Another FIRE review

[Gilgongo]

Having ramped my work down over the last few years and ramped up some extra-curricular activities, I'd now like to cut out the work completely.

It's a bit scary given the current economic state of things (and part time isn't really an option, nor would I want it in fact), so posting here for some views before I go for it. Hat tip to interesting posts from @the0ni0nking and @Greylocks who recently did similar, and to all who have offered great wisdom here over that time.

I'm aiming to resign in January, with my last day at the start of April. I'll be 57, married (wife is older, earning about £12-15K). Both of us in good health. One kid who just left university. No mortgage or debts. House in London worth about £700K. Full state pensions projected.

Based on a few years of bank/CC statements (and ignoring the COVID period), I'm aiming to cover outgoings of £37K p/a, made up of £25K "normal" spending and £12K for occasional extras (eg foreign travel, new kitchens, cars, etc.). Some years we'll spend more than £12K I'm sure, and some less.

Income will be primarily from dividends. About 70% from an ISA, the rest from a SIPP. About £28-30K as of this year but I'm assuming 15-20% less to be safe. Average TER 0.42%, platform fees about £500 p/a. Should be able to keep under the income tax threshold at least until state pensions come in.

I've allocated a £70K "cash bridge" to use until state pensions take over. We also have about 3 years of spending a cash buffer. The wife plans to keep working, and has about £150K split across an ISA and a SIPP roughly 70/30 bonds/gold (ETFs). We could use that to replenish said buffer if needed, and use it if costs start to ramp up towards the end.

I've toyed with the idea of buying an annuity with half of the investments. But I decided I'd like to keep the flexibility for now.

Overall I feel we've got a lot of cash going on. But then the aforesaid economic climate makes me feel a bit better about that so close to retirement at least.

Comments, as ever, are very welcome. Obligatory portfolio below.

G

ISA                                                
20-share HYP                            | £179,124.34
Merchants Trust Plc                     |  £94,746.75
City of London Investment Trust Plc     |  £92,309.17
iShares Physical Gold ETC               |  £55,233.60
Vanguard Global Aggt Bond ETF GBP H Inc |  £34,277.76

SIPP                                                       
iShares MSCI World Small Cap UCITS USD (GBP) Acc | £87,193.92
VT RM Alternative Income Retail GBP Inc          | £81,747.20
Vanguard FTSE Developed AsPac ex Japan USD       | £68,501.40
iShares GBP Corp Bond Ex-Financial UCITS         | £63,666.36
Vanguard S&P 500 UCITS ETF USD                   | £60,363.91
Murray International Trust                       | £47,798.85
                                                            
L&G PMC Multi-Asset 3 (employer's pension)       | £40,668.39 < -- plan to move to SIPP

[GrahamPlatt]

Congratulations.
Seriously, are you still debating with yourself whether it’s feasible?
I’d say you’re sitting pretty.

[Gilgongo]

Congratulations.
Seriously, are you still debating with yourself whether it’s feasible?
I’d say you’re sitting pretty.

Yeah. On the one hand, my rational mind thinks the same and I can't see a problem. But then on the other, I seem to think I've fooled myself into thinking that (no pun intended!). Psychology, eh?

[DrFfybes]

Congratulations.
Seriously, are you still debating with yourself whether it’s feasible?
I’d say you’re sitting pretty.

Yeah. On the one hand, my rational mind thinks the same and I can't see a problem. But then on the other, I seem to think I've fooled myself into thinking that (no pun intended!). Psychology, eh?

MrsF is very risk averse. It took me ages to convince her we could retire.

We'd got to the point with our early FS pensions we needed under 3% from investments, so she went part time for 12 months. That was before Covid, she's still 2.5 days until March when she will finally finish (yeah, right).

Since then we've been net savers, had an unexpected inheritance, and now need circa 1% from out investments to maintiain our lifestyle when she finishes, which will be amply covered by her SP in 4 ish years, so now our concern is avoiding leaving the taxman several times what our nieces and nephews will get.

We're also 5 years nearer to death, a lot less mobile than we were 5byears ago due to ongoing problems, and actually unable to do what we would like these days.

