How much would you actually need to retire/do what you want?
Discussion
How much of a windfall would you actually need to leave your job / retire / do whatever you want?
Hypothetical, but this conversation recently came up at work and two of my colleagues both agreed that a £1 million lotto win wouldn’t be life-changing for them... Really?! It certainly would make my life a lot easier and I’d be mortgage-free for starters with a couple of nice cars in the garage, plus a nice annual return on investments from what’s left to add on to my income.
I reckon anything over £2 million would easily give me more than enough financial freedom to do whatever I want and not have to be employed again. I don’t have an extravagant life at all, in my late 30s and have a low six-figure mortgage left. A good IFA with my own tailor-made portfolio would conservatively get me about £90k per year pre-tax income from £1.5 mill invested… mortgage free that would be plenty to live on while I enjoy doing projects and setting up my own little business
Thoughts? This would differ wildly person-to-person
Hypothetical, but this conversation recently came up at work and two of my colleagues both agreed that a £1 million lotto win wouldn’t be life-changing for them... Really?! It certainly would make my life a lot easier and I’d be mortgage-free for starters with a couple of nice cars in the garage, plus a nice annual return on investments from what’s left to add on to my income.
I reckon anything over £2 million would easily give me more than enough financial freedom to do whatever I want and not have to be employed again. I don’t have an extravagant life at all, in my late 30s and have a low six-figure mortgage left. A good IFA with my own tailor-made portfolio would conservatively get me about £90k per year pre-tax income from £1.5 mill invested… mortgage free that would be plenty to live on while I enjoy doing projects and setting up my own little business
Thoughts? This would differ wildly person-to-person
I am mid 30’s, £1 million and I could easily retire. The S&P500 has historically made roughly 10% a year so in the most basic form you could get £100k a year from one million. Although I know it’s not that black and white…
Wouldn’t make the most sense financially but I think I would clear my mortgage and spend a bit of money on my house. It’s nice enough and does us. I wouldn’t want a big expensive house.
If I wasn’t working I wouldn’t be doing the miles I currently do so I would get something fun for my daily. Alpine, Yaris GR, GR86 would be considerations.
Keep my Exige, have a nice amount of back up money as a float and invest the rest.
Enjoy a slower pace and simpler things in life. Thinking about it I could maybe do it on £500k! But I aren’t one of these people who are defined by work for their identity.
Wouldn’t make the most sense financially but I think I would clear my mortgage and spend a bit of money on my house. It’s nice enough and does us. I wouldn’t want a big expensive house.
If I wasn’t working I wouldn’t be doing the miles I currently do so I would get something fun for my daily. Alpine, Yaris GR, GR86 would be considerations.
Keep my Exige, have a nice amount of back up money as a float and invest the rest.
Enjoy a slower pace and simpler things in life. Thinking about it I could maybe do it on £500k! But I aren’t one of these people who are defined by work for their identity.
I think lump sums disappear surprisingly quickly.
I have a mortgage free house I could sell which is probably worth £300-350k. Let's be optimistic and say it's worth £350k.
I'm mid-50s - ignoring investment return (because it's not that significant on that amount of money) - if I wanted £25k a year (which doesn't seem excessive), that barely lasts me until me official retirement age (might last me until I'm about 70). Plus - although I do have private pensions, if I gave up work now to live off capital - then I'm not paying into them for the last 10-12 years of my working age, and that makes a big difference (especially since I am now at an age / income that I can pay a decent chunk in every year).
I'd love to retire now, but I can't make the maths work unfortunately.
I have a mortgage free house I could sell which is probably worth £300-350k. Let's be optimistic and say it's worth £350k.
I'm mid-50s - ignoring investment return (because it's not that significant on that amount of money) - if I wanted £25k a year (which doesn't seem excessive), that barely lasts me until me official retirement age (might last me until I'm about 70). Plus - although I do have private pensions, if I gave up work now to live off capital - then I'm not paying into them for the last 10-12 years of my working age, and that makes a big difference (especially since I am now at an age / income that I can pay a decent chunk in every year).
I'd love to retire now, but I can't make the maths work unfortunately.
I seem to remember something about this a few years ago (somewhen in the 90's), it stated then that the amounts were different for men and women and obviously age etc.
I do remember that for a man in his 20's he would need something like £1.2m even then. Presumably that is now more like £3m?
I reckon I'd be ok on about £1m.
I do remember that for a man in his 20's he would need something like £1.2m even then. Presumably that is now more like £3m?
I reckon I'd be ok on about £1m.
