Hi, I am... Retirement Investing Today

[GenghisKhan]

It’s time to delurk and introduce myself. I’m a bit of a rarity around these parts being UK based and I am 41 years old.

My story really began in late 2007 when I woke up to how much of the financial sector in this (and other countries) works. This led to disillusionment and a realisation that if I wanted to win then it was up to me and me alone. I quickly started reading and dabbling making a few mistakes along the way.

Jump forward to 2009 and my financial knowledge had improved greatly. I had a strategy and a plan to go with it. To then hold myself accountable I started a small website charting my journey and my learning which still exists today.

To the experienced on this site my strategy will sound childish and amateurish but it took me a long time to figure it all out. Crudely it’s:

1. Do everything in my power to maximise my earnings either in current job, current company, new company, new career, own business and/or 'side hustles'. This has worked very well over the years.
2. Spend the least amount needed to give the standard of living that my family and I desire. For me that has ended up being quite a small number. Looking back it surprises me how much I used to spend compared to now given my family is now happier and healthier than it has ever been. Combined with 1 it means as I write this post I am regularly saving 55% of my gross earnings. The remainder is tax and living expenses where unfortunately the taxman takes the lions share.
3. Build a diversified investment portfolio that meets our own personal risk profile and includes a little bit of market valuation tilting. Rebalance it according to the defined strategy. It also shifts focus slightly from growth to income as the year’s progress.
4. Minimise investment expenses and taxes that eat into the return from that portfolio.

That simple strategy has allowed me to be sitting here writing this post with 73% of the wealth I need for early retirement already accrued. So three quarters of the wealth needed in six and a half years. If it continues then I will go from being fleeced to financially independent in less than 10 years.

I’ve only recently discovered these forums but already feel aligned with most of the beliefs. I hope I can make valued contributions going forward.

 

[Meadbh]

Welcome to the forum, GK. (We can't call you Khan as we have a very senior member by that name).

Your strategy is not childish or amateurish in any way. It's exactly what this forum is about. Get those four things rights and the remainder is icing on the cake.

 

[AnIntentionalRoad]

Welcome and congrats on getting it figured out at a young age!

 

[GenghisKhan]

Welcome and congrats on getting it figured out at a young age!

Thanks for the welcome Meadbh and AnIntentionalRoad

It's interesting you say "getting it figured out at a young age". I am very self critical and push myself hard so it doesn't feel that way. Looking back I lost a bit over 10 years where I made all the usual mistakes which included car debt, buying "shiny things" which in hindsight gave no benefit and then spending everything I earnt bar a few % saved. Those savings were then invested in either high expense funds or expensive pension funds which resulted in portfolio drag I could ill afford given my low savings rate. If only...

That said I'm happy with the recovery. It does however sometimes feel a bit lonely given all of my friends and family really have no idea what I'm up to.

 

[heeyy_joe]

Is it delurk or unlurk? Must be a Brit thing.

 

[rodi]

GK - great job on figuring it out.

I, personally, didn't emphasize #1 as much - I wanted to find the right work/life balance... but as an engineer I still made a decent amount, even working only 4 days a week.

I had a similar epiphany about the live-below-your-means, maximize savings about 12 years ago, I retired this week at age 52.

 

[MichaelB]

Welcome to the forum, GenghisKhan

Your strategy is not childish or amateurish in any way. It's exactly what this forum is about. Get those four things rights and the remainder is icing on the cake.

Well said.

It does however sometimes feel a bit lonely given all of my friends and family really have no idea what I'm up to.

A problem often discussed around here. Forum members report no easy remedies but have lots of similar experiences to share.

 

[GenghisKhan]

The numbers are in for August 2014. I now have 74.4% of the wealth I need to pull the FIRE pin.

Annual expenses are down to 0.32% which I'm sure still sounds a lot to many US investors. One of the causes is a particularly expensive employer pension scheme that I'm in:
- as my employer matches contribution to a reasonable limit,
- it allows me to avoid tax now (40%) and pay it upon withdrawal (when I plan to be a 20% payer),
- as well as my employer contributing the majority of the employer national insurance (just another UK tax) contributions that they save because of my contribution.
So I take a deep breath and tolerate the expenses for these other big gains.

