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Introducing the LemonFools Personal Finance Calculators

First day of FIRE

Including Financial Independence and Retiring Early (FIRE)
pds2008
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Re: First day of FIRE

#122401

Postby pds2008 » March 5th, 2018, 5:37 pm

Congratulations, Quint - we almost share the same FIRE day because my last day at work was 28 February. Since then have been braving the weather up here in Scotland. I am 54 so have a few years before Occupational pension and then State pension kick in - will be living off the dividends until then.

Got my annual treat at the end of March when I am tacking a few days in London after a visit to the family down south; will be have three nights in nice hotel in Mayfair for a bit of luxury and a mooch around London.

My personal circumstances mean I will be rather busy over the next few months as I am selling up and moving back to the South of England. I will rent for the first year just to make sure I have not made a terrible mistake and then look for somewhere to buy.

RIght now I am in the midst of the house sale activity and focussing of de-cluttering. I have gone all Scandinavian and have decided not to take any furniture with me; largest items being my TV and a few pictures. Going minimalist on books, DVD's, CD'c and clothes is quite refreshing.

I also have to look after my late father's estate, in particular the sale of his house. This will probably take me through to the autumn when I am planning a month in France doing very little.

That should see me through to Xmas - then we'll see

Actually have my leaving lunch with my work colleagues this week because the weather scuppered plans last week - looking forward to seeing them troop back to work!

Enjoy your retirement

Yell

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Re: First day of FIRE

#122495

Postby MaraMan » March 6th, 2018, 4:46 am

Congratulations on your retirement. I write from the south Island of New Zealand as we are three weeks into a six week trip around New Zealand and Australia, something I was never able to do during my 38 year working life. A few days ago, on March 2, it was the first anniversary of my FIRE. On my 56th birthday some unexpected events happened at work and I negotiated my exit, so not exactly as planned but certainly not unwelcome. To date we have been living off a lump sum, mainly due to my tax situation, but as from the next tax year we will be living off our SIPPs and ISAs, with my defined benefit pension kicking in for me in 3 years when I hit 60. Anyway i have not regretted retiring early retirement for a second, the freedom, the lack of stress etc , have been wonderful and I am sure you will enjoy it as much as we are. Tomorrow we fly back to Australia for the second half of our “holiday”. All the best.MM
PS - I should add that my wife retired a few months before me and having this happen to both of us has been great.

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Re: First day of FIRE

#122948

Postby Quint » March 7th, 2018, 4:48 pm

Hi MaraMan

A month in NZ with maybe a stopover in Aus is on the cards for us.

Quint

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Re: First day of FIRE

#122988

Postby Quint » March 7th, 2018, 7:52 pm

As luck would have it after not having any sick time from work in the last 3 or 4 years I have come down with a nasty cold :(

Hope it clears as due to fly to the Caribbean Sunday.

Not expecting sympathy though ;)

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Re: First day of FIRE

#123049

Postby MaraMan » March 8th, 2018, 7:02 am

Excellent Quint, enjoy the Caribbean and your trip down under. Someone after my own heart.
Hope you enjoy as much as we are.
MM

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Re: First day of FIRE

#123630

Postby Mercenary » March 9th, 2018, 6:57 pm

Hi and congrats

Ooh, We're close, so close. Thing is we don't have kids so can run our retirement funds down to zero (just like how we entered this life!). I notice everyone talking about living off the interest, something that obviously requires a larger fund, presumably to leave something to the kids and dog. Is that right? Or do people mean a mix of income and capital?

BTW, got our diving in early (including working in the industry for a while), hence the smaller retirement fund!

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Re: First day of FIRE

#123684

Postby vrdiver » March 9th, 2018, 11:50 pm

Mercenary wrote:...we ... can run our retirement funds down to zero (just like how we entered this life!). I notice everyone talking about living off the interest, something that obviously requires a larger fund, presumably to leave something to the kids and dog. Is that right? Or do people mean a mix of income and capital?

BTW, got our diving in early (including working in the industry for a while), hence the smaller retirement fund!


Another diver! Must be something about diving that makes you realise there's more to life than work :)

Re running the retirement funds to zero, our plan A is to live forever, so just drawing dividends is our limit - no capital spend.

Obviously we'll need to switch to plan B at some point, but I think of the capital as a buffer for a comfortable end, be it care home fees or some other use: the main thing is not to have to worry about running out of money before running out of living!

On a funding principle, how much difference drawing capital makes will obviously depend on your retirement age and actual retirement duration.

As an example, let's assume fund growth = personal inflation rate. Let's also assume retirement pot is £1m and earns 4% pa for illustration. Finally, pick an expected bucket-kicking age - let's say 110 for safety (might conk out at 80, but what if our retiree doesn't? But in any case, pick an age you think is the lowest unlikely survival age...)

Draw £40k per year - can live forever without running out of cash.
Draw £44.2k and the pot runs dry at age 110.

Note thatthere is no safety net for poor sequence of returns (so a bad initial run of lower than expected returns would eat into capital faster than expected) and no margin for capital replenishment, as spending is always equal to or greater than yield on capital.

