Sanity check please

[skip207]

Can the collective have a look at my FIRE plan and tell me if it seems reasonable.  I ask because my WR could be well over 4% to start with... but it should pan out ok... ?!

This is my current plan

FIRE age 42.  Private pension age 57.  State pension (UK) age 67.  No children, no mortgage.  Everything in trust to wife should anything bad happen so below still applies if one of us slips off the plate.

FIRE pot at 42 c.£460k
Private pension at 57 c.£400k
Inflation Buster (tm) pot at 42 £60k
EF at 42 c.£120k
Target income c.£30k

Starting withdrawal £29k x 15 yrs from FIRE pot. 
Up to £4k PA from "IB (tm)" fund for 15 years.  (hoping not to touch this though and would be "primary EF")
At 57 this should leave me £240k left in FIRE pot, there abouts. (this is the bit that worries me!)

After 57 income of £9k from FIRE pot plus income of lets say £16k from pension. Total IRO £25k.  *shortfall due to inflation probably IRO £10k*.  Could opt to start using (some of) EF or hopefully the Inflation Buster pot will be north of £100k now.. so would look to use this.

67, state pension kicks in (x2 ppl) 25yrs contributions, so lets say worst case 1/2 pension so after 67 SP of £4+4=£8k (infl adj) and SIPP of £16k (infl adj).  Final retirement income IRO 24k in todays money. (reality is 25yrs cont = £6k ppn at current rate but lets say less for worst case rules change bla)

Thats my worst case scenario, best case my EF pot at 57 should be worth a lot more than £120k and by 67 assuming I did not need much of it then a lot more.
Tax should be minimal as its split between 2 ppl.

Main risks, market does not return 4% over period from 42 to 67. 
Hyper inflation
Aliens

Thoughts?

[Glenstache]

I would recommend using cFIREsim or equivalent to model your scenario out a bit. The related question is if you have the ability to further reduce spending in your "donut hole years" prior to pension kicking in or otherwise augment income in that time should returns be below projections. If the cFIREsim projections work well and you have adaptability after 42, then your plan seems sane, even if an allowed drawdown in the middle is a non-standard application of a retirement strategy compared to the baseline 25x/4% approach here.

[skip207]

I get 100% on the above plan over 50 years.  If I remove the £120k EF then I drop to 97%. 

I suspect that means I am borderline however my numbers in the plan are minimums really, so my FIRE pot should be at least £460k.  IYSWIM.   

[Glenstache]

I get 100% on the above plan over 50 years.  If I remove the £120k EF then I drop to 97%. 

I suspect that means I am borderline however my numbers in the plan are minimums really, so my FIRE pot should be at least £460k.  IYSWIM.

there is a thread somewhere in the forums that has the risk of portfolio failure tapped onto the mortality risk with age. It is useful for context, given that you are more likely (statistically) to pass on early than have your portfolio fail. In other words, you are probably fine, and go for FIRE and enjoy your life.

[PhilB]

Key question.  Is the £400k pension value in today's money and does it include assumed investment growth until age 57?   It makes a big difference if we are talking £400k now plus growth, £400k after assumed real terms growth or £400k after assumed gross growth!

[skip207]

Pension value today £150k.  Still £60k net to contribute.  So at FIRE it should be (at least) £220k.  It then has 15 years to simmer away with little / no contributions so based on 4% return me to £400k in 2037 which in theory should be inflation adjusted? 

[skip207]

I get 100% on the above plan over 50 years.  If I remove the £120k EF then I drop to 97%. 

I suspect that means I am borderline however my numbers in the plan are minimums really, so my FIRE pot should be at least £460k.  IYSWIM.

there is a thread somewhere in the forums that has the risk of portfolio failure tapped onto the mortality risk with age. It is useful for context, given that you are more likely (statistically) to pass on early than have your portfolio fail. In other words, you are probably fine, and go for FIRE and enjoy your life.

So its good and bad news LOL.  Thanks for that, yes I think I have seen the chart you are referring too.  :)

[swashbucklinstache]

I'd say that as usual, anything north of 95% on cfiresim means you are set if your expenses are accurate enough.

Only you can guess at that, and it is a guess. Remember that variance is additive and that doesn't help in drawdown, a.k.a. if your long run expense are 30k and long run market returns are 7% real, but in year one you have 70k expenses and the market is -25%....

