Author Topic: Early retirement  (Read 21524 times)

Patrick

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Early retirement
« on: May 13, 2014, 02:20:02 pm »
I know all about the 4% rule, as a reminder, if you have 25 x your annual expenses invested, you should never need to work again. But when would you think about hanging up the suit and tie?

I'm asking because although I love my job, a lot, changes on the way would mean I may need to spend a few years in a difficult place, far from the people I love... Money can buy you a lot, but it can't buy you years in your child's life. In theory I have enough, just, thank goodness for living well below my means... I could also consider a sabbatical from normal work now, and pick up a more permanent post again when he's older. Or I could find something I truely would love to do now... All sorts of questions...

Nios

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Re: When do you have enough?
« Reply #1 on: May 14, 2014, 10:28:32 pm »
If I were you and I had 25 x my annual expenses now with my young child I would probably hang it up now.

 If you love your job then as they say, you never actually work a day in your life if you love what you do, different story altogether. Unless you have other stuff to occupy your time with and it enables you to have a sense of social responsibility then great. But you may end up bored eventually. I think as humans we need to constantly be striving for achievement in what ever aspect of our lives in order to feel fulfilled.

Why not take your family with you and add to yours and their life experiences bucket together and build that stash even more if its an option so you're always close by to your son.

gcr

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Re: When do you have enough?
« Reply #2 on: May 14, 2014, 11:48:16 pm »
The question as to what is enough is really what your needs and wants are, and the lifestyle you want to maintain.
 Let me relate 2 stories:- My father served in the war, had a regular job and worked until age 60 and retired 33 years ago. He always owned his own house and 8 years ago sold his house and moved to a retirement village in Somerset West. His pension of R 13,000 (rental R 8,700) on the face of it plus income from R 1.4 mill met their limited needs of shelter, and sustenance. However age caught up with them and 2 years ago their entire financial needs changed:- I had to employ care givers to look after them (R 10,000 per month) rent and food and utilities remained the same, pharmacy accounts ranged between R 500 and R 1,000 per month and medical costs over and above medical aid settlements another R 300 per month. Family made a decision to relocate parents to a frail care facility at an all inclusive cost of R 22,000 per month for both parents - medical and pharmacy costs didn't change nor did income from pension or investment returns.
Was/is my parent finances adequate - I don't really know, my father passed away last month and my Mom will now experience a 50% payout on my Dad's pension but her rental is 2.2 times this income, will she survive on her and my Dad's investments - yes I believe she will for the next 4 years.
Moving to the next scenario:-
My pension is more than R500,000 per annum and I have investments of + R 3.0 million, a living annuity that I drawn down the minimum 2.5 % p.a., a house fully paid for and 2 cars (paid off). do I think this is enough - absolutely not - I have absolutely no idea what medical costs will be when I am in my 80/90's (my family has a history of long levity), what major operations I might be subjected to (bypass surgery today is astronomical) and what care I may require in the future. It is senseless considering your house as an asset, it is merely a bargaining chip for where you ultimately decide to rest your bones. So my sense is that I probably need to double or even triple my investments by the time I reach 80 which is in 13 years time.
So wealth is directly related to the lifestyle you want to live versus your needs and medical costs, and the type of medical/health care that you may require in the future - which is unpredictable. A simple experience like a stroke can change your life and circumstance dramatically.
So sit in a chair in a quiet corner of your lounge and ponder all the medical option that can befall you and then decide what is enough to sustain you
A reality check is always refreshing
             
Not everything that counts, can be counted, and, not everything that can be counted counts - Albert Einstein

Patrick

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Re: When do you have enough?
« Reply #3 on: May 15, 2014, 11:14:02 am »
Why not take your family with you and add to yours and their life experiences bucket together and build that stash even more if its an option so you're always close by to your son.
I'd love to, but the posting is looking like it could be South Sudan/Kenya/Senegal or similar places. Out of the three Senegal is the only one I'd consider a good location for raising a family. South Sudan is a non-family post, and Nairobi is too high risk in terms of crime/terrorism for me to want to raise my child there...

