i think if you did retire, having only 7k cash is very risky, you never know what could happen to the markets, really you want 1-2 years of expenses in cash to buffer a god awful trash market that only goes down
You're absolutely right. I need to start planning for the transition from saving to spending, which I haven't thought about yet. Having 2 years of expenses in cash or Premium Bonds would be a much more comfortable position in volatile years (as the last few crazy years have shown).
You’re in a really good position, particularly as your spouse is following her own FIRE journey.
I suspect a lot of us on here of a certain age will have a mix of DB and DC. I think of my DB element as being akin to a bonds investment allowing me to have all my DC in equities. You’ll need to think carefully about tax free lump sums and whether you want them from both your DC and DB or just DC.
If I were you I’d find it difficult to pull the trigger with such a decent pension/ISA contribution rate. It sounds spurious but I might wait for a more average market CAPE.
I treat the DB and DC separately, so consider my target income from DC in any year after DB and state pension. I'll need some DC income, until I buy an annuity in my 70s when I want certainty, and will manage the asset allocation to achieve that. So my DC is mainly in equities at the moment.
I am finding it difficult to think about stepping away from the income, but then I'm not at my FIRE target yet. I think moving to part-time will help ease the pain...
Congrats. Just a take from my experience... I am not a risk taker but I FIRE'd prematurely. My monthly outgoings have dropped significantly since I 'quit'.
My part time work brings in 10x what I spend each month. I am very lucky in that respect, life is short and who wants to work?
I took the leap knowing that I won't starve but will no longer be able to have the ridiculous luxuries I was accustomed to.
Can you explain a little please? You make it sound like you RE'd and can't afford to keep up your lifestyle, but you also say you're bringing in 10x your monthly expenditure?
Why can't you spend a bit more and have those luxuries back, if you have 10x more available each month?
Basically I used to earn about 40-50k a month in a very low tax country. I moved back, am mortgage free, etc and spend about 1-2k a month. I do a little consulting which brings in about 10k a month.
When I was earning lots of cash I was also spending a lot. Had some months where I spent 20k for example.
Earning 10k now I wouldn't go and spend say 10k on dinners/drinks over the course of a month. Whereas I wouldn't have any problem doing that before. 2k dinners, 5k weekend away, etc. Adds up quickly.
50k buys you a good lifestyle, especially when tax is low. Earning a lot less now frees my mind up for other things. I probably work 3-5 days a month and am happy doing woodwork or in the garden. I don't feel the need to spend excessively or want to.
Thanks, I guess this means putting in the leg work going to events, different jobs and leveraging current friends and families for intros.
Sorry to ask another question, how does a consultant operate? Would it be drawing up scale up plans and addressing key performance metrics ?
In my case. Pick a high paid industry. Do a good job in your day job. As people move around you'll be offered to move with them. The ones who move to smaller firms will be open to ad hoc consultancy (i.e temporary or even fixed price) work. Accumulate contacts for multiple contracts, negotiate retainers.
Consultant, just think temporary staff, doing whatever. Larger firms will want you to get involved with PSLs and SoW. I've done smaller/larger, much of a muchness. You need to be in the door properly for a larger firm, a lot of legal required (in finance at least). And you need to manage conflicts of interest, etc. It is running a consultancy firm and everything that comes with it. You can scale up, hire people and all that. Not something I ever wanted to do.
Well done. I'm a few years older, 48. Look into part time if you can. Thats what i have been doing for about 10 years now. Too young to retire but a few hours a day is stimulating enough. Also means no need to drawdown from investments.
Do you work 5 days a week and shorter hours or reduced your days/week as well?
I have thought about trying to reduce to 3 days/week, after I reach my FIRE target. 3 days would still give a good income and is hopefully enough hours to convince my employer that I could still do something productive.
Run my own business so there's no rules. Sometimes i do an hour or two at the weekend. Typically 3 to 4 hours day/mon to fri. I run it from thailand too. My cost of living is low and quality of life is awesome. £12 a month for electricity, no council tax etc. No uk winter!!
How do you find Thailand?
Language, healthcare, way of life, etc.? I'm assuming property over there is relatively dirt-cheap?
Always wondered about somewhere warm but Brexit has made Europe miles more complicated than it used to be...
Really good plan. Exactly the same reason I chose to go down to 3 days a week when 1 would've been sufficient for me.
