What are your HYP Goals?

[minerjoe]

Having been doing this for a few years now and watching the value of my shares and dividends grow, I am starting to wonder what are the goals I would be happy with. I don't mean "I want a million" but more the basic things.

For example; HYP goal
1) 5k in dividends (annually)
2) Enough to pay my mortgage (annually)
3) 20k a year
4) 50k a year (roughly my take home pay currently after tax)
5) the magic million

After that point I am not really sure what a goal might be, other than to build more savings and maybe spend it all on something.

I was wondering what goals (if any) other people had for their portfolios? I'm sure many are more modest and some much grander than mine! anyone out there building a trust for the family? I would be very interested.

Cheers,

[Darka]

My goal is basically to FIRE as soon as possible, on current projections I should be able to retire in 5 years, or at least my wife will, even if I have to work a couple of extra years which I don't mind as she is older than me and I want her out of work asap (she has cancer) and I don't want her working anymore than necessary, life is too short.

Financially, I would like the following (not there yet):

- Dividend income of £30,000 - which is more than I need, but allows for some safety margin to be reinvested during retirement.
- Growing dividend income of at least inflation (more would be nice, but trying to be realistic)
- Overall retirement fund of around £800,000+
- To trade less, so aiming for no sales during 2017
- To keep all charges below .25% in 2017

regards,
Darka

[bluedonkey]

Having been doing this for a few years now and watching the value of my shares and dividends grow, I am starting to wonder what are the goals I would be happy with. I don't mean "I want a million" but more the basic things.

For example; HYP goal
1) 5k in dividends (annually)
2) Enough to pay my mortgage (annually)
3) 20k a year
4) 50k a year (roughly my take home pay currently after tax)
5) the magic million

My goal maps across to 4), minus any savings that that level of take home pay produces.

[Gengulphus]

For example; HYP goal
1) 5k in dividends (annually)
2) Enough to pay my mortgage (annually)
3) 20k a year
4) 50k a year (roughly my take home pay currently after tax)
5) the magic million

Hmm... is goal number 5 the magic million in capital, in which case it's probably not very different from goal number 4? Or is it the rather more ambitious magic million in annual income? ;-)

But my answer is:
1) To pay my total costs of living.
2) To be able to pay care home costs, if and when I need to.
3) To be able to give the next generation of my family a good start in life - something along the lines of assistance on to the first rung of the housing ladder or with setting up in business - but nothing more than that: giving people unearned access to luxuries is IMHO not good for them and so not a very nice thing to do to them.
4) To better fund a project of mine, the details of which I don't want to talk about.

My HYP is currently achieving all of those goals - which I should possibly clarify by saying that it is achieving goal 2 in the sense of being able to fund care home costs, not of actually currently funding them!

And goal 4 is a rather open-ended one: the project in question is capable of absorbing as much or as little funding as I choose to give it...

Gengulphus

[OLTB]

My goal is currently fairly modest for my HYP and it only came about because of a previous review posting by Gengulphus on TMF I think.

In one of his posts, he alluded to an income target that increased with inflation each year and I thought, 'what a decent idea!'

So, wishing to keep Mrs OLTB content (and Next in business) I thought that if my HYP could generate £600 p.m. in today's terms in retirement, that should be enough for the little extras that make life a little easier. My first annual review will be in August 2017 and I am aware that I won't have a full dividend history because of how the HYP has been bought, but the target will be there and I shall increase this target with inflation - not too sure whether to increase at RPI or CPI though (or if there is a more accurate 'person in retirement' inflation measure).

Cheers OLTB.

[tjh290633]

I'm a long way down the road, so goals for me are less important. However the overriding aim has to be a continuing rise in dividend income, as I am with Gengulphus in the desire to be able to fund care home costs if needed.

Meanwhile I am happy to be able to take a cruise each year and to distribute some cash to my grandchildren. When one of our cars needs replacing, then the cash can be available, and the same goes for house repairs.

With the cost of care being of the order of £50k per year, it's important to aim for total income to get to that level if the capital pots are to be left untouched for the next generation. Even better, of course, is not to have to go into care.

TJH

[idpickering]

For my Wife and I, our HYP is going to be used for it's intended purpose, that is providing us with income in retirement. This could come in about 5 years, but in the interim I'm just dripping money into it on a monthly basis, as I have done for years.

Ian.

[Raptor]

What a great question. I am an "inbetweener" in that I could retire if I wanted to (in fact this is my second attempt to) but prefer to work part-time. So what do I want from my HYP today?

1. The ability to keep building, albeit only with re-invested dividends, which I do for my ISA and SIPP parts.
2. Use income from my trading account to "boost" my standard of living (4 and 5 * holidays).
3. Rising income over RPI.

As I have a company pension from a previous employer which I have been drawing since 2004, an income from my part-time work, totaling about £15K. Dividend income in the region of £15K of which a take roughly £3K. I really want to get this up to £20K., I think I am meeting those, but a few more years needed to see if I can then move to the next stage.

