Poll

What's your UK FIRE amount?

<£500k
41 (22.9%)
£500k-£750k
39 (21.8%)
£750k-£1m
47 (26.3%)
£1m-1.25m
15 (8.4%)
£1.25m-£1.5m
7 (3.9%)
£1.5m-£1.75m
10 (5.6%)
£1.75m-£2m
3 (1.7%)
£2m-2.5m
10 (5.6%)
£2.5m-£3.0m
1 (0.6%)
£3.0m-£4.0m
5 (2.8%)
£4.0m-£5.0m
0 (0%)
£5m+
1 (0.6%)

Total Members Voted: 178

Author Topic: What's your UK fire amount?  (Read 43873 times)

MisterA

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Re: What's your UK fire amount?
« Reply #200 on: November 16, 2021, 06:40:50 AM »
As has been pointed out, the poll is flawed, so the results don't mean much. I understand why home equity was included, but it skews the results so much. Someone with a £500k house, and a small amount in investments is in no position to FIRE. Likewise, someone who says their figure is >£1m, how much of this is property equity? Equity isn't going to feed you, unless you rent it out.

On the original premise of this thread I'm close to £1m now, I live in the North (cheapish property) and I have no debts. But I still feel that this isn't quite 'enough'. I'm curious about what we all need to live each year, and how confident we are that this figure will see us through thick and thin. Not quite the same as your current annual expenses.

vand

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Re: What's your UK fire amount?
« Reply #201 on: November 16, 2021, 07:10:07 AM »
yeah, pot size target without context is quite meaningless.. although where did the poll say it includes home equity?

That said, even allowing for inflation, I've now blown well past what I put down for my ThinFI number a couple of years ago, and I am nowhere near ready to pull the plug! It may seem a bit perverse, but the larger my pot grows the less and less sure I am about what level of expenditure I ultimately want to target in retirement...  I think that I have always been slightly paralyzed by any situation where I'm presented with too much choice, and that is exactly what growing your FI pot gives you...

Knowing myself, I'll probably end up amassing way too big a pot, and then end up spending down way too little of it.

MisterA

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Re: What's your UK fire amount?
« Reply #202 on: November 16, 2021, 08:32:41 AM »
although where did the poll say it includes home equity?

That said, even allowing for inflation, I've now blown well past what I put down for my ThinFI number a couple of years ago, and I am nowhere near ready to pull the plug! It may seem a bit perverse, but the larger my pot grows the less and less sure I am about what level of expenditure I ultimately want to target in retirement...  I think that I have always been slightly paralyzed by any situation where I'm presented with too much choice, and that is exactly what growing your FI pot gives you...

Knowing myself, I'll probably end up amassing way too big a pot, and then end up spending down way too little of it.
From the original post.
Net worth number as FIRE number in today's value
Including house value (capital)
Including value of any final salary pension
Excluding state pension
If a couple assume for you jointly?
I agree, my target figure keeps getting higher, the closer I get to it!

I'm well into the territory of what I originally thought would be enough, and there is a danger of just keeping going and going.

helloyou

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Re: What's your UK fire amount?
« Reply #203 on: November 16, 2021, 08:42:04 AM »
Of course you should include your home equity.

It's an investment like another one. Would you say someone who has £2M with 20% cash, 50% bond and 30% stock not in position to retire? It all depends on how you allocate your capital!

If you decide to put your capital into safer assets then you'll need a higher FIRE amount!

Best way to compare is to include your home.

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Re: What's your UK fire amount?
« Reply #204 on: November 16, 2021, 09:03:37 AM »
although where did the poll say it includes home equity?

That said, even allowing for inflation, I've now blown well past what I put down for my ThinFI number a couple of years ago, and I am nowhere near ready to pull the plug! It may seem a bit perverse, but the larger my pot grows the less and less sure I am about what level of expenditure I ultimately want to target in retirement...  I think that I have always been slightly paralyzed by any situation where I'm presented with too much choice, and that is exactly what growing your FI pot gives you...

Knowing myself, I'll probably end up amassing way too big a pot, and then end up spending down way too little of it.
From the original post.
Net worth number as FIRE number in today's value
Including house value (capital)
Including value of any final salary pension
Excluding state pension
If a couple assume for you jointly?
I agree, my target figure keeps getting higher, the closer I get to it!

I'm well into the territory of what I originally thought would be enough, and there is a danger of just keeping going and going.
There's definitely a level of inertia built into this decision, before I FIREd I was prepared to work additional years to get to the retirement income I wanted, after having FIREd I'd put a lot of effort into reducing my expenses before going back to work. Although it's entirely unnecessary: the markets (and a small inheritance) have done their job in the last 10 years and money is accumulating faster than I am ever likely to spend it.

shelivesthedream

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Re: What's your UK fire amount?
« Reply #205 on: November 16, 2021, 09:50:32 AM »
Of course you should include your home equity.

It's an investment like another one.

