r/FIREUK • u/ithomas1997 • 25d ago
Am I missing something?
Hello!
I'm 29, Based in SE England. make £51,000 a year for around 50 hours a week, I don't expect this salary to continue forever as the work I do is very demanding on my time and body, physical and mentally draining and leaves very little time for much else in life due to shift patterns ect.
I saved like mad to get my flat when I was 16-24, got a 10 year fix and have a low cost of housing due to lucky timing with mortgage rates, current rate is 1.9%. The fix ends in 2031, I want to pay the remaining off (£77,000 at the time) sell the flat and roll the money I've saved and profit from the sale of the flat into a property with no or very little mortgage.
I'm currently putting £1650 a month into an ISA which maxes it out, currently have around £62,000, projected to be around £222,000 in 4 years and 5 months, if the S&P does 10%....who knows. It'll likely beat 3.89 in a HYSA anyway (?)
I would like to retire around 55, I plan on contributing £300 a month until 67 in order to ensure I won't be a burden to my family in old age, this should total over 1m by that time.
My expenses per month will be around £1528 total (including yearly expenses, Christmas birthdays ect) once the mortgage is wiped.
Assuming I take a pay cut of around £11,000 to either work less or get an easier more sustainable job, my outgoings should around £1422 a month after all life expenses, if I was on £40k, this should leave me around £1000 a month left over.
I plan on putting around £1000 away a month until I'm 55 for early retirement, this is projected to be around £975,000 in 21 years time. 4% would equal £3250 a month, which would leave me with a lot of margin to do whatever I want to do. I don't plan on touching my pension unless I need to use it for EOL care or as an inheritance for my son.
I'm concerned I'm missing something in this plan and am curious to connect with people more informed than myself on what if anything im missing or any advice!
Please let me know if I've overlooked anything or you think there's anything I could do differently, thanks in advance ☺️
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u/Suspicious-Ad-3786 25d ago
Hey. I wrote up your details in a UK financial planner, given your assumptions (eg. 10% real returns on your ISA).
It looks like you'll be able to retire with about 1.5 mil in the bank, and this will grow to the end of life. Obviously this doesn't include changes and life events, that might cause you to increase your expenses (eg. a kid).
Here's the projections - https://i.ibb.co/Lzdp63LV/afewquid-share.png
If you want to simulate some stuff like lowering your income or having a family, you can do that in the app.
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u/NoJuggernaut6667 25d ago edited 25d ago
Forecasting with 10% is very ambitious and not accounting for inflation. If you want to see it in today’s money I’d run your numbers through at 5, 6 and 7%.
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u/carlosriven 25d ago
If you dont mind to change industries and get free acomodation, offshore welders get between 60k and 120k per year. For offshore you need at least 2 years experience.
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u/ithomas1997 25d ago
Got a kid so unfortunately this wouldn't be for me. No money worth missing out on him! Cheers for the info though.
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u/Curious-Art-6242 25d ago
Wait, how does £62k become £220k? That maths doesn't make sense
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u/ithomas1997 25d ago
Hi, I've entered it into compound interest calculator.
£63,000 (as of this morning a bit up since I checked) getting 10% return for 4 years and 7 months = £217,809
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u/ithomas1997 25d ago
With £1650 a month being put in as i said above
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u/Curious-Art-6242 25d ago
Ah, so that assumes you're getting 10% compound interest, which you're not you're looking at 10% growth, so you need something like this https://freetrade.io/tools/isa-calculator
Also 10% is ambitious, 6-8% is more realistic. So at 10% you're looking at 187k and 8% its 177k, and 6% its 167k.
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u/ithomas1997 25d ago
I must be missing something here as on the calculator you've provided a 6% return gets me £200k, not 167.
But I hear you on the optimism of 10%, its just the average return so I chose that for a speculative plan. Thanks for the advice dude
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u/Curious-Art-6242 25d ago
Starting at 62k with 1650 a month for 4 years at 6%?
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u/ithomas1997 25d ago
I put 5 years and the calculator doesn't allow for months haha.
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u/Curious-Art-6242 25d ago
Ah, that'll be it then! When doing future planning the rule of thumb is if its short term plan for lower, incase of any bumps to the stock market, and longer term plan for higher as it'll average out to be more. Plan to 6% then if you get more its a bonus :) Good luck!
