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Capital sum required to retire

  • 09-12-2017 5:05pm
    #1
    Registered Users Posts: 4,654 ✭✭✭ makeorbrake


    As per the thread title, what size of capital sum amount would be required to finance ones self going forward?

    I know there's a subjective element but if we assume the person to be 45, no other pension, property or equity, what sum would be needed to finance the average wage..


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Comments

  • Registered Users Posts: 4,310 ✭✭✭ jon1981


    As per the thread title, what size of capital sum amount would be required to finance ones self going forward?

    I know there's a subjective element but if we assume the person to be 45, no other pension, property or equity, what sum would be needed to finance the average wage..

    Too subjective to answer. By the age of 45 each individual would have established a different standard of living. What you require may be 2x what i require due to our personal circumstances.

    I guess if you can rule out mortgages (assuming you own a home), children ( assume they are self sufficient) ...etc. that would level the playing field when doing such analysis.


  • Registered Users Posts: 4,654 ✭✭✭ makeorbrake


    Ok, maybe I should come at the question in a different way. What capital sum would I need to finance 60k a year (adjusted for inflation year on year)?


  • Moderators, Business & Finance Moderators, Science, Health & Environment Moderators, Society & Culture Moderators Posts: 51,489 Mod ✭✭✭✭ Stheno


    Ok, maybe I should come at the question in a different way. What capital sum would I need to finance 60k a year (adjusted for inflation year on year)?

    All of the pension providers have calculated that will tell you this

    Just Google pension calculator


  • Registered Users Posts: 49 ✭✭✭ irish_investr


    shot in the dark: 1.5 million
    :)


  • Registered Users Posts: 1,788 ✭✭✭ Cute Hoor


    As per the thread title, what size of capital sum amount would be required to finance ones self going forward?

    I know there's a subjective element but if we assume the person to be 45, no other pension, property or equity, what sum would be needed to finance the average wage..

    All depends I guess on how long you plan to live, if you are going to die before retirement age you will need nothing, if you are going to live a year after retirement 50k should suffice, if you are going to live to 100 (assuming retirement age of 65) then you will probably need 50k x 35.


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  • Banned (with Prison Access) Posts: 3,246 ✭✭✭ judeboy101


    No mortgage or dependants and you could live like a king on 20k a year.


  • Closed Accounts Posts: 844 H.E. Pennypacker


    Here's some food for thought:

    http://www.mrmoneymustache.com/2012/05/29/how-much-do-i-need-for-retirement/

    Like him or loathe him, what he talks about in his blog is an interesting concept in terms of retirement and the cost of one's lifestyle.

    Another one to look at is a book called The Millionaire next Door by Thomas J Stanley.

    While both of the above look at the issue in a U.S. context, there'a a central theme that might be worth pondering when you look at your 60k a year.


  • Registered Users Posts: 7,494 ✭✭✭ BrokenArrows


    1.5 mill would give you 60k per year for 25 years without investment.

    If you invest 1.5mill and get 4% per year invested it will give you 60k

    4% is achievable.


  • Registered Users Posts: 2,649 ✭✭✭ cooperguy


    https://www.pensionplanetinteractive.ie/prophet/ will be able to tell you what a lumpsum would generate in annual income


  • Registered Users Posts: 4,654 ✭✭✭ makeorbrake


    Thanks all for the input to date. I'm working on the basis of a capital sum of 1.2million (as it stands right now...perhaps that may increase). Just as further background, I intend to 'retire' to a low cost country where the cost of living is a fraction of the cost of living here.

    Thanks to those that suggested the pension calculators. However, they don't seem to be set up for my purposes - to allow me to get an accurate output from them.

    I also have been paying in to a pension since 2003 - with 9% AVC's. However, if the projected figure that I see in the summary report I get each year is anything to go by, its worth diddly squat. Should I just leave this be or cash it out if I move away....??