No, it isn't. You can't spend the house you're living in. Good luck getting Aldi to accept "home equity" at the checkout! If it's a specific part of your plan to downsize at the moment of retirement to free up capital, I would argue that you're then not including your presumed house equity in retirement but rather that you're including the investments you plan to make with the freed up capital.

helloyou

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Re: What's your UK fire amount?
« Reply #206 on: November 16, 2021, 10:01:03 AM »
Of course you should include your home equity.

It's an investment like another one.

No, it isn't. You can't spend the house you're living in. Good luck getting Aldi to accept "home equity" at the checkout! If it's a specific part of your plan to downsize at the moment of retirement to free up capital, I would argue that you're then not including your presumed house equity in retirement but rather that you're including the investments you plan to make with the freed up capital.

Isn't it the same for stock? You're not going to Aldi checkout with some S&P stock. You need to sell it in order to benefit from it.

To some extent, you can imagine your home like a very expensive stock purchase.

Imagine instead of having a home you were renting and owned 1 share of Berkshire Hathaway at $284k. Selling it wouldn't be easy and you wouldn't want to do so. But in that case would you exclude this Brk.b share from your net worth?

PhilB

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Re: What's your UK fire amount?
« Reply #207 on: November 16, 2021, 10:05:08 AM »
Of course you should include your home equity.

It's an investment like another one.

No, it isn't. You can't spend the house you're living in. Good luck getting Aldi to accept "home equity" at the checkout! If it's a specific part of your plan to downsize at the moment of retirement to free up capital, I would argue that you're then not including your presumed house equity in retirement but rather that you're including the investments you plan to make with the freed up capital.

Isn't it the same for stock? You're not going to Aldi checkout with some S&P stock. You need to sell it in order to benefit from it.

To some extent, you can imagine your home like a very expensive stock purchase.

Imagine instead of having a home you were renting and owned 1 share of Berkshire Hathaway at $284k. Selling it wouldn't be easy and you wouldn't want to do so. But in that case would you exclude this Brk.b share from your net worth?

Your house is definitely part of your overall FIRE portfolio.  The dividends it returns are the rent that you don't have to pay.  Yes, people could choose to move to a cheaper area or a smaller house and require less capital, but exactly the same applies to renters who would need a smaller stash if they moved somewhere with a cheaper rent.

PhilB

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Re: What's your UK fire amount?
« Reply #208 on: November 16, 2021, 10:16:23 AM »
I agree, my target figure keeps getting higher, the closer I get to it!

I'm well into the territory of what I originally thought would be enough, and there is a danger of just keeping going and going.

I think for many people there is an element that once you hit a lean FIRE number, work becomes much easier to bear because a lot of the stress goes away.  That can have quite an impact on the equation of how much longer you are prepared to work.

MisterA

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Re: What's your UK fire amount?
« Reply #209 on: November 16, 2021, 11:33:33 AM »
Of course you should include your home equity.

It's an investment like another one.
Not mine!

The definition of an investment is "the outlay of money usually for income or profit", that's not why I bought our home.

I can't sell it or generate an income (without getting a divorce!).

Whatever happens to the value of my home is irrelevant, I'm no closer or further away from my FIRE targets. Do you think you're closer to your target when your home increases in value?

Sure, it stops me paying rent. It's an asset that forms part of my net worth. And it's a liability until it's paid for.

It's like the diesel in my car. It's worth more than I paid for it, but I can't sell it. And it stops me from having to pay bus fares. ;-)

An asset, not an investment.

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Re: What's your UK fire amount?
« Reply #210 on: November 16, 2021, 11:49:28 AM »
@MisterA you can check on google or ask your friend whether a home is an investment. You'll find out that for most (all?) people, a home is an investment.

But yeah, you can exclude it as a way to calculate your FIRE amount so you feel safer.

However you should benefit from it in a form of lower cost than paying rent all your life. That's the reason your bought it. And this lower cost to live in there is your dividend.


If a home is really a liability, then you'd be happy to hand it over to someone else. I'd be more than happy to get rid of my debt, which are true liability and a burden. The fact that you want to keep it shows it's an investment and not a liability.

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Re: What's your UK fire amount?
« Reply #211 on: November 16, 2021, 12:06:41 PM »
I remember a while back hearing an interesting explanation of how lottery winners go broke, and it's because they don't understand the difference between an asset that costs money to keep (house, car, jewellery) and an asset that makes money (typically stocks, bonds and interest bearing accounts).  Too many of the first sort of asset and too little of the second sort and they end up bankrupt.

A house could be either the first sort of asset, the second sort, or a mix of the two.

vand

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Re: What's your UK fire amount?
« Reply #212 on: November 16, 2021, 12:08:39 PM »
Your home is not an investment, though it is an asset which can be used as collateral to borrow against, which may be reinvested at a higher rate of return.. or used to buy a million packets of cheetos.

A house (of livable condition) is an asset, because it can be used to generate income - either real income if you rent it out, or an implied income if you live in it.

It is the mortgage that is a liability because it costs you money to maintain it.

You can turn your home into an investment by selling it, but at that point it stops being your home, and you are facing the problem of finding somewhere else to live and pay for.
« Last Edit: November 16, 2021, 12:10:54 PM by vand »

MisterA

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Re: What's your UK fire amount?
« Reply #213 on: November 16, 2021, 12:33:51 PM »
Your home is not an investment, though it is an asset which can be used as collateral to borrow against, which may be reinvested at a higher rate of return.. or used to buy a million packets of cheetos.

