Yes of course - sorry I wasn't trying to be a clever dick ... holding cash is smart to mitigate what you describe above ... the rate at which cash is depreciating is far worse than the CPI would have us believe though.Originally Posted by gary1064
Being forced to sell assets to live off during a bear market would be most uncomfortable.
Still looking for the crystal ball ... I'll let you know if I find it ... all the ones I have seen so far are a bit murky ...
Last edited by Montello; 3rd February 2020 at 13:52.
Interesting points thank you.
I guess having BTL is fine (given the returns are safer and stronger than most other investments). But your example above paints an interesting picture. This is of course an extreme example and your figures would go alongside significant rental income received along the way.
Sorry, but this is perhaps and example of anchoring; in the UK we have a particular obsession with property; but remember the issues of the late 80s an the mid 90s was pretty static.
Historically equities have always out performed property but people like property because it is more tangible and less volatile.
That said I have BTL investments but I recognise they are probably the poorest performing of my assets and I'm cutting back on them.
Also - legislation and red-tape is moving against the landlord all the time ... plus the affordability of property is at historic low levels ... a correction has to come ...
Very disappointing that some of the so called 'experts' here have neglected to point out the bleeding obvious - buy SS Rolex as they only ever increase. I'm buying 10 Air Kings and I expect them to be worth £250k each in 20 years
There are plenty if other threads to discuss the merits (or not) of investing in watches.
I did marry a younger lady Tony. But she doesn't work. So I only executed half of that plan correctly...... :)You lot should all have married younger women. I'm just going to make sure my other half keeps working for another 20 years
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The fact that you can leverage the BTLs to buy more BTLs has to be part of the thinking though.
It multiplies things up very quickly.
You can't do that with equities, though I accept your point about the UK (and Irish) obsession with property.
Bold mine. It multiples things, and in the recent past that has been up, if prices drop it multiplies the other way too!
Point taken about keeping all risk in GBP.
But anyway, a BTL example:
Put in £30k cash. Buy a small flat worth £120k with a £90k mortgage (75% LTV).
Rental income: £700 per month (conservative).
Expenses pcm: SC: £70; Ground Rent: £10; Mortgage Interest £150...Total = £230 pcm
Profit: £470 pcm = £5640 pcm
Tax (assuming basic rate relief of interest for a Higher rate tax payer) = c. £2.6k
Net Profit = £3k per annum
So, 10% return on your £30k cash. Assuming property values remain flat. I may be missing a few things (stamp duty, legal fees, etc.), but this is how my simple mind works and broadly why I am aiming to hold a couple of BTLs.
Gross rental rates are about half that in London, and I don't think you are getting 7% gross on average anywhere really?
Are you sure you've worked this out correctly? The rules on taxtion of mortgage interest have changed & according to some sites I've tried you would be paying tax on £7440 (£8400 less allowable expenses).
You haven't allowed for void periods, repairs, gas & electric annual checks either.
N. Ireland 7-9% pretty easily, and a much lower buy-in price too.
Mortgage interest releif is scaled back to basic rate relief. If you are a basic rate tax payer you can still deduct the whole lot (there is a technicality which means you could be pushed up into higher rate as the interest is now treated as a reduction in liability rather than a reduction in your income). I have explained that badly, but if you Google I am sure somebody will explain that a little clearer!
The sums I did above are based on a real life example just outside London.
It also can multiply things down very quickly too ...
The ability to borrow to invest in BTL is about the only thing it has in it's favour ... assuming you are bullish about property ... which I am not.
Last edited by Montello; 3rd February 2020 at 17:08.
Very generous example - my BTLs achieve about 3% yield gross.
Also - now you have things like EPC, Electrical inspection, Fire Risk Assessments and mitigation, Gas Safety certificates, Insurers applying terms ... add into that changes in government policy on landlord ... then add in a bad tenant ... and some unplanned property maintenance ... at the end of the day you have a lot of aggravation to deal with for the potential upsides.
As I said the ability to borrow and therefore gear a BTL is the only real attraction if you think property is a good bet ...
I agree with you on capital value, but that’s not something I’m overly interested in as I don’t plan on selling.
So I’m neither bullish nor bearish particularly.
I can get a yield of 7-9% locally, so I’m effectively getting 2/3 of every purchase paid by the tenant. It makes very little money right now of course, but I’m still working so don’t take anything from the BTL Co.
I’m not very highly leveraged either (<60%) so can afford the odd bump in the road re: repairs/tenants etc
The only thing that could change my view significantly is a huge change in legislation or a rapid interest rate rise.
In my area I could only dream of those yields; if I could achieve that I may be prepared to stick with the BTL but the reduced rates in my region combined with some bad tenants, unexpected capital investment for maintenance and legislative changes has severely dampened my enthusiasm for property so I am reducing my exposure; that said I have done very well so I am not complaining. I guess I have got to the point where the hassle is too much compared to what else I could do with that capital. Plus I am also expecting a correction in property prices so another reason to reduce my exposure.
