# 41 looking to retire at 50... possible ?



## teaandbiscuits

*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!


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## fistophobia

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?


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## mtk

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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## Gordon Gekko

Agreed. It all depends on your income requirements. My initial reaction is not a hope.


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## fistophobia

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.


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## noproblem

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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## fistophobia

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.


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## Purple

fistophobia said:


> 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.


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## Purple

fistophobia said:


> 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!


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## Sarenco

fistophobia said:


> 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.


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## mtk

fistophobia said:


> Benidorm has a pleasant climate all year long, and no language barriers. Its dirt cheap to live there.


I guess i am going off topic but I have to admit benidorm beach looks good...

https://www.skylinewebcams.com/en/webcam/espana/comunidad-valenciana/alicante/benidorm-playa-levante.htm


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## fistophobia

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.


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## PGF2016

fistophobia said:


> 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.


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## fistophobia

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.


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## mtk

fistophobia said:


> 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



Sarenco said:


> 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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## Sarenco

fistophobia said:


> 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?


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## fistophobia

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.


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## PGF2016

fistophobia said:


> 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?


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## huskerdu

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.


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## fistophobia

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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## Purple

huskerdu said:


> Funding 37 years retirement after 30 years working ( even at a reduced income) sounds like a tall order.


Unless of course you are a member of the Gardai.


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## fistophobia

Plan B is Benidorm. Cheap apartment, cheap beer and food, 
and "knees up mother brown" cabarets each night.


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## Sarenco

fistophobia said:


> 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%.



Way ahead of what?


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## Bronte

fistophobia said:


> Plan B is Benidorm. Cheap apartment, cheap beer and food,
> and "knees up mother brown" cabarets each night.



Then he can definitely retire at 50.  He'll only need to fund about 10 years. 

Until the OP answer Huskermu's questions it's pointless going any further in the discussion. 

And retiring early might not be the holy grail some think.  It's not for everybody.


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## Cervelo

For me there are 3 questions the OP needs to answer first before they can start thinking about retiring at 50
1. Why do you want to retire at 50
2. How much does it cost to fund your lifestye at the moment
3. What type of lifestye do you want when you retire and how much will that cost to fund.


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## PGF2016

teaandbiscuits said:


> *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!



One item that has been overlooked is your savings rate. You're not actually saving that much for someone with no kids or mortgage who wants to retire early. You should be living off the lower income and saving the full second income at the very least. Come retirement you'll probably be living off less again.


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## Connard

PGF2016 said:


> One item that has been overlooked is your savings rate. You're not actually saving that much for someone with no kids or mortgage who wants to retire early. You should be living off the lower income and saving the full second income at the very least. Come retirement you'll probably be living off less again.


That second income after tax is about €61,000. So they're not far off it.


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## Purple

All of these discussions leave me thinking that living for today with an eye on tomorrow is the best way to go. 
We  don't know what the future holds, man plans and the gods laugh and all that.


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## PGF2016

Connard said:


> That second income after tax is about €61,000. So they're not far off it.


I was suggesting living off the lower salary and saving the higher salary. 61k sounds like the after tax income of the lower salary.


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## Connard

PGF2016 said:


> I was suggesting living off the lower salary and saving the higher salary. 61k sounds like the after tax income of the lower salary.



You're correct, it is. I misread your post, I thought you meant live off the higher salary and save the lower salary. My bad.


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## Cervelo

Purple, I could not agree with you more and feel its a point that is forgotton in many a discussion here


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## Palerider

You can definitely achieve this worthwhile goal, I retired at 47 leaving my job on a severance package, I would have been planning like you on a 50 departure and was working towards that but it came a tad earlier for me. I did not have the same assets you outline or salary for that matter,  now in my 50's life is good, I worked hard for maybe ten years double jobbing and investing in yielding property assets that are working a treat ( all offshore in a company, taxes paid before the masses jump on it  ).

This is a solid life goal, well done for focusing, it will take effort and planning but the rewards are tremendous in terms of life flexibility and all that that means to individuals, each one is different but do ensure you have income from some source post age 50 -  property or pension or ideally as in my own case, both.


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## Shakespeare

On one point mentioned above, I don't believe anyone on Eur100k gross and making any kind of pension contribution is bringing home a net of over Eur5k per month. The days of effective tax rates being 40% are no longer with us, (and I do mean effective, not marginal tax rates). With a salary of Eur100k, possibly BIK on health insurance (a likely benefit on that salary in a multinational) and contributing even 10% to a pension is going to being to bring someone down closer to Eur4.5k per month and if only starting a pension now, at a 20%contribution, nett per month would be down just under Eur4k per month which is Eur48k per annum and a long way off Eur61k. These numbers can be easily run on the deloitte tax caluculator webpage


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## teaandbiscuits

Thanks all for the great feedback.  Lots to consider here.  Just back from travel with work so need to digest all of this!


