41 looking to retire at 50... possible ?

Discussion in 'Money makeover' started by teaandbiscuits, Mar 14, 2017.

  1. paddyd

    paddyd Frequent Poster

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    That's exactly the point though - home equity isn't an asset unless you release it, yet it's a costing to you every year in tax, insurance, maintenance and upkeep. only a tiny fraction of people actually downsize for the purpose of releasing equity. It's incredibly rare.
    Also, no official measure of net worth includes a family home.
    e.g If you have a 3-bed semi, you'll likely spend 25-35 years paying for it (again, plus all the interest, tax, insurance, maintenance etc) and then be carried out of it in a box. That's not an asset YOU can use, but you leave it as an inheritance for someone else.

    For net worth, it needs to be an 'investable' asset, and your family home simply doesn't qualify in 95% of cases.
     
  2. Sarenco

    Sarenco Frequent Poster

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    Ok but that's true of any asset other than cold, hard cash. You can't exchange your stock or bond certificate for groceries!

    Most assets have some carrying costs. For example, broker fees, income tax on dividends, DIRT, etc.

    The fact that only a tiny minority of people ever downsize on retirement - in this country - doesn't mean home equity isn't an asset.

    Not sure what you mean by any "official measure" - do you mean for the purposes of any State means test?

    I don't agree that something has to be an investment for it to from part of your net worth. I do, however, agree that home equity is not an investment. It's a consumption item.
     
  3. paddyd

    paddyd Frequent Poster

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    I get you, I think it's really how you look at at.
    Here's my own excelsheet budget: I have assets that generate me income on one side (and they have their own associated costs obviously) and then I have costs on the other. My PPR is a cost and generates no income. However, my plan considers it as an inheritance - passing the decision to use it as an asset (sell/rent it) or not (live in it) to the next generation.

    'Official measure' would be any of the notable global wealth reports - for example they would define a 'millionaire' as someone with €1m of investable assets, minus liabilities, and excluding the PPR.

    in other words, all those old ladies or gents in a €1.5m house but living on a small pension aren't millionaires, as they'll never downsize to a €400k two bed ground floor apartment down the street.
     
  4. Sarenco

    Sarenco Frequent Poster

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    Sure but they could downsize to a more appropriate property (and would be incentivised to do so if we had a property tax that was in line with international norms). Their heirs would certainly consider their homes to be assets!

    Your home doesn't generate an income, as such, but it does spare you from an expense that you would otherwise have to meet - rent. The rent saved by owning your home is sometimes called "imputed" rent.
    That looks very like the definition of an "accredited investor" in the US. Basically, the US rules assume that if you have $1million in investable assets, you are to be trusted to make your own financial decisions and can invest in private funds that haven't been vetted by the SEC.
     
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  5. fistophobia

    fistophobia Frequent Poster

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    Back to the OP questions and statement. I think you are in a strong, enviable position financially.
    Theres a certain amount of smug critique on this website, from people who are well sorted already.

    Best you can do is blank them.
    Listen, I agree, who in their right mind wants to work any longer than they have to?
    I will do everything I can legally, to avoid work. Ye know, in victorian times, it was only the lower classes that had to work.
    My golden rule is - dont spend capital, only spend the interest or income on your capital.
     
  6. Sarenco

    Sarenco Frequent Poster

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    I assume that is interest less DIRT. So you can spend something like 0.20% of your capital every year.

    You told us earlier on this thread that you could safely spend 4% of your capital every year.

    Which is it?
     
  7. paddyd

    paddyd Frequent Poster

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    I wouldn't worry so much about wanting to retire at a specific age - instead work to being able to fund your lifestyle costs from that point forward, either through saving a large amount of money (full early retirement), or by passive income (financial independence), or both of course. I aimed for passive income. Once you reach that point, you're ready to retire whenever you want - but you don't have to of course.
    I've always found this site reasonably helpful, simply because it allows me put in my own numbers for everything (esp inflation and investment returns),
    https://financialmentor.com/calculator/best-retirement-calculator
    but also lets you insert different passive income and pensions, and the ages they apply to.
    The usual pinch of salt applies, as it assumes consistent returns every year, so tone your numbers down. e.g. investment returns beat inflation only by 0.25%, or that you expect to live to 100, it's an easy way to build in contingency.
    If you're going to retire at 51 and live to 100, that's 49 years worth of lifestyle to fund and no-one knows how inflation and investment returns will affect those 5 decades
     
  8. fistophobia

    fistophobia Frequent Poster

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    I have a diversified portfolio, equities, long and short dated bonds - for income I have corporate bonds and high yield products.
    Could I survive a market rout? I think so. I always have 3 years living expenses in cash or near-cash securities.
    Been a fan of the Provy for many a year, the bonds and ord. shares - making money off other people's misery. Isnt that the capitalist way?
    I also do some peer to peer lending; example of recent funding being KC Peaches and Camile. I am averaging 4% nett yield p.a.
     
  9. DeeKie

    DeeKie Frequent Poster

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    Fistophobia where do you do your peer to peer lending?
     
  10. Gordon Gekko

    Gordon Gekko Frequent Poster

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    Sounds like Linked Finance to me
     
  11. fistophobia

    fistophobia Frequent Poster

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    Grid Finance
     
  12. Sarenco

    Sarenco Frequent Poster

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    You must be going way out the risk curve to achieve anything like that kind of net yield in the current environment.

    Personally, I think investing for income is an illogical preference and it's generally very inefficient from a tax perspective. Each to their own I suppose.
     
  13. Ndiddy

    Ndiddy Frequent Poster

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    If retiring at 50, would they still not pay tax on the 48k? I thought taxfree retirement income only came at 65+?
     
  14. paddyd

    paddyd Frequent Poster

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    You always have income tax to pay, even over 65. There are bigger exemptions for over 65s, that’s all (I think it’s 18€k for singles and €36k for married couples).