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My FIRE plan, please critique
12-06-2016, 05:05 PM
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#1
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Confused about dryer sheets
Join Date: Nov 2016
Posts: 3
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My FIRE plan, please critique
Evening everyone.
Just recently joined, although have spent the last 3 years getting up to speed with finances, I now feel I (belatedly) have a plan and would like peoples thoughts. I am UK based and here the basics:
- I'm 44 years old
- Partner is 51
- Based in UK
- No kids
- Current networth is approx £1,165,000 (approx £815k is our property)
- Mortgage is just £85k
- Current FIRE assets (pensions, investments) are £340k
- Our 'number' is £24k a year (net) to live off
- To do that we need £600k (which is 4% withdrawal rate)
Plan is to: - Save approx £30k per year for next 5 years (mixture of pensions and ISA's)
- Assuming modest growth of 7% per year, then in 5 years we should reach £600k
- Then we drawn down mixture of pension and ISAs (to minimise tax)
- When we each reach 67 then we will be able to draw another £8k each of state pension
- We then have option to either downsize and release equity if required and/or reverse mortgage to pay for any care home / medical costs in later life
It sounds quite simple and I'm sure there will be bumps on the way, but hoping that we haven't overlooked anything major!
Any feedback appreciated.
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12-06-2016, 05:41 PM
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#2
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Moderator
Join Date: Apr 2012
Location: San Diego
Posts: 14,211
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Welcome to the forum bownyboy.
The biggest issues I see with your plan are
- inflation... the £24k you need to live will be a bigger number when you get to retirement.
- 7% returns. Like all things - there are no guarantees... 7% return or better is easy in some years... and it might be -7% in another year... Personally, I use a lower return percentage in my calculations.
- age of retirement vs 4% rule. The 4% rule is based on a 30 year retirement. If you retire at 49 (and partner is 56) you are looking at a longer than 30 year retirement. I retired at 52 - and am trying to keep my withdrawals under 3% until I've had enough years under my belt to allow for sequence of returns risk. (Failure cases often occur because the market crashes early in your retirement - so your early withdrawals are eating into your principal and increasing your risk.)
Hopefully your aggressive saving and *good* market returns will make your plan work.
__________________
Retired June 2014. No longer an enginerd - now I'm just a nerd.
micro pensions 6%, rental income 20%
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12-06-2016, 07:29 PM
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#3
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Thinks s/he gets paid by the post
Join Date: Mar 2013
Location: Southern California
Posts: 3,999
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Welcome.
A 4% withdrawal rate works OK when you are 65 years old, but if you are still in your 40's or early 50's, some would consider 4% to be aggressive.
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12-07-2016, 08:01 AM
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#4
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,361
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+1 with all of the above. 7% may not be modest in this low interest rate environment and a 4% WR is not conservative for early retirees.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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12-07-2016, 08:10 AM
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#5
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Recycles dryer sheets
Join Date: May 2013
Location: Sarasota
Posts: 259
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Way too much net worth tied up in property. Consider downsizing to smaller home and retiring earlier. JMHO
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12-07-2016, 08:45 AM
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#6
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Dec 2015
Location: Michigan
Posts: 5,003
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Quote:
Way too much net worth tied up in property. Consider downsizing to smaller home.
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I would say you should consider this strongly. For a 3% WR you would need £800k, and then you would have more protection against inflation.
__________________
"The mountains are calling, and I must go." John Muir
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12-07-2016, 09:02 AM
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#7
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Give me a museum and I'll fill it. (Picasso) Give me a forum ...
Join Date: Nov 2010
Location: Sarasota, FL & Vermont
Posts: 36,361
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Quote:
Originally Posted by LiveBelowMeans
Way too much net worth tied up in property. ...
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Not uncommon in the UK methinks.
__________________
If something cannot endure laughter.... it cannot endure.
Patience is the art of concealing your impatience.
Slow and steady wins the race.
Retired Jan 2012 at age 56
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12-08-2016, 07:45 AM
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#8
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Thinks s/he gets paid by the post
Join Date: Sep 2016
Location: Acworth
Posts: 1,214
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Quote:
Originally Posted by pb4uski
Not uncommon in the UK methinks.
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Not to mention most of the US.. in 2011 the Census Bureau reported that median net worth in the US excluding primary residence was just under $17k, while the median net worth just under $69k. ~75% of the median household's net worth was their home equity at that time.
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12-08-2016, 08:13 AM
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#9
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Recycles dryer sheets
Join Date: May 2013
Location: Sarasota
Posts: 259
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Just because it is not uncommon doesn't make it smart. JMHO
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12-08-2016, 10:13 AM
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#10
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Moderator Emeritus
Join Date: Jan 2007
Location: New Orleans
Posts: 47,500
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Quote:
Originally Posted by exnavynuke
Not to mention most of the US.. in 2011 the Census Bureau reported that median net worth in the US excluding primary residence was just under $17k, while the median net worth just under $69k. ~75% of the median household's net worth was their home equity at that time.
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How awful!
Here is a poll of our members showing what percentage of their net worth their home represents. The most popular category seems to be 10%-20%.
__________________
Already we are boldly launched upon the deep; but soon we shall be lost in its unshored, harbourless immensities. - - H. Melville, 1851.
Happily retired since 2009, at age 61. Best years of my life by far!
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12-20-2016, 03:33 PM
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#11
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Confused about dryer sheets
Join Date: Nov 2016
Posts: 3
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Thanks everyone for your input. To answer some of the questions:
1 - Yes our house is a massive part of our networth. Thats because we're a) in the UK and b) in the south east where house prices are crazy prices. We live in a 3 bedroom semi-detatched cottage which is 1050 sqft, so not huge! We only have a small mortgage so it gives us options to either sell up in 5 years or rent out and live elsewhere. Also means we can reverse mortgage when we're old and frail to pay for care home fees if needed.
2 - Re: 4% withdrawal rate. The plan is that we withdraw 4% for the first 11 years, then my partner gets her state pension £8k per year, then 7 years later I get mine. So we will be either a) taking out less each year after that, or about the same to allow for inflation.
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