41 looking to retire at 50... possible ?

teaandbiscuits

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4
Age:
41

Spouse’s/Partner's age:
42

Annual gross income from employment or profession:
120k

Annual gross income of spouse:
100k

Type of employment:
Both multinational

In general are you: (a) spending more than you earn, or (b) saving?
We are saving, our target save is 50k/year

Rough estimate of value of home:
350k

Amount outstanding on your mortgage:
Paid off

Other borrowings – car loans/personal loans etc:
None

Do you pay off your full credit card balance each month?
Yes

Savings and investments:
240k in 5 year savings certs
220k split between various accounts (current, regular savers, short term fixed, credit union etc)
10k in Irish shares (BOI, AIB) via Degiro
60k in US domiciled Vanguard ETFs (4 fund Bogleheads-type strategy) via Degiro, investing approx 1000 / month, intend to buy and hold long term.

Do you have a pension scheme?
Me: 350k split over 3 pensions, including a current company scheme that I am contributing the max 25% to.
Spouse: Will be starting to contribute to one this year

Do you own any investment or other property?
No

Ages of children:
None

Life insurance:
Via work scheme, no separate policy

What specific question do you have or what issues are of concern to you?
Our previous financial goal was to pay off the mortgage. Now that is done our next goal is to plan for early retirement around 50. We plan to do that by maxing pension contributions and saving/investing

We have 2 questions we'd love some advice on:

1. We're working the numbers to try and see if early retirement is achievable. Any input would be appreciated. Or even questions to get us thinking the right way.

2. Apart from the pensions and the savings regime we are not sure how best to invest our money to further this goal. Basically we're good savers but not so great investors!
The 220k in various accounts is not really doing anything, so trying to find a home for that is a priority. We're somewhat paralyzed with indecision on what to do here.
- We think that translating some/most of that into ETFs is probably the way forward, but concerns about the current market means we're dripping the money in rather than buying in bulk. We're also somewhat concerned about the safety of those ETFs if Degiro was to have an upset and we had a large holding.
- Investing in a fund (Zurich, Irish Life etc) would also be an option but the 8 year deemed disposal and tax treatment doesn't seem to make this attractive vs the ETF option.
- Direct share investment is not something we're confident on our ability to do well (hence the ETF indexed funds approach)
Not sure what other options are out there, I guess we are somewhat risk-averse and scared to commit to something high risk. Again any advice would be appreciated

Thanks for reading!
 
Which Vanguard ETFs are you invested in? Are you aware of US estate taxes on amounts over 60K
These are USD denominated funds, correct? Currency risk?
 
1. Max spouse's pension contribution too
2 I agree with you about lack of confidence in picking ind, shares(. Me too)
3 whether you will Have enough at 50 depends on your after tax spending ....etc etc do a budget and analyse your expenditure .
4 Overall I would say unlikely ( IMHO) given current net worth is 1.2 million including house . Save hard and you might get to 2m by early 50s . (Is that enough 40 years at 50k a year is 2m?... Who knows ?)
 
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OP is in a very strong position relative to most people in the country. Some people think you need millions to retire early, thats not correct. Based on historical market trends, a 4% SWR (safe withdrawal rate) will work - this gives you 48K gross p.a.
Remember, thats without adding adding any new money.
 
Just a thought. Might not work out if you're going to retire in Ireland, but by moving to another country it might. Oh, sunshine included at no extra contribution
 
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Benidorm has a pleasant climate all year long, and no language barriers. Its dirt cheap to live there.
This country is a socialist state, wealth and savings are heavily taxed, and passed on to wasters. There is little incentive to becoming self-reliant and careful with money.
 
OP is in a very strong position relative to most people in the country. Some people think you need millions to retire early, thats not correct. Based on historical market trends, a 4% SWR (safe withdrawal rate) will work - this gives you 48K gross p.a.
Remember, thats without adding adding any new money.
Two people with no debts should be able to live comfortably on €48,000 a year. On that income, split between two people, you will pay almost no tax. You should have a take home income of around €850 a week.
 
Benidorm has a pleasant climate all year long, and no language barriers. Its dirt cheap to live there.
This country is a socialist state, wealth and savings are heavily taxed, and passed on to wasters. There is little incentive to becoming self-reliant and careful with money.
And the OP could buy a house from one of the retired UK couples who will have to leave after Brexit! :D
 
Based on historical market trends, a 4% SWR (safe withdrawal rate) will work - this gives you 48K gross p.a.
Remember, thats without adding adding any new money.

What markets? What historical period are you referencing? What about inflation? What about investment expenses and taxes? How could you possibly know what "will" work in the future?