    I have a mortgage which is manageable (repayments of 400/month). There's no equity in the property - albeit its not in negative equity either. It's secured on the cheapest money I will ever see in my lifetime (ecb + 0.52% tracker) so on that basis, I'll probably hold on to it. It should wash its face if I were to move away and rent it out (probably could get family to 'manage' it whilst I'm gone).
    1.5 mill would give you 60k per year for 25 years without investment.
    If you invest 1.5mill and get 4% per year invested it will give you 60k
    4% is achievable.
    Don't mean to sound thick - but if I understand you correctly, that amount would give me 60k for 25 years if I just left the funds in the bank. You mentioned investing it - and more or less being assured of 4% return. So this will result in me getting 60k pa for how many years?


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  • Registered Users Posts: 23,323 ✭✭✭✭ Peregrinus


    Age 45 is very young to retire.

    If you’re Irish, and male, and aged 46 next birthday, average life expectancy is another 35 years - i.e. on average you can expect to die in your eightieth year. (If you’re female, it’s another 38 years.) But if you’re saving for retirement, you can’t afford to plan on the basis of the average life expectancy; that gives you a 50% chance of running out of money while still alive, which is the very risk you’re trying to avoid. If you do make it to eighty, then based on standard life tables you now have another 8 years of life expectancy; if you make it to 88, you now have another 4 years of life expectancy, and so on. So you need to save to provide an income not for as long as you are likely to live, on average, but for as long as you might live, which is quite an age, and getting older all the time. If you want to retire at age 45, I’d suggest you want to be thinking of funding at least a 50-year retirement.

    It helps enormously if you can be flexible in drawing on your retirement savings. People will model this on the assumption of, say, average investment return of 4%, and they calculate that if you draw 4% of your retirement fund each year this will be offset by investment growth, so the (nominal) amount of your retirement fund will remain steady.

    This is a mistake. In the real world 4% might be a reasonable long-term average investment return to hope for, but returns in any year could be much higher or much lower. If in a particular year your investment return is 0% but you draw 4% anyway, your fund is now depleted to 96% of its previous value, and the long term investment return you should now be modelling is not 4% of what you originally put in, but 4% of 96% of that. A couple of years of negative investment returns, with you still drawing the same fixed income every year, will make a huge difference to the date on which your retirement savings are going to run out. And “a couple of years of negative investment returns” is something that is likely to occur more than once during your fifty-year retirement.

    So your chances of managing this successfully are hugely increased if you’re in a position to be flexible, and live off a significantly reduced income for a couple of years if you have to. That, of course, depends on your circumstances. The more you have fixed obligations (like a mortgage) the harder this is.

    If wild swings in income would be a problem for you, then you minimise the problem by investing in assets that generate stable, predictable income - e.g. government bonds and fixed income securities rather than shares, shares in banks and large industrials rather than cutting edge venture capital, etc. But there’s always a trade-off between risk and return; by investing in less volatile assets you tend to get a more stable, but lower, return.

    The other thing, of course, is that you want your income to maintain its real value. If you start off on an income of 60k at the age of 45, and are still living on an income of 60k at 85, I can guarantee that you will be living in poverty. (Just consider the position of anyone who is trying to live now on the amount they earned in 1977.) What matters here is not the nominal investment return that your savings earn, but the real investment return - the amount by which the rate of investment return exceeds the rate of inflation. So if inflation is 4%, and your nominal investment return is 7%, your real investment return is 3%.

    So, cutting through all that, you want to invest your money in a diversified portfolio of assets that is heavily weighted toward assets which generate a stable return. And you want to draw down on your money at a rate which does not exceed, or does not exceed by much, the real rate of investment return.

    Within these constraints, a real rate of investment return of 2% is realistic to aspire to. So if you want to generate an income of 60k which will rise in future years to maintain its real value, and you want that income stream to continue indefinitely, you would want about 3 million. Of course, you don’t want that income stream to continue indefinitely. If you’re happy to bet that you won’t live beyond 95, then you want it to continue for 50 years. By my back-of-the-envelope calculations you’d want about 1.9 million. But note that nobody can guarantee that you will get a long-term real return of 2%; you may not. And, even if you do, you still face the issue than in particular years where your real return is less than 2% you may need to reduce your income.


  • Registered Users Posts: 365 ✭✭ KellyXX


    Thanks all for the input to date. I'm working on the basis of a capital sum of 1.2million (as it stands right now...perhaps that may increase). Just as further background, I intend to 'retire' to a low cost country where the cost of living is a fraction of the cost of living here.