A house (of livable condition) is an asset, because it can be used to generate income - either real income if you rent it out, or an implied income if you live in it.

It is the mortgage that is a liability because it costs you money to maintain it.

You can turn your home into an investment by selling it, but at that point it stops being your home, and you are facing the problem of finding somewhere else to live and pay for.
Precisely!

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Re: What's your UK fire amount?
« Reply #214 on: November 16, 2021, 12:36:03 PM »
This is a good article about homes, assets and investments.

https://monevator.com/why-house-is-an-investment-and-an-asset/

As has been pointed out, the poll is flawed, so the results don't mean much. I understand why home equity was included, but it skews the results so much. Someone with a £500k house, and a small amount in investments is in no position to FIRE. Likewise, someone who says their figure is >£1m, how much of this is property equity? Equity isn't going to feed you, unless you rent it out.

On the original premise of this thread I'm close to £1m now, I live in the North (cheapish property) and I have no debts. But I still feel that this isn't quite 'enough'. I'm curious about what we all need to live each year, and how confident we are that this figure will see us through thick and thin. Not quite the same as your current annual expenses.
Yes Iím creeping into a higher poll category just through house price inflation. Iíd rather have this value in more liquid investments.

ĎEnoughí for me is a paid off home, 34x expenses and a separate home maintenance pot to cover those very infrequent but expensive items such as the new roof, or windows etc. Itís a long way from 25x expenses but I donít have very much discretionary spending and Iím on the cautious side.

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Re: What's your UK fire amount?
« Reply #215 on: November 16, 2021, 01:08:57 PM »
Of course you should include your home equity.

It's an investment like another one.
Not mine!

The definition of an investment is "the outlay of money usually for income or profit", that's not why I bought our home.

I can't sell it or generate an income (without getting a divorce!).

Whatever happens to the value of my home is irrelevant, I'm no closer or further away from my FIRE targets. Do you think you're closer to your target when your home increases in value?

Sure, it stops me paying rent. It's an asset that forms part of my net worth. And it's a liability until it's paid for.

It's like the diesel in my car. It's worth more than I paid for it, but I can't sell it. And it stops me from having to pay bus fares. ;-)

An asset, not an investment.

A common way to pay for retirement amongst 'normal' people, at least in the South of England, is to take out the largest possible mortgage, spend your working life paying it off, and then downsize.

We've freed up a sizeable six-figure sum by moving north a couple of years after finishing work. Could have freed up an even larger amount by moving to say Scotland, or France. Would've been odd not to include its value in net worth calculations.

MisterA

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Re: What's your UK fire amount?
« Reply #216 on: November 16, 2021, 01:44:13 PM »
I'd put a lot of effort into reducing my expenses before going back to work. Although it's entirely unnecessary: the markets (and a small inheritance) have done their job in the last 10 years and money is accumulating faster than I am ever likely to spend it.
Fantastic, well done.

I think that's what we all hope will happen.

ĎEnoughí for me is a paid off home, 34x expenses and a separate home maintenance pot to cover those very infrequent but expensive items such as the new roof, or windows etc. Itís a long way from 25x expenses but I donít have very much discretionary spending and Iím on the cautious side.
Yes, I've read that Monevator article.

Thanks for sharing your 'enough' thoughts, although I think you're a bit more than 'on the cautious side'! Although...

Our approach is similar. Our home is paid off, and we're probably targeting a similar 30odd-x minimum expenses pot, but then planning a 4% withdrawal rate - safe in the knowledge that we can cover expenses on 3% withdrawal (if that makes sense). And we also have a separate emergency fund. Flexibility is the thing.

A common way to pay for retirement amongst 'normal' people, at least in the South of England, is to take out the largest possible mortgage, spend your working life paying it off, and then downsize.

We've freed up a sizeable six-figure sum by moving north a couple of years after finishing work. Could have freed up an even larger amount by moving to say Scotland, or France. Would've been odd not to include its value in net worth calculations.
Whilst people talk about it, I don't know anybody who has actually downsized and released equity.

As I'm a northerner, I'm waiting for the house prices to rise as the southerners realise how much nicer it is in the north and move. It's already started.
« Last Edit: November 17, 2021, 01:53:21 AM by MisterA »

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Re: What's your UK fire amount?
« Reply #217 on: November 17, 2021, 04:44:57 AM »
As I'm a northerner, I'm waiting for the house prices to rise as the southerners realise how much nicer it is in the north and move. It's already started.


Don't tell everyone!

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Re: What's your UK fire amount?
« Reply #218 on: November 17, 2021, 04:57:23 AM »
As I'm a northerner, I'm waiting for the house prices to rise as the southerners realise how much nicer it is in the north and move. It's already started.


