32 year old, hopes to semi retire by 40

Discussion in 'Money makeover' started by peterpanics, Jul 5, 2009.

  1. z107

    z107 Guest

    This is pretty much what I have done. Here are some observations you might be interested in:

    1. Why wait until you're 40? - if you can't (or won't) do it now, you probably will never do it. It really is a state of mind whether you can do it or not. You need a healthy regard for money, but it isn't, surprisingly the controlling factor. You may be over concentrating on the finance aspect.

    2. The lifestyle change is huge. Don't expect that you'll suddenly have a carefree life, it doesn't work that way. Your commute/city stresses will be replaced by country ones. (All my friends are in Dublin, no one ever visits us etc, etc...)

    3. Being self sufficient is expensive :D and a lot of work.

    Best laid plans of mice and men...
     
  2. minion

    minion Frequent Poster

    Posts:
    504
    I think you are dreaming if you are thinking of retiring at 40 on those figures.

    Speak to a financial adviser. You'll find that you need a hell of a lot more if you want to live on that. Perhaps it might be just doable if you continue as you are until you are 50.
     
  3. Gorbashow

    Gorbashow New Member

    Posts:
    9
    It really depends on your life style.

    Here is something from me:

    1. Dunno what company you work for, but you might consider not to sell shares atm. Recession is not something that will stay forever. Economy goes along sinusoid. My opinion is within 8years global economy will enter upper part of this sinusoid. Might be better to sell them in that time.

    2. You might also consider investing some part of this free 35k a year (10-20%) into more risky assets: shares are still cheap atm and 8 years is just enough time to get some real value on them (but i would advise maybe some growing markets funds (china market seems really strong and full of potential)).

    3. Definitely talk to some good, experienced financial advisor about how to invest the money.

    Just to roughly estimate:

    You have:

    €95,000 in savings accounts
    €65,000 in unit funds
    €8,000 in company shares

    -------------------------------
    168k

    You can save additional:

    8 x 35k = 280k

    That would give you around 450k when you are 40 (with assumption intrest on the savings will be equal to inflation).
    Not counting pension in.

    I'd say it is not hard to get 5% after tax from your savings(mixing different types of assets) which will be roughly about 20k E a year.
    Adding to that your wife's job - 35k E will end up in around 50k a year after tax.
    Adding your let's say 10k after tax a year from your part-time job will move you to roughly 60k a year after tax.

    Mortgage on house will be probably around the same what you are paying renting.

    In my opinion, it is possible for you to retire at 40. It will be harder probably when kids get older, but it is very possible.

    /sorry for any grammar/spelling mistakes in advance. I'm not native.
     
  4. peterpanics

    peterpanics Registered User

    Posts:
    17
    Hello SPC100,

    I have calmed down a bit since but still have the same plan for now. Adding gradually to our investments and pension, keeping an eye on land prices and getting some experience when we can with that lifestyle via relations. Some of our expenses have dropped like rent since the original posts and some small increases in income to just about cancel out the tax changes.

    We now have the following:

    €85,000 in cash savings (Rabo and Northern Rock mainly)
    €84,000 in unit funds (Rabo and Quinn Life)
    €26,000 in shares (nominee account)
    €95,000 in Defined Contribution pension (maxing out AVC options for now and waiting for updates about tax changes from 2012 onwards)

    I am thinking of opening a foreign bank account soon for at least part of our savings, just in case something big happens. Also I am looking towards share certs or Crest/Euroclear instead of having shares in a nominee account, especially if I sell off the Quinn Life funds and move more towards shares instead. I do worry about the unknowns such as an Irish default or us leaving the eurozone and how it might impact us personally.

    Why the wait longer before taking the leap? I think it would be better to keep our current saving rates and gradually move towards the planned lifestyle, scaling down slowly with my current employers if possible. The next big step will be buying land to start working with part-time, I am very interested in Permaculture.
     