The question as to what is enough is really what your needs and wants are, and the lifestyle you want to maintain.
 Let me relate 2 stories:- My father served in the war, had a regular job and worked until age 60 and retired 33 years ago. He always owned his own house and 8 years ago sold his house and moved to a retirement village in Somerset West. His pension of R 13,000 (rental R 8,700) on the face of it plus income from R 1.4 mill met their limited needs of shelter, and sustenance. However age caught up with them and 2 years ago their entire financial needs changed:- I had to employ care givers to look after them (R 10,000 per month) rent and food and utilities remained the same, pharmacy accounts ranged between R 500 and R 1,000 per month and medical costs over and above medical aid settlements another R 300 per month. Family made a decision to relocate parents to a frail care facility at an all inclusive cost of R 22,000 per month for both parents - medical and pharmacy costs didn't change nor did income from pension or investment returns.
Was/is my parent finances adequate - I don't really know, my father passed away last month and my Mom will now experience a 50% payout on my Dad's pension but her rental is 2.2 times this income, will she survive on her and my Dad's investments - yes I believe she will for the next 4 years.
Moving to the next scenario:-
My pension is more than R500,000 per annum and I have investments of + R 3.0 million, a living annuity that I drawn down the minimum 2.5 % p.a., a house fully paid for and 2 cars (paid off). do I think this is enough - absolutely not - I have absolutely no idea what medical costs will be when I am in my 80/90's (my family has a history of long levity), what major operations I might be subjected to (bypass surgery today is astronomical) and what care I may require in the future. It is senseless considering your house as an asset, it is merely a bargaining chip for where you ultimately decide to rest your bones. So my sense is that I probably need to double or even triple my investments by the time I reach 80 which is in 13 years time.
So wealth is directly related to the lifestyle you want to live versus your needs and medical costs, and the type of medical/health care that you may require in the future - which is unpredictable. A simple experience like a stroke can change your life and circumstance dramatically.
So sit in a chair in a quiet corner of your lounge and ponder all the medical option that can befall you and then decide what is enough to sustain you
A reality check is always refreshing
Always appreciate your views gcr. Sorry to hear about the loss of your father.

Old age medical is a complete unknown. Most likely if I took the time off now I'd consider keeping myself employed in some way or another. I like feeling productive, and would always rather live on income than assets. Most likely in a fixed and retirement fund contributing capacity at some point in the future. I must say though, if I had your financial situation it would be a no brainer for me, but we are all different!

Just FYI, there is still a chance I get to stay in SA, but to quote the boss, I need to "sing for my supper"! It's really an odd situation, I've had one of my most impressive years. Travelled to 7 countries and impressed the hell out of everyone. All sorts of offers have come my way for the other countries, but my post in SA is likely to be taken by an outsider. Strange office rules means that foreigners outrank locals, and can displace them if the need arises.

yozzi

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Re: When do you have enough?
« Reply #4 on: July 17, 2014, 10:04:35 am »
The question as to what is enough is really what your needs and wants are, and the lifestyle you want to maintain.
 Let me relate 2 stories:- My father served in the war, had a regular job and worked until age 60 and retired 33 years ago. He always owned his own house and 8 years ago sold his house and moved to a retirement village in Somerset West. His pension of R 13,000 (rental R 8,700) on the face of it plus income from R 1.4 mill met their limited needs of shelter, and sustenance. However age caught up with them and 2 years ago their entire financial needs changed:- I had to employ care givers to look after them (R 10,000 per month) rent and food and utilities remained the same, pharmacy accounts ranged between R 500 and R 1,000 per month and medical costs over and above medical aid settlements another R 300 per month. Family made a decision to relocate parents to a frail care facility at an all inclusive cost of R 22,000 per month for both parents - medical and pharmacy costs didn't change nor did income from pension or investment returns.
Was/is my parent finances adequate - I don't really know, my father passed away last month and my Mom will now experience a 50% payout on my Dad's pension but her rental is 2.2 times this income, will she survive on her and my Dad's investments - yes I believe she will for the next 4 years.
Moving to the next scenario:-
My pension is more than R500,000 per annum and I have investments of + R 3.0 million, a living annuity that I drawn down the minimum 2.5 % p.a., a house fully paid for and 2 cars (paid off). do I think this is enough - absolutely not - I have absolutely no idea what medical costs will be when I am in my 80/90's (my family has a history of long levity), what major operations I might be subjected to (bypass surgery today is astronomical) and what care I may require in the future. It is senseless considering your house as an asset, it is merely a bargaining chip for where you ultimately decide to rest your bones. So my sense is that I probably need to double or even triple my investments by the time I reach 80 which is in 13 years time.
So wealth is directly related to the lifestyle you want to live versus your needs and medical costs, and the type of medical/health care that you may require in the future - which is unpredictable. A simple experience like a stroke can change your life and circumstance dramatically.
So sit in a chair in a quiet corner of your lounge and ponder all the medical option that can befall you and then decide what is enough to sustain you
A reality check is always refreshing
           

