Author Topic: Case Study - Can I really retire in 10 years?  (Read 5272 times)

taylost3

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Case Study - Can I really retire in 10 years?
« on: June 12, 2017, 06:01:04 AM »
Just starting out on my route to FIRE in the UK. I've made the calculations and I think 300k would be enough for us to retire with the 4% rule. We live a very modest lifestyle and 12k a year when we no longer have to work will be more than enough.  I would love to get some feedback on my current situation, as a quick spot check.

Basic Info:
32 soon to be married, with no dependents but we do intend to have a couple of kids in the next few years.

Financial Assets/Investments:
-Liquid Cash (in current and savings bank account): 55k (my other half is very sceptical of investing this and the majority is hers so it isn't my decision.
-Vanguard: Only just started 60/40 Lifestyle fund have about 4k. We are investing 1800 every month and my other half is saving 500 in cash.
Pension mine is pretty poor 3% match from my employer so I pay in a total of 6%
My partner has a great pension she pays in 3% and they pay 14%.

Expenses/Obligations:
-Mortgage 403 a month including utilities -1,100 this will reduce when we retire.
Home is valued at 190k we owe 103k.

Job:
-35k-40k per year depending on bonus (sales role)
Partner 29k no extras

We have 1 modest car that is 6 years old and we've owned from new which is paid for.

Am I really on track to retire in 10 years? Is this really be possible? I've done the math but I'm still unsure, I need some feedback from people who have been there and done it.

Any things I'm missing or should tweak your advice is appreciated.
« Last Edit: June 12, 2017, 06:03:24 AM by taylost3 »

Feivel2000

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Re: Case Study - Can I really retire in 10 years?
« Reply #1 on: June 12, 2017, 06:24:28 AM »
Income: 69.000

Saving:
12 * 2300 = 27.600

Mortage including utilities (if I understand you correctly, this isn't so clear to me):
12 * 1100 = 13.200

So your current annual spending is
69.000-27.600-13.200 = 28.500

I see two possibilities:
a) you could increase your savings rate by ~16.500 per year without missing out.
b) you will have a hard time, living with only 12.000 per year.

But you are on a good way, a 40% savings rate is not a bad start!


taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #2 on: June 12, 2017, 06:56:28 AM »
Sorry, this isn't clear salary is total before Tax so take home pay per year is in the region of 48,000 or 4,000 per month between us after tax and pension contributions.

The mortgage is 403 per month so 4,836 per year. Total bills are 1100 per month or 13,200 per year.

Feivel2000

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Re: Case Study - Can I really retire in 10 years?
« Reply #3 on: June 12, 2017, 07:41:18 AM »
Ok.

But still, without mortgage and savings, you are spending over 15,500 per year or ~1,300 per month.

Will you really be able to shave 300 per month off you budget without deprivation of quality of life?


taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #4 on: June 12, 2017, 08:44:05 AM »
I'm queietly confident we would the cost of commuting and petrol etc would be the majority of the 300 plus the plan was to use the 50k in cash to pay off the mortgage or at least put a huge dent in it leaving us 400 a month better off.

jade

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Re: Case Study - Can I really retire in 10 years?
« Reply #5 on: June 12, 2017, 09:08:24 AM »
Hiya @taylost3 :)

I just wanted to say hi from a fellow uK mustachian! Your situation isn't a million miles away from ours in many ways. I'm ten years older than you, and we have no kids but various similarities from what you shared and we're also building our stache based on living on 12 k a year too to be FI in (hopefully) ten years.

I often feel that you can't completely know how it will pan out but getting that savings rate up and spending rate down and keep on plugging away and we / you are likely to end up in the ballpark of where we're aiming (ten years to FI).