Don't tell everyone!
It's a cycle, London prices get out of sync with rural/Northern prices, rural/Northern prices catch up a bit, after a few years London prices start going up again, rinse and repeat.  If you make the move at the right point you are quids in, often at the expense of locals who haven't had that period of London salaries (although they have had the rural/Northern lifestyle: the longer I'm retired to the country the more I wonder whether all those years in London were worth it.)

vand

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Re: What's your UK fire amount?
« Reply #219 on: November 17, 2021, 05:45:10 AM »
As I'm a northerner, I'm waiting for the house prices to rise as the southerners realise how much nicer it is in the north and move. It's already started.


Don't tell everyone!
It's a cycle, London prices get out of sync with rural/Northern prices, rural/Northern prices catch up a bit, after a few years London prices start going up again, rinse and repeat.  If you make the move at the right point you are quids in, often at the expense of locals who haven't had that period of London salaries (although they have had the rural/Northern lifestyle: the longer I'm retired to the country the more I wonder whether all those years in London were worth it.)

Personally I don't see. I think we've seen the high watermark for the ratio of London vs overall UK home prices.  Lockdown started a secular trend in de-urbanisation imo, though it may even have started before then, because house prices in many parts of London have been flat for a long time.. Houses selling on my street (terraed Edwardians.. all fairly similar) are only fetching nominally the same prices they were 5-6 years ago.

My next door neighbours paid an ungodly amount for their house in late 2015 and it remains the highest price ever achieved for the whole street.
« Last Edit: November 17, 2021, 05:48:50 AM by vand »

shelivesthedream

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Re: What's your UK fire amount?
« Reply #220 on: November 17, 2021, 06:02:32 AM »
A common way to pay for retirement amongst 'normal' people, at least in the South of England, is to take out the largest possible mortgage, spend your working life paying it off, and then downsize.

We've freed up a sizeable six-figure sum by moving north a couple of years after finishing work. Could have freed up an even larger amount by moving to say Scotland, or France. Would've been odd not to include its value in net worth calculations.

I think my point still stands, though, that you would be including the anticipated freed-up capital in your relevant net worth calculations, not the value of the home you are anticipating living in at retirement.

However you should benefit from it in a form of lower cost than paying rent all your life. That's the reason your bought it. And this lower cost to live in there is your dividend.

The question is not "is it an asset or a liability?", it's "should you include it in your NW valuation when deciding if you can afford to retire?" The existence of a paid-off home is a great thing as it lowers your expenses, therefore reducing the NW you need to retire on. However, my parents looking at their paid-off £1 million London house and deciding that as they spend £40,000 a year which is 4% of £1 million they can afford to retire would be just stupid.

I guess if you're using NW to keep score with other "normal" people, or looking at how much earnings you've paid in to your NW vs how much it is now (my parents paid wayyyyyyy less than £1 million for their then-cosmetically-unfortunate house twenty five years ago) then including your house equity would make sense. But surely the big question for everyone on this forum is "when can I retire?" - in which case including only assets you plan to liquidate sequentially to cover your expenses is the only way to get a sensible answer.

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Re: What's your UK fire amount?
« Reply #221 on: November 17, 2021, 06:13:06 AM »
As I'm a northerner, I'm waiting for the house prices to rise as the southerners realise how much nicer it is in the north and move. It's already started.


Don't tell everyone!
It's a cycle, London prices get out of sync with rural/Northern prices, rural/Northern prices catch up a bit, after a few years London prices start going up again, rinse and repeat.  If you make the move at the right point you are quids in, often at the expense of locals who haven't had that period of London salaries (although they have had the rural/Northern lifestyle: the longer I'm retired to the country the more I wonder whether all those years in London were worth it.)

Personally I don't see. I think we've seen the high watermark for the ratio of London vs overall UK home prices.  Lockdown started a secular trend in de-urbanisation imo, though it may even have started before then, because house prices in many parts of London have been flat for a long time.. Houses selling on my street (terraed Edwardians.. all fairly similar) are only fetching nominally the same prices they were 5-6 years ago.

My next door neighbours paid an ungodly amount for their house in late 2015 and it remains the highest price ever achieved for the whole street.
It's a long cycle, this is the second time it's come around in about 20 years, I think.

I sold in London in 2016 and I'm carefully not looking at prices where I sold, I don't want to know.

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Re: What's your UK fire amount?
« Reply #222 on: November 17, 2021, 06:13:30 AM »

I guess if you're using NW to keep score with other "normal" people, or looking at how much earnings you've paid in to your NW vs how much it is now (my parents paid wayyyyyyy less than £1 million for their then-cosmetically-unfortunate house twenty five years ago) then including your house equity would make sense. But surely the big question for everyone on this forum is "when can I retire?" - in which case including only assets you plan to liquidate sequentially to cover your expenses is the only way to get a sensible answer.

It's not about comparison with 'normal' people, it's about comparison with people who rent rather than owning.  If I didn't own my house I would need a stash of something very similar to the house's value to generate the extra income I would need to pay our rent.