Obviously, retire later and the funds required for the same spending become less, but the point is that for early retirement, spending capital early is highly risky compared to later in the sequence. Early years are also likely to be the ones where you have the energy and enthusiasm to do things that cost a bit, again adding pressure to the capital.

Mrs VRD and I have a cunning plan: we consume 75% of the yield of our pot, and reinvest the remaining 25%. This gives us a hoped-for 1% above inflation pay rise every year (assuming dividends rise by inflation and yield is 4%) or a chance to recover capital and / or our cash buffer if a crash happens. We keep 3 years spending in cash or near-cash, so as not to be a forced seller in bad times, (savings accounts, fixed interest and premium bonds) which also acts as a buffer in the event of bad things happening, whether that's the stock market collapsing or the roof blowing off!

Each person will have their own safety metrics, from cash reserves to asset allocation. It's worth thinking through (with a spreadsheet) the different scenarios that could happen (look back over the last 50 years) and decide what you want to be "survivable" vs what you want to be "not a problem".

Obviously, if you have a high withdrawal rate but it's discretionary spending you can adjust the withdrawal rate if the economy tanks or your safety buffer is exhausted; that's where examples of Safe Withdrawal Rates tend to fail - they assume that you carry on spending regardless of fund earnings...

I'm no fan of working longer than necessary but equally not optimistic about mercy from the state should we become penniless in our decrepitude.

VRD

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Re: First day of FIRE

#123717

Postby DiamondEcho » March 10th, 2018, 9:43 am

vrdiver wrote:
Mercenary wrote:BTW, got our diving in early (including working in the industry for a while), hence the smaller retirement fund!

Another diver! Must be something about diving that makes you realise there's more to life than work :)

As 'yet another diver' I'm wondering if you might be onto something. IDK the ages of the others^ but I'm early 50s and been diving for c20 years. There is something meditative/'amongst nature' to it, and IME much dive-centric accommodation tends towards the functional/+ rather than luxurious. Up-top, well on the boats at least, it can be pretty warts and all together with fellow divers; I find it a striking social leveller too - what you are, outside of diving is simply irrelevant.
More than life to work, and also, some of the best experiences needn't be expensive.

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Re: First day of FIRE

#123721

Postby DiamondEcho » March 10th, 2018, 9:56 am

Re: a target end-point: Drawing income-only and leaving pot, or taking income + slice of pot/pa with a rough target of zero left over.

This is something I've considered in outline a couple of times, I'm tending towards a goal of end-target=zero. Anything I might wish to leave to others I can ring-fence from the capital. I can ensure my wife will never have cause to worry if I'm out of the picture before her. Then comes the trickier question of how quickly to draw-down capital on top of taking income. The fear of getting it wrong and running out of money. Maybe annuity tables could give direction on this? I'm also thinking:
- As you age some of the more discretionary spending budget will reduce [long-haul holidays, 'that retirement Jaguar' etc]. So I suspect there might be reason to fully enjoy what you have at the beginning, and then every few years look at how your spending pattern evolve. Looking at my parents are their friends, I suspect discretionary spending reduces faster than a new retiree might imagine.
- I can't see leaving much excess capital is wise if that starts prejudicing means-tested benefits [care-home fees etc?]. Continued parsimony in retirement comes back to bite you?
- Then there is the idea [VRD^] of a cash float of buffer to ride out any storms, how much and where to productively park it. So many things to consider...
- c4 months to go now to my effective down-tools day :)

Clitheroekid
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Re: First day of FIRE

#124408

Postby Clitheroekid » March 13th, 2018, 12:10 am

My plan has also been to die as I entered the world, with no assets and no debts. Unfortunately, timing it to perfection is tricky.

But I realised quite recently that the amount I was able to draw down (as a combination of capital and income) was actually far more than I'm likely to need (discounting care home fees).

When I started vaguely planning it maybe 15 - 20 years ago I was allowing for extensive (and occasionally expensive) travel, fine wining and dining, fairly expensive cars and so on, which reflected the life I was living at the time.

Since that time I've come to realise that I'm really not bothered about such expensive things, and that I can be perfectly happy on around half what I'd allowed for. This is a very pleasant discovery, and I suppose for the first time in my life I can honestly say that I have no financial concerns at all, either now or for the future,which is something very few people can say.

It also means, of course, that I could stop work entirely, and I suppose the fact that I have no intention of doing so says a lot about the enjoyment my work gives me.

An interesting question arises out of this situation - why do I not just work for free? What's the point of charging people for the work I do if I don't need their money?

Unfortunately, any reason I give for doing so is inevitably going to sound unconvincing and self-serving, but having given it some thought it's largely because charging - and the fact that clients are willing to pay - for my work validates its importance. If I were to do it for nothing the clients would no doubt be very happy, but I know instinctively that it would somehow give me less satisfaction. However, I don't really expect anyone to believe me! ;)

DiamondEcho wrote:- I can't see leaving much excess capital is wise if that starts prejudicing means-tested benefits [care-home fees etc?]. Continued parsimony in retirement comes back to bite you?