    Thanks to those that suggested the pension calculators. However, they don't seem to be set up for my purposes - to allow me to get an accurate output from them.

    I also have been paying in to a pension since 2003 - with 9% AVC's. However, if the projected figure that I see in the summary report I get each year is anything to go by, its worth diddly squat. Should I just leave this be or cash it out if I move away....??

    I have a mortgage which is manageable (repayments of 400/month). There's no equity in the property - albeit its not in negative equity either. It's secured on the cheapest money I will ever see in my lifetime (ecb + 0.52% tracker) so on that basis, I'll probably hold on to it. It should wash its face if I were to move away and rent it out (probably could get family to 'manage' it whilst I'm gone).


    Don't mean to sound thick - but if I understand you correctly, that amount would give me 60k for 25 years if I just left the funds in the bank. You mentioned investing it - and more or less being assured of 4% return. So this will result in me getting 60k pa for how many years?


    My parents retired at 48 and 50 to live in Malaga almost 5 years ago now. Very handy holidaying for me :)

    They budgeted that they would need 40k per year to be comfortable when they started out. I thought they were mad.
    My dad told me last month that they are living on 20k a year easily.
    And I can tell you they are living like lords on that 20k. Definitely wouldn't be able to do it in Ireland though.


  • Registered Users Posts: 900 ✭✭✭ 650Ginge


    Peregrinus wrote: »
    Age 45 is very young to retire.

    If you’re Irish, and male, and aged 46 next birthday, average life expectancy is another 35 years - i.e. on average you can expect to die in your eightieth year. (If you’re female, it’s another 38 years.) But if you’re saving for retirement, you can’t afford to plan on the basis of the average life expectancy; that gives you a 50% chance of running out of money while still alive, which is the very risk you’re trying to avoid. If you do make it to eighty, then based on standard life tables you now have another 8 years of life expectancy; if you make it to 88, you now have another 4 years of life expectancy, and so on. So you need to save to provide an income not for as long as you are likely to live, on average, but for as long as you might live, which is quite an age, and getting older all the time. If you want to retire at age 45, I’d suggest you want to be thinking of funding at least a 50-year retirement.

    It helps enormously if you can be flexible in drawing on your retirement savings. People will model this on the assumption of, say, average investment return of 4%, and they calculate that if you draw 4% of your retirement fund each year this will be offset by investment growth, so the (nominal) amount of your retirement fund will remain steady.

    This is a mistake. In the real world 4% might be a reasonable long-term average investment return to hope for, but returns in any year could be much higher or much lower. If in a particular year your investment return is 0% but you draw 4% anyway, your fund is now depleted to 96% of its previous value, and the long term investment return you should now be modelling is not 4% of what you originally put in, but 4% of 96% of that. A couple of years of negative investment returns, with you still drawing the same fixed income every year, will make a huge difference to the date on which your retirement savings are going to run out. And “a couple of years of negative investment returns” is something that is likely to occur more than once during your fifty-year retirement.

    So your chances of managing this successfully are hugely increased if you’re in a position to be flexible, and live off a significantly reduced income for a couple of years if you have to. That, of course, depends on your circumstances. The more you have fixed obligations (like a mortgage) the harder this is.

    If wild swings in income would be a problem for you, then you minimise the problem by investing in assets that generate stable, predictable income - e.g. government bonds and fixed income securities rather than shares, shares in banks and large industrials rather than cutting edge venture capital, etc. But there’s always a trade-off between risk and return; by investing in less volatile assets you tend to get a more stable, but lower, return.

    The other thing, of course, is that you want your income to maintain its real value. If you start off on an income of 60k at the age of 45, and are still living on an income of 60k at 85, I can guarantee that you will be living in poverty. (Just consider the position of anyone who is trying to live now on the amount they earned in 1977.) What matters here is not the nominal investment return that your savings earn, but the real investment return - the amount by which the rate of investment return exceeds the rate of inflation. So if inflation is 4%, and your nominal investment return is 7%, your real investment return is 3%.