Year to Date my wealth is up by 7.4% with 3.9% coming from the market and 3.5% coming from hard graft. Is compound interest soon to become king? Interestingly, this is only the second year (at least so far) since I started down this FIRE road at the back end of 2007 that the market is giving more than my saving. History looks like:
Investing Wisely Saving Hard
2008 -15.7% 26.8%
2009 26.0% 31.4%
2010 15.8% 18.5%
2011 2.7% 10.9%
2012 13.2% 10.7%
2013 5.6% 11.0%
2014 YTD 3.9% 3.5%

Still on target for FIRE in 2017...

 

[GenghisKhan]

A significant milestone passed last week - 75% of the wealth I need for FIRE.

 

[GenghisKhan]

2014 ended with an annualised investment return of 5.4%. Interestingly one of my star fund performers was a UK Index Linked Gilt fund which rose 19.2%.

My savings rate ended a little below par at 48.1% of gross earnings. I choose to pay my investment taxes out of my earnings rather than withdraw dividends or sell down and these are now starting to have an impact on my savings rate.
That said savings continue to move me towards FIRE faster than investment return. 2014 saw savings add 7.8% to my wealth.

Combining the two saw me move from 68.3% of the wealth I need to pull the FIRE'ing pin to 77.4%. I'm at 79% today. Achieve average market returns of a real 4%and I'm on target for a little less than 2 more years at age 44.

 

[2017ish]

good job!

 

[Options]

...

It does however sometimes feel a bit lonely given all of my friends and family really have no idea what I'm up to.

You'll get used to that as you'll find you're in the minority in your approach to finances. Have you visited the Bogleheads forum and Wiki? Lots of useful information there. Congratulations on being so wise and ahead of the game at 41.

 

[GenghisKhan]

good job!

Thanks. Time is fast approaching. Hoping I don't get the OMY itch.

You'll get used to that as you'll find you're in the minority in your approach to finances. Have you visited the Bogleheads forum and Wiki? Lots of useful information there. Congratulations on being so wise and ahead of the game at 41.

Yes I visit Bogleheads intermittently under the same name as this website. I'm pretty happy with my investment strategy and have my Number now so don't visit as much as I used to. I'm now switching to here. Reading a lot but not posting so much yet.

Most of my investing is now auto pilot - the exception is I'm trying to build a High Yield Portfolio as part of the UK equities portion of my portfolio. I currently have 13 (having just added BP this week) and am looking to get that to 25 to 30 by the time I FIRE.

I'm now starting to think more about the psychological elements of FIRE which seems to get some good discussion here.

 

[2017ish]

Thanks. Time is fast approaching. Hoping I don't get the OMY itch.

***

I'm now starting to think more about the psychological elements of FIRE which seems to get some good discussion here.

This is an interesting topic. As you can see on this board (and bogleheads), there is a wide spread of anticipation/fear/uncertainty among people. Per my username, I'm not there yet, by DW and I have been anticipating for years, and are starting to trend (perhaps prematurely) to glee. Hopefully, we won't discover that we have been naive in our unbridled optimism....

 

[GenghisKhan]

Q1 '15 was good to me. Living well below my means and saving the difference between earnings and spending allowed me to increase wealth by 5.7%. On top of that Mr Market also added a further 5.8% to my wealth.

I now have 87.2% of the wealth I need for Early Retirement. A year ago it was 69.9%. If Mr Market performs to average then I'm about 1.1 years out. FIRE day is fast approaching and if I pull it off I will have gone from no hope to FIRE in about 9 years.

If anyone is interested I update and record my financial position every week. This has been my journey to FIRE since waking up and adopting my 'Do-It-Yourself' approach.

 

[Katiek]

Thanks for the update. It's great to see you making progress and seeing the results of your hard work

 

[GenghisKhan]

Still have my head down helping FIRE approach at a rapid rate. Today I have 92% of the wealth I need for FIRE. Providing Mr Market behaves should be done in a little over 6 months.

A couple of observations from my journey so far:
- If I hit my FIRE date my saving hard and investing wisely strategy will have resulted in me saving 0.9% of my FIRE wealth per month. Something I'm quite proud of given way back in 2007 I was on target to retire when the government told me I could. I've now turned that into age 44 with a planned move to the Mediterranean immediately after.
- In my case compound interest has just never got to work. Only 1/3 of my wealth built to date has come from investment return with 2/3 coming from savings (working very hard and living frugally). Investment return from my diversified portfolio has been an annualised 5.9% since 2007.

 

[Katiek]

Thanks again for the update and nice to hear you're so close to your goal!