Really though, if you're reasonably sure of your expenses and flexible I say go for it. Especially if you live somewhere that makes healthcare expenses less of an unknown.

[PhilB]

Pension value today £150k.  Still £60k net to contribute.  So at FIRE it should be (at least) £220k.  It then has 15 years to simmer away with little / no contributions so based on 4% return me to £400k in 2037 which in theory should be inflation adjusted?

So at the point you pull the plug you are looking at £860k of total funds (£460k + £220k + £120k + £60k) of which just over 25% would be unavailable until 58 (Pension access age intended to rise to 58 by 2028 and your state pension won't be until 68).  From those overall funds you want £30k pa which is a 3.5% withdrawal rate with the safety blanket of SP coming in after 26 years which should cover a good half your income needs based on current value.  Most on here would say a 3.5% withdrawal rate was pretty safe.
As regards having to wait 16 years to get at the pension money, you'd need to average -3.4% pa real returns over the 16 years to run out before you could access those funds - and if that happened we'd probably all be stuffed anyway!
Have you got state pension forecasts yet?  You probably want to factor in some voluntary NICs to get yourselves up to full SP.

[skip207]

I'd say that as usual, anything north of 95% on cfiresim means you are set if your expenses are accurate enough.

Only you can guess at that, and it is a guess. Remember that variance is additive and that doesn't help in drawdown, a.k.a. if your long run expense are 30k and long run market returns are 7% real, but in year one you have 70k expenses and the market is -25%....

Really though, if you're reasonably sure of your expenses and flexible I say go for it. Especially if you live somewhere that makes healthcare expenses less of an unknown.

We did a 3 mo expenses analysis last year and our very base line standing costs, food, insurances, fuel and utilities were £12k PA.  I expect we would spend roughly the same again on entertainment, travel, clothes, general W&T items and DIY items, gifts, one offs etc.  That brings me to £24k, ish.  The only caveat is we will have to pay the mortgage off to get to those numbers or downsize.  We are happy to downsize so that's the route we will go. 

Healthcare is "free" so that's not a problem.

We discussed the plan last night again in detail and I think we are on the right path.  Now its just a matter of time till we get closer to our goals.

[skip207]

Pension value today £150k.  Still £60k net to contribute.  So at FIRE it should be (at least) £220k.  It then has 15 years to simmer away with little / no contributions so based on 4% return me to £400k in 2037 which in theory should be inflation adjusted?

So at the point you pull the plug you are looking at £860k of total funds (£460k + £220k + £120k + £60k) of which just over 25% would be unavailable until 58 (Pension access age intended to rise to 58 by 2028 and your state pension won't be until 68).  From those overall funds you want £30k pa which is a 3.5% withdrawal rate with the safety blanket of SP coming in after 26 years which should cover a good half your income needs based on current value.  Most on here would say a 3.5% withdrawal rate was pretty safe.
As regards having to wait 16 years to get at the pension money, you'd need to average -3.4% pa real returns over the 16 years to run out before you could access those funds - and if that happened we'd probably all be stuffed anyway!
Have you got state pension forecasts yet?  You probably want to factor in some voluntary NICs to get yourselves up to full SP.

Thanks Phil very good info thanks.  I did get a SP forecast I have full contributions to date, but if we fire at 42 I will only have 25 years.  Wife not sure, she was a student till she was around 25 so not sure for her as we never actually checked hers.  Worst case around 17 years?  I will put that on the to do list!

£850k is my NW goal excl house so the numbers are slowly starting to fall into place.  We are currently sitting around £530k so my worst case prediction at the moment is FIRE in 2024 but with some fair winds we are aiming for Oct / Nov 2022.

[former player]

You can make voluntary National Insurance payments until you have the full 35 years.  As I recall the voluntary payments are pretty low and the return excellent, but you can go onto the NI website and check.

Also, I remember a chart somewhere (how helpful a reference is that?) giving different safe withdrawal rates for different countries, and the UK came out at 3%.  That may or may not mean anything for you, depending on how your investments are structured.

A small amount of part time work or consulting income at the start of FIRE could add a lot of security to your calculations - you have the expenses sorted, so there is the potential for only a very little extra income doing something congenial after FIRE to make a big difference.