Retire at 55, what do you think?

As an early retiree and coincidently 55 next month (woohoo) here's my little bit of advise for early retirement

There are three main things (IMO)that need to be addressed borrowings, savings and spending habits
1. Borrowings
Simply put you cannot even think about early retiring if you are carrying any debt with you and the sooner you do that the better
Debt is a cost and drain on your resources and it makes perfect sense (in most cases) to clear it if you have the resources
Not only does it make sense financially, But mentality it's a game changer and will open up more avenues for point two
2. Savings
When in employment a pension is the best way to save for retirement, ergo you should be maximising your contributions to this
But pensions come with a lot of T&Cs like when you can access them and what happens after you access them and this has to be looked into to make sure a. you can access it when you need it and b. you understand the workings of the ARF after you access the pension
In particular I thinking about the your draw downs and the 4% rule and what that is going to mean to the longevity of the ARF should the fund not perform as well as you had hoped
You will also need (IMO) a second savings vehicle (again IMO) a stock portfolio is that way to go, I say this because if your ARF is not performing as hoped you can leave the drawdown at the minimum (4%) and supplement your living requirements from the stock portfolio and thus hopefully preserving the longevity of the ARF
Which is why in point one I said clearing you debt gives you more avenues for saving which in turn gives you more options for income streams in retirement. I myself have three a pension (yet to be accessed) a stock portfolio and a large cash holding in state savings, I could include a fourth which would be the nuclear option the PPR, should all else fail
3. Spending Habits
I say this all the time when asked about early retirement, you need to know exactly how much you need to live on, both essential and non essential spending because only then can you make the correct decisions on what income you need for retirement and if your funds/savings are able to provide that for the long term but also what you can cut out of you life to make the numbers work

One little bit of extra advise, life is a journey make sure you enjoy the here and now and don't be putting off everything for a future date as …
 
What do you anticipate your children will be doing when you are 55? What if one of them studies a long course like medicine or something that requires a two year masters or a PhD? Can they live at home during their studies and are there employment opportunities locally so they can live at home in their early career? Will you be happy to leave them and live in another country when you retire?
 

Hi Cervelo

Let's tease that out a bit.

You do need to coordinate your ARF and any investments outside it. So you should be looking at the diversification of your total portfolio. You should not look at your ARF and outside investments separately.

So if the ARF does poorly, it's likely that your total portfolio will be doing poorly as they will both be in equities.

So worry about the longevity of your total portfolio.

There is probably a tax advantage in stretching out your ARF so you use up the 20% tax bands.

So should you take out the minimum 4% drawdown from the ARF and then cash your non ARF investments as you need them?

Brendan
 
I don't think this makes sense. Why would you keep a parallel equity-based vehicle where you are exposed to tax on dividends and CGT? People forget that you are only taxed on 4% of the ARF, you don't actually have to draw it down!

If you want to mitigate equity risk you have to diversify. So hold cash or buy an annuity.
 
Sorry for the delay in responding guys, too nice a day not to go for a spin up to Glencree
First off I fully understand that I'm probably going to get a schooling in how wrong my way of doing this is but it's based on my experiences and how I view certain things. Early retirement is an ongoing process and does require constant fine tuning both financially and mentally

Brendan, I don't look at my pension, investments and state savings separately they very much are looked as a whole unit but like cogs in a wheel they also serve very different purposes as I progress along this journey.

lets start with the pension, remember it's a PRSA at this moment in time and I don't expect to cash it in for a good few more years
I view my pension as something that grows(hopefully) in the background, passively for want of a better word. When the time comes and I turn it into an ARF it will be made up of a couple of ETF's, for me ETF'S are a buy and hold thing so like the PRSA the ARF will sit there "passively" growing and I will dip in and out of it as needed.

My stock portfolio is the bread and butter of our lifestyle and is the second biggest in terms of value after the house and is made up of individual stocks and shares but it very much is a rollercoaster ride in terms of performance but overall it's working for what I need it to-do, provide an income for us

The state savings is the backup plan if for some unknown reason the other two get wiped out, very unlikely but with the last two years we've had and a war brewing in the east who knows what's going to happen over the next five to ten years. It also allows me the flexibility in my approach to risk in the stock portfolio and a buffer should the portfolio not perform as expected

Regarding the 4% rule, I probably need to have a rethink about that and the taxation side of things but as it's still a PRSA and rules and regulations are more than likely going to change I'll deal with that closer to the time of encashment
NoRegretsCoyote said:
People forget that you are only taxed on 4% of the ARF, you don't actually have to draw it down!
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I've always looked at the 4% minimum withdrawal as a yearly requirement when you have an ARF, is this not the case??
 
NoRegretsCoyote said:
People forget that you are only taxed on 4% of the ARF, you don't actually have to draw it down!
Click to expand...

Hi

Why would you not draw it down?

It makes no sense to pay tax and not draw down the net amount? You are leaving it there just to be taxed again when you withdraw it.

Are we missing something?

Brendan
 
Brendan Burgess said:
It makes no sense to pay tax and not draw down the net amount? You are leaving it there just to be taxed again when you withdraw it.

Are we missing something?
Click to expand...
A poor sequence of equity returns very early in retirement is a big risk.

It could make more sense to leave it alone and pay the tax from another uncorrelated asset that you hold like cash or property.
 
I recently did it, at close enough to the age being talked about.,
I wake up every day with nothing to do and all day to do it.
Sometimes I plan what im doing. most days I just go with the flow. Loving it.
 
Reni10 said:
No not held in Euros but is a fairly stable currency
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Sterling was stable (and is generally reasonably so). In 2016 UK pensioners retired in Spain found themselves dealing with a sizeable devaluation of sterling against the euro overnight. Some found that their pensions suddenly didn't quite cover their cost of living. I'm not saying it isn't possible to do but if you're planning living in another currency whilst drawing a pension in euro you probably need to consider carefully the impact of any sudden change of valuation between the two currencies. Being paid in one currency and living in another is inherently risky.
 
Read back over all this thread and I noticed that everything is based on having enough dosh to retire at a set age. Yet, not a mention of health or the many other things that have a habit of putting a total kibosh on future plans. Make sure you have plans for your health, and your families health in order. Even then, many things outside of your control could happen.
 
Not being flippant, but how can you plan for your health or anyone else's health ?
 
I don't get the retiring at 55 thing. I could certainly see working 2-3 days a week at 55 but retiring fully? I'd find that hard.
Taking long holidays, not working in a decision making or high stress role, 4-5 day weekends. All that sounds great but not retiring fully.
 
I think it's very much a horses for courses type thingy, when I first retired at the end of 2011 I did absolutely nothing for 2012 except watch as much sport on TV as I could and ride my bike, I called it my "detoxing" year but by early 2013 I was board off my face so I took a part time job in a local bike shop developing their website amongst other things and since 2017 I'm fully retired and enjoying life more than ever

Work plays an important role in peoples life and when it's there one day and gone the next it can be quite a shock to the system, so for some people presumably like yourself easing yourself into retirement or finding the correct work/life balance is the way to go rather than making the final cut!!
 
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