Retirement Investing (inc FIRE)

[nadia77]

Hi everyone,

Diving into the realm of Retirement Investing, including the intriguing concept of FIRE (Financial Independence, Retire Early). What strategies are you employing to secure a comfortable retirement? Whether it's traditional investments or exploring the FIRE movement, let's swap insights. Have you discovered any hidden gems or challenges along the way? Share your wisdom on financial freedom and early retirement—it's a journey we're all navigating, and collective knowledge makes it even more rewarding!

[monabri]

Welcome! Why not start the conversation by posting some ideas you are considering for discussion?

[Urbandreamer]

In my experience there are no hidden gems.

Sure different opinions abound, but no secrets.

Take for example the seminal work "Your money or Your Life", arguably the book that started the FIRE movement.

What does it say.
Spend less than you receive.
Know what and where you spend.
Invest the surplus.
Seek ways to increase income and hence the surplus.
Seek ways to spend less and hence increase surplus.
Consider what you need to live with no income, see above.
Use the 4% rule plus a safety buffer to work out the capital requirements.

Sure they argue for investing in government bonds rather than equities, but basically their methods are what any and all would suggest.

The reason that the book is seminal, is not it's methods. But the concept that Financial Independence is something that we can and should aim for. Indeed despite arguably starting the FIRE movement, it spends much time considering what to do if you don't actually want to retire.

I like and recommend the book "Beyond the 4% rule", but it's not rocket science. It's a book about risks and risk management. It's seminal concept is that you should think about what you desire financially when you cease work. How much risk you are willing to take and the risks that you must accept that are outside of your control.

What do you regard as "traditional investment" with respect to retirement investing? I fear that in my day that meant ignore the subject and hope that someone else, the company or the government, would do it for you.

PS there is a book called "The 100 year life", that argues you can't save enough to fund retirement and that you should simply accept that you will work until you die. I disagree with that argument.

[Itsallaguess]

Diving into the realm of Retirement Investing, including the intriguing concept of FIRE (Financial Independence, Retire Early).

What strategies are you employing to secure a comfortable retirement?

Whether it's traditional investments or exploring the FIRE movement, let's swap insights.

The Times have recently had an article discussing the FIRE movement, which covers most of the basic concepts around the idea -

How to retire early: the Fire movement -

https://www.thetimes.co.uk/money-mentor/pensions-retirement/private-pension/how-to-retire-early-the-fire-method


I've been planning and striving for some level of early-retirement for most of my working life, and much of it is common sense so long as some broader and related aspects are given a little thought -

• Life well within your means, with a plan for a serviceable post-work lifestyle that is financially achievable with a well-defined strategy and approach that, importantly, your personal circumstances are capable of both delivering and coping with over the long term

• Have a long-term plan whilst in work to enable you to utilise regular spare funds through which to build a level of capital that is likely to sustain the above when and where required

• Have a long-term plan for utilising that level of capital in a post-work scenario that enables a regular income to be taken from it

• Be clear on the post-work years that will need higher or lower levels of funding over time, taking into consideration other aspects such as State Pensions possibly starting some time later, and taking some financial pressure off from that point, and potentially enabling some level of 'front-loading' of your own capital into years where that later regular funding might not be available. Don't over-save or under-spend and end up with a bow-wave of capital once things like State Pensions do kick in - look to 'flatten' the long-term income-curve...

• Reconsider any plans that look like they're going to bleed out anything over a 4% yield from capital. Do so only with an 'eyes wide open' attitude where capital is likely to erode over time with regular higher withdrawals. That might well be 'part of the plan', and especially taking into account aspects such as the previous point around State Pension availability, but do so with a clear view as to when and why such over-provision might be required.

• Take into account later-life spending, and ask yourself if you think you'll be needing the same amount of income at 80 as your plan says you're going to need at 60. Modify your plan to suit realistic later-life spending...