Two things that have helped me a lot recently:

1) Monevator's compound interest calculator: http://monevator.com/compound-interest-calculator/ to play with the figures (a good incentive to save even more and see how that affects the ten year plan) and

2) this book: https://www.amazon.co.uk/Escape-Everything-work-consumerism-despair/dp/1783521333 "escape everything" by Robert Wringham is really inspiring (and funny) and has helped me have a major shift again in consumption patterns so much so that I think our spending will be down further this month (usually 1k) as a result. The focus is also on living the good life now too so I don't feel any sense of scrimping, it just put a lot of things into focus.

All the best!

« Last Edit: June 12, 2017, 10:11:00 AM by jade »

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #6 on: June 12, 2017, 10:31:24 AM »
Hi Jade,

That's fantastic thanks for your help it's great to see a fellow Brit on their journey to FI.

I'll take a look at the resources you recommended do you have a case study or anything I could take a look at I'd be eager to take notes from someone on the same journey.

Thanks

jade

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Re: Case Study - Can I really retire in 10 years?
« Reply #7 on: June 13, 2017, 07:41:57 AM »
Hi again taylost3,

This is my first case study on here: https://forum.mrmoneymustache.com/ask-a-mustachian/reader-case-study-mortgage-free-uk-couple-now-need-investment-advice/msg1225281/#msg1225281 from last year.

Thanks to the advice we got here, we have now started a VLS60 like you and I have started my employer pension too.

tag

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Re: Case Study - Can I really retire in 10 years?
« Reply #8 on: June 13, 2017, 07:20:11 PM »
It all seems possible until you add kids. Is 12000/yr still possible with kids??

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #9 on: June 14, 2017, 06:29:54 AM »
Good question the truth is I don't know until we get there I do hope our wages would have increased by then and without lifestyle creep we should be able to cover the difference in extra savings.

UKstache

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Re: Case Study - Can I really retire in 10 years?
« Reply #10 on: June 14, 2017, 08:22:30 AM »
Hi, another UK person here. Some similarities with my situation here too. I think your 300,000 figure is very low, I'm looking for more like double that to feel confident and that's without kids, but each to their own. I'd just say think carefully about best use of that cash sum. At the moment in cash you're losing out. Repaying mortgage now may be better if investing is out of the question. Also make sure you use tax efficient accounts where you can!

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Laura33

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Re: Case Study - Can I really retire in 10 years?
« Reply #11 on: June 14, 2017, 09:38:01 AM »
FWIW, the 4% rule assumes that your 'stache is invested in a mix of stocks and bonds.  Keeping a big chunk of your assets in cash will very likely not give you the kinds of returns you would need to maintain 4% in perpetuity. 
Laugh while you can, monkey-boy

ixtap

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Re: Case Study - Can I really retire in 10 years?
« Reply #12 on: June 14, 2017, 10:16:29 AM »
I'm queietly confident we would the cost of commuting and petrol etc would be the majority of the 300 plus the plan was to use the 50k in cash to pay off the mortgage or at least put a huge dent in it leaving us 400 a month better off.

It sounds like you are focused on your month to month costs, with little room for even annual costs, much less genuine surprises. If you are living that close to the edge, where is your emergency fund after retirement and, more importantly, how do you rebuild it at after you need it?

You are projecting living on less than half what you are currently spending. How close to that can you get now, with your jobs? What do you plan to do with that extra time once tour are retired? How much of it do you do now?


babybug

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Re: Case Study - Can I really retire in 10 years?
« Reply #13 on: June 14, 2017, 04:10:59 PM »
According to the calculator yes, at £1800 a month, saving, with 7% return you'll save up £312k in 10 years.

But, if you have children, that changes things such as child care or one of you decides to stay home losing one income, or you want to move for better schools or to be near family etc...

In your position I'd feel a lot better with a paid off home or a really good emergency fund when I retire, in addition to the invested funds, to weather a major emergency or market downturn.

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taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #14 on: June 15, 2017, 03:29:03 AM »
Hi, another UK person here. Some similarities with my situation here too. I think your 300,000 figure is very low, I'm looking for more like double that to feel confident and that's without kids, but each to their own. I'd just say think carefully about best use of that cash sum. At the moment in cash you're losing out. Repaying mortgage now may be better if investing is out of the question. Also make sure you use tax efficient accounts where you can!

