Some great balanced points in there , sort of rubber stamping what my own thinking is, Fayf but no I am not underestimating my children's needs. I'd have retired already if that was the case . Going back to my original post that’s why I’ve grafted so hard up to now and now I want to spend more time with them.
Case study Have I enough to retire now ?
- Thread starter marsaday
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Because equities suffered a horrible sequence of returns over the period.
The problem with holding no growth assets in the ARF is that the portfolio is highly unlikely to keep up with inflation, particularly after expenses.
Gordon Gekko
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The more I think about it, I’d definitely clear the mortgage and the car finance.
Then I’d use my €730 a month of additional cashflow to build my €8,000 back up to the desired level.
OP, what exactly is your monthly income requirement excluding the €730 and excluding any amounts you save?
i.e. in net/after-tax terms.
e.g. “We need €2,000 into our back pockets each month to keep the show on the road”
Then I’d use my €730 a month of additional cashflow to build my €8,000 back up to the desired level.
OP, what exactly is your monthly income requirement excluding the €730 and excluding any amounts you save?
i.e. in net/after-tax terms.
e.g. “We need €2,000 into our back pockets each month to keep the show on the road”
Excluding the €730 and savings made monthly requirement would be say €3750 nett. That's a realistic average calculation factoring in seasonal and some parts of the year more expensive than others.
Lucius Lamb
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Any thoughts on what might be an appropriate ARF asset allocation for OP given his age, plans for early retirement and size of his fund? Sequence of returns must be a big risk consideration for anybody thinking about retirement in the current environment where equities could be heading for a major correction.
Gordon Gekko
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Okay, so that’s €60,000 gross of tax.
You mentioned gross income of €40,000 at the outset.
Did you mean €40,000 net of tax?
Otherwise, how are you getting by?
I don’t think you can retire yet.
An annual 4% withdrawal from an €1m fund that tracks the MSCI World index starting in 2000 would have fallen to €305,000 at its lowest point, giving you an income of €12,200. An allocation of bonds would have helped somewhat.
I would probably go for something like a traditional 60/40 allocation in the OP's shoes.
Mind you, I wouldn't retire yet if I was in the OP's shoes. I think he should wait until he is debt-free and the kids are self-sufficient.
From my cash resources, I suppose that's why I'm reluctant to pay off the mortgage at what is a reasonably low rate of 2.9%. If I needed cash fast then I'd probably be forced to take it out of my ARF at 20 % rate (which would be ridiculous ) whilst I'm still working , even if on a lower income job as thunderin' eejit suggested earlier in the thread 'cos as you say yourself , Gordon , I'm going nowhere soon.
Gordon Gekko
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Okay, so things are a little trickier than they appeared.From my cash resources, I suppose that's why I'm reluctant to pay off the mortgage at what is a reasonably low rate of 2.9%. If I needed cash fast then I'd probably be forced to take it out of my ARF at 20 % rate (which would be ridiculous ) whilst I'm still working , even if on a lower income job as thunderin' eejit suggested earlier in the thread 'cos as you say yourself , Gordon , I'm going nowhere soon.
You have a €60,000 income requirement, and that’s before you factor in your mortgage repayments and savings/retirement provision itself.
And your income is €40,000.
Well firstly, forget about retiring in the near future, that just isn’t an option unfortunately.
Could your spouse earn some income? 45 with adult children, a shortfall of income coming into the household, and sitting on the sidelines seems a tad extreme in my view.
Brendan Burgess
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Working for another year will not change the risk materially. He will earn about €35k net which is neither here nor there.
If he works another 10 years, he will have €350k more. That will reduce the risk a bit.
But not nearly enough to justify working in a job you don't like for 10 years.
Brendan
I presume that will fall materially once the mortgage is cleared and the kids are off the payroll.
I think the OP is definitely on the home straight and could plan on retiring before the imputed distributions kick in on his ARF.
Just not quite yet.
Plus any investment returns on his ARF, which will have to support himself and his wife for 10 years less.
Lucius Lamb
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Do you have the current value of the ARF tracking the world index with a 4% annual withdrawal? Thanks
Duke of Marmalade
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I don't know what kind of large expense you envisage might hit you. Is it that you might have a sudden craving for a world cruise? Or, heaven forbid, one of the kids comes to you saying they have a money problem?
Would it not be possible to re-mortgage in such a situation? 2.9% isn't especially cheap and you should be able to re-mortgage at less than that though I don't know what expenses are involved in re-mortgaging.
Gordon Gekko
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No.
Excluding the mortgage and saving/retirement provision, there’s a €40k net/€60k gross income requirement.
Brendan Burgess
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Have I got that wrong?
Today he has an ARF of €1.25m
If he works for another year, he will have
ARF €1.25m
Return on ARF: say 4% - €50k
Net salary : €35k
Expenditure: (€60k)
Wealth after one year: €1,275
If he stops working
ARF €1.25m
Return on Arf: €48k
net salary: 0
Expenditure: (€60k)
Wealth after one year: €1,238.
So he just loses the net salary if he stops working.
Or the net salary and the investment return on the net salary to be exact.
Brendan
Yes but the OP also seems to have material educational expenses at the moment that will presumably fall away in a few years -
Well, I assume he wouldn't be drawing on the ARF if he kept working - he has 3 or 4 years before imputed distributions kick in.
An additional ~€100k, net of taxes, supplemented by his remaining post-tax savings, would allow him to comfortably clear the mortgage and get his kids through college before drawing ~€50k (gross) per annum from the ARF from age 61.
Gordon Gekko
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It’s a case that concerns me to be honest.
I think the OP just doesn’t have enough set aside and I think the spouse should look for some work. 45 is way too young.
An important factor here is they have separate tax bands / credits even if the OP retires early, so their spouse can earn 8k per annum virtually tax free, or c.24k at lower rate.