With an eye on retirement I'm re balancing my assets and I have too much in the UK and property ...
All fine and dandy if house prices stay flat or increase.
But if in the above example house prices fall £30k, you lose all your money.
Gearing works wonderfully in asset price inflation, but similarly conspires to cripple you in asset price deflation.
There’s only one way for IRs to go now we pulling up the drawbridge of cheap European labour.
My current thinking is 55 ideally being made redundant at 53ish. 15 years in a final salary defined benefit scheme so at 47 another 5 years service will take me to 20 years. Then redundancy payment would equate to 2 years pay taking me nicely to 55.
Plan would be to cash in this scheme which is currently circa 850k so expect it to be ~1.3m. This is a preference to me as was diagnosed with Lymphoma in 2017 but even though in remission would provide us far more enduring security.
In terms portfolio, will be mortgage free in 18months, currently 150k invested in cash and ISA's and currently 130k in employer shares. They pay 6.2% dividend so project at 53ish dividend alone will be 12k pa.
There is also ~150k from old schemes but dont really factor those in.
Has there been any update yet on the change to state pension age going to 67? And am I right in thinking when the state pension age goes to 66 then 67 the earliest you can retire and access your pot is 56 and then 57?
Cheers
If that was me I'd retire ASAP.
Firstly it may not be as easy as you think to “cash in” your pension. The way things are going regulatory wise you may not be able to find anyone to do it for you.
The state pension age has changed and is changing further - mine is 66yrs and 9 months.
https://www.gov.uk/state-pension-age
And yes there is a plan to increase the age to access private pensions to 57 in 2028
https://thepeoplespension.co.uk/when...pension-money/
You lot should all have married younger women. I'm just going to make sure my other half keeps working for another 20 years
I did that, and she took my house after ten years...
(I kept my pensions though, and they're worth more).
generally without property, on the basis you are looking to maintain capital, rather than erode.
If you have no dependents & weren't retiring too early then you can flex this quite a bit. You could include property if you had considered equity release further down the line and didn't have the pressure to maintain capital for offspring and generational planning.
there are no hard and fast rules; just the usual caveats that whatever you do today may come back to bite you tomorrow; so don't be too optimistic in projections.
Last edited by westberks; 4th February 2020 at 10:29.
Venture Capital Trusts
have fairly strict rules about what you can invest in (your start up sounds pretty typical), I've just used the 'money advice' link as it is neutral, but you can hunt around and they are generally deemed (and are) higher on the risk spectrum than most run of the mill pension funds.
as things stand they have a 5 year term and then the matured funds can be reinvested for another 30% relief.
https://www.moneyadviceservice.org.u...capital-trusts
people also liked property historically as it was an easily geared investment. £50,000 in stocks may grow at a faster rate than property; but a £50,000 deposit on a flat worth £200,000 will give you the growth on the total asset value with the hope that the rent 'washes' the cost of the debt and charges. Given the new BTL tax & stamp duty rules, along with the onerous regulations of holding buy to let properties, it is far less attractive in the current market. But over the past 20 years the above method has done well and also is something that Brits tend to feel more comfy with.
I'm also looking to cut back my BTL investments as they are a PITA!
***edit - just seen this has been covered in more detail before i replied but I agree that BTL is not the golden goose that some people think but can work for lower tax payers with favourable scenarios as part of planning
Last edited by westberks; 4th February 2020 at 10:31.
we were quietly hoovering up all the SS stock and keeping then in a private bunker that we bought on SC
I should have not married 2 certifiable crazy bitches; then i'd be typing this from my private island in the CaribbeanYou lot should all have married younger women. I'm just going to make sure my other half keeps working for another 20 years
assumptions about future FS values are a bit risky as they are dependent on the actuarial valuations and underlying gilt rates etc. The current trend for inflated transfer values is mainly due to low gilt & interest rates increasing the cost of calculating what the cost is to buy you out of the scheme & the desire to get as many people out of the schemes as possible & off the balance sheet. The actuaries can vary this to suit themselves and it is their decision and pretty much bullet proof; so in a few years with extra service, the figure could actually be lower.
Your health background would usually be a suitable reason to justify a transfer if the multiples of the CETV were also generous. I've executed a couple with similar circumstances where somebody that had survived cancer didn't fancy the option of only leaving a £23,000 spouses pension in lieu of a £1.2m pension pot if something did happen to them!
Great thread this and thanks for the response/s.
I appreciate there are lots of unknowns but I'm just trying to plan as best I can, My employer helpfully has the ability to instantly 'project' what the CETV is and have been plotting this for the last 2 years so have already seen large fluctuations. I think they are actively trying to reduce their exposure to this but again we shall see. I know of two other (former) colleagues who have been able to convert their DB scheme to access the CETV so certainly see the benefit to this. My mindset is exactly as you describe @Westbirks so hopefully when the time comes and I can retire I'l be able to convert.
