I know a couple of people were looking at this thread as their situation was similar. I just wanted to post an update as I received really helpful advice on here and on another thread and it seems rude not to communicate my conclusions. My thought process may be useful to others in the UK who are also completely new to all of this or alternatively someone may be able to tell me if I've misinterpreted anything and gone awry!
Thanks again to those that posted to help me. I started off a complete beginner and although I'm not much more than a beginner now I do feel I've moved from a state of confusion to being able to take some positive steps with future strategy.
BudgetWithout any idea on budget/expenses/annual living amount its almost impossible to plan for anything. Even a couple of k difference in annual expenditure causes such wild differences in the FIRE target that its really important to have a strong grasp on costs. So I have spent most of my time in this area.
In this thread I quoted £22,000 as my target annual living expenses. I have been able to get this to £20,000. However I see some take the approach of trying to add 10-15 years worth of inflation onto this figure. Some don't. I am conscious that the state pension has some uncertainty around exactly what age it will pay out and the overall amount. Therefore I reached the following conclusions:
1. I won't rely on the state pension for providing any of my annual expenses, but acknowledge that I'm likely to qualify for something at some point.
2. I won't add inflation onto the £20,000 figure.
3. I hope to some extent these first two points cancel each other out. Where one giveth, one taketh away!
4. To play safe, give some contingency if inflation had a period where it was higher than normal, and to ensure I could always cut expenses if needed I will stick with the original £22,000 figure.
That gives me a FIRE target of £550,000.
Age Related Decisions - I've decided I don't want to work at all after 55 and will therefore look to take my company pension at this point. I can always be flexible with this and work PT if need be.
- Between now (I'm 40) and 55 I will use a combination of full time work, part time work and ISA's to cover my expenses.
- Ideally the full time part should be as short as possible.
Investment Decisions- I want my company pension to hit my FIRE target
- I want to use ISA's to support part time work to give me my £22,000 annual expenses.
- If that means my ISA's run out at 55 then that's fine although ideally not.
- I will cut my emergency fund roughly in half to get my ISA's off and running.
- From a monthly investment perspective I will change my company pension/ISA split from 50:50 to 66:34
To Do List1. I will need to work full time for at least 4 years. I will have a major review of strategy Jan 2022 when I have much more certainty of what has happened in-between now and then and only 11 years left to cover expense wise (assuming pension is on track for 55). Hopefully part time work will be a positive step at this point.
2. I need to keep reading and learning about investing. I am currently reading some of the books on MMM's recommended list as well as the JL Collins series and of course these forums.
3. I need to plan whether I would want to work part time at my current employer or if I fancy something different, or a combination.
4. I must get some spreadsheets together to track my investments.
5. I need to understand what growth rate to use for compounding. So far I have been using 4.5% hoping this is a slightly pessimistic view (80:20 stock/bond AA).
That's it so far. Not a bad first week of learning from the forums!