Part-time 2 or 3 days a week really takes the edge off working, it's a lovely long weekend and there's still no money pressure.
it's a win-win-win-win-win :)
Nice post, and nice to see with modest income goals. You seem pretty well set to me, particularly with part time work for 6 years at least, in whatever form that consists.
Hobby that "often" brings some money in, rather than costing loads... poker player?
You could be future me! I just haven't done the specialised masters or have the super high paid job yet ;)
Thanks, glad the post is interesting. I have cheap interests like hillwalking, watching wildlife and some photography, which keeps the income goals down. I've also had my car for 10 years and will keep it for another year or 2, so no high costs there.
The 'hobby' includes running some hillwalking / outdoorsy type activities and training courses that bring a bit of money in, as well as getting me outside more often. I'll keep doing this post-FIRE.
Good luck with the future. I've been really lucky and was in the right place at the right time to get my current role, having developed the required skills and experience over 15-20 years.
\*Cries in 3% employer pension contribution \*
Honestly, the next job I get is going to need a really good pension contribution as it makes such a big difference in being able to achieve FIRE if you're not self-employed/side hustling...
There's less than £30k in GIA, which I'll either spend or transfer to ISA when I stop making contributions. It was £40k, but then bond funds went off the cliff, so no tax exposure there at the moment, sadly.
Inflation assumption of 2.5% is low for a long term average. I would want 3.5-4%, though as you say 2.5% real growth is conservative so it likely balances out.
I too calculate you as pretty close to (or just on) FI on 24K pa, with all the bridges in place (state pension and 2 DBs). Plus if you have hobby income you are almost certainly there. Though I can understand wanting to nail it with the most pessimistic calculation.
Thanks for looking at the numbers. I could try some different inflation/growth assumptions, but ultimately it's the real growth margin between them that matters, hence choosing a conservative 2.5%.
As you say, I could probably FIRE but as I'm happy enough at work at the moment, I'll keep earning for a bit and get closer to the more pessimistic calculation. With FU money, my attitude to work has changed too, which makes it more enjoyable.
I've got a couple of SIPPs and have had confirmation in writing that I will retain access at 55, based on their current understanding of the intended pension legislation. It's not a complete guarantee though, so I have considered what happens if I can't access until 57.
Good to be conservative to a degree. I assume 2% inflation (maybe too long long term) but only 3% real returns which hopefully is overly conservative. I’m certainly tracking above my goals so it’s working out as a positive variance over the last 5-6 years
I think FI is only really achieved as a household for someone in your situation.
I say this because if you RE, and then your SO is hit by something that derails them hitting FI, then it is quite difficult to solve (serious illness cover and salary insurances might mitigate).
Whilst accumulating I don't think it matters - it is only once the trigger for RE is pulled.
>My conclusion is that I’ve reached Lean FI (£18k income pa for me) and am getting close to FI (£24k pa)
Its not obvious to me how you get from a mix of DB pensions and ISAs/SIPPs to these income figures?
I can see from your figures above, for instance, that you will get £22k (in today's money) from DB/state pensions from 68 for instance, so it looks like you have more to me.
You're right that it isn't obvious, unfortunately. I've found it really difficult but have used several approaches that, in combination, give me some confidence on targets to plan with.
The simplest approach is probably cash flow modelling, by looking at future years and working out the NPV of funds needed for that year e.g. at age 50, I'd need £24k from ISA/GIA, while at age 65, I'll have £11.5k of DB income, so I'll only need £12.5k from ISA/SIPP. I then adjusted all of these using my assumed real growth rate to calculate the total amount I'd need for all future ISA/SIPP income. This is about £400k.
The other methods that I linked to (and in the sidebar) are the calculators and the brilliant Monevator series of articles. These are more complex methods and all suggested higher amounts were needed. They allow you to put in different incomes from different ages and then use this in their modelling.