• Have multiple layers of safety-related redundancy, for when inevitable funding issues arise. Don't over-think the possible issues - they may be market-related, or they may be health related, or a myriad of other possibilities, but just concentrate on having multiple layers of 'coping provision', covering such things as 'income reserve', where regular spending is lower than planned income, and multi-level 'emergency savings' available in cash or near-cash options to cover 12 to 18 months of regular spending, to enable you to have spending-provision for a good length of time that's completely separate from any 'normal running' market-facing investments. Use multiple pots and multiple holding entities for such safety-nets - things like Cash ISA's, Premium Bonds, etc., so that critical single-points of failure are removed from your safety-related plans as much as possible.

• Don't forget 'big ticket' expenditure that is likely to be needed over the course of many years. Things like new cars, or large house-repair and up-keep funding, and the potential requirement to help family members with financial aid. Make sure there's some level of yearly 'big-ticket' spending-requirement in your plans, and think about how these might occur and how they might be covered off within your plan, possibly at very short notice...

• Finally, I'll end with an important one that's gained prominence in my own thinking over recent years - Have *enough* margin in your plans to provide a good level of safety, but do make sure you're not continuing to *over-build* margin, if it's at the expense of any FIRE-related long-term goals themselves...

Cheers,

Itsallaguess

[Gilgongo]

I think the biggest single factor in allowing me to invest in "getting there" was to pay down and pay off our mortgage. It was a huge millstone, which, once lifted meant that all the others factors just went up.

[tjh290633]

It's a long time ago for me, but my objective, as I approached retirement, to ensure that my net income after retirement would not be much different from that before retirement.

That income included state and occupational pensions and dividends from my portfolio. What helped was having paid off my mortgage through a unit trust savings plan, which yielded a surplus, and the absence of paying pension contributions and national insurance.

One part of my pension was money purchase, from which I took the maximum permissable as cash, used to boost my equity portfolio, and the balance was used to buy an LPI-linked annuity.

Nowadays the annuity route is not compulsory. An income oriented SIPP would be a better bet, drawing down the income as needed.

There is one overriding principle. Start saving early and take advantage of the available tax breaks.

TJH

[Itsallaguess]

‎
Another important aspect that I forgot to mention in my earlier post is that FIRE doesn't need to be a single-hit solution in terms of a future work / life balance.

Where it might be possible, incorporating a period of part-time work might open up further options in terms of timing and financing of such FIRE-related plans, and perhaps also offer up what might sometimes be a much-needed transitional arrangement between a long working life and into what's hopefully going to be a long period out of work.

Finance is sometimes only part of the struggle to cope with such plans. Many people invest so much personal ballast into their working lives that there might be other non-finance related issues with what might otherwise be a leap into the unknown in terms of the 'what are you going to do with your time' question.

Some struggle with that more than others, of course, but where it does become an important question, for what might be a myriad of personal reasons, then considering a mid-way period of part-time work might well tick a great deal of boxes if it's available to anyone, in terms of both finance and that mental-transition.

There's a lot to get used to in a post-work life, and some early focus on this type of self-awareness might pay as many dividends as the finance side of things...

Cheers,

Itsallaguess

[DrFfybes]

In my experience there are no hidden gems.

Sure different opinions abound, but no secrets.

Take for example the seminal work "Your money or Your Life", arguably the book that started the FIRE movement.

What does it say.
Spend less than you receive.

I've not heard of that book, but then again I hadn't realised there was such a thing as a FIRE movement until after I stopped work aged 52 ish.

I would say I think the book stole item one from Charles Dickens from the 1850s

I agree, there are no secrets. I was brought up not to buy something if you can't afford it, and "don't waste money on crap you don't need" (or words to that effect). MrsF is the same. Sure we missed out on driving new cars every 3 years, or spending 4 weeks a year on a beach drinking cocktails and livestreaming onto social media on our latest iphone and reliving it at home on our 60 inch telly, but we weren't really bothered about that sort of stuff. And not having children probably helped

Consequently we saved, invested, and then I suddenly realised we had saved Quite A Lot when on the day of the Brexit vote our portfolio dropped by far more than a year of my takehome salary, and I wasn't concerned but instead moved cash into Equities. After that it was a relatively short leap to looking at what we were actually spending, what we had coming in, what we were wasting money on, and going part time for a year or so and then resigning.