Gcr, would I be correct in saying that if you have R3m invested (same as myself) you should be expecting around 25-30% return per annum which is somewhere in the region of R1m and added to your R500k pension is a fairly decent income going forward?

gcr

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Re: When do you have enough?
« Reply #5 on: July 17, 2014, 11:41:38 am »
Yozzi - With present investments and pension my income is sufficient to meet all my needs. However I don't take funds out of my trading account (which is 75% of my investments) so these funds are not used to support my lifestyle - all dividends are used to purchase shares and when I can afford it I put more funds into my trading account by juggling my current account, card accounts, and bond account. My dividends run about at about R35,000 p.m. thanks to the government now taking 15% divi tax. So in essence my share portfolio grows annually based on how well my portfolio performs - however that is wealth based on a paper value as I am still holding the shares in the portfolio. What I am alluding to is at present day value I can afford most of my wants, but extend my longevity to age 80 and I don't know whether I will be in the same position I am now, somehow I don't think so, I could for example get below CPI increases on my pension and that shortfall would need to be made up somehow, so I am happy to take 18% increase in portfolio value, but aim for + 20% so that CGT and other taxes don't take too much of my available funds and don't force me into selling off capital to survive
Hope this explains my views on how much is enough 
Not everything that counts, can be counted, and, not everything that can be counted counts - Albert Einstein

Patrick

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Re: When do you have enough?
« Reply #6 on: July 17, 2014, 03:06:34 pm »
Yozzi - With present investments and pension my income is sufficient to meet all my needs. However I don't take funds out of my trading account (which is 75% of my investments) so these funds are not used to support my lifestyle - all dividends are used to purchase shares and when I can afford it I put more funds into my trading account by juggling my current account, card accounts, and bond account. My dividends run about at about R35,000 p.m. thanks to the government now taking 15% divi tax. So in essence my share portfolio grows annually based on how well my portfolio performs - however that is wealth based on a paper value as I am still holding the shares in the portfolio. What I am alluding to is at present day value I can afford most of my wants, but extend my longevity to age 80 and I don't know whether I will be in the same position I am now, somehow I don't think so, I could for example get below CPI increases on my pension and that shortfall would need to be made up somehow, so I am happy to take 18% increase in portfolio value, but aim for + 20% so that CGT and other taxes don't take too much of my available funds and don't force me into selling off capital to survive
Hope this explains my views on how much is enough

Is the R35k p.m. a type perhaps? On a R3mil portfolio that would be a return of 14%. Is it not perhaps R35k per year? Congrats on getting yourself into such a solid position though. Mind if I ask what your day job used to be?

gcr

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Re: When do you have enough?
« Reply #7 on: July 17, 2014, 03:39:37 pm »
Yup should be R 35k p.a. :D
Securing space, approving layouts, authorising capex expenditure, managing project managers and contractors to build branches for one of the 4 major banks
« Last Edit: July 17, 2014, 03:44:23 pm by gcr »
Not everything that counts, can be counted, and, not everything that can be counted counts - Albert Einstein

Mr_Dividend

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Early retirement
« Reply #8 on: April 20, 2015, 07:49:57 am »
As a couple of guys asked what was my story I thought I would tack it on to this thread as it seemed appropriate.

