How far off am I.

[banjocountry]

Looking for when I can retire (sooner the better I keep telling my partner).

I'm currently 48 and partner 46.

We're quite frugal and the household annual spend for both of us is £27k living "normally". This includes residential mortgage but not the buy to let mortgages.

We did create a luxury/FAT fire budget just for fun and this worked out to £42k a year but realistically we'd never spend all that.

Current assets to nearest thousand:
£68,000 - Cash

£10,000 - Trading stocks account
£72,000 - ISA

£151,000 - Partners pension
£263,000 - My pension

£734,000 - Equity in buy to let property (£740,000 mortgage against £1,474,000 total value). Post buy to let mortgages, expenses and tax income I'd estimate at £23,000 per annum. I've not put rents up for a while so this could potentially be increased.

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

I also have some share options due next year. The price of these may vary but currently estimated to provide £80,000 pre-tax if price remains stable (and I stay in work until then)

Key problem is we've just hit a good saving patch. We can currently save approx £89k per annum. My thoughts are to jack it in once the share options can be cashed in and retire early but my partners thoughts are to carry on saving the £89k for as long as we can until one of our jobs becomes redundant or we've 100% had enough.

I'm thinking buying one more buy to let property with the share option cash would plug the shortfall in income and we could then retire living of that income and only dipping in to the ISA pre-55/57 retirement and then the pensions at 55/57 if need be.

Any advice appreciated.

[nmdhqbc]

been a while since we've had one of these
if you do not love your job quit right now. i make 27k about 2% of your wealth excluding your home.

[Araya]

Hi,

At 2.1% SWR you're well into 'highly likely to die with many millions' territory. This SWR never failed historically as long as you weren't wiped out in a single country bet/collapse. Consider that your rental income will be mostly tax-free once you quit. And then there's also an extra safety net from state pension in a couple of decades. You can likely live from rental income, pay off your residential mortgage and still have 0.5M in investments plus double state pension in some time. That's as waterproof as one can get.

[JohnB]

You have enough by a fair margin

[banjocountry]

Thanks for the replies. I do appreciate getting others thoughts.

I must admit it's a scary thought, stopping work.

I think it makes sense I wait for the share options to cash in next year. However sub consciously I feel like I'm might be using that as an excuse to delay and then find another reason to delay again next year.

For those that have stopped how have you got over the "mental block" side of things.

[Itsallaguess]

Thanks for the replies. I do appreciate getting others thoughts.

I must admit it's a scary thought, stopping work.

I think it makes sense I wait for the share options to cash in next year. However sub consciously I feel like I'm might be using that as an excuse to delay and then find another reason to delay again next year.

For those that have stopped how have you got over the "mental block" side of things.

I'm still working, but when I squint a bit I can start to see a slight brightness at the end of a working-life tunnel, but I know myself well enough to appreciate that I'm likely to suffer with the same mental blockers at some point, and have raised this issue a number of times over the years, discussing what's commonly known as 'One More Year' syndrome, and trying to garner some confidence from those that have gone through the same process, and let's face it, even the most confident of people are likely to have *some* level of nervousness at such a life-changing event being on the horizon...

Here's a link to a recent 'One More Year' thread - not sure it will help, but I thought I'd offer a link just to show the sort of processes I've been trying to look at to give me some personal confidence at some future point in time -

https://www.lemonfool.co.uk/viewtopic.php?f=30&t=29449

It sounds like you're in a good position, and I'd be keen to hear of your progress, both physically and mentally, through the coming period of change in your circumstances...

Well done, and Good Luck!

Cheers,

Itsallaguess

[kempiejon]

Thanks for the replies. I do appreciate getting others thoughts.

I must admit it's a scary thought, stopping work.

I think it makes sense I wait for the share options to cash in next year. However sub consciously I feel like I'm might be using that as an excuse to delay and then find another reason to delay again next year.

For those that have stopped how have you got over the "mental block" side of things.

A couple of others have said you have enough, I'd say you've got too much what are you going to do with all that money - do you have heirs or a bequest in mind ultimately?

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

If you have enough money and don't love working how about a half way house can you reduce your hours? Could you find something enjoyable to do for less money? I've a couple of friends one a writer another with a forge who are hoping to monetise hobbies when work is reduced.
My own plan is to work flexibly once I have financial independance from wages when I expect I'll take casual work, do some volunteering or take a few months off to travel etc.
Easing oneself into the change might help the mind set.

[vrdiver]

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

[Snakey]

In the end I didn't get OMY syndrome. My situation is that I have great technical skills and terrible political skills and although my 20s were fine while passing exams and being one of a pool of nameless commoners, it then became obvious that once into the actual pyramid I was going to struggle with promotions at every step of the way and probably never reach what - from a pure technical challenge perspective - would be my full potential.