Sent from my HTC Desire 510 using Tapatalk

This is a great point and if the money were mine I would certainly use it towards to mortgage or invest it however the money is my soon to be wives and she is very reluctant to invest. She might be willing to pay it off the mortgage but I think even that is unlikely so I know it's going to devalue the cash sum but there's not much I can do, unfortunately.

For a long time we lived on only my modest salary and managed just fine so I'm very confident of being able to live off 300k plus this is the aim for financial independence, not retirement. it's very likely I will still work part or full time to top things up, but I'll cross that bridge when I get to it. Then at 55 (57,58 whatever age it is at the time),  we will get an another influx of cash from private pension and at 67 or state pension hopefully which will really set us up for the rest of our lives.

We live in the north east of England so this helps the cost of living is far cheaper up here.

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #15 on: June 15, 2017, 03:29:30 AM »
Hi again taylost3,

This is my first case study on here: https://forum.mrmoneymustache.com/ask-a-mustachian/reader-case-study-mortgage-free-uk-couple-now-need-investment-advice/msg1225281/#msg1225281 from last year.

Thanks to the advice we got here, we have now started a VLS60 like you and I have started my employer pension too.

This is really helpful thanks Jade

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #16 on: June 15, 2017, 03:30:35 AM »
FWIW, the 4% rule assumes that your 'stache is invested in a mix of stocks and bonds.  Keeping a big chunk of your assets in cash will very likely not give you the kinds of returns you would need to maintain 4% in perpetuity.

Yea the 300k I want to build will be in stocks and share this 50k will be an addition to that.

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #17 on: June 15, 2017, 03:32:54 AM »
According to the calculator yes, at 1800 a month, saving, with 7% return you'll save up 312k in 10 years.

But, if you have children, that changes things such as child care or one of you decides to stay home losing one income, or you want to move for better schools or to be near family etc...

In your position I'd feel a lot better with a paid off home or a really good emergency fund when I retire, in addition to the invested funds, to weather a major emergency or market downturn.

Sent from my KIW-L24 using Tapatalk

Hopefully the 50k we have in cash now will be used to half the mortgage this would then leave us with a mortgage payment in the region of 200. The other options would be to work for 2-3 years extra to pay off the mortgage entirely which would bring our outgoings down way under 1,000.

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #18 on: June 15, 2017, 03:34:21 AM »
I'm queietly confident we would the cost of commuting and petrol etc would be the majority of the 300 plus the plan was to use the 50k in cash to pay off the mortgage or at least put a huge dent in it leaving us 400 a month better off.

It sounds like you are focused on your month to month costs, with little room for even annual costs, much less genuine surprises. If you are living that close to the edge, where is your emergency fund after retirement and, more importantly, how do you rebuild it at after you need it?

You are projecting living on less than half what you are currently spending. How close to that can you get now, with your jobs? What do you plan to do with that extra time once tour are retired? How much of it do you do now?

Great point IXTAP we do also have the 50k cash and I have about 8k which I would use for annual costs or if this were really tough I would just stop investing for however long which would delay FIRE but I see this as the better options rather than saving money for annual costs I may not have.

UKstache

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Re: Case Study - Can I really retire in 10 years?
« Reply #19 on: June 15, 2017, 03:51:35 AM »
Hi, another UK person here. Some similarities with my situation here too. I think your 300,000 figure is very low, I'm looking for more like double that to feel confident and that's without kids, but each to their own. I'd just say think carefully about best use of that cash sum. At the moment in cash you're losing out. Repaying mortgage now may be better if investing is out of the question. Also make sure you use tax efficient accounts where you can!