I am 41, married no kids (but two lovely dogs), house paid and retired. As I have never been paid much - quite a bit of luck has got me to this point, but also a healthy dose of financial planning/ or at least frugality. Firstly I have always been a good saver and at an early age could not see the point of only saving 10% - at that rate it would take forever to save for anything meaningful. I have always worked and made my pocket money - started pushing trolleys at the local OK at around 12 on holidays - eventually graduating to my paper route (business day and ST - BD is still my favourite newspaper, ST is now a tabloid IMO). Anyway, always had jobs often two, and with it saved and bought all that I needed - unfortunately a lesson that I did not learn - saving IS NOT investing. Personally there should be a clear distinction between the two, as they have two very different uses. As said, I have always been a good saver, had I been a good investor - well, I would be sitting pretty pretty.

Let's fast forward here otherwise this could take forever! About 13 years ago got married in the UK to a Cape Town lass and we started saving together for a house/ shack in Spain/France - deciding that country living would be great having watched a few TV series and read a few books. Took around 2 years of long hours, often weekends and we had around 20,000 pounds - by that time we had seen that we could buy a better condition house in a rural setting in the Western Cape. So we took a holiday, rented a car and visited a few places we had seen on the internet. We settled on one in a tiny village about a hour and a bit outside CT - cost us R280,000. For that we got a huge house that had been used as a B&B and large 6000m2 plot. But wiped us out financially and we had to go back to work for a year to get the cash for car, fridge and the bit's need to make it into a B&B. Unfortunately it never really worked and although we had a happy couple of years, we were broke at the end, but the property price had shot up and I sold it privately (for cash in a week) for 1.6mill - this was my first bit of luck.

We used half for our new house (sold house on Sunday/bought new house on Monday/ cash was in my account on Wednesday/ house was transferred in one month - all in all a very quick sale) BTW we received 1.2mil straight away, the rest came later as had divided the property and that took ages and some engineering works - after that and various fees I guess we came out with 1.5mil. Anyway, new house was 800k pretty much spit the R400k, wife made a studio( she works from home), bought a car, chewed through a bit of money before buying some shares after a year of pestering her (she would have got Capitec at under R100, instead of the R140 she paid) and I used my half to open a shop - something I always wanted. I have, unfortunately, always been in retail - after the food industry, I think the kakkiest sector to be in - long hours/low wages - yippee.

Part two later - I type with two fingers - so this is taking a while.

jaDEB

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Early retirement
« Reply #9 on: April 20, 2015, 09:49:07 am »
I will start : -

Mine is not so much Early retirement, but rather getting cash ready for Emergency, but the idea of Early retirement is there.

I have a pension, current company, not touched. But had a Preservation fund from previous company, 15 Years ago. Cashed it up in February 2015 and added the monies to my Portfolio. Thus my portfolio is much higher than in past.

« Last Edit: April 20, 2015, 09:58:53 am by jaDEB »
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jaDEB

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Re: Early retirement
« Reply #10 on: April 20, 2015, 11:36:05 am »
How do you draw a income, i.e. tax etc ?
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Orca

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Re: Early retirement
« Reply #11 on: April 20, 2015, 12:22:12 pm »
Debt is the biggest stumbling block with retirement and can prevent you from ever retiring. My wife and I were very fortunate to have our business collapse and our belongings attached by the Sheriff and sold. Plus we had to hand in our very handy credit cards and my wife's precious Edgars card was cancelled. That was 19 years ago.
At the time, it felt like our world had collapsed around us but looking back now, it was a blessing in disguise.

After we clawed back up over the years, the fear of having credit has never left us. My family did not lack for anything as we had more cash available and no credit at all to pay every month.
I now do have a credit card but use it as a debit card. (you cannot book international flights without a credit card).

As I said, the snowball effect of credit can prevent you from ever retiring.
I started here with nothing and still have most of it left.

Patrick

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Re: Early retirement
« Reply #12 on: April 20, 2015, 12:53:28 pm »
Ok did a little merging of the two topics that were all related...

Mr_Dividend

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Re: Early retirement
« Reply #13 on: April 20, 2015, 02:18:36 pm »
Part two.