    So, cutting through all that, you want to invest your money in a diversified portfolio of assets that is heavily weighted toward assets which generate a stable return. And you want to draw down on your money at a rate which does not exceed, or does not exceed by much, the real rate of investment return.

    Within these constraints, a real rate of investment return of 2% is realistic to aspire to. So if you want to generate an income of 60k which will rise in future years to maintain its real value, and you want that income stream to continue indefinitely, you would want about 3 million. Of course, you don’t want that income stream to continue indefinitely. If you’re happy to bet that you won’t live beyond 95, then you want it to continue for 50 years. By my back-of-the-envelope calculations you’d want about 1.9 million. But note that nobody can guarantee that you will get a long-term real return of 2%; you may not. And, even if you do, you still face the issue than in particular years where your real return is less than 2% you may need to reduce your income.

    There is a certain amount of pessimism in your view. The need to be flexible and consider inflation are important.

    OP there's numerous studies on the 4% rule. Have a look see what conclusion you come to.

    The S&P500 seems to have an after inflation and dividend adjusted return of 7.6%. It's up over 20% without dividends this year too.

    True the sequence of returns will play a big part in how it works out but if you get passed the first few years without having to sell assets at recession prices then the chances of success are pretty good.

    One way to ensure you don't have to sell at low prices is to have a cash buffer. You get to use that cash buffer to find spending instead of selling assets. Just sell assets when they are ahead and cash when they are not. Or a balance of the two. Replace the cash to the buffer when assets are up.

    Something else to consider and the parents in malaga post perhaps eludes to it somewhat...you spend less money as you get older.....67 years olds on average have a lowering spending need than 47 year olds. I think it's called the Ty Bernicke's Reality Retirement Plan you spend 2% less on average from 55 to 75.

    You can try playing around with firecalc.com for a look at how you would have done in the past.


  • Registered Users Posts: 117 ✭✭ Squozen


    Multiply your annual expenses by 25 and you should have the value you need to be financially independent. Make sure your investments always return you more than this and you never need to work again (although nothing's stopping you from working for fun instead of necessity).
    So this will result in me getting 60k pa for how many years?

    FOREVER. The joy of compound interest.

    But €60k is a ridiculously large amount of money for somebody with no mortgage. Much safer to budget for living on €20-30k for a few years in a cheap country (which is still pretty extravagant), let the money accumulate and reevaluate.


  • Registered Users Posts: 900 ✭✭✭ 650Ginge


    Life expectancy figures as used by actuaries are very biased and usually wrong for every individual.

    In 1950 the America life expectancy table give a life expectancy to people born that year of 55.....so on average they would be dead by 2005.....most of them are still alive in 2017. With such long time lines accuracy is improbable.

    But a question i have asked and never got any answers to is for everyone born in any given year say 1950 how many are still alive now. You would think that data exists. I cant find it.


  • Registered Users Posts: 365 ✭✭ KellyXX


    And when you retire you probably don't have the expenses of mortgage and all your other work related expense you have now.
    That's a huge sum of you work.it out in yearly expense that you won't have anymore.


  • Registered Users Posts: 23,323 ✭✭✭✭ Peregrinus


    650Ginge wrote: »
    There is a certain amount of pessimism in your view. The need to be flexible and consider inflation are important.

    OP there's numerous studies on the 4% rule. Have a look see what conclusion you come to.

    The S&P500 seems to have an after inflation and dividend adjusted return of 7.6%. It's up over 20% without dividends this year too.

    True the sequence of returns will play a big part in how it works out but if you get passed the first few years without having to sell assets at recession prices then the chances of success are pretty good.

    One way to ensure you don't have to sell at low prices is to have a cash buffer. You get to use that cash buffer to find spending instead of selling assets. Just sell assets when they are ahead and cash when they are not. Or a balance of the two. Replace the cash to the buffer when assets are up.

    Something else to consider and the parents in malaga post perhaps eludes to it somewhat...you spend less money as you get older.....67 years olds on average have a lowering spending need than 47 year olds. I think it's called the Ty Bernicke's Reality Retirement Plan you spend 2% less on average from 55 to 75.