My (top secret) "career ambition" was always to retire at 50, and I left my job a few weeks ago at 49. The trigger was having come off worst in just one too many political power plays and I crunched the numbers and thought yeah you know what, I don't have to put up with this any more. It's early days of course, but as yet I have not for one single second wished that I hadn't done it - even for "one more year".

There are a couple of threads of mine knocking about to remind me of how rubbish my life was in the run-up to "retirement" - getting through that home straight, when you are finally finally in a position to stash away tens of thousands per year, is supposed to be the best bit but for me it wasn't worth the stress once I had what I needed. All the "yes, but I'm having the last laugh really" wasn't enough to switch off the way it felt whenever I got passed over, kept down, or someone successfully put the boot in. And ultimately, all joking aside, there's a reason these jobs pay so much. There is a cost to doing them that goes way beyond the inconvenience of being stuck at a desk while the sun's shining.

Psychologically your positions will be entirely different, and so your personal calculations of whether it's worth it will be different too, but you each need to weigh up the push and pull factors. There's a pretty neat article in the Guardian today that you might like which covers almost exactly this (although naturally with the assumption that you'll need to carry on working in some form or other).

My OMY debate was so much easier than I'd expected in the end. I did a small handful of OMMs, but only because with a salary kept below the personal allowance clawback band only by virtue of big pension contributions (and I'm over the LTA), and still being in lockdown with lousy weather etc, the cost/benefit was so strongly in favour of staying until a little way into the new tax year given the accrued holiday I had piled up.

The main risk I see for myself now I've pulled the plug is a pretty standard non-financial one. I've left a highly technical role working with rules that change/develop every year. If I discover not now but in three years' time that my life without work is meaningless and empty and I want to run back to full-time employment, it will be too late. But that isn't a thing that OMY would solve, in fact it's the opposite because if such a crisis of self going to happen then it'll happen whenever you retire and surely you're better off going through it when you're younger.

The main risk/danger I see for you is that you're not an "I", you're one half of a "we". You have a double risk of it not feeling as good as you'd expected in that even if only one of you regrets it that'll sour things for you both. If one of you wants to go back into employment that's going to change the future experience of the other one for the worse, unless your ambition is to travel alone or you can keep yourself busy in the local neighbourhood. Plus, if you ever split up, so do those assets - you'd need to each buy a house for one-half of that equity (no new mortgage if you don't have an income), sell the BTL and pay tax on that equity and each try to make a living from one half of what's left, pay the lawyers if you're legally married and the split isn't amicable, and suddenly those finances look shaky.

For the BTL when talking about putting up the rent you said "I". Is that property yours alone? If so, have you discussed the possibility of your other half carrying on working and you giving up? That might be an interesting halfway house.

[CliffEdge]

I would say give yourself at least three years to decompress.

[banjocountry]

Thanks.

What do you mean give yourself 3 years to decompress? Is that work part time for 3 years?

I'm hoping to use my spare time to do more exercise. Go out for walks, join a gym, go cycling.

Also hoping to visit family and friends more often.

[Hariseldon58]

I’m not sure they have enough, they have assets that are highly concentrated in property.

BTL landlords are exactly popular, have been subject to a lot of harsh regulatory expansion and tax changes.

Markets are very high in property and equities. I’d take the £89k for a few years, if you really get cheesed off you can quit. I retired at 49 in 2007 and didn’t expect 2008/2009 !!!

Think about what you’ll do, lifestyle creeps when you have time and relative youth.

[Araya]

I’m not sure they have enough, they have assets that are highly concentrated in property.

BTL landlords are exactly popular, have been subject to a lot of harsh regulatory expansion and tax changes.

Markets are very high in property and equities. I’d take the £89k for a few years, if you really get cheesed off you can quit. I retired at 49 in 2007 and didn’t expect 2008/2009 !!!

Think about what you’ll do, lifestyle creeps when you have time and relative youth.

Following this logic one should never retire because markets are always either high (might crash anytime - bad!) or just crashed (might keep going down? - also bad!). One should base one's decision to retire or not on logic and numbers, not personal opinions on whether stocks are expensive, and definitely not on public perception of landlording.

