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When to retire?

Including Financial Independence and Retiring Early (FIRE)
Spet0789
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Re: When to retire?

#481658

Postby Spet0789 » February 20th, 2022, 12:56 pm

DrFfybes wrote:
BlackBeard wrote:Exactly my point, when to retire? I have friends who have said don’t leave it to late to retire, and having done the maths it looks like I’m not that far off, my current outgoings have been minimal in the last 12 months as had large tax bills to pay and I have still managed to live comfortably, but I don’t want to leave it to late and then end up having to leave a large pot to the cats home, so tying to find that balance! Wish I had Mystic Megs direct phone number.


You used to be able to phone her, but it was 150p/minute. It's all Email and Facebook these days.

https://www.mysticmeg.com/contact

As for "can you afford it"?.. you say you spend £60k. Our spend has gone up post retirement as we're out and about more - lunches out, entrance to attractions, cakes and coffee, more fuel, eating out, weightwatchers subscriptions, etc. Given your asset base assuming business valuations are correct then it really shouldn't be an issue, you could put it under the mattress as cash and last 30 years (excluding inflation) so you need growth to cover inflation.

I have global funds and sell down for income, I got another chunk to invest last week when I settled mum's estate, but when markets are moving 3% in days, that's 6 months' of living expenses wiped out, or regained in no time. With such uncertainty that is why you get the 3.5-4% suggestions.

Paul


Money saving tip. Eat less cake, cancel the weight watchers subscription!

EthicsGradient
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Re: When to retire?

#481698

Postby EthicsGradient » February 20th, 2022, 3:16 pm

BlackBeard wrote:When is the best time to retire and become financially independent, and tax efficient?

I am 56 years young with a partner, no dependants, own home no mortgage, current investments spread across ISA, SIPP's and self managed investment account, earring a return of 5% and capital growth at 8%, BTL property no mortgage, a business worth around 200K and passive business interests worth 900K

Sipp is no where near the LTA, but total of savings and investments is at that amount.

As I have no dependants I want to make sure I take the plunge and retire at the right time so as not to end up leaving anything left to the cats home or worse the government!

If you really want to minimise both the amount you leave to charities, other people or the government, then the endgame should be to sell all your assets, including your house, and buy an index-linked annuity covering the £60k for you both, plus the rent on the equivalent house. That way, you've let the annuity company work out how much you need, and you have your guaranteed income while either of you is alive, but nothing left after that apart from current accounts and maybe a savings account for emergency payments. There might be a problem if rents increase significantly faster than the general inflation rate, I suppose.

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Re: When to retire?

#481790

Postby tjh290633 » February 20th, 2022, 11:20 pm

1nvest wrote:Because if someone has enough, why take the risk of accumulating more that they might never spend themselves anyway. Historically both stock prices and dividends have collapsed more than 75%, potentially leaving a former 'enough' having become 'insufficient'.


I guess you are thinking of 1974, when shares fell dramatically, but also bounced back very quickly. From my own records, dividend income was virtually unaffected.

More recently, dividends have fallen in the 2008 setback and again in the reaction to the pandemic, but they soon bounce back. That is why a cash reserve makes sense. Staying fully invested through such shocks has proved to be a good move, as the recovery inevitably comes.

TJH

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Re: When to retire?

#481797

Postby Steveam » February 21st, 2022, 3:23 am

TJH wrote: “… as the recovery inevitably comes.” Until it doesn’t! I understand the point Terry is making but there really is no certainty. Individual markets collapse, the system might be inherently fragile or have become so in ways we can’t yet see. The recovery might happen but take 50 years … Aliens land in Central Park. Any plan is based on assumptions and one of the assumptions in financial plans is some degree of continuity but I would try to bring these assumptions out into the open and then address them.

Best wishes,

Steve

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Re: When to retire?

#481805

Postby 1nvest » February 21st, 2022, 7:09 am

tjh290633 wrote:
1nvest wrote:Because if someone has enough, why take the risk of accumulating more that they might never spend themselves anyway. Historically both stock prices and dividends have collapsed more than 75%, potentially leaving a former 'enough' having become 'insufficient'.


I guess you are thinking of 1974, when shares fell dramatically, but also bounced back very quickly. From my own records, dividend income was virtually unaffected.

More recently, dividends have fallen in the 2008 setback and again in the reaction to the pandemic, but they soon bounce back. That is why a cash reserve makes sense. Staying fully invested through such shocks has proved to be a good move, as the recovery inevitably comes.

TJH

No Terry.

1899 Equity Price Index = 100; Equity Income Index = 100
1920 Equity Price Index inflation adjusted = 29; Inflation adjusted Equity Income Index = 14

It took to 1959 before the inflation adjusted price index recovered to 100+ levels; Equity Income index was still down at 55 levels.