    You can try playing around with firecalc.com for a look at how you would have done in the past.
    The long-term real return on US equities is 6%, but if your investing a portfolio for this purpose you certainly would not be advised to invest 100% in equities - too volatile, which is a problem for reasons already pointed out. The long term real return on US bonds is 2%, so if you have a 50/50 portfolio you'd be looking at 4%.

    But of course unless you happen to be retiring to US dollarland, you wouldn't invest exclusively, or even largely, in US shares and bonds - you'd be taking an entirely unnecessary exchange rate risk. So you need to be looking at long term returns in the markets in which its appropriate for you to invest, given where you will be retiring to.

    And you rather glibly say that "if you get past the first few years without having to sell assets at recession prices then the chances of success are pretty good". Yes, they are. But you have no reason to assume that you will get past the first few years without having to sell assets at reduced prices. If you could successfully predict market downturn, you wouldn't have to be worrying about how to fund your retirement. So your retirement strategy needs to be robust; it needs to work even if there's a sustained market downturn in the years immediately after you retire. Probably you need to hold a couple of years' worth of your income requirements in cash, which of course will further reduce your expected return on your portfolio.

    The bottom line, I think, is that if somebody is serious about doing this they need to sit down with a good investment adviser, discuss their objectives and their attitude to risk, and then look at the portfolio that's appropriate for them and then make a realistic estimate of the real returns that portfolio is likely to generate. Then they should model the income they can prudently draw from that, and stress-test how they will fare should conditions turn adverse - which, at some points in a 50-year retirement period, conditions certainly will.


  • Registered Users Posts: 900 ✭✭✭ 650Ginge


    Peregrinus wrote: »
    The long-term real return on US equities is 6%, but if your investing a portfolio for this purpose you certainly would not be advised to invest 100% in equities - too volatile, which is a problem for reasons already pointed out. The long term real return on US bonds is 2%, so if you have a 50/50 portfolio you'd be looking at 4%.

    But of course unless you happen to be retiring to US dollarland, you wouldn't invest exclusively, or even largely, in US shares and bonds - you'd be taking an entirely unnecessary exchange rate risk. So you need to be looking at long term returns in the markets in which its appropriate for you to invest, given where you will be retiring to.

    And you rather glibly say that "if you get past the first few years without having to sell assets at recession prices then the chances of success are pretty good". Yes, they are. But you have no reason to assume that you will get past the first few years without having to sell assets at reduced prices. If you could successfully predict market downturn, you wouldn't have to be worrying about how to fund your retirement. So your retirement strategy needs to be robust; it needs to work even if there's a sustained market downturn in the years immediately after you retire. Probably you need to hold a couple of years' worth of your income requirements in cash, which of course will further reduce your expected return on your portfolio.

    The bottom line, I think, is that if somebody is serious about doing this they need to sit down with a good investment adviser, discuss their objectives and their attitude to risk, and then look at the portfolio that's appropriate for them and then make a realistic estimate of the real returns that portfolio is likely to generate. Then they should model the income they can prudently draw from that, and stress-test how they will fare should conditions turn adverse - which, at some points in a 50-year retirement period, conditions certainly will.

    I had to look up 'glibly'.

    I am not an expert or either do I have a crystal ball. You seem to be more informed than the majority. To be honest you could be right with 6% or you could be wrong, Warren Buffet reckons 7% over a long term period. I am sure you, Peregrinus, appreciate that little old 1% difference is absolutely huge over what could be a 50 year time frame. 6% would turn 1 million into 18 mil and 7% would turn it into 29mil. Or drawing down 63500pa v 72500pa.

    As for the buffer cash reducing the returns, yes it will and over a 50 year window the difference if everything else was equal would be huge. But just for clarity and using simple rounded none specific example assuming the 4% rule of 40k needing a million euro. Having 40k in cash would reduce the return from say 6% to 5.76%, admittedly that will get much bigger over time. But it is better than selling out on a 25%-40% drop every 10 years or so, over a 50 year timeline that will get very expensive indeed. I still think that having a cash buffer to ride out the next recession without selling is a good plan, should you maintain the cash buffer after that point I don't know, I would probably do it, but it will cost me in the longer term probably. But you have enough and you can reduce the stress caused by market volatility then maybe it is worth it.