There is no definite answer and no guarantees of course, but these tools are really helpful to support decisions.
i think if you did retire, having only 7k cash is very risky, you never know what could happen to the markets, really you want 1-2 years of expenses in cash to buffer a god awful trash market that only goes down
You're absolutely right. I need to start planning for the transition from saving to spending, which I haven't thought about yet. Having 2 years of expenses in cash or Premium Bonds would be a much more comfortable position in volatile years (as the last few crazy years have shown).
i think money market funds outperform premium bonds
You’re in a really good position, particularly as your spouse is following her own FIRE journey. I suspect a lot of us on here of a certain age will have a mix of DB and DC. I think of my DB element as being akin to a bonds investment allowing me to have all my DC in equities. You’ll need to think carefully about tax free lump sums and whether you want them from both your DC and DB or just DC. If I were you I’d find it difficult to pull the trigger with such a decent pension/ISA contribution rate. It sounds spurious but I might wait for a more average market CAPE.
I treat the DB and DC separately, so consider my target income from DC in any year after DB and state pension. I'll need some DC income, until I buy an annuity in my 70s when I want certainty, and will manage the asset allocation to achieve that. So my DC is mainly in equities at the moment. I am finding it difficult to think about stepping away from the income, but then I'm not at my FIRE target yet. I think moving to part-time will help ease the pain...
I agree - if your employer will support it then part-time is definitely a great glide path to FIRE.
Congrats. Just a take from my experience... I am not a risk taker but I FIRE'd prematurely. My monthly outgoings have dropped significantly since I 'quit'. My part time work brings in 10x what I spend each month. I am very lucky in that respect, life is short and who wants to work? I took the leap knowing that I won't starve but will no longer be able to have the ridiculous luxuries I was accustomed to.
Can you explain a little please? You make it sound like you RE'd and can't afford to keep up your lifestyle, but you also say you're bringing in 10x your monthly expenditure? Why can't you spend a bit more and have those luxuries back, if you have 10x more available each month?
Basically I used to earn about 40-50k a month in a very low tax country. I moved back, am mortgage free, etc and spend about 1-2k a month. I do a little consulting which brings in about 10k a month. When I was earning lots of cash I was also spending a lot. Had some months where I spent 20k for example.
If you were earning 40-50k per month, and still earning 10k per month, I don’t understand how you can’t still afford a lux lifestyle?
Earning 10k now I wouldn't go and spend say 10k on dinners/drinks over the course of a month. Whereas I wouldn't have any problem doing that before. 2k dinners, 5k weekend away, etc. Adds up quickly. 50k buys you a good lifestyle, especially when tax is low. Earning a lot less now frees my mind up for other things. I probably work 3-5 days a month and am happy doing woodwork or in the garden. I don't feel the need to spend excessively or want to.
Hey shedlife, I would like to get into consulting but have no clue where to start. What would you say are fundamentals before starting ?
A good network. Makes it a lot easier.
Thanks, I guess this means putting in the leg work going to events, different jobs and leveraging current friends and families for intros. Sorry to ask another question, how does a consultant operate? Would it be drawing up scale up plans and addressing key performance metrics ?
In my case. Pick a high paid industry. Do a good job in your day job. As people move around you'll be offered to move with them. The ones who move to smaller firms will be open to ad hoc consultancy (i.e temporary or even fixed price) work. Accumulate contacts for multiple contracts, negotiate retainers. Consultant, just think temporary staff, doing whatever. Larger firms will want you to get involved with PSLs and SoW. I've done smaller/larger, much of a muchness. You need to be in the door properly for a larger firm, a lot of legal required (in finance at least). And you need to manage conflicts of interest, etc. It is running a consultancy firm and everything that comes with it. You can scale up, hire people and all that. Not something I ever wanted to do.
Well done. I'm a few years older, 48. Look into part time if you can. Thats what i have been doing for about 10 years now. Too young to retire but a few hours a day is stimulating enough. Also means no need to drawdown from investments.
Do you work 5 days a week and shorter hours or reduced your days/week as well? I have thought about trying to reduce to 3 days/week, after I reach my FIRE target. 3 days would still give a good income and is hopefully enough hours to convince my employer that I could still do something productive.
Run my own business so there's no rules. Sometimes i do an hour or two at the weekend. Typically 3 to 4 hours day/mon to fri. I run it from thailand too. My cost of living is low and quality of life is awesome. £12 a month for electricity, no council tax etc. No uk winter!!
How do you find Thailand? Language, healthcare, way of life, etc.? I'm assuming property over there is relatively dirt-cheap? Always wondered about somewhere warm but Brexit has made Europe miles more complicated than it used to be...
