Early Retirement at 57

Im told I can access mine from 50 years old if I want.

Allowing people to carry their contributions forward is a good idea- it incentivises lump sumpayments when people get windfalls.

Their justifications for increasing the SFT are.... weak.... Nobody with the financial cop on to accumulate 2 million plus in their pension fund is going to be dumb enough to then throw that money away on an annuity. They're also unlikely to be renting in their retirement....

Really great thread and interesting to hear the different outlooks, I can see my own dad doesn't want to sit still in retirement and still wants to keep involved in something work wise. That's his want and that's fine, me I would finish work tomorrow and potter quiet nicely, I've started by taking parental leave already and love the time off. It does limit the income but I'm not interested in fancy cars or clothes anymore, going to spend my money on my whoop watch, gym, golf and decent food and hop off that pension for many a year!!

if you can afford it, and your finances are in order, dont think twice about this, go for it, you will not regret it, lifes away too short, unfortunately theres a good chance you wont be fit enough to do what you can do now, as you age, so go for it, and best of luck with it

One of the contribution limit or SFT should be scrapped. Why do we need both of them?

To be fair, the FIRE stuff is mostly common sense- pay off high interest debt, invest in index fund & over pay mortgage. And a debt free homeowner has vastly more options than the person paying half their salary on mortgage, car loan etc.

It's not that the influencers selling these concepts are wrong- It's more that if you can't grasp the idea in a 3 minute Instagram video, whatever they're selling you isn't really going to help. And if you do grasp it, the course etc is still a waste of time and money.

Day trading is an excellent way to lose money. Even for professionals, vanishingly few traders can beat the market long term.

I know someone from Dublin who retired early. Had his pension and investments all set up.

When he retired he moved up to Northern Ireland - i think he had to be there a certain amount of years first before he could take money from his investments. He got better tax treatment on his investments and in general was far better off financially living off his pension and invested money than he would have been if he was tax resident south of the border.

Ive heard of people doing the same in Spain or Portugal too, but i dont know anyone who did it myself.

Is the wrong answer.

First off, 4% is the minimum withdrawal from your pension fund each year up to age 70 when it increases to 5%.

Sustainable/Safe Withdrawal Rate is the amount you can draw down from your pension fund every year without going broke and dying in poverty. It's dependent on your investment strategy in retirement, and whether you're apply the rate to the value of the fund when you retire, or the reducing balance. For example:

— If you invest your entire fund in nice safe German government bonds with a return at or below the rate of inflation, draw down 4% of your initial balance per year, and are lucky enough to live 30+ years after retiring, you still stand an excellent chance of dying in poverty.

— If you invest in the Nasdaq 100 (in which I personally am all in with for my fund) and it continues to deliver an annualised inflation adjusted return of 11% for the same 30+ years while you draw down 8% of the balance, you'll get richer and richer over time.

— If you draw down any percentage of the remaining balance of your pension fund each year, you will never actually run out of funds: even if you withdraw 50% of the fund, you'll still have the remaining 50%. (The remaining 50% may be worth buttons, but this is illustrative).

Whether US stock indices are currently under- or over- valued is debatable and largely irrelevant. The pendulum swings both ways and it's only ever clear in retrospect which is the case, and anyway only idiots try to time the market. Nobody— but nobody— should be making decisions on how to invest for their pension based on the situation as it happens to be today. If you start your pension at 35 you're highly likely to be investing for 50 years or more, half of which you're going to be paying into it.

Long term trends are extremely clear: indices like the S&P and Nasdaq outperform every other investment option. For anyone about to say "Gold" here's a chart which shows you're wrong. (Anyone is about to say "Crypto" is an idiot— aside from anything else, crypto hasn't existed long term and anyway isn't an investment so much as a gamble which relies on finding bigger fools).

https://www.macrotrends.net/2608/gold-price-vs-stock-market-100-year-chart#google_vignette

How much anyone needs or wants in retirement is an entirely separate question. I personally am aiming to have more disposable income in retirement that I do while working, for the simple reason that I'll have more opportunity to spend it usefully on travel & hobbies. If I had an extra couple of hundred euro a week now I'd just do something stupid with it like buy a new car so I dump my spare income into my pension instead.

"The traditional solution to this is to implement a glidepath. A typical example would be going from a 70/30 stocks/bonds split to maybe 50/50 at retirement."

Yes, I know. It mitigates the risk (edit: certainty) of volatility by killing the long term annualised return on investment. That's why it's a bad long term strategy. It's good for 5 years or less if you require certainty, but it's reasonable to assume the vast majority of people hope to live longer than that when they retire— I certainly do.

Over periods longer than 5 years the volatility inherent in the stock market indices are usually ironed out so there's a big opportunity cost with putting any portion of your investment in bonds. At no point in the last 20 years was either the NASDAQ 100 or the S&P 500 worth less than double what it was worth 20 years before that, which is better than government bonds will get you.

Whether the indices are overvalued or undervalued today is only relevant if someone is dropping their investment into it today and withdrawing it all at some point in the medium term future. Nobody operates their pension like that: it's paid in over decades and withdrawn over decades. If it's overvalued today it'll be undervalued tomorrow and vice versa— daily, monthly, and annual fluctuations only really matter to the professionals. Long term trends are all that matters for individuals making pension investment decisions.