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## teaandbiscuits

fistophobia said:


> 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?



Hi, yes USD denominated.  ETFs are Vti, vxus, bnd, bndx.  I understood a non us broker would result in no estate tax from another AAM thread.  Sounds like i need to confirm that thanks!



mtk said:


> 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 ?)



Super feedback thanks.  We did a budget and estimated spending would be 35k/year including some contingency.



PGF2016 said:


> Questions for @teaandbiscuits: Are you open to downsizing or moving to lower cost geographies?



Hi, yes we are certainly open to moving in Ireland.  My wife wants to live in the country and keep chickens!  Other countries? maybe, have lived abroad in the past and liked it.  Our current house is a 2 bed so little room for downsizing.



huskerdu said:


> 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.
> .



Yes I should have included this in the original post.  We had estimated 35k a year and had increased this by 2% a year to account for inflation.  Not sure how realistic a inflation buffer that is.



Cervelo said:


> For me there are 3 questions the OP needs to answer first before they can start thinking about retiring at 50
> 1. Why do you want to retire at 50
> 2. How much does it cost to fund your lifestye at the moment
> 3. What type of lifestye do you want when you retire and how much will that cost to fund.



Good questions!
1. Tired of working, want to enjoy life while young enough to do so.  Lots of hobbies and interests but no time.
2. We've started to track this seriously now, the answer we always had before was "not much" but we may be in for a surprise
3. Comfortable nothing very extravagant, our interests tend more towards the outdoors than expensive things and big nights out.  Run one car.
Sorry it's late here and I'm on a tablet (hate typing on these things!), hope the above makes sense.



Purple said:


> All of these discussions leave me thinking that living for today with an eye on tomorrow is the best way to go.
> We  don't know what the future holds, man plans and the gods laugh and all that.



Great point and we agree.  It seems like today is all about work though which is wearing us down!


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## fistophobia

The way to retire early is to have a high savings rate and clear the mortgage. This has a dual effect - increases your stash and reduces what you need to live on - you train yourself to live on less. For those of us who did it closer to age 40 (me included), the AVC and pension route is of no use. I would focus on eliminating or reducing recurring costs. I do not want 25% of my money in a lump sum, an ARF, an annuity or to be tied into financial products.

The end goal is the same - financial independence.


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## Gordon Gekko

It is very difficult to build wealth in any meaningful way without using "financial products" as you term them.


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## Sarenco

I can't see any logical reason why somebody who is saving for retirement - early or otherwise - wouldn't make maximum use of all tax-advantaged pension space.  It's a no-brainer.


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## Gordon Gekko

It is a crying shame that opaque charges, poor investment strategy, and bad press seem to have turned many people off pensions.

There is no better way to save for retirement.


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## dub_nerd

Gordon Gekko said:


> It is a crying shame that opaque charges, poor investment strategy, and bad press seem to have turned many people off pensions.



Don't forget government raids too.


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## SirMille

Cervelo said:


> For me there are 3 questions the OP needs to answer first before they can start thinking about retiring at 50
> 1. Why do you want to retire at 50
> 2. How much does it cost to fund your lifestye at the moment
> 3. What type of lifestye do you want when you retire and how much will that cost to fund.


This post saved me typing


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## Gordon Gekko

I would also question the wisdom of retiring at 50.

Money is not the be all and end all. The people I know who enjoy the healthiest and most "successful" retirements still work a little.


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## SirMille

If I may ask the OP, what hobbies do you have. A bit off topic


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## Gerry Canning

After your pension contribution @ 25% you have k70 + spouses income of k 100 = k170 to live on.
I assume ? you will need a similar lifestyle ?

1. Have k120 left of the k170 after tax ,less savings k50 each month = k70 left  to spend
 It seems you require a net k70 per year to maintain life style.
.........................................................................................
2. Hold circa k900 twix savings and pensions .
Future save k50 + 25% pension on your salary = k30 == total saving of k80 per year.
............................................................................................................
After 9 years you will have K900 + more saved of 80@9 years = k720. + some growth.
That equals k1620 to be divided over another 25 years from age 50 = k65 per annum.
.................................................................................................... 