So, back to numbers and facts:

NW: £1.43M

Annual expenses: £27k

NW after paying off residential mortgage: £1.12M

Expenses after paying residential mortgage (estimate): <£20k

Years of expenses saved: >55

Even if OP's money just kept with inflation and made zero return forever, and state pension was cancelled, they could live until they are both 100+ and not run out of money. Now, there's close to zero chance of things going that bad over the next half a century. Most likely state pension will still be there in 20 years for OP and his wife, and this alone will cover their expenses. So they have 55x annual expenses to bridge ~20 years till state pension. Nothing is ever 100% guaranteed, but OP's situation looks as close to 100% safe as it gets. I do agree though that possibly reducing real estate exposure somewhat and diversifying might be a good idea.

[Kantwebefriends]

If I were you I'd be bunging excess income into your pensions. Get maximum tax relief while it is available.

Check on whether it will be worth your while to top up your NICs to give you full State Retirement Pensions in due course. (It almost certainly will be.)

Pocket the options cash.

Retire.

Think about how to realise the capital gains on your BTLs without paying too much tax. Currently there's no CGT to pay on death, so there's one strategy right away. Another would be to sell while your taxable incomes are low e.g. after retirement but before you begin your pensions.

[Hariseldon58]

So, back to numbers and facts:

NW: £1.43M

Annual expenses: £27k

NW after paying off residential mortgage: £1.12M

Expenses after paying residential mortgage (estimate): <£20k

Years of expenses saved: >55

Even if OP's money just kept with inflation and made zero return forever, and state pension was cancelled, they could live until they are both 100+ and not run out of money. Now, there's close to zero chance of things going that bad over the next half a century. Most likely state pension will still be there in 20 years for OP and his wife, and this alone will cover their expenses. So they have 55x annual expenses to bridge ~20 years till state pension. Nothing is ever 100% guaranteed, but OP's situation looks as close to 100% safe as it gets. I do agree though that possibly reducing real estate exposure somewhat and diversifying might be a good idea.

The OP has his assets very concentrated in one asset class, he has significant debt relating to that asset. The pension assets can’t be touched for some years.

He has £150,000 in assets that could be realised quickly, along with £917,000 of debt relating to £1,783,000 of property.

Property generally works out well but I remember times when it had sticky periods, refinancing a BTL mortgage without a job is not easy, I looked to buy a BTL a couple of years ago and was offered £15,000 mortgage, despite no debt and cash and equity assets ( realisable within a few days if need be) north of £2m (strange but true, salaried income was required to cover the loan)

The unexpected gets you, tenants stop paying, can’t get them out, problems with the buildings etc

In more easily realisable assets and without debt, then the amount indicated would work fine of course but would you go into retirement for perhaps 50 years with a concentrated directly help property portfolio and debt of nearly £1m

[Araya]

In more easily realisable assets and without debt, then the amount indicated would work fine of course but would you go into retirement for perhaps 50 years with a concentrated directly help property portfolio and debt of nearly £1m

Good point re: concentration in real estate. In OPs place, having pretty much won the game, I'd be looking to downsize/derisk RE portfolio rather than buy another property. And of course pay off mortgage on residential property.

[Dod101]

You are certainly quite frugal, in fact I do not know how 2 of you can live off £27,000 per annum. Are you sure that is correct, including not just month to month expenses but also replacement of clothes/furnishings and so on? Be realistic about that and you may also want to consider a foreign holiday from time to time.I would hang in there and get a few more share options provided the company is worth it.

I would certainly broaden out your investment income from BTL to share dividends and you might want also to upgrade your accommodation which seems rather modest at £309,000 although that depends on where you live.

Dod

[Araya]

in fact I do not know how 2 of you can live off £27,000 per annum.

Median household spending is £31k per annum and median household size is 2.4 persons. £27k looks spot on for a median couple...

[Dod101]

in fact I do not know how 2 of you can live off £27,000 per annum.

Median household spending is £31k per annum and median household size is 2.4 persons. £27k looks spot on for a median couple...

Bl**dy H*ll! I must be a spendthrift.

Dod

[banjocountry]

I’m not sure they have enough, they have assets that are highly concentrated in property.

Thanks for the reply. I do have a high percentage in property and have always thought I need to rebalance and putting more in to stocks and shares. There are 8 buy to let properties (owned jointly with my partner) and we manage them all ourselves. They're all local to us. You do hear of some horror stories in BTL but I guess I've been quite fortunate and not had too many issues, which hasn't put me off investing another one.

If I were you I'd be bunging excess income into your pensions. Get maximum tax relief while it is available.
Check on whether it will be worth your while to top up your NICs to give you full State Retirement Pensions in due course. (It almost certainly will be.)
Pocket the options cash.
Retire.
Think about how to realise the capital gains on your BTLs without paying too much tax. Currently there's no CGT to pay on death, so there's one strategy right away. Another would be to sell while your taxable incomes are low e.g. after retirement but before you begin your pensions.