Fundamentally the coincidence of bad events, Predominately the mid/late 1910's Spanish Flu pandemic, WW1, transition of Pound no longer being the primary reserve currency.

Stock price and income can/have both halved or more and stay down longer than a reasonable retirement timescale (20, 30 years).

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Re: When to retire?

#481827

Postby DrFfybes » February 21st, 2022, 9:36 am

1nvest wrote:1899 Equity Price Index = 100; Equity Income Index = 100
1920 Equity Price Index inflation adjusted = 29; Inflation adjusted Equity Income Index = 14

It took to 1959 before the inflation adjusted price index recovered to 100+ levels; Equity Income index was still down at 55 levels.

Fundamentally the coincidence of bad events, Predominately the mid/late 1910's Spanish Flu pandemic, WW1, transition of Pound no longer being the primary reserve currency.

Stock price and income can/have both halved or more and stay down longer than a reasonable retirement timescale (20, 30 years).


If you go back far enough, anythig can have happened, meteorites, Ice ages... The 1900-1920 was a particular set of circumstances. What are the chances of getting a Global flu pandemic, the Yuan taking over as the Global currency, AND having a major European conflictin such a short space of time these days?

Oh, erm,...

Re hedging equities with Gold...

Apparently, in the USA, Gold has almost got back to its 1980 inflation adjusted peak. Between 1980 and 2000 it lost 80% of its value in real terms.
https://www.macrotrends.net/1333/histor ... year-chart

The data is only available for US markets and inflation figures.
https://www.macrotrends.net/2324/sp-500 ... chart-data

Gold gained most in 2000-10, when the S&P lost 60%.

As a retiree using investments for income, when markets start to drop and gold starts to rise, do you need to sell an appreciating asset over a depreciating one? This isn't easy, even with hindsight. And even during the decade long dips (or market crash years) Equities still provide an income stream. If you sell off the Gold to maintain the income, you still end up losing out. Hence 3 years' spend in cash, used to TOP UP the income as it drops should in reality last 5-6 years.

I can see how Gold/Equities balance as an investment, but how does it operate as an income stream?

tjh290633
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Re: When to retire?

#481918

Postby tjh290633 » February 21st, 2022, 5:23 pm

1nvest wrote:No Terry.

1899 Equity Price Index = 100; Equity Income Index = 100
1920 Equity Price Index inflation adjusted = 29; Inflation adjusted Equity Income Index = 14

It took to 1959 before the inflation adjusted price index recovered to 100+ levels; Equity Income index was still down at 55 levels.

Fundamentally the coincidence of bad events, Predominately the mid/late 1910's Spanish Flu pandemic, WW1, transition of Pound no longer being the primary reserve currency.

Stock price and income can/have both halved or more and stay down longer than a reasonable retirement timescale (20, 30 years).

Of course there was a war on. Think about Consols and War Loan. How did they fare?

The composition of the main index might be instructive. Originally full of railways, textile manufacturers, and other declining industries. I did have the history of the FT30 index somewhere. The Dow might be a better one to look at. Mutatis mutandis and all that.

TJH

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Re: When to retire?

#481974

Postby AWOL » February 21st, 2022, 9:42 pm

https://earlyretirementnow.com/start-here/

I would take the time to study the Safe Withdrawal Rate articles at the above website and populate the Google Sheet that is linked from the site. It uses historical US market returns but can be hacked if required. Volatility and the pound cost ravaging effect in drawdown mean that maintaining real returns requires quite conservative drawdown rates. If you don't wish to bequeath anything then you can be much more aggressive. I recommend working out your own rates using supplemental cash flows like rental income, final salary or state pensions.

I would also recommend considering the CAPE based rule.

Finally it is worth considering that the future could always be worse than past market returns.

Ultimately one has to decide how much and which risks to accept.

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Re: When to retire?

#482040

Postby Darka » February 22nd, 2022, 9:29 am

There is only one thing guaranteed; one day you will die.

I would chose to retire sometime before then, overthinking the future and making sure you can protect against every eventuality will ensure you die before you retire.

Time is the one thing you can never get more of.

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Re: When to retire?

#482663

Postby Kantwebefriends » February 25th, 2022, 12:05 am

BlackBeard wrote: I want to make sure I take the plunge and retire at the right time so as not to end up leaving anything left to the cats home or worse the government!


One way to avoid that horrible denouement is at age, say, 75 use your remaining capital to buy an annuity.

MrFoolish
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Re: When to retire?

#482679

Postby MrFoolish » February 25th, 2022, 8:02 am

Darka wrote:There is only one thing guaranteed; one day you will die.

I would chose to retire sometime before then, overthinking the future and making sure you can protect against every eventuality will ensure you die before you retire.

Time is the one thing you can never get more of.