So if my simple assumptions are your general thoughts = you are close.
Also after 68 add in state contributory pensions of  % of years contributions , I guess k6 each


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## paddyd

This post is a month old, but after reading through it, especially the last page above, am I right to say that saving all your money into tax-advantaged pension funds while having a goal to retire early don't mix well, considering you can't access the pensions until well after 50 in virtually all cases?

I set the goal about 10 years ago of financial independence rather than specifically early retirement. I wanted to have the OPTION to not work if I wanted to. I have a small pension from years ago, but that's it, about 4-5% of net worth.
I achieved financial independence last year and left my job. I didn't hate it, I really enjoyed it, but I had the option to reduce my stress level and I chose to. At 38, I'm taking time off 9-5 work, investigating some new business ideas, which may happen soon (and put me back to work), but mainly playing golf, meeting people, exercising, walking the local beach and being a full time parent to an 8 and 10 yo. I'm testing what true early retirement might be like in years to come. My passive income requires a few hours per week, but that's it.

Some personal views:
- I can't see the point of including any normal 2/3/4-bed family home in a measure of net worth, even if it's paid off. I don't believe many reputable surveys of household wealth do either (net worth = INVESTABLE assets, minus all debt. It's not an investable asset). Downsizing is something a few % of households will do in retirement. Use it as contingency if you wish, but I wouldn't have it as a cornerstone of any retirement plan.

- The 4% SWR is risky advice for any person intending to retire early (40-60 years of retirement). A more recent large study found its closer to 3% or perhaps 3.5% at most. The sequencing of return risk is too high. Yes, you can adjust the SWR if you hit a bad few years, but have you planned for that?
https://earlyretirementnow.com/2016/12/07/the-ultimate-guide-to-safe-withdrawal-rates-part-1-intro/
see the success rate table half way down with various withdrawal rates.

- reducing you lifestyle costs are just as important as saving
Using a 3% withdrawal rate, the difference between a consistent lifestyle cost of €39k pa versus €45k is over €200k less to save. €1.3m v €1.5m.

- do a dry-run year of retirement. See if you can live the lifestyle on the costs you've planned, while you're still working. Crucially, don't assume that you'll save lots by not working (fuel, tolls, food, coffees etc). You'll still drive places, meet people for lunch and do other things & hobbies, never mind perks like a work mobile phone perhaps and of course funding your own VHI (both of those will easily add €2k pa to your lifestyle costs). Take account of every single cent. Go line by line in your credit card bill and current a/c.

- dont plan to retire early while servicing any debt of any kind. Likewise with over €1-1.5m of net assets and a low cost of living, you don't need life assurance either.

- inflation. It's an invisible tax on all assets and something you should never ever ignore.

I read somewhere: Plan your retirement with a micrometer, measure it with a ruler, so that you can execute the plan with an axe 
Good luck.


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## Sarenco

Excellent post.

One niggle - the linked study on SWRs only references US securities, assumes a wafer thin 0.05% expense drag and ignores taxes completely.


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## paddyd

Sarenco said:


> Excellent post.
> 
> One niggle - the linked study on SWRs only references US securities, assumes a wafer thin 0.05% expense drag and ignores taxes completely.



100% agree and funnily enough i was going to say that last night - almost everything related to SWR is US based and not applicable in a European/Irish context. Personally I use 3% as my own guide, simply because my lifestyle is adjustable if I need to (€3-3.5k monthly, including plenty travel).
At the moment, even reliably beating inflation isn't a certainty.


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## fistophobia

PaddyD,

Its nice to see a similar ER person on here like myself. Maybe we should compare notes.
Most people would include their house in calculations of net worth. To me this is delusional.
Unless you can sell and downsize in the future.
Like yourself, I am not counting it. I do not consider my house to be an investment asset.
It attracts expenses, it does not provide an income, unless you rent it out.
Net worth to me is investible assets, that achieve income or capital growth.
I still believe in the 4% SWR - although I am only selling to rebalance, based on my IPS.
Retiring early is not so much a risk as you would think. I agree, its all about expense control.
I don't have a car, so that rules out a lot of recurring expenses.
If I was doing this again, I would have retired earlier. Even forgetting about investing the money, a high savings rate would do it in 5 years.


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## Sarenco

paddyd said:


> almost everything related to SWR is US based and not applicable in a European/Irish context



You might find this recent article of interest -

http://www.fa-mag.com/userfiles/stories/whitepapers/2015/WealthVest_Sept_2015_Whitepaper/12040-Pfau-Sustainable-Withdrawal-Rates-Whitepaper-.pdf

The bottom line is the so-called "4% rule" would not have worked in the vast majority of developed economies.