There was never a master plan, never a goal or target, no strategy, just a sudden "ere love, have you seen how much we've saved? You know we can live on that if you took your pension early?"

Personally I think the FIRE Movement was basically started by people who wanted to make enough money telling others the bleeding obvious so they could retire

Paul

[Urbandreamer]

In my experience there are no hidden gems.

Sure different opinions abound, but no secrets.

Take for example the seminal work "Your money or Your Life", arguably the book that started the FIRE movement.

What does it say.
Spend less than you receive.

I've not heard of that book, but then again I hadn't realised there was such a thing as a FIRE movement until after I stopped work aged 52 ish.

I would say I think the book stole item one from Charles Dickens from the 1850s
.......
Personally I think the FIRE Movement was basically started by people who wanted to make enough money telling others the bleeding obvious so they could retire

Paul

The book I mentioned doesn't actually use the term FIRE, because it predates the movement. It was published in 1992 and is an incredibly dull read. Mostly because it keeps bashing on about putting some effort into knowing what you are spending and the difference between that and your desires. How short term spending can get in the way of long term desires.

Here is a link to Goodread reviews. You might note how few actually enjoyed the book.
https://www.goodreads.com/en/book/show/78428

I would argue that you may have good reason to criticize current FIRE evangelists, but less reason to question it's origins.

PS, correct me if I'm wrong, but didn't Mr Micawber wind up in prison for debt? When you think of his famous statement, which assumes putting 5% away, would that be enough?

[scotview]

I took early retirement, at 52. Since retiring my planning has seen the impact of several very negative changes to the tax system, like, changes to unsheltered dividend tax, frozen tax thresholds, increase to marginal tax rates (42% in Scotland).

Changes to tax rules cannot be planned for and can have big affects in retirement. If Labour get in we may see many more such changes.

Sorry for the negativity.

[CliffEdge]

Diving into the realm of Retirement Investing, including the intriguing concept of FIRE (Financial Independence, Retire Early), I am employing various strategies to secure a comfortable retirement, whether it's traditional investments or exploring the FIRE movement.

Let's swap insights. Have you discovered any hidden gems or challenges along the way? Share your wisdom on financial freedom and early retirement—it's a journey we're all navigating, and collective knowledge makes it even more rewarding!

[Adamski]

Obvs not getting divorced or putting kids through private schools

For me, paying off mortgage at 40 helped a lot. Also not panic sell, staying invested very long term, very slow and steady is the plan. But that I guess is more aimed for traditional early retirement, rather than FIRE. Cheers

[Urbandreamer]

I took early retirement, at 52. Since retiring my planning has seen the impact of several very negative changes to the tax system, like, changes to unsheltered dividend tax, frozen tax thresholds, increase to marginal tax rates (42% in Scotland).

Changes to tax rules cannot be planned for and can have big affects in retirement. If Labour get in we may see many more such changes.

Sorry for the negativity.

I'd describe it as words of wisdom. I recently took early retirement and hence feel that I completed my FIRE journey. However financially, at least upon paper, I was almost certainly able to retire three or four years ago.

We can only plan based upon the world that we currently live in. As has been posted by TJH, the current world was not the case when he retired. He was required to buy annuities, effectively investing in government debt and UK monetary policy.

Flexibility might be advisable. After all, most of the changes that you describe happened under the Tories, so Labour only have to be as bad for your concerns to have merit.

Many of us invest internationally, which is probably a good idea. I'd argue that if young enough, investing in yourself, might be a good idea. Being able to command a good salary or having internationally desirable skills would be no bad thing.

I'd advise avoiding currency risk and accepting corporate and geopolitical risk instead. Diversifying to spread the risks. I have a very low opinion of the amount of QE, money printing and deficit spending that has recently occurred in most jurisdictions.

[DrFfybes]

Diving into the realm of Retirement Investing, including the intriguing concept of FIRE (Financial Independence, Retire Early), I am employing various strategies to secure a comfortable retirement, whether it's traditional investments or exploring the FIRE movement.