Sent from my HTC Desire 510 using Tapatalk

This is a great point and if the money were mine I would certainly use it towards to mortgage or invest it however the money is my soon to be wives and she is very reluctant to invest. She might be willing to pay it off the mortgage but I think even that is unlikely so I know it's going to devalue the cash sum but there's not much I can do, unfortunately.

For a long time we lived on only my modest salary and managed just fine so I'm very confident of being able to live off 300k plus this is the aim for financial independence, not retirement. it's very likely I will still work part or full time to top things up, but I'll cross that bridge when I get to it. Then at 55 (57,58 whatever age it is at the time),  we will get an another influx of cash from private pension and at 67 or state pension hopefully which will really set us up for the rest of our lives.

We live in the north east of England so this helps the cost of living is far cheaper up here.
I get it now. For a "basic" FI number rather than RE your 300k is much more in line with my own thoughts.

I live in the north east too so lots of similarity! Wish I had discovered this stuff earlier like you though.

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taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #20 on: June 15, 2017, 09:49:47 AM »
Hi, another UK person here. Some similarities with my situation here too. I think your 300,000 figure is very low, I'm looking for more like double that to feel confident and that's without kids, but each to their own. I'd just say think carefully about best use of that cash sum. At the moment in cash you're losing out. Repaying mortgage now may be better if investing is out of the question. Also make sure you use tax efficient accounts where you can!

Sent from my HTC Desire 510 using Tapatalk

That's exactly it I will have options, then in my early 40s we can do what I want as a family and hopefully spend more time with my kids and watch them grow without being stuck in the rat race.

Its a small world good to meet a fellow Northerner, I'm from Sunderland. Great name by the way.

This is a great point and if the money were mine I would certainly use it towards to mortgage or invest it however the money is my soon to be wives and she is very reluctant to invest. She might be willing to pay it off the mortgage but I think even that is unlikely so I know it's going to devalue the cash sum but there's not much I can do, unfortunately.

For a long time we lived on only my modest salary and managed just fine so I'm very confident of being able to live off 300k plus this is the aim for financial independence, not retirement. it's very likely I will still work part or full time to top things up, but I'll cross that bridge when I get to it. Then at 55 (57,58 whatever age it is at the time),  we will get an another influx of cash from private pension and at 67 or state pension hopefully which will really set us up for the rest of our lives.

We live in the north east of England so this helps the cost of living is far cheaper up here.
I get it now. For a "basic" FI number rather than RE your 300k is much more in line with my own thoughts.

I live in the north east too so lots of similarity! Wish I had discovered this stuff earlier like you though.

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dreams_and_discoveries

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Re: Case Study - Can I really retire in 10 years?
« Reply #21 on: June 15, 2017, 10:15:32 AM »
Hi guys, it seems a very frugal life on 12k for a family, no doubt it can be done but there doesn't seem much wiggle room.

But reading deeper, you also have a pension that you aren't including in the 300k? And state pensions too? That makes it sound a bit comfortable.

However, your biggest threat now is inflation. Up to 2.9% in the UK now, what interest rate are you getting on your cash savings?

I'd join the chorus urging you to learn more and get comfortable investing, and look into the maths of paying off a mortgage v.s. investing the money.

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #22 on: June 16, 2017, 05:01:24 AM »
Hi guys, it seems a very frugal life on 12k for a family, no doubt it can be done but there doesn't seem much wiggle room.

But reading deeper, you also have a pension that you aren't including in the 300k? And state pensions too? That makes it sound a bit comfortable.

However, your biggest threat now is inflation. Up to 2.9% in the UK now, what interest rate are you getting on your cash savings?

I'd join the chorus urging you to learn more and get comfortable investing, and look into the maths of paying off a mortgage v.s. investing the money.

I agree but unfortunately the money isn't mine we are currently getting 0.5%. I think paying it off the mortgage may be an option which would effectively half our mortgag and our biggest outgoing

Feivel2000

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Re: Case Study - Can I really retire in 10 years?
« Reply #23 on: June 16, 2017, 05:26:05 AM »
So what is you budget and planning for retirement?
Lets assume you save 350,000 and the house is paid off.


taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #24 on: June 16, 2017, 07:07:28 AM »
12k a year to live on then start doing something I enjoy that might be paid work or not.