Looking to the future I want my HYP to be able to have an "inheritance" to pass on to my daughter (and any grandchildren that I hope will be along at some point). As to the "golden" million, I have worked out that my "total" capital available to me this year will top that mark very shortly (in fact it does but as I have a rather large project kicking off this year that will eat some of this, I have set aside an amount in my mind off this).

Raptor.

[ayshfm1]

This is a question I am currently pondering

Once upon atime is was simply "To generate at least enough dividend to replace my family expenditure."

Things had been ticking along uneventfully, I was putting as much money into my company pension as I could. Last year it was taken over and the pension was closed, this presented an opportunity. I joined my new employers scheme and then transfered north of 20 years contributions into my SIPP greatly expanding it.

My HYP would probably not meet with the approval of may here. It is really three discrete pots with much duplication, my wife's sipp, my sipp and my isa. My Wife's SIPP probably comes closest, my SIPP has nearly 70 different holdings. I've arguably been guilty of collecting, but the focus has been on yield and diversity. My ISA is 60% preference shares, LLPC being the largest single holding (the SIPP's also have small holdings of preference shares.)

At this point the whole lot combined exceeds 900K in value. It may throw off as much as 40K per year in income at the moment - I don't really know.

I will be battle testing it this year, month by month to see if the income produced matches what we spend.

Assuming it passes the test, I'm 49 and my wife is younger and excluding the ISA I can't access the money for nearly 6 years. So what now?

[Lootman]

But my answer is:
1) To pay my total costs of living.
2) To be able to pay care home costs, if and when I need to.
3) To be able to give the next generation of my family a good start in life - something along the lines of assistance on to the first rung of the housing ladder or with setting up in business - but nothing more than that: giving people unearned access to luxuries is IMHO not good for them and so not a very nice thing to do to them.
4) To better fund a project of mine, the details of which I don't want to talk about.

My HYP is currently achieving all of those goals - which I should possibly clarify by saying that it is achieving goal 2 in the sense of being able to fund care home costs, not of actually currently funding them!

Re (3) I recall you recently said that you are a "confirmed bachelor". Stating it that way rather than "single" or "divorced" made me think that you didn't have any children. So when you talk about the "next generation of my family" are you talking about nieces and nephews?

I don't mean to be nosey but I ask because it's an issue I'm having right now. I want everything to go to our children but my wife wants to help support our nieces and nephews (on her side of the family, of course; I have none) as well. Obviously if one considers one's financial responsibilities to include more distant relatives than it's possible that no HYP is big enough!

We've already helped our children buy their first home and I'm in your camp in that I don't want to give them more than they need as they will just fritter it away. But I do give them 3K a year as allowed by the IHT rules, but not "gifts from surplus income". Their homes came considerably more expensively, naturally.

I retired before I had heard of HYPs so I cannot add much to the original question. To me it's just one of several investment strategies and I don't rely on it in the way that others here do.

[OZYU]

Such a good OP question.

Our aims have in fact changed.

I am a few years in 'retirement', having turned 71 this week (a rubbish time to have a birthday imo!), and the original aim was to substantially supplement retirement income. There was enough hyp income, all in ISAs, when I officially 'retired' to do that.

However, my last outfit did not 'let me' retire, and for the first five odd years kept offering me consultancy work, which involved much global travel (but which we could both use as part holidays too at basically very little net cost), thus 'offers I could not refuse'. I still do the odd job for them, but essentially in the UK/France/Switzerland nowadays and will stop soon as we have increasingly found that in retirement there are not enough hours in the day anyway and I must get more into the garden and workshop to prepare for our last downsizing! So that consultancy has more than supplemented retirement income without touching divis and the ISAs have continued receiving some top ups and all divis have continued being re invested.

This means that now there will be enough to also better assist one local community project plus the grandkids(our children have said they are ok) and a good slice of ISA divis will start to flow out soon for these purposes, unless we use a smaller taxable portfolio we had earmarked for potential nursing/care fees first. I am modelling the various options at present, no problem.

Ozyu

[kempiejon]

My HYP is for post-work living expenses. Most of my HYP is ISAd but some is unsheltered. I also have a couple of pension incomes due but hope to be living off my HYP before I can draw them.
A few years into the HYP route I started measuring my HYP contribution against specific bills - TV licence, car tax, utility bills, annual motoring costs, you get the picture. I also have pretty accurate costings for my annual expenses, discretionary and obligatory and I currently record my HYP income as a %age of my annual costs. I guess this is the FI (financial independence) bit of FIRE.

So the goal for my HYP - to allow me to retire early (the RE bit of FIRE) I want to have enough income from HYP to replace working, meeting my living expense, including a most non essential spends I've got used to. I can then choose to sack off the job or not, however I need to account for catastrophes, building a reserve and income margin those are unknown, how much is enough? When the income meets my current spends then I'll try and live of the HYP income and save all my salary - hopefully adding to the reserve and income margin.

As I'm building my HYP I have an increasing income because I'm adding cash, a unitised HYP looking at income units and income per unit growth does sound like just the thing, I'm not measuring it. I want my HYP income to pace my inflation rate post employment. When the pensions begin to pay I expect to have surplus income for more luxuries and if need be later life care costs.

