

This is despite the changes of plan that might be needed as a result of the things that we didn't know about 18 months ago e.g. I now want to pay off my mortgage when my fixed rate runs out - which is going to take some juggling but the thing is, it'll still all work out OK.

There would be lots of things I'd do differently - cash in my investments before Ukraine, fix my gas and electricity for two years in August 2021 instead of one year, bulk-buy Topics before they stopped making them... but not the decision to be free. Not just for an extra £75k, not when I'm nowhere near a situation where I'm gonna starve for the lack of it.

There are some things you just can't put a price on. Don't get so hung up on watching a lovely number on a spreadsheet get even bigger that you forget that the sole purpose of that number is to be swapped for time - and they aren't making any more of that for any one of us.

(In any event, unless you're very unlucky, after a while the numbers get bigger all on their own and that's even more satisfying to watch.)


I think the thing I can't get my head round is that I won't be cash flow positive until I'm 57 (i.e. pension money kicks in).

It seems wrong that I'd be loosing money from now until then. I feel like I need to have all my expenses covered before I retire which I know is wrong as there is a big cash buffer which can cover the shortage.

It's just a mental block that I'm struggling to get past.


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