I am very familiar with the academic literature in this area and would respectfully suggest that such bald assertions are positively dangerous.
 
Barenco,

Are you expecting long periods of zero economic growth, and corresponding poor market performance?
What do you think your pension is invested in?
How is assuming 4% SWR a dangerous idea? You can get that in dividend yield, without touching your capital sum.
Taxes and expenses? The OP has touched on this - Vanguard is as low as you can get in TER expenses, and De Giro is a low cost broker.
I know about these matters - I am a professional investor.
 
OP is in a very strong position relative to most people in the country. Some people think you need millions to retire early, thats not correct. Based on historical market trends, a 4% SWR (safe withdrawal rate) will work - this gives you 48K gross p.a.
Remember, thats without adding adding any new money.

Where are you getting 48k from? 350k of their current net worth is tied up in their home and this is not income producing.
 
We are talking about net worth - I would include a paid off house in this calculation of means.
You cant have it both ways, early retirement means you should downsize and get your equity working for you.
They intend to continue hitting a high savings rate for next 9 years. They will easily increase the pension and investment fund, provided lifestyle expenses are kept under control.
A couple with 48K income, at current RPI (retail price index), that is a huge amount to live on, without a mortgage.
The 4% SWR assumes normal inflation in the calculations.
 
A couple with 48K income, at current RPI (retail price index), that is a huge amount to live on, without a mortgage.
The 4% SWR assumes normal inflation in the calculations.

Firstly if include house in net worth as i did then the 48k must cover cost of housing ie rent

Secondly i dont agree 48k is a huge amount to live on but OP can do his own calculations

What markets? What historical period are you referencing? What about inflation? What about investment expenses and taxes? How could you possibly know what "will" work in the future?

I am very familiar with the academic literature in this area and would respectfully suggest that such bald assertions are positively dangerous.

Thirdly 4% is not a given as sarenco rightly points out above some markets e.g japan if i recall correctly only supported 2%. i personally would never assume it
 
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I know about these matters - I am a professional investor.

Excellent. Let's work through the details so...

Are you adjusting your 4% withdrawal rate for inflation on an annual basis? If you're not, the OP could find that their standard of living diminishes significantly over time.

You mentioned dividend yield so I assume you are talking about an equity portfolio. Is that a 100% equity portfolio? A global equity portfolio or something else? Do you know what the failure rate was historically on an annual withdrawal rate of 4%+CPI from a 100% global equity portfolio over various rolling 30 year periods? What about 40 years? 50 years?

Incidentally, the 12-month trailing yield on the FTSE Global All Cap index is 2.26% - not 4%.

ETFs are certainly cheap but they are not free - either to acquire or hold - does your 4% SWR incorporate these expenses?

What about taxes? The OP will be paying the taxman roughly half of all dividend income and a third of all capital gains from their taxable portfolio. Is your 4% SWR robust enough to withstand that level of taxation? What about withholding taxes on the underlying portfolio holdings?
 
I am not talking about putting the farm into ETFs.
Do your own research on the available funds. There are dividend based funds that pay 4%, some are non-UCITS.
They could follow a Bogleheads investment strategy, balanced with bond funds. There is alos a permanebt portfolio, that is back tested 30 years. maintians the capital amount through 2008 / 09 for example.
When the time comes to drawdown pension fund, there are ways to structure this, keep both people under the high rate of tax.
The tax situation on ETFs is a problem for sure.
 
We are talking about net worth - I would include a paid off house in this calculation of means.
You cant have it both ways, early retirement means you should downsize and get your equity working for you.
You didn't make it clear in your previous post that the OP would have to downsize and the OP has not hinted at any plan to do that.

Also, 'early retirement means you should downsize' is not applicable in all cases.

Questions for @teaandbiscuits: Are you open to downsizing or moving to lower cost geographies?
 
teaandbiscuits - you cant answer the question until you have estimated what income you think you will need to fund your life.
You will need to fund approx 37 years. and don't forget inflation.

Do you intend to travel, run two cars, pursue hobbies etc. . How much will these cost ?
How much do you need to have put aside for medical expenses as you get older ?

Funding 37 years retirement after 30 years working ( even at a reduced income) sounds like a tall order.
 
I created a spreadsheet showing tax treatment of ETF investment.
Using aggregate global market funds, (non- UCITS), you will still be way ahead, assuming 3% growth p.a. and forced sales every 8 years, CGT at 33%.

Aside from all of this, with income levels like this, and to get to the goal at 50, I would be putting away 5K nett each month.
Even keeping this in the bank, I think you could achieve said goal.
 
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