Hi welcome, love to see more UK based people here. It looks like you've got a solid plan, that's certainly workable. Are you prepared to reduce costs or go back to work if needed? Or do you only want to retire when it's 100% guaranteed to succeed?
With the minimum retirement age being raised to 55, do you definitely have one of the pension schemes that is grandfathered in to a retirement age of 50? There are still a few about, but not many.
On the mortgage side, is there a reason you have such a high interest rate at 4%? To put this in context, mine is 1.5% and has been under 3.5% for over 5 years.
What do you plan to do when you retire? Are you able to accurately estimate expenses - what will go up, what will go down? Your social spending is quite high, would this increase exponentially with more free time, or do you have frugal hobbies in mind?
Have you thought about tax? If your income is coming from a pension and rental income, it will all be taxable - looks like basic rate at those numbers.
What's the occupancy rate/desirability on the rental? It looks quite critical to your plans to have that income each and every month.
Do you have any transport costs or do you walk everywhere?
Also I'd cash out your employer shares as soon as you can and invest in a tracker -as if they went bust, you don't want all your eggs in one basket.
As an aside, I wouldn't worry about converting to dollars - it's certainly easier for me in pounds.
Hi D&D - assumed mainly US posters so wasn't sure if I would get the discussion going if I used £s.
Thanks for the reply. Comments added:
Are you prepared to reduce costs or go back to work if needed? Or do you only want to retire when it's 100% guaranteed to succeed?
I would prefer to retire when it is 100% guaranteed to succeed. I enjoy my job and earn a good salary / bonus and know that the company wouldn't want me to leave so if I needed to earn more for the pot, I would be better staying AS IS until I am 100% certain the FI pot is sufficient.
With the minimum retirement age being raised to 55, do you definitely have one of the pension schemes that is grandfathered in to a retirement age of 50? There are still a few about, but not many.
Yes - I know I'm very fortunate and the last generation in the UK who will benefit from these schemes.
On the mortgage side, is there a reason you have such a high interest rate at 4%? To put this in context, mine is 1.5% and has been under 3.5% for over 5 years.
Maybe I've missed an opportunity here! I've been aggressively clearing this down the last 20 months and will have this cleared by YE then onto the next phase. I paid £1500 interest during 2015 & projected £523 for 2016 so hopefully not a big difference if I include the costs of changing mortgages.
What do you plan to do when you retire? Are you able to accurately estimate expenses - what will go up, what will go down? Your social spending is quite high, would this increase exponentially with more free time, or do you have frugal hobbies in mind?
I've only recently became confident that I could potentially retire in 5 years time so cannot answer the first question with real certainty at this stage. What I have done is base the projected costs on my current spending and increased the holidays / social slightly (accepting these are high already so could be scaled back if required) and added in gym costs to build in a buffer. The reduced mortgage interest on Flat 1 & 2, reduced cable and Accountant fees of £540 (not shown in my case study but incurred this year) have also been factored in.
I'm getting comfortable with the frugal lifestyle across the various categories but still enjoying my weekends / holidays at the moment.
I've recently joined the library, stopped using lifts, getting a Cashback Credit Card, looking at bikes.......I'm up to Dec 2012 on the blogs and thoroughly enjoying the journey so far.
Have you thought about tax? If your income is coming from a pension and rental income, it will all be taxable - looks like basic rate at those numbers.
Pension - yes this has factored in the 20% Tax already. Buy To Let needs a few adjustments. When I'm 50, the rental will increase to min. £600 per month. From this, the Letting Agents (£72), Factor Fees (£100) and Tax at 20%. My mortgage costs will still be around £200 mo so I would need to pay this £20k off from the 25% tax free lump sum or savings / shares pot and buy myself out of the current deal or move to Interest only at around £50 per month. I'm thinking of paying this off at the moment but not decided at this stage. By that time the full impact of the Interest charges / 10% Maintenance costs 2015 budget changes take effect, the buy to let Annual profit will be c. £3600 (or £4200 if I clear it off).
Do you have any transport costs or do you walk everywhere?
No car & taxi costs are included in social budget. I live in the city centre so walk mostly when going out and get a taxi back to the flat at the end of the evening.
What's the occupancy rate/desirability on the rental? It looks quite critical to your plans to have that income each and every month.
I've had the flat for over 8 years now - only been empty a few days between tenants and in a prime spot near a hospital / university. I currently have a foreign doctor in the flat on a 12 month agreement. This is critical to my plans however, I have the option to purchase a further flat which I could move into and rent out my current primary 2 bedroom residence in the city centre for c. £850 mo (net income after Tax / Letting etc - £600 mo).
Also I'd cash out your employer shares as soon as you can and invest in a tracker -as if they went bust, you don't want all your eggs in one basket.
Current employer in FTSE 100 and huge cash surplus so highly unlikely to go bust. Not looking to increase shares - all future share purchases will be in Index Funds (UK / Other).
Hope this covers the points raised - thanks again for your response and please let me know if you require any additional information.