Agreed. You can always spend less in those years where investment returns are low. If you think you can't manage to do this then you might want to examine your priorities in life.

tjh290633
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Re: When to retire?

#482721

Postby tjh290633 » February 25th, 2022, 11:44 am

Kantwebefriends wrote:
BlackBeard wrote: I want to make sure I take the plunge and retire at the right time so as not to end up leaving anything left to the cats home or worse the government!


One way to avoid that horrible denouement is at age, say, 75 use your remaining capital to buy an annuity.

What is so horrible about leaving your estate to a favourite charity?

TJH

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Re: When to retire?

#482798

Postby UrbanAchiever » February 25th, 2022, 6:30 pm

Darka wrote:There is only one thing guaranteed; one day you will die.

I would chose to retire sometime before then, overthinking the future and making sure you can protect against every eventuality will ensure you die before you retire.

Time is the one thing you can never get more of.


Absolutely. I'm all for careful financial planning for retirement, hence one of the reasons I come to these forums. But never forget that the future is unknown.

My mum and dad retired early. My dad was 52, my mum 49. Eight years later my mum died of motor neuron disease. The last 2 years of her life were unimaginably horrific. Thank god they retired when they did. At least she had 6 amazing years of not working and living life to the full.

This was a big lesson to me. I won't be able to afford to retire as young as they did, but I have decided on a retirement age of 55, even though I won't be able to access my pension until I'm 57.

I just hope I live long enough to get there and to enjoy it if I do.

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Re: When to retire?

#482803

Postby Darka » February 25th, 2022, 7:26 pm

UrbanAchiever wrote:Absolutely. I'm all for careful financial planning for retirement, hence one of the reasons I come to these forums. But never forget that the future is unknown.

My mum and dad retired early. My dad was 52, my mum 49. Eight years later my mum died of motor neuron disease. The last 2 years of her life were unimaginably horrific. Thank god they retired when they did. At least she had 6 amazing years of not working and living life to the full.

This was a big lesson to me. I won't be able to afford to retire as young as they did, but I have decided on a retirement age of 55, even though I won't be able to access my pension until I'm 57.

I just hope I live long enough to get there and to enjoy it if I do.


People get carried away trying to plan for everything that could go wrong and end up working "one more year", often repeatedly; sacrificing the most important resource they have, time.

My father died soon after retiring and I decided that I wanted to have as much retirement as I could, especially as my wife is older than me.

Since retiring last September, inflation has increased, war has started and energy bills are climbing, but I do not regret my decision to retire at all.

We are starting to plan some holidays etc for the coming months and of course will enjoy those (hopefully :D) but the joy of not working; no more managers, no more pointless appraisals, meetings, annoying colleagues, etc has been utter bliss!

I highly recommend it!

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Re: When to retire?

#482883

Postby 88V8 » February 26th, 2022, 10:08 am

Darka wrote:People get carried away trying to plan for everything that could go wrong and end up working "one more year", often repeatedly; sacrificing the most important resource they have, time.
...the joy of not working; no more managers, no more pointless appraisals, meetings, annoying colleagues, etc has been utter bliss!

Do so agree. I had more than a belly full of that lark, and that was before the woke/gender nonsense came along, and the plague of the mobile phone and being 'on' 24/7.

I was working for a company with poor management, and rather fed up. I took a cursory look at our finances and decided to retire.
No great planning.
I just resigned, aged 56.
And have not regretted it.
Five years later we did that classic thing of moving to the country.

Most people can cut their spending a lot if needs be.
For me, nothing outweighs and benefit of not having to get up and commute to work.
Well, not that sort of work.
My household jobs list today is quite extensive, but it's my list and not someone else's.

As I said, the OP has ample funds on which to retire, and he should stop dithering and just do it.

V8

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Re: When to retire?

#482977

Postby AWOL » February 26th, 2022, 4:08 pm

For me I must say the general feeling of retirement is one of being my own boss, doing what my family needs done and what I want to do. If I want to go up a hill today then I can, if I want to run up then I can, if I want to ski then I can, If I want to lie around reading books then I can.

However looking back at work there is one thing that I absolutely hated and for most people this will seam trivial but to me it was a nightmare and that was self-appraisal. I'd get my self-appraisal forms returned and told that I needed to re-tell my successes showing how I was the pivotal hero behind each success and I just never saw it that way. I loathed it.

For the first two years of retirement I did miss the endless queue of urgent problems needing solved which I would immerse myself in. This seams to be a common thing and I think anyone approaching retirement should bear this in mind.

Finally, I would like to highlight that for most people it is much easier on the emotions going at a time of your choosing than being forced to go. Being made redundant often feels like being dumped and I have known many people to have the start of their retirement poisoned by this even though it was in their financial best interests. Consequently I recommend choosing an exit if at all possible. Events may overtake one but otherwise this is a good way to retain a feeling of being in control of ones destiny rather than thinking "I gave them the best years of my life and this is the thanks I get".