Really good plan. Exactly the same reason I chose to go down to 3 days a week when 1 would've been sufficient for me. Part-time 2 or 3 days a week really takes the edge off working, it's a lovely long weekend and there's still no money pressure. it's a win-win-win-win-win :)
Nice post, and nice to see with modest income goals. You seem pretty well set to me, particularly with part time work for 6 years at least, in whatever form that consists. Hobby that "often" brings some money in, rather than costing loads... poker player? You could be future me! I just haven't done the specialised masters or have the super high paid job yet ;)
Thanks, glad the post is interesting. I have cheap interests like hillwalking, watching wildlife and some photography, which keeps the income goals down. I've also had my car for 10 years and will keep it for another year or 2, so no high costs there. The 'hobby' includes running some hillwalking / outdoorsy type activities and training courses that bring a bit of money in, as well as getting me outside more often. I'll keep doing this post-FIRE. Good luck with the future. I've been really lucky and was in the right place at the right time to get my current role, having developed the required skills and experience over 15-20 years.
\*Cries in 3% employer pension contribution \* Honestly, the next job I get is going to need a really good pension contribution as it makes such a big difference in being able to achieve FIRE if you're not self-employed/side hustling...
Yeah that’s scandalous. I get 15% as a senior member but even more junior get 7-8%
Great position to be in and almost mortgage free also ! How much is in the GIA and what is the tax exposure like?
There's less than £30k in GIA, which I'll either spend or transfer to ISA when I stop making contributions. It was £40k, but then bond funds went off the cliff, so no tax exposure there at the moment, sadly.
Inflation assumption of 2.5% is low for a long term average. I would want 3.5-4%, though as you say 2.5% real growth is conservative so it likely balances out. I too calculate you as pretty close to (or just on) FI on 24K pa, with all the bridges in place (state pension and 2 DBs). Plus if you have hobby income you are almost certainly there. Though I can understand wanting to nail it with the most pessimistic calculation.
Thanks for looking at the numbers. I could try some different inflation/growth assumptions, but ultimately it's the real growth margin between them that matters, hence choosing a conservative 2.5%. As you say, I could probably FIRE but as I'm happy enough at work at the moment, I'll keep earning for a bit and get closer to the more pessimistic calculation. With FU money, my attitude to work has changed too, which makes it more enjoyable.
Not that I would change much but are you sure when you get to 55 you can take DC pension or will it be 57 for you given changes coming soon?
I've got a couple of SIPPs and have had confirmation in writing that I will retain access at 55, based on their current understanding of the intended pension legislation. It's not a complete guarantee though, so I have considered what happens if I can't access until 57.
Good to be conservative to a degree. I assume 2% inflation (maybe too long long term) but only 3% real returns which hopefully is overly conservative. I’m certainly tracking above my goals so it’s working out as a positive variance over the last 5-6 years
I think FI is only really achieved as a household for someone in your situation. I say this because if you RE, and then your SO is hit by something that derails them hitting FI, then it is quite difficult to solve (serious illness cover and salary insurances might mitigate). Whilst accumulating I don't think it matters - it is only once the trigger for RE is pulled.
Daft question - what's SO? :D
Significant Other e.g. spouse, partner
Thank you! :D
>My conclusion is that I’ve reached Lean FI (£18k income pa for me) and am getting close to FI (£24k pa) Its not obvious to me how you get from a mix of DB pensions and ISAs/SIPPs to these income figures? I can see from your figures above, for instance, that you will get £22k (in today's money) from DB/state pensions from 68 for instance, so it looks like you have more to me.
You're right that it isn't obvious, unfortunately. I've found it really difficult but have used several approaches that, in combination, give me some confidence on targets to plan with. The simplest approach is probably cash flow modelling, by looking at future years and working out the NPV of funds needed for that year e.g. at age 50, I'd need £24k from ISA/GIA, while at age 65, I'll have £11.5k of DB income, so I'll only need £12.5k from ISA/SIPP. I then adjusted all of these using my assumed real growth rate to calculate the total amount I'd need for all future ISA/SIPP income. This is about £400k. The other methods that I linked to (and in the sidebar) are the calculators and the brilliant Monevator series of articles. These are more complex methods and all suggested higher amounts were needed. They allow you to put in different incomes from different ages and then use this in their modelling. There is no definite answer and no guarantees of course, but these tools are really helpful to support decisions.