    Does such a thing a good independent financial advisor exist, theres very few independent ones around. Most work of commission. The true fee paid ones are like hens teeth and like anyone is subject to their own biased, albeit maybe more experienced view of the world.

    I would suggest anyone doing this (early retirement) firstly doesn't listen to anything said on boards but merely uses that as a kick-starter to do you own research. Become a financial advisor but skip all the dumb exams and titles. Then go see a financial advisor when you decipher the rubbish that most of them will be talking.


  • Registered Users Posts: 900 ✭✭✭ 650Ginge


    There is large community of people both seeking and having succeeded in achieving FIRE. Financial Independence Early Retire, it can and is being done by mostly ordinary people, it sure takes a different mindset. But it can be done.

    Some one linked MrMoneyMustache in an earlier post, but there are lots of others too.

    I like this post showing how one ordinary person did it in 10 years, showing ordinary income and real returns...

    http://rootofgood.com/zero-to-millionaire-ten-years/

    or these guys....

    http://ourtour.co.uk/home/

    There is loads of people out there doing it. One thing that comes through clearly as common to them all is that it is about keeping it simple, nothing complex, no get rich quick schemes, no ferraris and champagne, just hard work and perseverance.


  • Registered Users Posts: 23,323 ✭✭✭✭ Peregrinus


    650Ginge wrote: »
    Life expectancy figures as used by actuaries are very biased and usually wrong for every individual.
    Life expectancies are averages and, like all averages, they are very useful when you're looking at large groups, but practically useless when looking at individuals. Nearly every individual will die either before or after the date that would be suggested by his life expectnancy; relatively few die on or near that date. That's how averages work.

    And, yes, life expectancy figures are calculated from death records. You don't know how long anybody's life is until he dies. The result is that the life expectancy figures we have now reflect the lifetime impact of the medical, dietary, environmental etc experiences of people who have already died, most of whom were born many decades ago. Somebody born today, or born recently, will have different medical, dietary, environmental etc experiences. We hope that they will give him a longer life expectancy than we would calculate by looking at the age his grandparents, great-grandparents etc lived to and, for the past couple of centuries, life expectancies have steadily advanced. But, actually, it's not inevitable that this will continue.
    650Ginge wrote: »
    But a question i have asked and never got any answers to is for everyone born in any given year say 1950 how many are still alive now. You would think that data exists. I cant find it.
    We can estimate this (based on life expectancies!) but it's extremely hard to calculate by measurement. Birth and death records aren't linked - if I get the birth certificate of a person born in 1950, it will not show whether he is still alive or not. So it would be a huge exercise to search through the death records looking for a death certificate for each person for whom a 1950 birth certificate exists. And, even if I identify all the people born in 1950 for whom no death certificate exists, it doesn't follow that they are all still alive. They could have died in another country, for example. Or they could have changed their name (e.g. on marriage) between birth and death, and it may be that a death certificate exists but I have simply failed to match it up.


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  • Registered Users Posts: 1,788 ✭✭✭ Cute Hoor


    650Ginge wrote: »
    I like this post showing how one ordinary person did it in 10 years, showing ordinary income and real returns...

    http://rootofgood.com/zero-to-millionaire-ten-years/

    Two very interesting reads.
    These guys had a reasonable start to their 10 years in that they owned a rental condo that they sold and invested the proceeds, that gives you a nice start. It seems to me that they were extremely frugal in their 10 year mission, 1 holiday to Argentina that they got free flights for and didn't bring the kids (presumably to save money). With such frugality over the 10 years, how easy will it be for them to start spending freely and enjoying the fruits of their wealth, a second blog in 10 years would be interesting, I'd suspect that rather than dwindling their fund will have more than doubled in that period, it's difficult to change the mindset.

    They succeeded in eliminating their taxes, ending up with a tax credit in one year, how could they do that and if every lad was at it who'd pay the taxes, the littler people. Here, even with using all the tax avoidance measures available to you, you would still have to pay USC and PRSI, even using tax avoidance measures to avoid the 20% tax element probably wouldn't make economic sense.