Either you need to include the house, or you need to specifically exclude housing costs from discussions of your main stash and have a completely separate category of a paid off house / a separate stash to pay your future rent.  Rent is probably the biggest ticket item for most renters and you would completely lose comparability if some people's numbers included it and others' didn't.


shelivesthedream

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Re: What's your UK fire amount?
« Reply #223 on: November 17, 2021, 07:06:47 AM »

I guess if you're using NW to keep score with other "normal" people, or looking at how much earnings you've paid in to your NW vs how much it is now (my parents paid wayyyyyyy less than £1 million for their then-cosmetically-unfortunate house twenty five years ago) then including your house equity would make sense. But surely the big question for everyone on this forum is "when can I retire?" - in which case including only assets you plan to liquidate sequentially to cover your expenses is the only way to get a sensible answer.

It's not about comparison with 'normal' people, it's about comparison with people who rent rather than owning.  If I didn't own my house I would need a stash of something very similar to the house's value to generate the extra income I would need to pay our rent.

Either you need to include the house, or you need to specifically exclude housing costs from discussions of your main stash and have a completely separate category of a paid off house / a separate stash to pay your future rent.  Rent is probably the biggest ticket item for most renters and you would completely lose comparability if some people's numbers included it and others' didn't.

You know, you're absolutely right. I guess I hadn't thought of that - possibly because so many (all?!) of the UK FIRErs I follow own or are planning to own their own home! Obviously one can theoretically choose to rent in retirement, but I can't think offhand of anyone who's made or will be making that choice. I'd sort of forgotten that the original point of the poll was to compare people on the forum to each other. I've read too many times about people who DO think that 4% includes 4% of the home they're living in!

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Re: What's your UK fire amount?
« Reply #224 on: November 17, 2021, 09:37:04 AM »
This may be well known but I hadnít seen it before a link was included in the latest Monevator post. The below site is really very interesting, especially the longer reports. It provides a great guide for anyone at the start of their journey, and donít even know where to start to calculate their UK FIRE amount.

https://www.retirementlivingstandards.org.uk/

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Re: What's your UK fire amount?
« Reply #225 on: November 17, 2021, 10:41:30 AM »
This may be well known but I hadnít seen it before a link was included in the latest Monevator post. The below site is really very interesting, especially the longer reports. It provides a great guide for anyone at the start of their journey, and donít even know where to start to calculate their UK FIRE amount.

https://www.retirementlivingstandards.org.uk/

This has been much discussed and pilloried on MSE over the years.  The level they set as 'comfortable' is way above what the median working couple - who generally have a mortgage or rent to pay - earn.

It contrasts markedly with the Which survey which uses three levels of 'Essential', 'Comfortable' and 'Luxury' linked below.  The Loughborough study has a 'comfortable' level more than 20% higher than what the Which survey considers 'Luxury' for a couple!

https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

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Re: What's your UK fire amount?
« Reply #226 on: November 17, 2021, 11:01:11 AM »
Oh crumbs PhilB, how am I always so hopelessly out of touch! Iíve never seen any of these before and Iím supposed to like personal finance! I agree some of the categories had some flaws and parts were very high but the minimum levels here seemed to be reasonably Mustachian. I just would call it comfortable rather than minimum.

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Re: What's your UK fire amount?
« Reply #227 on: November 17, 2021, 11:48:18 AM »
There's a big difference in the methodology.  The Loughborough one got people together in groups to have a discussion about what they thought the numbers should be.  The Which one surveyed thousands of Which members who were pensioners about what they actually spent.

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Re: What's your UK fire amount?
« Reply #228 on: November 18, 2021, 03:19:01 AM »
This is a good article about homes, assets and investments.

https://monevator.com/why-house-is-an-investment-and-an-asset/

As has been pointed out, the poll is flawed, so the results don't mean much. I understand why home equity was included, but it skews the results so much. Someone with a £500k house, and a small amount in investments is in no position to FIRE. Likewise, someone who says their figure is >£1m, how much of this is property equity? Equity isn't going to feed you, unless you rent it out.

On the original premise of this thread I'm close to £1m now, I live in the North (cheapish property) and I have no debts. But I still feel that this isn't quite 'enough'. I'm curious about what we all need to live each year, and how confident we are that this figure will see us through thick and thin. Not quite the same as your current annual expenses.
Yes Iím creeping into a higher poll category just through house price inflation. Iíd rather have this value in more liquid investments.

ĎEnoughí for me is a paid off home, 34x expenses and a separate home maintenance pot to cover those very infrequent but expensive items such as the new roof, or windows etc. Itís a long way from 25x expenses but I donít have very much discretionary spending and Iím on the cautious side.

Sometimes I think people focus on SWR so much that they are failing to see the whole risk/reward dynamic of using such low SWRs.

Statistically by using a sub 3% WR you're far, far more likely - in fact almost certain - to die with an ungodly amount of unspent money - say, 5-10 times the amount you started with than you are to go broke.  The risk is that you die leaving a huge amount of money on the table. That doesn't strike me as particularly good idea if the main goal from your pot is to just to provide income in retirement (of course, it could be that you want to pass on a family legacy too).


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Re: What's your UK fire amount?
« Reply #229 on: November 18, 2021, 03:23:50 AM »
Sometimes I think people focus on SWR so much that they are failing to see the whole risk/reward dynamic of using such low SWRs.