So started a very small shop about 8 years ago - and, through a bit of trail and error learn't a few important things. The owner is the last person to be paid - and I mean, the VERY last. In fact, if you do not make the effort, you might not get paid at all! Although I did reinvest all profits back into the business, which is good to a point, at some time you do need to start taking some out and setting it aside - I did not.

I also found out I was a better manager than owner when staff where concerned - bit soft really. I am also fairly lazy so some checks and balances where throw out the window. I am a good buyer though and have an ok "small business brain" - so did grow my one shop into three and into better locations. And then closed them all - in the reverse of how I opened them. No 3 was closed purely because of staff, 2 was the gold mine but closed when two large chain stores moved in. So I was left with shop one, the first one and a hell of a lot of stock (1mill plus)that came from the other two and still had a year and a half to go on the lease and carrying around R300K worth of stock debt.

Now around this time I found out that my farther was going to make my sister and I beneficiaries in a smallish trust my grandfather had set up - rather nice of him. Paid out 30K in 2013, 40k in 2014 and 2015. It looks like this is set to continue for a while, but my farther has first dibs if he needs it - so not guaranteed, but a handy about of cash.

So I started doing calculations to see if i could survive not working - and how much I would need to invest and what return I could expect. But more importantly, finding out how much I need to live - as luck would have it, not much. I have never had a store card in my life and the only debt have ever had has been linked to my shop. With a bit of trial and error I have found R5500 p/m does the trick nicely. I do though have medical aid - which would probably be good, but the local hospital is fine for most things and have a private clinic that charge R350 per visit including medication - think I've been twice in 8 years or so.

That R5500 includes a bike ride to a spur for sunday breakfast every week and we normally can squeeze in one comedy/ classical or Jazz night in CT. Basically gets divided into R600 p/w (food/spur/petrol) R1200 p/m (insurance/rates/elect/dstv/internet) - gives around R1700 for that big OTHER category (gifts/DIY/monthly outing).

But as said, no holiday cash or medical aid. And please note, my wife still works from home and has no intention of retiring, nor would she have anything to do if she did - and all bills are split, so we are actually spending double on the figures quoted above.

Now I give my wife 10% of what I get from the trust and I need R5500 per month so R5500 x 12 = R66 000 per year -  R36K (R40K - 10%) - I need to generate R30K per year out of what I could salvage out of the last shop. I figured with a bit of luck I could squeeze R500K out of it (after paying expenses and stock debt and car debt) I with a bit of luck get 5% of dividends using a mix of REITs ( at around 6 - 8%) and decent dividend paying shares ( at 3 - 5%) and this would give me 5%.

I am not sure why I decided the dividend approach "clicked" with me - I know it doesn't really matter, but the fact I am not selling the capital really makes sense and just sit's well with me. Also I think I worked it off R5K per month - so it did work on paper. i have only recently found the extra R500 p/m makes it all work well - funny how a relatively small amount makes quite a difference

Anyway - after making a spreadsheet with my new financial goals, set about putting it into action - and I am happy to say it all worked quite well. Ended up putting in R650K into my main account (did include around R60k from the trust) so an ok but not great return from my original investment - I did spend a bit on the house adding pool and walls and lot's of other bits/ and very full wood workshop - I am not a minimalist at all. Plus got an old motor bike and a new bakkie that should last me 20 or so years.

Have been retired just over 6 months - the R650K has grow to R900K (but was invest monthly from 2 years ago, so very hard to work out a yearly return - plus way more came at the end as debt was paid). So far this year it is on 12% - I do not expect or need it to shoot the lights out, but 15% per year on the capital would be great. I am more interested in the dividend obviously - and that is what I look for in SENS. I hope that dividends out strip inflation and essentially I get richer as I get older -  ;D I work on 6 months/ 6 months - 1 being the trust and 2 being all the dividends for a year.

Now I need to go my a thermostat for my oven - cannot handle burn't muffins anymore, part three later.

jaDEB

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Re: Early retirement
« Reply #14 on: April 20, 2015, 03:12:28 pm »
Good read, please keep it coming. PS. my daughter turned 21, so I had to put her on medical aid, if you want to, have a look at Discovery Key care. Not too expensive and it has a hospital plan.
jaDEB

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