Again, I would stress that these studies don't take account of investment expenses and, critically, taxes.


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## paddyd

Agreed, it's incredibly dangerous advice and post tax/expenses are the only returns that matter.

Ive avoided the SWR conundrum by aiming for financial independence rather than early retirement - I still technically work for my living, mainly as a landlord, which I quite enjoy (while providing cover for all the usual pitfalls) and equally will probably return to some form of full time work, working for myself.

Also my other half still works and is younger, so there isn't really any early retiring going on - it just feels like that after 16 years of solid graft and suddenly have a lot of time back to fill with things that I'm happy to be doing.


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## Buddyboy

It's very interesting to see peoples different opinions on what "retirement" , and specifically "early retirement" actually is..  Paddyd - you say you are retired, but some people look at being a landlord as working, albeit for yourself.  I agree with you.

When I mention early retirement to some people, I get the response, that at 51 I am too young to retire.  I assume their view of retirement is sitting by the fire with the rug over them, and getting the odd visit from the (adult) children.  Me, I am actively putting other things in place so I will have a lot to do, some of which will bring in a modicum of income. So maybe "retirement" could be defined as not working a 9-5 for someone else.  Even moving from a full-time job to something two days a week could be viewed as retirement.

And I also agree with you on no debt as being a key factor.


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## paddyd

Lol - I say I'm financially independent - I don't say I'm retired 
Agree with you otherwise


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## Dan Murray

Interesting stuff, Paddy

Of course, in my day, safe withdrawal was more a family (rather than financial) planning concept.


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## Sarenco

Dan Murray said:


> Of course, in my day, safe withdrawal was more a family (rather than financial) planning concept.




Arguably, I suppose, both concepts were/are (to a greater or lesser extent) inter-connected.


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## Buddyboy

Dan Murray said:


> Interesting stuff, Paddy
> 
> Of course, in my day, safe withdrawal was more a family (rather than financial) planning concept.


Ah yes, like the Billings method, favoured by the catholic church
The old joke "What do you call people who use the Billings Method?.............Parents!"


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## paddyd

article in today's Journal related to our conversation why a family home isn't an investable asset in terms of net worth, with 25% of adults in an 'unsuitable' home and unable to afford to move: http://www.thejournal.ie/housing-ireland-3420157-Jun2017/


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## mtk

The main financial benefits of a PPR  are 
no rent to pay 
and 
any increase in value is CGT  free

But I agree most people dont downsize  even if they talk about it (know area, costs involved,  etc.)

Is there a market for equity release products ?


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## paddyd

mtk said:


> Is there a market for equity release products ?



I would argue that's exactly what the HSE Fair Deal program is


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## paddyd

mtk said:


> The main financial benefits of a PPR  are
> no rent to pay
> and
> any increase in value is CGT  free



If your family home has a mortgage, as 70% do, then it's a cost, not an asset. Even with the mortgage paid off, it's more of a security or a contingency, than an asset.


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## Sarenco

Well, there are costs (insurance, LPT, maintenance) that come with owning a property whether or not you have a mortgage on that property.

I don't see how you could argue that home equity is not an asset or that it doesn't form part of your net worth.

However, I agree that it's not an investment any more than a car or any other asset that can be rented is an investment.  It's a consumption item.

Whether it makes sense to own, as opposed to rent, your home is another matter entirely.


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## paddyd

That's exactly the point though - home equity isn't an asset unless you release it, yet it's a costing to you every year in tax, insurance, maintenance and upkeep. only a tiny fraction of people actually downsize for the purpose of releasing equity. It's incredibly rare. 
Also, no official measure of net worth includes a family home. 
e.g If you have a 3-bed semi, you'll likely spend 25-35 years paying for it (again, plus all the interest, tax, insurance, maintenance etc) and then be carried out of it in a box. That's not an asset YOU can use, but you leave it as an inheritance for someone else.

For net worth, it needs to be an 'investable' asset, and your family home simply doesn't qualify in 95% of cases.


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## Sarenco

paddyd said:


> home equity isn't an asset unless you release it


Ok but that's true of any asset other than cold, hard cash.  You can't exchange your stock or bond certificate for groceries!

Most assets have some carrying costs.  For example, broker fees, income tax on dividends, DIRT, etc.

The fact that only a tiny minority of people ever downsize on retirement - in this country - doesn't mean home equity isn't an asset.

Not sure what you mean by any "official measure" - do you mean for the purposes of any State means test?

I don't agree that something has to be an investment for it to from part of your net worth.  I do, however, agree that home equity is not an investment.  It's a consumption item.