  5. jpd

    jpd Frequent Poster

    Posts:
    1,273
    This isn't as easy as it sounds - safe(?) investments such as 10 year government bonds (French/German) yield around 3.3% gross whilst blue chip companies dividend yields are around 3-4%. These are gross and you have to take into account inflation.

    Of course, there are riskier investments ie Irish Gov't bonds pay 8% currently.
     
  6. Lamorna

    Lamorna Registered User

    Posts:
    23
    Hi Peterpanics,

    Well done for saving so much!

    I think your plan is do-able. If you can earn 20KE working p/t you'll still be earning more than many people who work f/t!

    On a farm, you will regularly face big expenses such as mending the fences; pruning the trees (if you have any trees); maintaining any buildings (barns, sheds for equipment, garage for tractors etc.) in good condition. It can add up, and it's hard work: my granfather fell off a tree while pruning it when he was 73 years old and he dislocated his shoulder! 1 stay in hospital to do an IRM and check that he didn't have concussion or anything else...

    Although you called this thread 'retire at 40', you might end up working longer than office workers: my grandfather only retired as a farmer when he was 76. He couldn't afford to do it before, and he had to make do with a very small pension.

    My big worry would be medical bills, first with children, and then for the two of you as you get older. Cancer treatment, for example, is very expensive.

    Another worry would be paying for your kids' education. You managed to work through uni but you were lucky. I tried to do the same in Paris when I was young and I ended up dropping out: one month I just had not earned enough to pay the rent and that was the end of my studies. I resumed studying in the UK but had to give up because I was working very long hours (+ I had 7 housemoves in 2 years). I don't think I'll be able to start again, because of the £9K fees.

    It sounds like a good plan otherwise. Congratulations again for saving so much. So many people seem to be 'born to shop'. It's a shame there aren't more people like you!
     
  7. Guns N Roses

    Guns N Roses Frequent Poster

    Posts:
    552
  8. Nige

    Nige Frequent Poster

    Posts:
    1,032

    I'd take that "report" with a pinch of salt.

    It includes £54k for childcare, which the OP won't have. It has another £11k for babysitting, which seems high to me. It also includes the cost of buying junior their first car!

    Children are expensive, but not necessarily as expensive as many vested interests would have you believe.
     
  9. peterpanics

    peterpanics Registered User

    Posts:
    17
    Hi Lamorna,

    Thanks for the comments. Working through college was tough at times alright. It is true that medical costs could be much higher in the future than I expect now while in good health. I like the idea of physical work currently but it could be very different in 20 years time for sure, maybe I would miss the office even later on. Lots of small steps to come over the next years hopefully to figure it all out.

    I checked out the Guardian link, categories are interesting but I agree with Nige.
     
  10. mammyof2

    mammyof2 Frequent Poster

    Posts:
    51
    Hi Peterpanics

    I've been following this thread with interest and commend you on your planning and for thinking through so thoroughly how you want to live your life and working to achieve it!

    A couple of things that strike me

    - I am amazed how at negative many of the posts are towards your suggestion. If your estimate that you and your wife can earn approx 55k per annum after you have downsized and 'retired' is correct, with low or no childcare expenses, low or no mortgage and a good pot of savings, that puts you in an extremely fortunate position. We are a family of two adults and two kids with a very high mortgage, very high childcare costs and lots of the costs associated with both working full time outside the home (travel, work clothes, etc etc) and manage very well on a net income of 65k. Without a mortgage or childcare costs, I reckon we would be comfortable on 25k net. Your 55k gross (probably about 35 - 40k net?) would therefore be an annual fortune!

    - You are basing your planning on the assuption that your wife will want to work more or less full time and you will want to spend a significant proportion of your time caring for your children. That's fine, but I would not make a final assessment of whether this lifestyle will work for you both in the medium to long term until you actually have your first child. Childrearing, particularly if you are relatively isolated geographically, can be an exhausting and thankless task and it takes a particular type of person to find personal fulfillment in making this their main life project. I don't mean this as negatively as it sounds - having children is also incredibly joyful and life affirming - but I think you need to establish for yourself personally that being more or less a full-time parent is genuinely what you want to do and I think its hard to establish that without actually living the reality of it!