Finally I do not have a magic capital figure like a £1M pot nor a set income amount like £20k or £50k/annum it's about my costs, it's about what I want to spend. I will not be mortgage free when I reach FI but it should follow within a few years increasing my spendable income for luxuries when that happens.

[minerjoe]

Great insight coming from others here. Always good to get some view points.

From myself, I am about to enter my 30's - so someway off the position others here are in life and 100% of my HYP is ISA sheltered. For me this is essentially an alternative pension which will supplement my work one/s.

[tjh290633]

However, my last outfit did not 'let me' retire, and for the first five odd years kept offering me consultancy work, which involved much global travel (but which we could both use as part holidays too at basically very little net cost), thus 'offers I could not refuse'. I still do the odd job for them, but essentially in the UK/France/Switzerland nowadays and will stop soon as we have increasingly found that in retirement there are not enough hours in the day anyway and I must get more into the garden and workshop to prepare for our last downsizing! So that consultancy has more than supplemented retirement income without touching divis and the ISAs have continued receiving some top ups and all divis have continued being re invested.

So you too have discovered that being retired is a full-time job.

TJH

[ping123]

What an insightful discussion. I started with absolutely no knowledge about investing. Fastforward 10 years, i roughly have move than 1.5Mio worth of HYP like investiments most of them the usual suspects ( have a few Pref shares, and IT's) in our family fund. Most of our shares are unsheltered as I am outside the country. As the new Dividend tax rule kicks in , I have given almost a fourth of my shares as a gift to my son ( who is a student) who is in UK so that he can invest in ISA's etc andd also make use of 16K annual allowance ( 5K plus 11k) . I will continue to pass on excess income through gifting etc consistent with IHT rules. Overall div income is around 43 K GBP and we will continue to keep funding HYP till we reach income around 60K.

Fortunately I also have DB pension which will kick in after 10 years

So the goals are
1) Have sufficient income so that I have flexibility not to work for a man if needed
2) Provide opportunyties for Children
3) Fund full university Education for my daughter ( by taking out capital if needed)

[ping123]

my apologies, I have misrepresented in my post above. We gave our Son cash over teh last couple of years who in turn opened up ISA and share accounts to purchase HYP shares and will continue to do so.

[vrdiver]

I started our HYP (Mrs VRD has no interest in finances) in 2003/4 with a view to taking control of our retirement funding, after realising what a shabby job the incumbent pension company (DC) was making of it.

We hit the magic mark of having more HYP income* than expenditure in 2013 and both of us have now retired, still a few years away from being able to access any pension funds (SIPP will become available to us when we hit 55 respectively, although for younger people I understand the age limit will rise).

What I didn't realise at the time of switching to the HYP route was that it also brought with it the confidence of managing a large pot of money; I feel no need to hand my savings over to an IFC for a review, nor do I worry about the market taking a tumble or two. So I'd say in retrospect my goals were:

Build HYP income to meet expenditure** (thus allowing retirement)
Have HYP dividends grow at RPI or a bit more, after withdrawing expenditure requirements (so far so good, but early stages by HYP standards).
Some of HYP to be accessible before access to pensions allowed, so as to give choice on retirement age.
HYP to teach me how to handle large (for me) investments whilst still being able to sleep well at night.

Secondary considerations were:
Keeping the capital (as opposed to buying an annuity) to either pass on or to spend in very-old-age if required (care home fees)

VRD


*HYP income includes a safety margin to allow for bad divi-years.
**We have a budget (planned and tracked)that includes planned holidays, hobbies etc. mainly to establish confidence that what I think we need is actually realistic)

[Lootman]

edited as related post deleted and no longer flowed. 7/1/17. Raptor.

One thing you have to do is project the different possibilities for how long you will live. And if you choose to plan for an abnormally long life then you will need a great deal more money, which in turn means working for several or even many more years.

And the question then has to be asked about the value of working more years when you really don't want to, just to avoid a small risk of, say, living beyond age 95.

Personally I take the view (or rather, look the view, as I stopped work 15 years ago) that it is the quality of my life that matters more than eradicating the last 1% or 2% risk that I might run out of money if I live much longer than I expect to.

And if it turns out that I get to 95 and then run out of money, then so be it.

[thebarns]

Spot on Lootman.

Concluding, the provision of potentially eye watering care costs whether at home or in a nursing home should not be factored into what a HYP could reasonably be expected to cover, particularly out of its income.

[dspp]

I think this point may just about be relevant given the goals nature of the query. I think one needs to be careful about using averages re care and longevity. There is statistical evidence that wealthier people live longer, it shows up in the inequality statistics. There is also anecdotal evidence that parking someone in a high-end care home means that they last longer once in it than they would have done if they'd either been in a low-end care-home or at home. That's my personal observation from paying attention to an admittedly small dataset but perhaps worth bearing in mind.

My take-away is that if you have £1m in the cupboard spinning off £50k/yr then the good news is that you're more likely to be able to afford high-end care-home fees, and the bad news is that you might be stuck there longer than perhaps you want to be !

regards, dspp