I recognise that many people are risk averse and for that reason opt for the glidepath or similar strategy. I would argue that it's not really any safer than 100% in an index fund, it's just more consistent. That sort of underperforming consistency is effectively useless to someone who isn't basically already rich. There are other, better, ways of hedging against volatility, chiefly using part of your lump sum as a contingency fund to cover the crappy years.

I agree with most of what you say, and appreciate you responding.

Couple of points:

"killing the long term annualised return"
It doesn't kill the return, even at 50/50 allocation; it just reduces it - it's still a healthy positive expected return(assuming a sensible, proportionate allocation between stock markets, using low cost index funds, with similar sensible assumptions applied to the bond/bond fund allocation).
And just to clarify for OP or anyone else, it's also normal and generally very good advice, to hold some bonds in your portfolio, even when investing for the long term (as opposed to just 100% stocks or stock index funds/ETFs).
I hold a (roughly speaking) 70/30 split stocks/bonds, and have done so since I retired, and I am looking at a time horizon >>30 years.
There is a good writeup here on this topic : https://monevator.com/bond-asset-classes/

"Whether the indices are overvalued or undervalued today is only relevant if someone is dropping their investment into it today"
I've already addressed why this isn't true for the original poster in my previous post.

This page gives a good, detailed explanation of sequence of return risk : https://monevator.com/sequence-of-returns-risk/.
Hope that helps.

Roughly speaking, a 2% drop in return on my pension investments will reduce my pension pot on retirement in 14 years by about 25%. Assuming I live to age 80, it cuts the growth of my pension pot in half. To me, that's killing my growth— there is no scenario where reduction of 2% in the return on my investment will not make me much less better off in retirement.

I think where we're fundamentally at odds is our attitude to risk. For me, the benefits of increased return over the long term is worth the risk of (sometimes fairly extreme) volatility over the short & medium term. We probably also have very different views over what constitutes a "healthy" return. My number is 7.5% or more after inflation, I'm guessing yours is lower.

Put another way:

If I have a certainty of 4.5% (after inflation) return— which is pretty decent as it equates to 6.5% before inflation— I'll be OK in retirement. By which I mean I won't starve & I won't be cold, and I'll have some nice things for a while. Around my mid-70s the fund will run out and I'll be reliant on the state pension and my work pension (which together should be around €18k at current values, which in fairness isn't awful). I will struggle financially, and I definitely won't be able to have the life I want in retirement.

If I achieve an after-inflation return of 7.5% (which is 2 thirds of the long term after-inflation annualised return of the Nasdaq 100) I will be comfortable for the rest of my life. I'll have more or less the life I want, but with a bit less bling.

I prefer the excellent chance of retiring early and being comfortable for the rest of my life to the near-certainty of working longer and being poor for my final years. I'm comfortable with that excellent chance of being comfortable for all of my retirement being attached to a small but significant risk of being poor for all of it. I understand that many others can't accept that risk.

I semi retired the start of 2019. I got a redundancy payment from work. I do a bit of farming and have two small houses rented. I could live on that income without touching my pension pot. Drew down my pension the start of this year to access the lump sum for another investment. I will take 4% a year from now until 70. I have it at level 4 of a 7 level investnent strategy.

60% equities, 20% fixed insterest, 15% alternatives and 5% property. I intend to ride the rhino by not accessing more than the statutory drawdown every year. I am hoping that the fund will out preform the drawdown.

It's all relative 500/ week each for a couple would see you very comfortable IMO as long as you are not a spender. By a spender I mean people that feel they need tochange the car every 3 years, carry out home improvements. Will you want two holidays a year and a few weekends away. Will you want to go to a restaurant every week( as opposed to a pub for dinner on a a Sunday). Will you want to see the world.

I am lucky as I still actively farm even at that for me personally retiring when I did was too young. However I was under pressure between the job and the farm. I was doing 40k+ km driving at work. I was on call. Money was excellent but I had a disc done on my back late 2016. The driving was causing it to start to act up again.

It peculiar but my better half was always on about that she intended to retire at 55. She is probably going to do it now over three years later.

I am kinda of ready to rock on for another 2-3 years.

travel plans are a big part of my reason for retiring- it's what I want the time for

That's something that's often mentioned in this context, and is something of a paradox because the best (and cheapest) time to travel is when you're younger. The longer you wait, the more funds you'll need to set aside and the greater the risk that health issues - even minor ones - will begin to have an impact on where you can go and what you can do when you get there. That's one of the reasons I didn't bother waiting till "retirement age" to give myself the time for travelling, preferring to sacrifice the monstrous pension fund in favour of getting out and about while still fit and able.

Also extensive travel and serious DIY projects tend to be incompatible - too much competition for the same resources !

All I want is to have my time to myself to do whatever i want to do with. Be that sit in the garden, Go for a walk. Go on a holiday or just sleep in or have a nap during the day.

Cant wait to off an employers schedule and just on my own.

Obviously I need money put away to allow me to do the things that require money