Statistically by using a sub 3% WR you're far, far more likely - in fact almost certain - to die with an ungodly amount of unspent money - say, 5-10 times the amount you started with than you are to go broke.  The risk is that you die leaving a huge amount of money on the table. That doesn't strike me as particularly good idea if the main goal from your pot is to just to provide income in retirement (of course, it could be that you want to pass on a family legacy too).

I absolutely disagree. It's way better to be safe than sorry.

We are also at all time high in term of stock market with interest rate at 0% and inflation ramping to 6%. Clearly there is a big currency devaluation happening.

Things is, past performance doesn't predict the future. And if we keep seeing inflation cranking up so high, even at 3% spending rate it may not be enough, especially if you expect to live 50+ years on top of that.

I think nowadays we should aim for 3% spending or 35X. Mostly due to the crazy printing the gov is doing

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Re: What's your UK fire amount?
« Reply #230 on: November 18, 2021, 05:24:35 AM »
Yes the question posed was how much was enough to ďsee us through thick and thinĒ which is going to generate a more cautious approach than a situation where someone is prepared to go back to work.

The SWR in itself is fairly meaningless without context. Iíd be happy with a 4% or higher withdrawal rate if there was so much discretionary spending in the budget that I could easily cut back heavily in times of trouble. Also the difference between a 4% or 3% WR isnít that much if someone is willing and able to go part time for a few years, escaping the full time grind earlier.

As with all things personal finance related, there are a whole host of individual scenarios, back up plans, DB versus DC pensions, property set ups etc that will impact what an individuals FIRE amount will be.

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Re: What's your UK fire amount?
« Reply #231 on: November 18, 2021, 06:21:06 AM »
Sometimes I think people focus on SWR so much that they are failing to see the whole risk/reward dynamic of using such low SWRs.

Statistically by using a sub 3% WR you're far, far more likely - in fact almost certain - to die with an ungodly amount of unspent money - say, 5-10 times the amount you started with than you are to go broke.  The risk is that you die leaving a huge amount of money on the table. That doesn't strike me as particularly good idea if the main goal from your pot is to just to provide income in retirement (of course, it could be that you want to pass on a family legacy too).

I absolutely disagree. It's way better to be safe than sorry.

We are also at all time high in term of stock market with interest rate at 0% and inflation ramping to 6%. Clearly there is a big currency devaluation happening.

Things is, past performance doesn't predict the future. And if we keep seeing inflation cranking up so high, even at 3% spending rate it may not be enough, especially if you expect to live 50+ years on top of that.

I think nowadays we should aim for 3% spending or 35X. Mostly due to the crazy printing the gov is doing

Well if the question is do I think forward returns over the next decade are going to be lower, my answer is yes.

If the question is does this imply that you can't afford to withdraw more than 4% my answer is not necessarily.

In fact the data shows that there is basically no correlation between periods of higher or lower returns vs a portfolio's ability to sustain any particular SWR, so why worry about future return if it doesn't do anything for the amount of money you can safely spend from your portfolio each year...

https://www.kitces.com/blog/url-upside-potential-sequence-of-return-risk-in-retirement-median-final-wealth/



Quote
investors earning long-term returns anywhere between 5.5% and 9.5% necessitated the ďsameĒ 4% safe withdrawal rate! Even as an 1874 retiree had only a 5.96% 30-year return but was able to sustain a more-than-double safe withdrawal rate of over 9.2%

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Re: What's your UK fire amount?
« Reply #232 on: November 18, 2021, 06:23:05 AM »
Yes the question posed was how much was enough to ďsee us through thick and thinĒ which is going to generate a more cautious approach than a situation where someone is prepared to go back to work.
That was me.

I've read the latest Monevator articles about calculating your expenses etc, but it's really difficult, there are so many variables. My teen kids won't be around for long, and an age gap between myself and my wife means that I'll likely finish work before she does. If I go with the original premise of this thread (including home value and DB pensions etc etc), the worst multiple of expenses I come out with is 30x, this is my situation currently. If I ditch the kids and lots of discretionary spending, my expenses multiple is 70x. But if I take the property value out, those multiples change to 20x or 50x. My expenses don't include anything for rent, as we own our home.

I hate the idea of living off our investment sum and depleting it, whilst waiting for the old age pensions and final salary pensions to arrive. And also, after working for decades and living quite frugally, we want to be more comfortable and worry free when we finish. And I'm never going back to work!

I've pondered these things for years, and I do know what to do. But it isn't easy!

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Re: What's your UK fire amount?
« Reply #233 on: November 18, 2021, 06:32:02 AM »
Yes the question posed was how much was enough to ďsee us through thick and thinĒ which is going to generate a more cautious approach than a situation where someone is prepared to go back to work.
That was me.
Yes and pease donít think I was criticising the question MisterA. Itís a perfectly valid question. Understanding our relationship with money through various and changing life phases is really difficult. I donít have kids so itís a bit easier for me here. I agree it is not easy but you sound as though you are in a really solid position.

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Re: What's your UK fire amount?
« Reply #234 on: November 18, 2021, 08:11:20 AM »
I hate the idea of living off our investment sum and depleting it, whilst waiting for the old age pensions and final salary pensions to arrive.