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Re: When to retire?

#482989

Postby kempiejon » February 26th, 2022, 5:08 pm

AWOL wrote:For me I must say the general feeling of retirement is one of being my own boss, doing what my family needs done and what I want to do. If I want to go up a hill today then I can, if I want to run up then I can, if I want to ski then I can, If I want to lie around reading books then I can.

However looking back at work there is one thing that I absolutely hated and for most people this will seam trivial but to me it was a nightmare and that was self-appraisal. I'd get my self-appraisal forms returned and told that I needed to re-tell my successes showing how I was the pivotal hero behind each success and I just never saw it that way. I loathed it.

For the first two years of retirement I did miss the endless queue of urgent problems needing solved which I would immerse myself in. This seams to be a common thing and I think anyone approaching retirement should bear this in mind.

Finally, I would like to highlight that for most people it is much easier on the emotions going at a time of your choosing than being forced to go. Being made redundant often feels like being dumped and I have known many people to have the start of their retirement poisoned by this even though it was in their financial best interests. Consequently I recommend choosing an exit if at all possible. Events may overtake one but otherwise this is a good way to retain a feeling of being in control of ones destiny rather than thinking "I gave them the best years of my life and this is the thanks I get".


I have been made redundant twice, and I'm hoping for a third, first time the timing suited me, it was part time job and I wasn't invested in them at all. 2nd time was unexpected and upsetting from a company I had given 13 good years it took me a few months to get over it. Hopefully next time will be soon and liberating. Where I work my department has been threatened with a review since 2019 there's bee a couple of false starts but I've been informed that it's coming soon. If I was reviewing my role I'd see it off. I really am under utilised as the direction of the business has made my little expertise less needed. Those doing the review might have other thoughts but hopefully by stating I'd be keen to reduce my hours up to and including voluntary severance they might see me as an easy win.

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Re: When to retire?

#483007

Postby AF62 » February 26th, 2022, 6:55 pm

AWOL wrote:Finally, I would like to highlight that for most people it is much easier on the emotions going at a time of your choosing than being forced to go. Being made redundant often feels like being dumped and I have known many people to have the start of their retirement poisoned by this even though it was in their financial best interests. Consequently I recommend choosing an exit if at all possible. Events may overtake one but otherwise this is a good way to retain a feeling of being in control of ones destiny rather than thinking "I gave them the best years of my life and this is the thanks I get".


The organisation I worked for announced it was undertaking a large reorganisation in 2014, and it seemed quite possible at that time it would result in my redundancy (and my wife’s as she worked in the same organisation, although in a different discipline), along with many thousands of other employees.

Roll on through 2015 and into 2016 and the redundancies across the organisation started, office by office across the country, a few hundred here, a few hundred over there. People you had worked closely with suddenly vanished. And so it continued through 2017, 2018, and 2019.

Although there were theoretically timescales, nothing was certain at all - not even the likelihood of redundancy itself. HR would not commit itself to anything.

Every time the organisation made an announcement so much time would be wasted on employees talking about what it meant for them.

Eventually in December 2019 there was some certainty on mine and my wife’s position, with confirmation at the start of January 2020 that we would both be made redundant.

But when?

HR were still being utterly elusive. Even after sending us letters that we would be made redundant, they refused to being pinned down to a definitive timescale as to when. The best they would offer was indicating it might be in the autumn of 2020, but that might change.

The delay to providing definitive information meant yet more time was wasted by employees debating what was going on.

And then of course as soon as we were told at the start of January 2020 the local management then started to plan how the work would be reallocated for those being made redundant.

The result being that not only were people immediately demotivated at how they were being ‘written out’ whilst they were still employees. I ceased doing any meaningful work by March as all my responsibilities had been moved to others, and most of those being made redundant had either effectively had their work removed by late spring / early summer or frankly given up caring about anything they did.

However by then the pandemic had happened, and by late summer the redundancy date moved back to 31st December 2020. And this was despite the fact that those being made redundant were ‘working from home’ with nothing to do.

As it turned out they paid me for about eleven months for doing nothing, including four months extra pay I didn’t think I was going to get.

The redundancy payment itself was exceedingly generous, but even that caused huge concern and turmoil within those being made redundant as no financial or legal advice was being provided about the various options open to people.

And then there was the (unsaid) discontent from those not being made redundant and not receiving the exceedingly generous redundancy payments.

For my wife and myself it meant we could retire a couple of years earlier than we had planned to and be in a very good financial position.

However I would have far far preferred being able to pick a retirement date, rather than having an HR department saying “dunno” (and ‘don’t care’) to what date we would be leaving, until right to the wire.


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