    - In terms of long term planning for your children, its very important that you choose to downsize to a location where there are free national and secondary schools that you are happy with and are in the catchment area for. If you can be fairly sure that the first 18 years of your children's education will be largely cost free (you will inevitably end up paying for extra-curricular stuff and school associated stuff at some stage), that gives you substantial room for maneovre in terms of planning for potential third level costs.

    - Health: make sure that your planning includes a good chunk of money annually which is set aside for private health insurance. An unfortunate necessity in my opinion. However, if you shop around and reaslistically assess what you really need, you can keep costs down. We are constrained to one particular insurer because I have a pre-existing condition, but we still managed to half our bills this year by changing our policy to one which includes a very similar level of cover, but does away with some of the fluff that we never use or claim for anyway.

    Keep us updated on your progress, sounds like you have your priorities very clear!
     
  11. peterpanics

    peterpanics Registered User

    Posts:
    17
    Hi mammyof2,

    Thanks for the reply.

    Some negativity was fine with me as I was always a bit unsure of the plan, I am 35 now with one child and 40 years old seems close. The assumption was that my wife will work 2 or 3 days a week as she does currently, she still likes that idea until later in life but who knows what might change.

    "In terms of long term planning for your children, its very important that you choose to downsize to a location where there are free national and secondary schools that you are happy with and are in the catchment area for. If you can be fairly sure that the first 18 years of your children's education will be largely cost free (you will inevitably end up paying for extra-curricular stuff and school associated stuff at some stage), that gives you substantial room for manoeuvre in terms of planning for potential third level costs." -> Definitely good advice.

    "Health: make sure that your planning includes a good chunk of money annually which is set aside for private health insurance." -> Private health insurance part of the spending breakdown for the family for sure. I have seen how important it can be.

    I will give a short update about my progress.....
     
  12. peterpanics

    peterpanics Registered User

    Posts:
    17
    Short update:

    One child now which has been truly great but also a learning experience. Not really any closer to getting serious about finding a location in the countryside, time passes so quickly. Still renting in the city for €1100 a month jointly. My wages have gone up in the last 2 years but are likely levelling off now at my level. Costs are about €25000 now for me alone per year with everything included (about the same for my wife annually).

    Savings now:
    ==========
    €150,000 in cash accounts
    €98,000 in unit funds
    €38,000 in shares
    €105,000 in Defined Contribution pension (slowed down AVC contributions for now)
    ==========

    I think I will need a 'pot' of something like 25 to 30 times my annual spending minus what I make from part-time work if I was to semi-retire at 40ish. Keeping my costs low I guess is the main part of the equation, reading sites about financial independence.

    One day it will be nice to convert the 10 years of hard saving into something 'real' instead of just some virtual numbers on screens and on pieces of paper, especially with all the turbulence globally and in Ireland financially recently. 5 more years until I am 40!

    Thanks to those who replied since I last did.
     
  13. panindub

    panindub Frequent Poster

    Posts:
    60
    Hi peterpanics,

    Just came across this post today, and I'm really hope this works out for you!
    I'd also like to retire early, but have bought in Dublin an expensive house and mortgage along with that, so hoping to retire maybe a few year early...maybe 60yr old if possible..fingers crossed.

    I also work in IT and don't expect employers we be too interest in IT staff in their 60s...keeping up with technology and all that(even though it possible). I feel agism will be a factor in any interviews.

    You seem to be on the right path; plan as must as possible and assess the risks and when your ready make the jump :) Remember for big dicission like this, their is never a right time in life.

    There are lots of early retirement blogs in the Internet, one of my faviourite at the moment is this one(US based, but still worth a read);
    http://www.mrmoneymustache.com/
     
  14. peterpanics

    peterpanics Registered User

    Posts:
    17
    Hi cashier,

    "It is a good time to make a start in looking for your dream home now that you have started a family" -> Yes, that is a sentence I have heard recently close to home :)
    "hope the little one is thriving!" -> So far, long may that continue.
     