As clarified above the age when you can access your private pension is due to change to 57 in 2028, will this be a taper or a cliff edge? I ask as I turn 55 in 2027 so am trying to understand my exposure!
Thanks gents.
Tip: don't marry a 3rd ...I should have not married 2 certifiable crazy bitches; then i'd be typing this from my private island in the Caribbean
I have observed in my group of friends getting divorced totally mashes "The Number ...."
This is a big factor to consider ... easy street when they are going well but things can turn ...
I married one certifiable crazy bitch and was at zero again 15 yrs ago - this is why I’’’m typing this from a Caribbean island that’’’s not private .I should have not married 2 certifiable crazy bitches; then i'd be typing this from my private island in the Caribbean
Having 4 more children rather messed with the number too.
#workingtil70
Last edited by MarkO; 5th February 2020 at 11:09.
I can take mine at 55 but suffer 4%/yr loss as NRD is 60.. It's a chunk of money, but it's in your hands not theirs.
In this scenario, can that person afford to support themselves (and anyone else) or 10k per year, or do they need 15k per year?
I think this is they key question here - does the £10k/year allow you to live as you want or do you need it to be £15k? Obviously there may be other sources of income to supplement the £10k and at some point later the State Pension will also kick in and add a boost. Have you checked the State Pension due?
Having joined the Police in July 1990, I should at 56 be retiring in July this year though I decided to buy back a year of life and instead retired in July 2019, best decision I have ever made.
My wife now 48 also finished work in September 2019 and together we live off my annual pension and lump sum.
After holidaying in the area over the last few years we decided to rent a property for six months just outside a mountain village called Bedar situated in the Almeria province and arrived in Spain on the 30th October 2019.
My In laws are currently looking after our house in the UK as we did not want to sell up, instead we wanted to see if this area suited us and we it.
We now have residencia and will pop back to England CV permitting in late June to tidy up some affairs before returning here to a house we will be renting for the foreseeable future, i will be renting my house in the UK so one will pay for the other.
Life here is great, yes it is cheaper for a lot of things though you should factor in for items that you need before you can obtain residencia.
Spanish Health insurance, (mandatory for us re our age) costs approx €165.00 per month, car insurance is more expensive, costs related to importing the car and all general documentation for living here is expensive compared with the U.K, though worth every cent.
Since my retirement and the move to Spain we have lived well on my Monthly pension topped up with rent from a small property left to me by my grandmother so have not had to take any funds from the lump sum I invested, though I understand that recently these will have taken a bit of a hammering.
Don't wait too long building up that pension pot, yes it's nice to have lots of money but ask yourself do you or will you really need it.
Putting life In context on 8th February my wife and I were in Granada for a couple of days celebrating my birthday when I received a phone call from a friend informing me that her husband had cancer and was to have an operation the following week. He has now had the operation and thankfully it looks like all is OK.
On the 17th February, I received a phone call from a friend informing me that one of my work colleagues a 35year old female friend had gone home from work and having had checks at her doctors had been sent to hospital where further research diagnosed her with cancer.
Only time will tell with her as she is currently undergoing treatment and hopefully she will beat it as she is certainly a fighter.
So when to retire, what age? --- Whenever you feel the time is right, though don't let money hold you back.
Regards,
Keith.
PS, We have an annual pension which as stated is topped up to £25,500 though do not spend anywhere near that amount.
Last edited by carlyrox; 14th March 2020 at 16:52.
Thanks Mark and hope you and yours are safe and well.
Keith.
As the Early Retirement thread has been active recently, I thought I'd give this a bump, quite interesting reading, albeit from a couple of years back.
Be aware that the value of investments may fall as well as plummet.
Sent through the ether by diddling with radio waves
thanks for bumping, this is a question i've wanted to ask for a while
higher inflation now from 2020 must've made life harder but i suppose there are also better returns on savings. hard to weigh it all up
Inflation certainly throws a spanner in the works as does a recession.
Not much I can do about my situation now as my income is minimal now.
I retired at 45, then did some more work at 53, then stopped at 64, now I’ve found something to do again, I was 65 last week
Look at James Shack’s latest vlog on YouTube. 6 reasons why you should consider retiring. Food for thought!
I first retired at 44 with my company pension, off 3 months and bored, restarted a small job that grew responsibilities so gave up, and then took another, and repeat till 4 years ago, gave up totally, now living off our pensions and investment income, happily.
That is an excellent video, I subscribe to his channel. I generally find his stuff spot on.
Here is the link. https://youtu.be/OuDCDp9Z9Y4
Thanks for adding the link.
Found it very interesting and thought provoking.
Watching my mother get slowly ravaged by dementia, ASAP is my plan.
Sorry to read the above.
My father and mother in law both died of cancer aged 64. That accelerated our thinking …
Really good video, thanks for that. I'm 65 and going to probably call it a day next summer. This sort of information is priceless. I lost a golfing buddy recently (he was 63). He started feeling unwell in March...died in June, it really shocked me.
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