Feivel2000

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Re: Case Study - Can I really retire in 10 years?
« Reply #25 on: June 16, 2017, 07:52:23 AM »
Ok, my answer to your question (Can I really reitre in 10 years?) is: that might work or not.


UKstache

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Re: Case Study - Can I really retire in 10 years?
« Reply #26 on: June 16, 2017, 09:04:35 AM »
Sunderland eh, can't be helped I guess, football fan at all?

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SpreadsheetMan

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Re: Case Study - Can I really retire in 10 years?
« Reply #27 on: June 16, 2017, 09:12:41 AM »
Hi guys, it seems a very frugal life on 12k for a family, no doubt it can be done but there doesn't seem much wiggle room.

.....
That was my thought - 12k is pretty optimistic as a total household budget unless you don't allow for house repairs/improvements (or rent cost if you don't own), car depreciation, anything else breaking or having to be replaced, any holidays, any personal spending, any child expenses etc.

I wouldn't try ER on 300k total investment and 50k cash unless you were close to state (or private) pension age. The 10 year target would mean you going at 42, so leaving gaps of 13 years to private pension and 26 years to state pension (and a lot of occupational pensions). That is a long time.

However, the great thing about aspiring to FI/RE is that investing hard, paying down debt, living frugally (but still having a life) is going to pay back big anyway - it's a no-lose proposition.

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #28 on: June 16, 2017, 10:11:57 AM »
Sunderland eh, can't be helped I guess, football fan at all?

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No not a football fan at all I have a season ticket at the stadium of light 😀That's not football!

You from Newcastle then I take it?

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #29 on: June 16, 2017, 10:14:24 AM »
Hi guys, it seems a very frugal life on 12k for a family, no doubt it can be done but there doesn't seem much wiggle room.

.....
That was my thought - 12k is pretty optimistic as a total household budget unless you don't allow for house repairs/improvements (or rent cost if you don't own), car depreciation, anything else breaking or having to be replaced, any holidays, any personal spending, any child expenses etc.

I wouldn't try ER on 300k total investment and 50k cash unless you were close to state (or private) pension age. The 10 year target would mean you going at 42, so leaving gaps of 13 years to private pension and 26 years to state pension (and a lot of occupational pensions). That is a long time.

However, the great thing about aspiring to FI/RE is that investing hard, paying down debt, living frugally (but still having a life) is going to pay back big anyway - it's a no-lose proposition.

This is a brilliant post thanks. The intention is FI rather the ER so I intend to do some form of work that may be full time or part time but between us we wouldn't need to work much at all to double or income.

You hit the nail on the head FIRE is win win it mat take me longer we'll see when I get there.

UKstache

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Re: Case Study - Can I really retire in 10 years?
« Reply #30 on: June 16, 2017, 11:35:08 AM »
Yeah Newcastle. Seriously though, a season ticket might be seen as a fancy luxury on this forum. You could invest it for better returns!

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dreams_and_discoveries

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Re: Case Study - Can I really retire in 10 years?
« Reply #31 on: June 16, 2017, 02:22:30 PM »
If the plan is to downshift, and go part time, or pick up more rewarding lower paying jobs, then yes, that looks doable in 10 years.

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #32 on: June 16, 2017, 04:45:20 PM »
Yeah Newcastle. Seriously though, a season ticket might be seen as a fancy luxury on this forum. You could invest it for better returns!