Let's swap insights. Have you discovered any hidden gems or challenges along the way? Share your wisdom on financial freedom and early retirement—it's a journey we're all navigating, and collective knowledge makes it even more rewarding!

Have we just unearthed CliffGPT?

[airbus330]

Work out in detail how much you spend now. Adjust for savings made by not working. Multiply that number by 30 and assuming you are 55 or older, you won't be far off what you need to retire for good.
Once FIRE'd, there are a myriad of ways to invest, but simplicity is good. For me 80% is in 3 trackers with a good slug of cash or cash equivalants because thats what makes me comfortable. I like investing, so 20% of my investments is under my management.
I am in year 4 of FIRE that started at age 60. I have no reason to suppose that I will be bust in 26yr time. The last 4 years have been extraordinarily turbulent in the markets and I am very glad I only mangage 20% of my pot, so worries have at worst been moderate when I have made mistakes. So while my 20% is currently down some (but generating ATH dividends to live on), the 80% is up. Overall I have more than when I started 4yr ago. You can get tied in knots with investing, I admire the ones on here that pop up once a year with their update and then disappear back to keeping a quiet eye on their portfolio. My aim is to work on this and further simplify my investments so less research and monitoring is required. GL

[CliffEdge]

Diving into the realm of Retirement Investing, including the intriguing concept of FIRE (Financial Independence, Retire Early), I am employing various strategies to secure a comfortable retirement, whether it's traditional investments or exploring the FIRE movement.

Let's swap insights. Have you discovered any hidden gems or challenges along the way? Share your wisdom on financial freedom and early retirement—it's a journey we're all navigating, and collective knowledge makes it even more rewarding!

Have we just unearthed CliffGPT?

CliffGPT was a glam rock band famous in the 1980s, fronted by Jacob Rees-Mogg. Their number one hit was "Those were the Days" and "Shroud for a Nightingale". Their farewell gig was performed at the Sidney Opera house on the moon to an audience of over 5000 eggplants.

[SalvorHardin]

I FIRED twenty years ago, having worked in pensions and retirement planning, so I have quite a bit of relevant experience.

Get a very accurate picture of your spending needs before you retire. If needs be, log your spending for several months.

Remember that you spent quite a bit to be in work, so this spending will vanish. But when you retire your spending on other things may increase (eating out, day trips, holidays).

There is always the prospect of part-time work.

Find something to do. If your work formed a huge part of your indentity, retirement will be a shock (especially if work was a big part of your social life).

You may need to lie about your circumstances to friends if you retire very early (as I did). Some sort of consultancy "work" from home is a reasonable cover.

[Adamski]

!

Hi nadia, a lot depends on your situation - age, work, family etc Are you able to give some general details and those who've already early retired could give specific advice. Cheers

[MuddyBoots]

There's a psychological element to this in the area of knowing yourselves and self-discipline.

When I had a mortgage and a regular job I made a rule that I would increase my mortgage payments and pension + ISA contributions annually in line with any salary increase I had, so I snowballed my debt repayments and investments.

I said "knowing yourselves" because if you're in a couple you may find that you have different attitudes to saving vs spending. As I got into middle age I realised how much like my dad I am (don't tell my younger self!!). And my relationship with my wife does mirror my parents in the sense that I'm a saver and she's a spender. I'm happy with my old clothes and have a make-do-and-mend attitude whereas she likes new things. So we've had to learn to compromise and find a middle path. Credit cards are a case in point. The way I think of it is that saving your money is really buying security and peace of mind rather than material things, but then when you're married the big assets are shared between you.

I have some friends who have gone down the buy-to-let route in their investments, and mine is more based on unit trusts. One of the differences is that unit trusts, and other share/bond based investments held outside a pension are a lot more liquid than buying houses, so you need a fair amount of self-discipline to stick with the plan for the long haul and not get tempted to start cashing in early.

[Dicky99]

There's a psychological element to this in the area of knowing yourselves and self-discipline.

For me the self discipline is about learning to sit on my hands against the inclination to keep meddling and changing things. If I could reverse the changes I've made in the last couple of years I'd be a few quid better off than I am now.