Oh how this resonates!  I'm supposedly 3 years into this phase with another 7.5 years to go until those pensions start to come on line.  I very deliberately saved a capital sum to run down over this period and still find the idea horribly, horribly hard.  The fact that I know how stupid this is doesn't change it and so far I have totally failed to spend any of it.

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Re: What's your UK fire amount?
« Reply #235 on: November 18, 2021, 09:21:15 AM »

I guess if you're using NW to keep score with other "normal" people, or looking at how much earnings you've paid in to your NW vs how much it is now (my parents paid wayyyyyyy less than £1 million for their then-cosmetically-unfortunate house twenty five years ago) then including your house equity would make sense. But surely the big question for everyone on this forum is "when can I retire?" - in which case including only assets you plan to liquidate sequentially to cover your expenses is the only way to get a sensible answer.

It's not about comparison with 'normal' people, it's about comparison with people who rent rather than owning.  If I didn't own my house I would need a stash of something very similar to the house's value to generate the extra income I would need to pay our rent.

Either you need to include the house, or you need to specifically exclude housing costs from discussions of your main stash and have a completely separate category of a paid off house / a separate stash to pay your future rent.  Rent is probably the biggest ticket item for most renters and you would completely lose comparability if some people's numbers included it and others' didn't.

Also, while it's true that I can't spend my house, or derive an income from it while I live there, it is still there as an asset, albeit an illiquid one.

If my stash starts to diminish and it looks like I might run out of money, I could potentially move to a smaller house (or to a cheaper part of the country) and free up several hundred thousand pounds. That might be a preferable option to trying to restart paid employment in my sixties or seventies.

This is partly why the concept of hitting a single net worth 'number' doesn't really work in the UK. Each £1 of net worth in an ISA is potentially worth more than a £1 of net worth in a pension - because the latter might have a future income tax liability. Each £1 of net worth in a house has associated costs for maintenance, and no associated income (unless you want to view it as imputed rent).

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Re: What's your UK fire amount?
« Reply #236 on: November 18, 2021, 11:14:52 AM »
You also have the fun and games of how do you value any DB schemes you may be lucky enough to have.  I just used the LTA method of 20x the payout to keep it simple.  It's actually worth more than that to me, but everyone will have their own views depending on how much they value certainty and how keen they are to leave an inheritance.

It probably makes more sense to just stick to comparing how much FIRE income people want rather than stash size.  I understand the attraction of the bigger numbers you get with net worth calculations though!

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Re: What's your UK fire amount?
« Reply #237 on: November 19, 2021, 01:26:56 PM »
It probably makes more sense to just stick to comparing how much FIRE income people want rather than stash size.  I understand the attraction of the bigger numbers you get with net worth calculations though!
I'm not really interested in our net worth, just my FIRE income level, and how much I need to grow my stash to get there.

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Re: What's your UK fire amount?
« Reply #238 on: November 19, 2021, 04:59:10 PM »

This is partly why the concept of hitting a single net worth 'number' doesn't really work in the UK. Each £1 of net worth in an ISA is potentially worth more than a £1 of net worth in a pension - because the latter might have a future income tax liability. Each £1 of net worth in a house has associated costs for maintenance, and no associated income (unless you want to view it as imputed rent).

I agree with this. And I find discussion about SWR %ages quite difficult (far too simplistic) to relate to my own [UK] circumstances, where there is hopefully state pension for me / spouse in around 18 years and modest final salary pensions kicking in at different times ahead of that. I have a cash and ISA pile to be used to bridge the gap, and my buffer is a defined contribution pension pot. So I've cash flowed these various elements and the answer is a lemon - my withdrawal rate starts at over 5% (because I haven't properly valued the final salary pensions and state pensions probably) which shrinks over time.

Another assumption I've used is in the decade to age 60 I expect to spend like royalty, and expect my taste for long haul holidays to diminish somewhat as I near 70 - so I don't expect a steady income, but a declining one. I've kept my paid-off house as a contingency, hoping never to need to sell it. Lucky kids.

What a ramble. Sorry about that. I suppose the short answer is I'm content with the stash, but a SWR simply doesn't cut the mustard when working out whether it's enough - for me. I think the lightbulb moment for me was reading Fireandwide's 'Fire Triangle' (https://fireandwide.com/money-playing-the-fire-triangle-part-ii/) cash flow explanation - it provided a clear explanation of why I wasn't seeing the SWR as something I could apply.

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Re: What's your UK fire amount?
« Reply #239 on: November 20, 2021, 01:47:28 AM »
I find discussion about SWR %ages quite difficult (far too simplistic) to relate to my own [UK] circumstances, where there is hopefully state pension for me / spouse in around 18 years and modest final salary pensions kicking in at different times ahead of that.

I couldn't agree more.  I'm a firm believer in splitting pots between those planned to give a drawdown income in perpetuity (for which the SWR approach makes sense) and those for bridging gaps between income streams / meeting specific expenses (for which it doesn't).  Trying to lump the two together makes no real sense as not only are your varying withdrawal rates difficult to model, but your asset allocations will likely be very different because of the differing timescales.