I would never want to get to the stage of claiming means-tested benefits. This is partly because it would mean that I had deliberately wasted money and therefore didn't deserve them, but also from a purely selfish point of view I would have to take what I was given rather than being able to choose. And believe me, having seen some examples of "what you're given", there is a hell of a difference. If, God forbid, I do end up in some sort of care then at least I'd want it to be as comfortable as possible for as long as possible.

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Re: First day of FIRE

#124451

Postby xxd09 » March 13th, 2018, 9:11 am

Hi Clitheroekid
Care home fees are the sting in the tail
For a couple the figures are potentially enormous-£50000 plus per annum each!
How do you fund for that!
Personally hoping for a 6month terminal cancer diagnosis then off to Dignitas at a moment of my choosing !
Joking/Serious of course
Appreciate others thoughts on this potential scenario which will affect us all
xxd09

tjh290633
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Re: First day of FIRE

#124464

Postby tjh290633 » March 13th, 2018, 9:32 am

Clitheroekid, you mentioned working for free. That, of course, is what volunteers do and help provide valuable services to the Community. One such is driving for Age Concern on their Hospital Car Scheme. That's not the only one, of many similar ideas.

TJH

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Re: First day of FIRE

#124476

Postby Jabd2001 » March 13th, 2018, 9:50 am

Re care homes.
1. Not everyone needs them (think the figure is about 15% of elderly pop at present, but can't remember source, sorry)
2. Not very many people need them for years and years
3. If you need a care home, you don't need a house (generally speaking, more likely to need residential care if no partner)
4. I agree it is much better to have the means to decide when, whether and what sort of care you want, as state provision is only available for people with very severe needs. However, money is no use if there are no good services to buy - I worry much more about my fathers' carers going bust, and whether I can find a decent care home, than him running out of money.
5. You will still be getting state pension, any other DB pension if you have it, and (at the moment) a bit of other non means tested help (eg attendance allowance, and I think some help with nursing care once very dependent.)
6. I think immediate needs annuities are probably worth looking into, for longevity insurance at the very end.

In my (limited of course) experience, my father (who has, admittedly, the kind of good state and DB pension provision unique to his generation, overall about £34k of guaranteed income per year, plus savings from a modest lifestyle throughout his life, plus a house) has zero risk of running out of money even if he needs 10 years of the most expensive residential care, which just isn't going to happen. He currently spends about half his net income on home care, but is still comfortably underspending. If you have a paid for house, once you get very elderly you spend hardly anything.

I fully expect the situation to change (many times) over the next several decades, but there does come a point where there is no point fretting about the detail. Over long timescales its impossible to eliminate risks of many types.

Quint
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Re: First day of FIRE

#125208

Postby Quint » March 15th, 2018, 6:43 pm

Mercenary wrote:Hi and congrats

Ooh, We're close, so close. Thing is we don't have kids so can run our retirement funds down to zero (just like how we entered this life!). I notice everyone talking about living off the interest, something that obviously requires a larger fund, presumably to leave something to the kids and dog. Is that right? Or do people mean a mix of income and capital?

BTW, got our diving in early (including working in the industry for a while), hence the smaller retirement fund!


Hi, we have no kids either so leaving a capital legacy is not required. This does help with flexibility as well as being able to vary the drawdown rate if required.

Quint
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Re: First day of FIRE

#125718

Postby Quint » March 18th, 2018, 1:49 am

Sat in the hotel in St Lucia and have had an email telling me that an ex work colleague took ill and died suddenly last Wednesday night. I am 50 and he was a good 10 years younger than me.

More convinced than ever now that we have done the right thing.

ap8889
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Re: First day of FIRE

#125784

Postby ap8889 » March 18th, 2018, 2:08 pm

Dying in harness sucks, and happens to too many folk. Glad to hear you got out in time with your health intact: You have won the game! Enjoy your holiday.

You can always make more money, but you can never make more life.

JohnB
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Re: First day of FIRE

#125802

Postby JohnB » March 18th, 2018, 3:58 pm

A friend dying of cancer at 51 was one of the triggers for me to FIRE at 48

Quint
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Re: First day of FIRE

#125872

Postby Quint » March 19th, 2018, 1:21 am

JohnB wrote:A friend dying of cancer at 51 was one of the triggers for me to FIRE at 48

Yes, it really hits home. Same happened to us.

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Re: First day of FIRE

#129385

Postby YeadonLad » April 1st, 2018, 10:30 pm

Yes, it really hits home. Same happened to us.


The reason that I got out when given the opportunity at 54 and a bit. After a twelve month period when several people that I had worked with in the past died in their 50's.

There is far more to life than work.

Dod101
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Re: First day of FIRE

#129386

Postby Dod101 » April 1st, 2018, 10:46 pm

YeadonLad wrote:There is far more to life than work.


It all depends. I was coming back from Singapore a week ago sitting next to a guy who was clearly working and had what I hope was a sensible conversation with him about work etc. I still feel a slight tinge of regret that I am not working. I enjoyed my work and it fired me up to speak with him. I do not understand those that want to stop working asap, even by the age of 40. In fact I feel sorry for them. I am sure there are many people who enjoy working and we retirees need to ne grateful to them because they the ones keeping the world going round.

Dod


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