 

[Markola]

Congrats on your progress. Can you say more about your interesting pending move to the Mediterranean, such as where and why there?

 

[GenghisKhan]

Congrats on your progress. Can you say more about your interesting pending move to the Mediterranean, such as where and why there?

When I was much younger I was lucky enough to be able to live close to an ocean that you could swim/surf/kayak in for a large portion of the year. That is a form of exercise that I want back.

Where I live today in the South East of England it is a lifestyle of excessive pace and zero community. A move will hopefully slow that down. There is also just no value in homes around here and Council services are expensive. By moving to the Med I lose the ability to earn large money but by doing so I can FIRE years earlier as my pot needs to be so much smaller.

I'm tired of the dark cold winters.

Our approach has been to try and spend time in a number of Med countries outside of the main tourist seasons over the last few years. Of course visiting is not living so when we make the call towards the end of this year we will first rent to make sure it's for us.

We're down to 3 countries having written Italy off:
- Spain, likely near Marbella. Absolutely love the sea and country side. Healthcare is good, low cost and public easily obtainable. Housing is inexpensive. We fit with the culture. We'll be living off dividends and interest so the taxation is a problem at over 20%.
- Malta, likely somewhere on Gozo or north Malta. The historical architecture including all the old farmhouses/houses of character is just beautiful in our eyes. Housing is the most expensive of our shortlist. Healthcare will be more expensive than Spain but nothing like the absurdity of the US and the public system is excellent (having used it during a visit) As a foreigner can play on the non-domicile rules making tax sensible. Worried about island fever given it's very small size.
- Cyprus, a village on the hills behind Paphos. This needs more work. Healthcare would be private and will run to about EUR1,000 per person so not expensive. Housing is good value. Taxation should run to £0 for the first 17 years which will give us plenty of extra money for travel. Country financial stability is an issue and so we could keep financial life offshore which brings its own risks.

 

[GenghisKhan]

It's been a fabulous few months financially both from a saving and investing perspective. This culminated in me becoming FINANCIALLY INDEPENDENT a month or so ago at age 43! I now have 105% of the wealth I believe I need to ensure I never have to w*rk again.

With my investment return YTD at 14.0% it actually all snuck up on me meaning I'm not yet ready to actually FIRE. That will have to wait until mid-2017.

Some of the highlights of my journey to FI:
- Time to achieve FI = 8.7 years
- Annualised investment return = 6.9%
- Average savings rate = 53% of gross income
- Contribution from saving = 62%, contribution from investments = 38%
- Planned withdrawal rate = 2.5%

 

[MBAustin]

Congratulations, GenghisKhan! Being FI is really the goal, after all. ER is just one option that opens up once you hit FI.

 

[Cap_Scarlet]

It's been a fabulous few months financially both from a saving and investing perspective. This culminated in me becoming FINANCIALLY INDEPENDENT a month or so ago at age 43! I now have 105% of the wealth I believe I need to ensure I never have to w*rk again.

With my investment return YTD at 14.0% it actually all snuck up on me meaning I'm not yet ready to actually FIRE. That will have to wait until mid-2017.

Some of the highlights of my journey to FI:
- Time to achieve FI = 8.7 years
- Annualised investment return = 6.9%
- Average savings rate = 53% of gross income
- Contribution from saving = 62%, contribution from investments = 38%
- Planned withdrawal rate = 2.5%

I've been following your journey and your website and you've done a really good job with a little benefit from a rising market ;-).

A couple of observations (from a fellow Brit).

From a financial perspective I know your expenses are pretty low, but your retirement stache is also on the modest size. I would be a bit nervous relying on that for the rest of my life. Of course you could always go back to work but I know for me (and I am sure for you as well) that would be totally soul crushing.

In a similar vein, not sure how old the kids are but where do you see their futures financially in terms of university and / or other financial support? There's different views but I know from my perspective its so much harder for them that I feel almost duty bound to sling a fair chunk of change in their direction (60k for three years at Uni - cheap by US standards - but a significant chunk of an early retirees budget).

Of the locations you mention I would definitely plump for Spain. Cyprus is too close to Greece to be financially comfortable (and of course suffered its own meltdown) that I would not be confident that all the things you need (medical, schooling etc) will remain affordable. Malta is just too small, particularly if you did want to do some work in the future and Spain is at least on the up again (although I would never live there due to the preponderance of British oikdom).

Finally - the big question - what are you waiting for?