Go for it - it is a lot easier to reign in your spending when you can't walk the 4 miles a day to go and watch a GP, stand all day at a festival, or get out of a sportscar without help.

Paul

[tacpot12]

I agree you are well set for the retirement you want. I think you are being over-cautious about the potential for dividends to decline. I've been retired for six years, and converted my retirement portfolio from accumulation funds to dividend paying Investment Trusts and EFTs a year after retiring. I retired at age 53 so had to bridge two years before I could start to draw on my SIPP, so for the second of these years I was accumulating cash in the SIPP to give me a cash buffer of 1 year of income. Since then my dividend income has only ever gone up, and that was through the pandemic and various lockdowns, Ukraine war, cost of living crisis, etc. Assuming that your dividends won't increase at the same rate as inflation seems to be a more realistic planning assumption.

Hope you both enjoy it. I had a similar plan as to when I would hand my notice in (I also had to give three months notice), but the idiots made me redundant just before I resigned, so they paid me to start my retirement two months early!

[vand]

Congrats, you appear to be in great shape.

Never though I'd say this as a very paid up member of the "everyone should own some gold" school of thought, but dare I say I would consider replacing some of the gold with bonds if you can lock in today's rate for any decent length of time - 30% is a very high allocation to gold.

under simulation both 70/10/20 and 70/20/10 stocks/bonds/gold work better than 70/30/0 and 70/0/30

[Adamski]

Personally I also like holding lot of cash at the moment given high interest rates and savings rates up to 5%. You may want to hold even more if want certainty.

I like your portfolio, nice and simple.

Sounds like youvhave plenty of headroom already. You could move out of London and free up capital. Or are you planning to leave that as an inheritance?

[Gilgongo]

but the idiots made me redundant just before I resigned, so they paid me to start my retirement two months early!

I can live in hope! Interesting points about the dividends. On them not increasing at the same rate of inflation, I think we'll naturally spend a bit less in high-inflation times, but yes more realistic to plan against that.

MrsF is very risk averse. It took me ages to convince her we could retire.

I'm in a similar position, although more in the area of "What are you going to do all day?" - which is legit of course but I do have quite a lot planned. But it's a non-fiscal "factor" in all this to be sure.

dare I say I would consider replacing some of the gold with bonds if you can lock in today's rate for any decent length of time

Good point! Hm. Will think about that...

[DrFfybes]

MrsF is very risk averse. It took me ages to convince her we could retire.

I'm in a similar position, although more in the area of "What are you going to do all day?" - which is legit of course but I do have quite a lot planned. But it's a non-fiscal "factor" in all this to be sure.

You wait until she's still working part time to pay the bills and you're sat on your bum all day on TLF

[kempiejon]

I'm in a similar position, although more in the area of "What are you going to do all day?" - which is legit of course but I do have quite a lot planned. But it's a non-fiscal "factor" in all this to be sure.

Who says you have to do anything? The point of RE is you're in charge of your time. I think I've said on the boards before that idly staring out the window with my thoughts is a perfectly acceptable past time for me. I have enough things to fill my time without work and from previous times of non employment once I have the time it's easy to find more things to do.

[tacpot12]

I spent the first year of retirement doing all the jobs that had been put off at home for too long, but after that I found I needed something else to help fill the week and started volunteering a couple of days a week. It's very rewarding as I get to work on the front line providing a vital service, but I don't have to take any great responsibility for the overall service. I also took up a couple of new hobbies, which are great when it comes to Christmas and Birthday, when people want to know what to get you!

[Hariseldon58]

Clearly affordable, don't worry about timing , stuff always happens and it works out. Went fire at 49 in late 2007...

Saw portfolio value decline by around 40% in March 2009, dividends did hold up well and a cash bridge would have been useful....

The recovery period was very good for the portfolio, 7 out of 16 years have seen the portfolio end the year at an all time when adjusted for inflation, 9 years below a previous high, you will see volatility but inflation adjusted spending is around double.