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That's was pre MMM I haven't renewed ha

Jamese20

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Re: Case Study - Can I really retire in 10 years?
« Reply #33 on: June 27, 2017, 04:27:06 PM »
this is very similar to my goal,

if you look on jl collins website it describes the 4% rule in more detail and gives you a couple of interesting perspectives

it turns out in 15 years you could withdraw 7% of your portfolio, not give yourself inflation raises and you would have 96% success rate! the 7% gives you a very nice 21k! leaving plenty of room for flexibility.

after those 15 years i would have a predicted 270k pension as a safety margin so if your similar to that then i think its very safe and very flexible personally - 250-300k stash at 7% withdrawal non inflation adjusted periods seems like a rather luxurious retirement to me with a strong liklehood of getting richer!

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #34 on: July 25, 2017, 06:58:53 AM »
this is very similar to my goal,

if you look on jl collins website it describes the 4% rule in more detail and gives you a couple of interesting perspectives

it turns out in 15 years you could withdraw 7% of your portfolio, not give yourself inflation raises and you would have 96% success rate! the 7% gives you a very nice 21k! leaving plenty of room for flexibility.

after those 15 years i would have a predicted 270k pension as a safety margin so if your similar to that then i think its very safe and very flexible personally - 250-300k stash at 7% withdrawal non inflation adjusted periods seems like a rather luxurious retirement to me with a strong liklehood of getting richer!

That's interesting Hames thanks for sharing. Do you have a case study I could read or follow along be interesting to compare notes as we're on a similar journey?

Playing with Fire UK

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Re: Case Study - Can I really retire in 10 years?
« Reply #35 on: July 25, 2017, 07:33:03 AM »
I'm going to buck the trend and say that it is possible to live well on 12k a year. But it is not possible for everyone to live well on 12k a year.

Me and my SO have a most delightful life on less than that (the high inflation may have changed it slightly of late).

Remember if children come into the picture then so does child benefit. [I have no idea about the cost of child rearing, but in my childhood it was possible to make money between child benefit and foster carer's allowance.]

I agree but unfortunately the money isn't mine we are currently getting 0.5%. I think paying it off the mortgage may be an option which would effectively half our mortgag and our biggest outgoing

I understand the reluctance to invest, but 0.5% is really pitiful. If investing is off the cards I'd strongly suggest following Martin Lewis's advice and messing around with multiple current and savings accounts and direct debits to two Tesco savings accounts. It is a ball ache, but worth it if investing isn't an option IMO.

Careful as you pay off the mortgage 1) checking for early repayment fees 2) check that they will allow you to reduce the payment and keep the term the same. Mine only let me reduce the term, which wouldn't have reduced monthly payments until it was all paid off.

Playing with Fire UK

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Re: Case Study - Can I really retire in 10 years?
« Reply #36 on: July 25, 2017, 07:48:54 AM »
1,100 on utilities alone? What does that cover?

Also, if you change the title to include "UK" you may get more UK folk stopping by.

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #37 on: July 25, 2017, 09:29:38 AM »
Thanks Playing with Fire great advice it's good to hear a different point of view. THe 1,100 is every bill we pay not just utilities. I should have explained that better.

Playing with Fire UK

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Re: Case Study - Can I really retire in 10 years?
« Reply #38 on: July 25, 2017, 09:57:37 AM »
Thanks Playing with Fire great advice it's good to hear a different point of view. THe 1,100 is every bill we pay not just utilities. I should have explained that better.

That makes sense - I think you'd struggle to live well on 12k paying 1.1k a month in utilities!

taylost3

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Re: Case Study - Can I really retire in 10 years?
« Reply #39 on: July 26, 2017, 05:06:23 AM »
Thanks Playing with Fire great advice it's good to hear a different point of view. THe 1,100 is every bill we pay not just utilities. I should have explained that better.

That makes sense - I think you'd struggle to live well on 12k paying 1.1k a month in utilities!



Agreed but that will also reduce significantly when we are FI due to the mortgage being payed off for one. Bills will be more like 500 when FI.

Playing with Fire UK

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Re: Case Study - Can I really retire in 10 years?
« Reply #40 on: July 26, 2017, 10:21:24 AM »
Cool, 500 sounds totally doable.