Just don't underestimate the psychological challenge of actually spending those bridging funds!

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Re: What's your UK fire amount?
« Reply #240 on: December 12, 2021, 05:54:42 AM »
I find discussion about SWR %ages quite difficult (far too simplistic) to relate to my own [UK] circumstances, where there is hopefully state pension for me / spouse in around 18 years and modest final salary pensions kicking in at different times ahead of that.

I couldn't agree more.  I'm a firm believer in splitting pots between those planned to give a drawdown income in perpetuity (for which the SWR approach makes sense) and those for bridging gaps between income streams / meeting specific expenses (for which it doesn't).  Trying to lump the two together makes no real sense as not only are your varying withdrawal rates difficult to model, but your asset allocations will likely be very different because of the differing timescales.

Just don't underestimate the psychological challenge of actually spending those bridging funds!

I did exactly this when my wife and me retired in 2018.  I was 2.5 years away from the state pension, and the other half was 6 years away. Iíd worked out the post-tax money needed to ďpayĒ ourselves the equivalent amount each month, and compiled a ring fenced stash to do just that.  Itís worked well.

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Re: What's your UK fire amount?
« Reply #241 on: December 12, 2021, 06:54:00 AM »

I did exactly this when my wife and me retired in 2018.  I was 2.5 years away from the state pension, and the other half was 6 years away. Iíd worked out the post-tax money needed to ďpayĒ ourselves the equivalent amount each month, and compiled a ring fenced stash to do just that.  Itís worked well.

Glad it's worked well for you. I have the fortunate challenge of having c 17 years to bridge before state pension kicks in; there is enough cash to keep going for a while (3-5 years) but the rest will be reliant upon a combination of ISA and private pensions, all at different times. The sums work out, but psychologically 'spending' - as PhilB mentions - feels much harder right now. Especially as I will need to convert equity to cash during this time.

On the other hand this is the right decade to all of the more physically active things I want to do, so there's the rub - we should have more than enough and I need to trust that. I haven't used a 'proper' / financial advisor cash flow model, instead relying on my Excel skills (I work in finance so am confident the sums work). Not the right subject chain, but my point is - for me at least - I'm not sure the mathematically 'right' number will ever be enough to erase uncertainties, especially when there is a reasonably long gap before state pensions kick in .... ugh, sorry, turned into a bit of a worry-vent...

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Re: What's your UK fire amount?
« Reply #242 on: January 14, 2022, 12:43:38 PM »

So I'm pretty sure that I could get by happily on £20k/pa after tax (not including OH, we keep finances separate). With a paid off home and a simple low cost lifestyle, that sort of figure just below the median wage would represent financial freedom to me. That said, it's difficult to know for sure. Just a few things to consider are:


I've been tracking my expenditure much more closely in the last year or so.. my 20k/pa was always a high-side estimate. My actualy spending is probably 25-35% below that figure.

Given that, I would draw my lean-FIRE line at the personal tax threshold, currently £12.5k. This of course works beautifully; pocketing the full tax savings gains on the pension. x25 pot is £312.5k.

Normal FIRE would probably be £15k/year. x28 pot for £420k.

FatFIRE for me would be 20k/year with a x33 pot, so £660k.


313k - 660k.. that's quite a wide spread. I definitely wouldn't feel ready to pull the plug on work at 313k, but would probably do before 660k. First, I need to get to 313k and then see how I feel. Hopefully I can hit that in the next year or so.

Interesting to revisit this as of Jan/2022.

Sailed past this original LeanFI number quite some time ago, and barely stopped for a breath.. and looking back I don't think I'd be happy if I had taken my foot off the gas at that point. Now currently about 90% of the way to the original NormalFI number adjusting for inflation etc.

Revised targets in inflated 2022 currency:

LeanFI: x25pot * £20kpa = £500k
NormalFI: x27pot * £26kpa = 702k
FatFI: x29pot * £33kpa = £957k

LeanFI is hopefully 1-2 years out
Normal FI is probably 3 years out at best maybe 4
FatFI is more of a blue sky target at this stage, but could happen in maybe 5 or 6 years if I really wanted to commit to it


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Re: What's your UK fire amount?
« Reply #243 on: January 14, 2022, 12:54:18 PM »
Hmmm.  That's a pretty scary personal inflation rate vand!

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Re: What's your UK fire amount?
« Reply #244 on: January 15, 2022, 01:26:41 AM »
4 and a bit years on, how time flies!

Weíre now at £800k combination of cash / ISAs and SIPPs.

£2k a month withdrawal was a tad optimistic but a good target to start with. Turns out after analysing our real expenditure using Moneyhub for last 3 years its around £3.5k to £4K a month.

Iím going to pull the plug in August when my contract finishes and we will have around £880k. Comfortable with that number as we will both have state pensions on top.

Weíre currently at £440k with £79k remaining on mortgage. Target is to have £600k in investments for a £2k a month withdrawal.

Plan is to finish doing up the house and then look at getting consent to let as round here a typically 3 bed semi can rent for £2k to £2.5k per month.

We will then move on a LCOL area near the sea like Devon, Cornwal where you can easily rent a 3 bed house for £1k a month.