Reply to: The Plan

[Andyw]

What happened?

He operated in England !

[ChimpMaster]

Only works if you're an investement whiz kid...and only if you're not greedy.

My plan was similar to that...now the plan is to work until I die. Or move abroad which-ever comes first.

What happened?

[lilelvis2000]

Build up experience/doss around -- in your 20's
Earn good money -- 30's
Save -- 30's
Invest -- 30's
Semi-Retire -- 39


Sound good?
Anyone else got a similar plan?

Only works if you're an investement whiz kid...and only if you're not greedy.

My plan was similar to that...now the plan is to work until I die. Or move abroad which-ever comes first.

[IR35 Avoider]

Three flats like mine would cost just over a million. After costs and basic rate tax they would bring in just under £30,000 per year.

The purpose of owning real assets like property and shares (as opposed to bank deposits or bonds) is that the capital and income should automatically rise to keep pace with inflation.

Of course owning just three properties is risky. You could spread your money over hundreds of properties by investing in commercial property funds. Listed ones are paying dividends of 5% at the moment.

[ChimpMaster]

Well that just goes to show who really is self centered!

I would want to leave my children with some kind of legacy, an inheritance if you like. So I don't want to go about creating a situation where I die broke and leave my wife/children with nowt.

Actuaries are clever people but only numerically. Think business-like and think assets. Buy assets to generate your income, whether that be properties, mutual funds, stocks (dividend income), long dated gilts/bonds etc etc. That way you get your income and still retain a good chance of inflation busting rises over the long term.

[Jabberwocky]

Of course, I ignore any bequest motive, but since contractors are self-centered wa*kers that seems reasonable. Did I mention that I am an actuary ?

[Dundeegeorge]

If you live long enough you see everything,

even an intelligent posting from Jabberwocky.
I think I'd better go for a lie-down, I feel quite faint.

[Jabberwocky]

But that is what I said...1 million is just about adequate, as you can draw up to 40K without eating into the million which as you say is necessary. Inflation will eat your capital considerably over 40 years, which is why you need a buffer, i.e. you can probably draw a bit less than 40 in the beginning and then increase it later.

On half a mill there is anbsolutely no way.

That's a gross over-estimate - the 1 mill is of no use to you when you die, and that is guaranteed - what you need is a good set of life tables and some fking intelligence. As a ball park figure find the price of an annuity that delivers £40,000 p.a. - Christ, I am wasted on here.

[BlasterBates]

Think cashflow, not net value, and then it makes more sense.

A very much simplified example is - £1m in the bank will generate £40k income a year in interest. That leaves your £1m in tact for as long as you need. Or ... 4 mortgage free houses will generate £40k in rental income per year, and of course the houses will always be yours. It's not like you're eating into the actual value of the house or the £1m. Ignoring inflation of course.

But that is what I said...1 million is just about adequate, as you can draw up to 40K without eating into the million which as you say is necessary. Inflation will eat your capital considerably over 40 years, which is why you need a buffer, i.e. you can probably draw a bit less than 40 in the beginning and then increase it later.

On half a mill there is anbsolutely no way.

[GreenerGrass]

Ignoring inflation of course.

Don't ignore inflation, if you take inflation into account it makes even more sense to buy the houses. Increase in rent over time, and value of the houses (well, after the great property crash of 2008 anyway).

40 grand pa isn't going to be worth a great deal in another decade or 2.
Anyway by then all non-Sharia compliant bank accounts will have their assets frozen and confiscated for use by the government of the Peoples Islamic Republic of Britain.

All because you were too bloody tight-fisted and selfish trying to save for financial freedom instead of breeding like a rabbit to ensure the survival of the nation.

[ChimpMaster]

Sign on the dole and get benefits !

Go swimming off Dover, throw away your passport and pretend you're an immigrant who needs asylum.... free house, food, benefits, no taxes, cash in hand work... gotta love Britain.

[Andyw]

Sign on the dole and get benefits !

[ChimpMaster]

Too much hassle. Just live off the cash...

Yep that's what I would want to do too. The real problem is then that inflation eats into your imaginary £1m savings so you can't really spend the whole £40k interest you earn each year, more like spend only £15k and leave the other £25k in the bank to account for inflation!

Might as well just give up and work til ur 75.....

[Flubster]

Too much hassle. Just live off the cash...

[ChimpMaster]

...yes but at 39 you need a hell of a lot more than if your 65, this money needs to fund your life for 40 years plus not 15, if you're married with sprogs you'll probably need more.

People who retire at 40 work as traders in the City and have a couple of mill behind them.

However you'll probably have enough then to plough it into a B&B in Spain or work yourself to death on your own campsite in Tuscany. Thats what a lot of 40 year olds seem to do these days.

Think cashflow, not net value, and then it makes more sense.

A very much simplified example is - £1m in the bank will generate £40k income a year in interest. That leaves your £1m in tact for as long as you need. Or ... 4 mortgage free houses will generate £40k in rental income per year, and of course the houses will always be yours. It's not like you're eating into the actual value of the house or the £1m. Ignoring inflation of course.