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## paddyd

I get you, I think it's really how you look at at.
Here's my own excelsheet budget: I have assets that generate me income on one side (and they have their own associated costs obviously) and then I have costs on the other. My PPR is a cost and generates no income. However, my plan considers it as an inheritance - passing the decision to use it as an asset (sell/rent it) or not (live in it) to the next generation.

'Official measure' would be any of the notable global wealth reports - for example they would define a 'millionaire' as someone with €1m of investable assets, minus liabilities, and excluding the PPR.

in other words, all those old ladies or gents in a €1.5m house but living on a small pension aren't millionaires, as they'll never downsize to a €400k two bed ground floor apartment down the street.


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## Sarenco

paddyd said:


> in other words, all those old ladies or gents in a €1.5m house but living on a small pension aren't millionaires, as they'll never downsize to a €400k two bed ground floor apartment down the street.


Sure but they _could_ downsize to a more appropriate property (and would be incentivised to do so if we had a property tax that was in line with international norms).  Their heirs would certainly consider their homes to be assets!

Your home doesn't generate an income, as such, but it does spare you from an expense that you would otherwise have to meet - rent.  The rent saved by owning your home is sometimes called "imputed" rent.


paddyd said:


> 'Official measure' would be any of the notable global wealth reports - for example they would define a 'millionaire' as someone with €1m of investable assets, minus liabilities, and excluding the PPR.


That looks very like the definition of an "accredited investor" in the US.  Basically, the US rules assume that if you have $1million in investable assets, you are to be trusted to make your own financial decisions and can invest in private funds that haven't been vetted by the SEC.


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## fistophobia

Back to the OP questions and statement. I think you are in a strong, enviable position financially.
Theres a certain amount of smug critique on this website, from people who are well sorted already.

Best you can do is blank them. 
Listen, I agree, who in their right mind wants to work any longer than they have to?
I will do everything I can legally, to avoid work. Ye know, in victorian times, it was only the lower classes that had to work.
My golden rule is - dont spend capital, only spend the interest or income on your capital.


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## Sarenco

fistophobia said:


> My golden rule is - dont spend capital, only spend the interest or income on your capital.


I assume that is interest less DIRT.  So you can spend something like 0.20% of your capital every year.

You told us earlier on this thread that you could safely spend 4% of your capital every year.

Which is it?


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## paddyd

I wouldn't worry so much about wanting to retire at a specific age - instead work to being able to fund your lifestyle costs from that point forward, either through saving a large amount of money (full early retirement), or by passive income (financial independence), or both of course. I aimed for passive income. Once you reach that point, you're ready to retire whenever you want - but you don't have to of course.
I've always found this site reasonably helpful, simply because it allows me put in my own numbers for everything (esp inflation and investment returns),
https://financialmentor.com/calculator/best-retirement-calculator
but also lets you insert different passive income and pensions, and the ages they apply to.
The usual pinch of salt applies, as it assumes consistent returns every year, so tone your numbers down. e.g. investment returns beat inflation only by 0.25%, or that you expect to live to 100, it's an easy way to build in contingency.
If you're going to retire at 51 and live to 100, that's 49 years worth of lifestyle to fund and no-one knows how inflation and investment returns will affect those 5 decades


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## fistophobia

I have a diversified portfolio, equities, long and short dated bonds - for income I have corporate bonds and high yield products.
Could I survive a market rout? I think so. I always have 3 years living expenses in cash or near-cash securities.
Been a fan of the Provy for many a year, the bonds and ord. shares - making money off other people's misery. Isnt that the capitalist way?
I also do some peer to peer lending; example of recent funding being KC Peaches and Camile. I am averaging 4% nett yield p.a.


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## DeeKie

Fistophobia where do you do your peer to peer lending?


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## Gordon Gekko

Sounds like Linked Finance to me


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## fistophobia

Grid Finance


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## Sarenco

fistophobia said:


> I am averaging 4% nett yield p.a.


You must be going way out the risk curve to achieve anything like that kind of net yield in the current environment.

Personally, I think investing for income is an illogical preference and it's generally very inefficient from a tax perspective.  Each to their own I suppose.


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## Ndiddy

Purple said:


> 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.


If retiring at 50, would they still not pay tax on the 48k?  I thought taxfree retirement income only came at 65+?


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## paddyd

Ndiddy said:


> If retiring at 50, would they still not pay tax on the 48k?  I thought taxfree retirement income only came at 65+?


You always have income tax to pay, even over 65. There are bigger exemptions for over 65s, that’s all (I think it’s 18€k for singles and €36k for married couples).


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