  • Registered Users Posts: 696 ✭✭✭ Viscount Aggro


    I discovered the FIRE concept back in 2012.
    Was always frugal with money, but this put my savings rate onto another level.
    The goal was always to retire early, at least by age 50.

    My experience has been, dont tell friends and family what you are doing, it will end badly - they wont understand and will attack you.
    Focus on your savings rate, forget the investing side, until you have your frugal muscle developed.
    For the honours students, read Early Retirement Extreme, by Fisker - the website of the book. He retired at 27, by saving hard for 5 years.

    Since JAN this year, I have been at 100% savings rate each month. Yes, I have enough passive income to support this.
    It also helps that I know what I am doing, in terms of asset allocation, and tax and trading expenses.
    I think in 2013 I squirrelled away a ton - combination of savings, market gains and dividends, bond interest.
    As a rough guide, you need 25 times your annual living expenses.

    The difference between 50 or 60% savings rate is 5 years more chained to a desk.

    So, yes its hard to achieve FIRE in Ireland, but it is possible.


  • Registered Users Posts: 1,434 ✭✭✭ Austria!


    1.5 mill would give you 60k per year for 25 years without investment.

    If you invest 1.5mill and get 4% per year invested it will give you 60k

    4% is achievable.

    Yeah, but what's left after taxes?


  • Registered Users Posts: 117 ✭✭ Squozen


    Austria! wrote: »
    Yeah, but what's left after taxes?

    You can’t live on €60k before taxes with no mortgage??


  • Registered Users Posts: 1,434 ✭✭✭ Austria!


    That depends on what's left after taxes? I assume it's just regular income tax you'd pay?


  • Registered Users Posts: 117 ✭✭ Squozen


    Austria! wrote: »
    That depends on what's left after taxes? I assume it's just regular income tax you'd pay?

    Well, yes. It’s income so you pay regular income tax.


  • Registered Users Posts: 23,323 ✭✭✭✭ Peregrinus


    Squozen wrote: »
    Well, yes. It’s income so you pay regular income tax.
    Not necessarily. The return on your investments will come as a mix of income and capital gains so you'd pay income tax on some of it and CGT on the rest. You might in fact select your investments with a view to maximising the tax efficiency of the return stream (though, personally, I would counsel caution; it's generally dangerous to let tax considerations distort investment decisions).


  • Registered Users Posts: 365 ✭✭ KellyXX


    The way I look at it,.in your 30s ton50s or thereabouts you have a mortgage. You also have costs of getting to work and costs of putting money into a pension.
    So let's say you take home 4k after tax and spend 2k on these costs.
    That means when you retire you should hopefully have no mortgage and no longer have to pay to provide a pension.
    So you should need enough to cover only 2k a month in retirement.

    A lot of people I speak to think that what it costs them to live today will be the same costs in retirement. Not true at all.


  • Registered Users Posts: 23,323 ✭✭✭✭ Peregrinus


    KellyXX wrote: »
    The way I look at it,.in your 30s ton50s or thereabouts you have a mortgage. You also have costs of getting to work and costs of putting money into a pension.
    So let's say you take home 4k after tax and spend 2k on these costs.
    That means when you retire you should hopefully have no mortgage and no longer have to pay to provide a pension.
    So you should need enough to cover only 2k a month in retirement.

    A lot of people I speak to think that what it costs them to live today will be the same costs in retirement. Not true at all.
    This is correct. Although of course at a later stage of retirement costs may rise again, if you need e.g. to buy in home care or to move to a supported environment.

    Also it's relevant to remember that things like paying off the mortgage and getting your feckless adult children out of the house and into careers of their own are independent events from retiring. The OP was looking to retire in his 40s, when he might well still have a mortgage and/or dependants, and when he couldn't buy himself a brand-new Toyota Corolla and think "that'll see me out!".


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  • Registered Users Posts: 10,076 ✭✭✭✭ elperello


    When calculating the sums you should factor in some extras that become available as you age.
    The state pension or whatever replaces it.
    The over 70 medical card.
    The household package, free TV licence etc.


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