FIRE

BIG-notorious said:
It's also important to remember that experiences make people happier than things. (That's not me saying it, there's actual serious research on the subject!) So even if you are splurging, you're really much better off dropping a grand on a holiday than on the latest iphone for example.
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Agreed. The weirdest thing in the latest click bait article was saying it’s experiences that matter, then imply they never go on holiday and certainly not abroad:

To me, we live a life of abundance. We enjoy time freedom, luxury in the form of experiences, and the ability to slow down and savour life.
Ask our parents’ generation how many overseas holidays they took as kids, or how many cars they owned growing up, and the answer might surprise you.

Somewhere along the way, our generation changed the definition of what it means to live a rich life. We equated happiness with consumption, but in doing so, we lost sight of what truly matters.
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A lot of the ‘fire’ type stuff on YouTube is similar, just parroting the same stuff about living a simple life, but trying to say it’s time rich full of ‘free’ experiences also. All very vague so it seems meaningful rather than meaningless. Which is nice but we all know experiences are a great choice over things perhaps, but they cost just as much or more.

Living carefully so you can comfortably afford experiences like overseas holidays is something I can understand more for example, especially when it’s often cheaper than Ireland anyway, so equating it as some kind of rampant consumerism doesn’t make sense.
 
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Each to their own.

If somebody chooses to save a significant chunk of their income so they can shave years off their working life, I don’t see why anybody would have an issue with that.

I would guess that most working folks don’t absolutely hate their jobs but look forward to retirement nevertheless.

My issue with the chap writing in the Indo is that he appears to have made a host of financial mistakes -

- Stopping pension contributions to purchase rental properties outside a tax-advantaged pension wrapper is just dumb;

- Buying investment properties within a limited company is ultimately very inefficient from a tax perspective;

- Taking out a personal loan to upgrade his car, etc.

And yet he’s presenting himself as some kind of financial guru.
 
I read that article a few days ago then listened yo a few of his podcasts. A few things confused me. He is not retired and he is not living off passive income which I thought were the two cornerstones of FIRE. So I am guessing he is working towards FIRE but not there yet. I don't see how 700K in a few mortgaged properties is going to help him do the RE part of FIRE. He works part time to earn 40K per year after tax which he says is enough for his family of 5, 3 young kids. Kids get very expensive when they hit teenage years so he has his most expensive years ahead of him, plus college perhaps.

He mentioned that in Ireland the only way to FIRE is to set up a limited company and the reason he gives is because company tax is only 12% or 19% if you work in certain services. I don't get this. At some point if you take out the money you are taxed on top of the 14 or 19% tax you already paid. Even if there is an advantage to buying/selling/running his properties this way ultimately he still has to pay income tax on whatever he takes out from rent or when selling again not seeing a huge advantage. Can anyone explain this?

So ultimately I am confused as to why anyone is giving him a hearing on FIRE. Living frugally outside of Dublin, ok maybe, but it's not FI or RE. IMO
 
huskerdu said:
. He’s making a good living telling people not to spend too much money on takeaways and first class flights
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So he has not retired but telling everyone about FIRE like he has?

He appears to be just another participant in the content creator Ponzi scheme where people speak/preach about the obvious for likes and views.

I don't get the take away for a family at €50. Is this really the cross that financial freedom dies on for families?

'F' is for Family and Fun too.

Anyone that avails of first class travel (normally just long haul) puts more value on the status or comfort than the additional cost. I doubt they give much thought to FIRE. Maybe first class reference to US where First is Business?

Anyway, both are poor examples to demonstrate how to achieve FIRE
 
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@homeowner

His arguments for investing in rental properties through a limited company are completely bogus.

Brendan has a good “Key Post” on the subject -

Key Post - Why you should never use a limited company to invest in residential property

I am not a tax expert, so corrections welcome. Some of the figures have been deliberately simplified e.g. 50% for personal taxes. This comes up a lot in various formats so I thought I would update the Key Post on the topic. This post is about an Irish individual investor who wants to buy...
www.askaboutmoney.com
 
This is crazy... And a self-sabotaging cop out with the commonplace "I don't understand pensions (or equities etc.) so I'll stick with (comparatively much less tax efficient) bricks and mortar investments" excuse.
https://m.independent.ie/business/personal-finance/i-switched-from-investing-in-a-pension-into-property-so-i-could-retire-at-43-now-im-on-course-to-do-that-at-41/a1326288586.html
Houghton, who hosts the Irish Fire Podcast, started investing through his pension. However, “I had no idea about financial products and you get signed up to default portfolios balanced between stocks, bonds and cash, even though if someone is under 50, they should be 100pc in equities”.