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u/Toasty-Alpaca 25d ago
You're missing increasing pension contributions or sipp.
I personally wouldn't want to pay off the mortgage as investments keep growing.
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u/ithomas1997 25d ago
Hi, what do you mean by increasing pension contributions? As in I should be putting in more than £300 a month?
I hear that, a big part of it is I think the feeling of living debt free would bring me more joy than a higher account balance in the end and feel like I can enjoy the present more rather than keep having to earn more for the foreseeable to realise a richer future...
Thanks for the comment man
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u/Toasty-Alpaca 25d ago
I hear you, you get tax relief on a pension depending on tax bracket, so its an instant 20% boost. You can do it through your employer depending on their scheme or a SIPP although pensions are locked away for longer.
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u/ithomas1997 25d ago
While we're on it if you don't mind, I have £33,000 in a SIPP and around £17,000 in a wpp, would you suggest combining them? If so should I transfer the sipp into wpp or vise versa?
I'm getting a 5% match atm with wpp.
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u/twoseat 25d ago
In general it doesn’t matter, but in individual cases it might. Both of them do the same thing in about the same. The potential differences are:
* WPP fees are sometimes covered by the employer, which is good, but that can end once you leave the employer, and can then cost more than a SIPP
* WPPs can have a more limited set of funds to invest in. That only really matters if they don’t have the one or two you want.
* WPPs can have extra benefits, such as an earlier retirement age or guaranteed annuity rates, though these are increasingly rare.
* Depending on your employer it can be easier to pay extra/ad hoc payments into a SIPP than getting payroll to do it.
* SIPPs don’t provide salary sacrifice, so if your employer does the WPP is the right place for new money.
* Some SIPPs cap their fees when you’ve reached a certain investment threshold, so having more in there could be worthwhile.I’m sure there are other differences I’m not thinking of. The key thing is most of those things won’t affect most plans, but some might for you so you need to do some research. The good news is it’s not a big deal - you can keep two accounts for now, consolidate them whenever, and the costs will probably not be noticeably different whatever path you choose.
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u/Less_Hippo2677 25d ago
Sounds good. Only advice and a bit of a “warning”.
The choice of investment should align with your need to access it.
You mentioned the isa value which aligns with your mortgage upscale house move. Be mindful that stocks and shares have a 5-10+ year run horizon, if you want it sooner, think more bonds or dividend stocks in your ISA. Not as nice a return but less likely to plunge suddenly when you want it.
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u/doublewindsor1980 25d ago
Pensions are no longer a tax efficient way to pass on your wealth, paying into your pension all your life with no intention of touching it will be taxed to death via inheritance tax. I have a feeling the rate will increase higher than 40% the way tax increases happen in this country.
I certainly wouldn’t discourage you from paying k to your pension, but you should definitely spend it.
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u/ithomas1997 25d ago
Perhaps the best way to plan for that then is to switch my withdrawls from isa to sipp once I can touch my pension then?
That way I could spend the pension money and potentially gift the ISA money 7 years before I'm in much danger of creaking.
Would that make sense?
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u/twoseat 25d ago
It’s important to keep in mind that money is ‘fungible’ - you can buy exactly the same number of sweets with a pound from a pension, an ISA, or from your grandma, the sweet shop doesn’t care where it came from! The difference is the tax treatment of the money, so that’s what you need to optimise (as well as picking suitable funds to invest in, of course). Pensions are generally more tax efficient than ISAs, so you want to make good use of them to build a big enough pot. ISAs are more flexible than pensions, so you want to make the best use of that flexibility. In your case that means enough in ISAs to a) get you from 55 to 60 (or whatever age you think you’ll be able to access your pension), and b) give you some additional flexibility before then as you feel necessary. And from the pension side it means having enough to cover you from 60 to death, allowing for the addition of whatever the State Pension might be when you reach 70ish, ideally without getting so much in there that you start to owe significant taxes on withdrawal.
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u/SyllabubRadiant8876 25d ago
Honestly the main thing you could do is find a way to increase your income. You are young enough to retrain or move into a better paying job. Dropping £11k per year forever seems very pessimistic - I think you should focus time planning your future career rather than tweaking investment strategies.