  15. peterpanics

    peterpanics Registered User

    Posts:
    17
    Hi panindub,

    "plan as must as possible and assess the risks and when your ready make the jump" -> I think my jump will be very gradual, definitely will not drop the current job if thinks are looking risky. Will be small steps all the way if possible.

    Thanks for the 'mrmoneymustache' link, I never saw that before.
     
  16. Brendan Burgess

    Brendan Burgess Founder

    Posts:
    32,444
    I hadn't seen this very interesting thread before.

    It seems to me that you are both doing jobs you like, that you are being well paid for them, and that you enjoy your frugal lifestyle.

    That is different from someone whose only target is to save as much as possible, by making such sacrifices that they don't enjoy life.

    If you are in the first category, then you probably don't need to do much in the way of planning.

    If you are in the second category, I think you should have second thoughts. Don't make huge sacrifices for a false god of "being able to semi-retire at 40".

    Being cash rich probably means you could buy a house on a few acres within comfortable commuting distance of Dublin. You may well have to take out a mortgage. If this gives you the place you want to live long-term, go for it, even if it means working a lot longer than 40.
     
  17. peterpanics

    peterpanics Registered User

    Posts:
    17
    Hi Brendan,

    Thanks for your comments. I think we both have realised (especially me) that we are in jobs we like, the "frugal lifestyle" does not feel so frugal to us (even though I said "hard saving") with our combined spending at ~€50000 a year (I guess it will creep upwards) allowing us to go on a few holidays a year and enjoy life. We will likely find that house on a few acres (modest mortgage still likely) but no big rush currently as things are fine renting for a little bit longer while we decide where (biggest blockage for us but first step is to seriously look out there). The financial independence goal will still remain but the urgency seems to have disappeared since I started this thread in 2009, I guess the aim of "being able to semi-retire at 40" was a bit naive when I was not really sure what I wanted 3 years ago.
     
  18. Gorbashow

    Gorbashow New Member

    Posts:
    9
    Hi peterpanics

    Good to see you are doing well and seems like it will eventually go as you planned.

    Just one thing you might consider is to allocate some savings into the commodities.
    Some silver and gold (but physical coins, bars - so you have it in your hands when something bad happen), might not be a bad idea considering what is going on in EU with the EUR and in US vs CHINA currency war.
    Sure everything can happen but as long as they are printing "phoney" money everywhere you should be pretty safe with gold and silver and in case everything goes bad, this might be a last resort.

    Just something to consider. Obviously best to explore the subject yourself before you make any decisions.
    Food for thought:
    youtube(dot)com/watch?v=bXIHvvZe_mU&feature=related
    youtube(dot)com/watch?v=LpeFv8eNLIE&feature=related
    youtube(dot)com/watch?v=AZrQilGtzP0&feature=relmfu
     
  19. mtk

    mtk Frequent Poster

    Posts:
    341
    I have thought about retiring mid 40s to but have decided to keep going until the magic 50 when ( 2 years) you can access your Dc scheme fund and avcs ( about 500k by then)to put money in arf and draw it down.
    I do not enjoy my work mainly due to the new boss ( of 11 months) but i guess i dont want him to "win" by quitting without a job to go to. Another job is proving hard to find ( have been trying). All a little depressing .
     
  20. DerKaiser

    DerKaiser Frequent Poster

    Posts:
    1,442
    My understanding is as follows:
    €300k in accessible savings
    €100k in pension
    Hope to semi retire on a joint household income of €55k gross
    Currently spend €50k per annum

    A few observations:
    Spending €50k per annum is far from frugal.
    You'd be able to knock at least €6k off that on the difference between dublin and country rents.
    A gross income of €55k is about €41k after tax, anyone without massive debts should be able to live on that.

    Why not just do it whilst you're still young and have the energy?
    Otherwise you'll keep pushing it out and waste most of your life dreaming about it.