“There’s all this talk about taking 100 minus your age and that being how much you should be in bonds. That would mean at 40, I should have 60pc of my money in bonds but you won’t get enough returns.”

Because Houghton wants to retire early, he stopped making pension contributions and now holds 75pc of his assets in property, having bought two rental properties in 2022 to generate passive income.
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Sarenco said:
....three of which are held within his limited company (I’ve no idea why).
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Because he bought the properties using pre-tax income.

He works as a contractor (software developer), the cash he amassed within the company from that business was then used to buy the leveraged properties.
 
Or will he be able to keep his income in the lower rate? Ie avoid the higher rates by paying himself dividends at a rate to stay out of the higher rates?

He is right I think about not paying into a pension scheme if you want to retire early as most schemes have an age at which you can collect. But presumably if you are a contractor, self employed or via a company, you can set up a more flexible scheme?

I joined an employers DB scheme and there’s no flexibility, no cash until 65. But I paid into another scheme with another employer for a few years which had a potential start date of 60. If I had set up my own I could probably have selected 55 or even 50.
 
Annieindublin said:
Or will he be able to keep his income in the lower rate? Ie avoid the higher rates by paying himself dividends at a rate to stay out of the higher rates?
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Dividends are taken post company tax and then taxed as regular income. So you are paying more tax (corporation tax plus income tax) this way. AFAIK
 
Annieindublin said:
He is right I think about not paying into a pension scheme if you want to retire early as most schemes have an age at which you can collect.
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Can retire from a pension scheme by 50, so I'd think it's best to have the pension scheme funded but also have investments outside the pension to live on up till you're 50
 
I could've accessed my PRSA at 50 if I wanted to, presume that hasn't changed in the last 20 years ??
 
Fortune said:
If you'd set up your own, it'd most likely be a PPP or PRSA and you'd only be able to go as low as 60.
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I've taken money from one of my PRSAs from age 57.
LDFerguson said:
Early retirement (age 50 to 60) of a PRSA is only permissible if you are retiring / retired from all employments at that time.
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Ah, I fit into that category. But my understanding from previous discussions here and separately is that I can still go back to paid employment without penalty if I chose to do so...
 
Fortune said:
Pre income tax, but post corporation tax.
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It makes it a lot more attainable than buying a property after paying PAYE, PRSI and USC. He opened my eyes at least to the possibilities that exist when you can earn in a LTD company structure vs. being an employee.
 
It’s true that it is easier to build up a fund within the company than it is personally because corporation tax is lower than income tax.

But it’s still a bad idea.

Tax on profits generated from the rental income is 25%, rising to 40% if the profit remains in the company for more than 18 months.

And you will have to extract the profit at some stage, whereupon it will be liable to up to 52% tax on the income.
 
ClubMan said:
Ah, I fit into that category. But my understanding from previous discussions here and separately is that I can still go back to paid employment without penalty if I chose to do so...
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You can indeed. If someone is retired from paid employment at the time of drawing down the PRSA, then it's fine. There's nothing in the rules that says you can't subsequently take up an offer of a job. I know several people who retired in their 50s, took a chunk of time off to scratch various long-standing itches, got a bit bored afterwards and went back to work part-time. Other than the obligatory pension fund withdrawals from the tax year in which you turn 61, which might end up being taxed more than you'd like if you're also earning a salary at that time, there's no problem doing it.
 
LDFerguson said:
Other than the obligatory pension fund withdrawals from the tax year in which you turn 61
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Does that just apply to ARFs/vested PRSAs or does it also apply to other pensions that are just sitting there "paid up" that haven't actually been "retired" or otherwise accessed (e.g. tax free lump sum and/or pension income withdrawals) at that stage?
 
ClubMan said:
oes that just apply to ARFs/vested PRSAs or does it also apply to other pensions that are just sitting there "paid up" that haven't actually been "retired" or otherwise accessed (e.g. tax free lump sum and/or pension income withdrawals) at that stage?
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Applies to ARFs. Not sure about vested PRSAs but I assume it's similar and probably does as these are pretty much the same product. Definitely doesn't apply to non-retired paid up pensions where no TFLS has been taken. Non vested PRSAs suffer from obligatory pension fund withdrawals from the age of 75.
 
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