Don't spend too little, things happen and having a surplus when you're limited in how you can spend would be ..frustrating.

[Snakey]

Who says you have to do anything? The point of RE is you're in charge of your time. I think I've said on the boards before that idly staring out the window with my thoughts is a perfectly acceptable past time for me.

I'm coming up to 2.5 years "retired", current age 51, and I feel inspired to list out the pastimes I've picked up since then:
- I'm learning a language on Duolingo
- I've joined the gym and go swimming every morning
- I read the paper properly and have a stab at the crossword etc (and I do this in the local park when the weather's nice)
- I walk across the park to the big supermarkets (a couple of miles away) rather than making the best of the smaller ones locally
- I visit family more often than I did, am more relaxed when I'm there (and not secretly resentful that that's my weekend/annual leave gone) and can stay for longer, and have even caught up with old school friends while there
- I've gone on a few city breaks
- I read more

The thing about that list is that there is nothing of any note on there (one particularly plain-speaking friend said, in amazement bordering on contempt, "What do you even DO all day?"). In particular, there is nothing that I couldn't have fitted in around full-time work if I'd really wanted to! But firstly, I don't care what anybody else thinks - they're the ones who had to get up and go to work today, not me! - and secondly, I've never been aligned with the modern fashion of over-scheduling. There are always people striding around the changing rooms/supermaket aisles/across the park in a mad rush because they've got somewhere they need to be next, and - although their daily achievements must dwarf mine - it makes me stressed just to watch them. Horses for courses.

Things I have felt zero need to do include:
- going back to work*
- volunteering my time
- taking on other people's tedium, so they can improve their day while good old Snakey looks after the kids/waits in for the plumber
- train for a marathon (or any other newly-discovered "ambition" whose main real purpose is to fill huge amounts of time and headspace)
- get a dog/take up an evening class in order to "meet people"...

*Although I was tempted from a financial perspective when the cost of living crisis set in. Funny isn't it, it's one thing to know in your head that of course these things are going to happen from time to time, but quite another to see it in action (like: oh, my investments are down by 10 - for now . But... what's that, the remaining 90 will only buy 75 worth of stuff - for ever? ). I've got over that now.

The way I see the endgame is that the absolute worst-case scenario is that you have to manage on your State pension alone - and really, how likely is it that things will be that bad? Even just owning your home (on which you could presumably take equity release in extremis as you'd surely be quite old when the money ran out) and having a few tens of thousands left in the bank puts you above a large percentage of the population.

[Gilgongo]

In particular, there is nothing that I couldn't have fitted in around full-time work if I'd really wanted to!

This is a very good point. The "weight" of a job is more than just the hours in the day. It robs you of some kind of agency I think. When I left university, I was a freelance translator while living in my parents house - rent-free! If the phone didn't ring from one of my agencies by 10:00am, I knew I'd not have any work that day so I used to just chill out. I could listen to music, go off on my bike, buy a bottle of wine. Whatever.

Then I got a "real" job in London and my entire life was compressed into weekends. The realisation of that - the "weight" of it was terrible for a few months. I got used to it. But I remember that feeling of lost freedom.

I'd like to get back to that state of mind where you can just look at the morning light and say to yourself "Well, what shall I do today?" and include "nothing" in my answer.

[rhys]

Then I got a "real" job in London and my entire life was compressed into weekends. The realisation of that - the "weight" of it was terrible for a few months.

I graduated in 1989. My first job, with Deloitte, started just before the August bank holiday. I recall feeling that it was quite wrong to be working in AUGUST! Later on, I recall the shock at having to request 'leave' in advance - and the realisation that my manager had to approve it before I could have any time off.

The upside of this was that I worked as much as I could, and retired just at the country went into lockdown. My wife, eight years younger, isn't impressed by the fact that I've withdrawn from the labour force. Personally, the pleasure at being able to do just what I like each day is worth it. Never mind the fact that I can afford to do this. My only regret is that by dropping out of the work force, I won't have any contacts to offer to my children (teenage) in ten years' time.

[DuncanM]

looks good, you can always take a part time job to earn pin money if you need to.