Thanks for the reply. I generally put anything that attracts higher rate tax in to my pension. The rest goes in to the ISA/property purchases. We've only been doing ISA's for a couple of years. Prior to that it was all pension/property.

I've got full NI contributions for a state pension. My partner has a few years to go to get there (54).

I'd never really thought about selling the properties. My strategy is that they would bring in my "operating income" so to speak and I can dip in to my savings for any larger capital expenditures. So ideally the properties would cover the annual £27k living expenses (they don't yet) and then I could use the pension/ISA to cover any shortfalls due to tenancy problems or costs like boiler replacements, etc.

My partner keeps telling me I had a cheap mid-life crisis. I went through a phase of buying cycles. Must have bought about 10 at one point. Fortunately I sold them all for pretty much what I paid so wasn't too out of pocket. They keep telling me to have some extra funds in case I have a "proper" mid-life crisis.

Property generally works out well but I remember times when it had sticky periods, refinancing a BTL mortgage without a job is not easy, I looked to buy a BTL a couple of years ago and was offered £15,000 mortgage, despite no debt and cash and equity assets ( realisable within a few days if need be) north of £2m (strange but true, salaried income was required to cover the loan)

The unexpected gets you, tenants stop paying, can’t get them out, problems with the buildings etc

In more easily realisable assets and without debt, then the amount indicated would work fine of course but would you go into retirement for perhaps 50 years with a concentrated directly help property portfolio and debt of nearly £1m

I've looked in to refinancing the properties if I retired early with my broker and there are a lot more lenders that cover this now. They essentially look at the income the properties are generating to ensure they cover the debt. They're not necessarily the cheapest but there are quite a few lenders in this sector now.

You're right regarding the amount of debt. It's a lot. It bothered me a lot when starting out. I'm more relaxed about it now but it might be worth de-leveraging the BTL portfolio rather than buying another BTL. Alternatively I do like the suggestions made to covert the equity in to stocks and shares.

Good point re: concentration in real estate. In OPs place, having pretty much won the game, I'd be looking to downsize/derisk RE portfolio rather than buy another property. And of course pay off mortgage on residential property.

[/quote]

Thanks. I do like the idea of downsizing/de-risking the portfolio. Not really thought of that.

I've never bought in to paying off the residential property mortgage early. I've always been told this is the best kind of debt as it's the cheapest. I'm on a lifetime tracker with offset. Any cash I have is put in to the offset account and reduces my monthly payment (note the budget figures assume no offset and a full mortgage payment).

Would be interesting to know why you feel paying the residential mortgage off early over the others would be good. Thanks in advance.

You are certainly quite frugal, in fact I do not know how 2 of you can live off £27,000 per annum. Are you sure that is correct, including not just month to month expenses but also replacement of clothes/furnishings and so on? Be realistic about that and you may also want to consider a foreign holiday from time to time.I would hang in there and get a few more share options provided the company is worth it.

I would certainly broaden out your investment income from BTL to share dividends and you might want also to upgrade your accommodation which seems rather modest at £309,000 although that depends on where you live.

Dod

We used to spend a lot more but then I got in to budgeting.

I initially used YNAB but now we have bank accounts that allow you to categorise spend and keep pots. It's saved us a fortune.

Essentially our incomes get paid straight in to our offset saving account so we don't get greedy and spend it all. From there a fixed monthly payment goes onwards in to 5 accounts:

1) My personal spend
2) My partners personal spend
3) Fixed monthly household expenditure (utilities, mortgage, life insurance, tv license, etc)
4) "Pots" account to build up for regular but not monthly expenditure (holiday, medical, car and house insurance, xmas, birthdays)
5) Groceries

We spend what's in the accounts and anything left over stays and rolls over.

The £27k budget is based on the above which we've run for a 5 years. We tweak the budget every so often

The budget doesn't cover one off unexpected expenditure e.g. boiler repair.

It's interesting that you mention the accommodation is modest at £309k. I'm in Yorkshire and the area I'm in that provides a 4 bed detached house with a medium sized garden. I'm happy with it. However my partner has murmured that they'd like to move up to something bigger. I keep joking this is FOMO as some of their family has recently upgraded to larger premises. We did go look at a 5 bed house with considerable land for £500k not too long ago. The current owners were selling up as they'd be "rattling around in it". I kind of thought we'd be the same.

In the end I said I'd be happy to upgrade if they really wanted to but we'd have to put delay and early retirement plans. They've cooled off on the idea since. I think the thought of pushing the retirement finish line further away wasn't too appealing.