It's all going to depend on your lifestyle you live, if when you retire you are wanting new cars every so often, nice holidays amongst all the other luxuries to go with it then i suspect a million ain't going to last too long, on the other hand if you are like me where having a 1 million pound pension pot is nothing but a dream where you just want to be able to afford to live comfortably enough and have the odd treat here and there then i suspect that number will last for most people's retirement.
Someone I know, who is retired, can live on the state pension of around £21,000 a year.
That covers all the day to day costs like, food, council tax (or whatever it's called this week), heat light, fuel for the cars, tax, insurance, servicing (buy ordinary, reliable cars - nothing fancy), meals out etc. House is long paid for.
The only time they dip into capital is for er, capital items - posh holidays, replacing cars etc.
Don't smoke. Don't drink heavily, don't gamble.
Dull? No, not if that is what you have chosen to do.
That covers all the day to day costs like, food, council tax (or whatever it's called this week), heat light, fuel for the cars, tax, insurance, servicing (buy ordinary, reliable cars - nothing fancy), meals out etc. House is long paid for.
The only time they dip into capital is for er, capital items - posh holidays, replacing cars etc.
Don't smoke. Don't drink heavily, don't gamble.
Dull? No, not if that is what you have chosen to do.
You need to understand the impact of inflation, sequencing risk and safe withdrawal rates.
90,000 30 years ago has the same purchasing power as £215,000 today and you probably won’t have hit state pension age in 30 years time.
6% return on average over the long run might be possible, but it could have a number of bad years in a row. This is particularly a problem if it happens at the start as you still need to draw down income and will likely never recover the portfolio value.
It’s been challenged since and in the U.K. it’s a bit lower, but the rule of thumb is if you want an investment to last 30 years without running out and maintain the value of the withdrawals against inflation you can withdraw no more than 4% per year. The so-called safe withdrawal rate. 60k not to be sniffed at, but it’s probably in post tax terms similar to 2 adults earning median salaries albeit with the mortgage paid off, but a lot more free time to fill.
90,000 30 years ago has the same purchasing power as £215,000 today and you probably won’t have hit state pension age in 30 years time.
6% return on average over the long run might be possible, but it could have a number of bad years in a row. This is particularly a problem if it happens at the start as you still need to draw down income and will likely never recover the portfolio value.
It’s been challenged since and in the U.K. it’s a bit lower, but the rule of thumb is if you want an investment to last 30 years without running out and maintain the value of the withdrawals against inflation you can withdraw no more than 4% per year. The so-called safe withdrawal rate. 60k not to be sniffed at, but it’s probably in post tax terms similar to 2 adults earning median salaries albeit with the mortgage paid off, but a lot more free time to fill.
Derek Chevalier said:
A44RON said:
A good IFA with my own tailor-made portfolio would conservatively get me about £90k per year pre-tax income from £1.5 mill invested…
A good IFA wouldn't promise this. Back to the original question. To truly retire - a windfall of 2m to generate circa 80k/yr, or 1m if I kept the missus at work and sold the daughters horse
Actually we could probably do it now with an additional 1m if we add in our existing investments. The daughter and the horses is our biggest expense - costs can be so unpredictable.
£1m.
I'm mortgage free anyway. The interest would be enough for me. I could also buy 10 houses or about 18 flats to my way for that but that requires alot of work. Atleast they'd go up in value while I'd be earning enough to not "work" except fixing houses...
Now what would actually happen..
I'd lose 200k on a couple cars.
I'd get excited buy a bigger house for my new cars. Thats 500k left over.. a holiday or two.. yea for complete comfort and fun £3m, but i could retire on 1m if I could be sensible.
I'm mortgage free anyway. The interest would be enough for me. I could also buy 10 houses or about 18 flats to my way for that but that requires alot of work. Atleast they'd go up in value while I'd be earning enough to not "work" except fixing houses...
Now what would actually happen..
I'd lose 200k on a couple cars.
I'd get excited buy a bigger house for my new cars. Thats 500k left over.. a holiday or two.. yea for complete comfort and fun £3m, but i could retire on 1m if I could be sensible.
The exceptionally simple rule of thumb I use is the 25 year rule (which I guess is designed for if you retire at 65 and think about living until 90).
It will be shot down in flames by anyone with any decent knowledge, but at least it's a starter for ten.
So, say you need £2000 a month to live, you'd need £24000 a year, multiplied by 25 means you'd need a pot of £600K to achieve that.
That, of course, doesn't take into account state pension, investment growth or anything else positive or negative.
It will be shot down in flames by anyone with any decent knowledge, but at least it's a starter for ten.
So, say you need £2000 a month to live, you'd need £24000 a year, multiplied by 25 means you'd need a pot of £600K to achieve that.
That, of course, doesn't take into account state pension, investment growth or anything else positive or negative.
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