Retiring

[Manchester33]

Because when its paid you can divert your free cash into pensions etc and if times get tough/circumstances change, then you can stop paying into a pension, but if you have a mortgage you still have to find the dosh

The point you've made is accurate, but only if the investor chose a SIPP over an ISA. If they were concerned about tough times/change of circumstances, paying down your mortgage actually ties up cash that could offer you more financial security/flexibility if it were in an ISA.

 

[Manchester33]

Totally agree with this.
ive paid off my mortgage once already and what a great feeling that was however taking sound financial advice is the best way forward.
I really appreciate this post mate as I am wanting to make my payments to clear what’s left oc it but maybe that money is best invested in a SIPP instead.

Yes, when I first read about the subject it blew my mind. I think we're hard-wired to consider 'all debt is bad' and that one of your major financial milestones is to become mortgage-free.

I can completely understand people wanting their house paid off, but there are so many better (in my opinion) arguments against it.

If you offered most people an option of owning a house worth £500k or having £500k invested in index funds whilst living in a house with a £500k mortgage, people tend to go for the former. But when you tell people that they should expect to earn around £35k pa from the later option, they start to change their tune! :P

 

[Manchester33]

I’m working towards a date of 2030 to retire / slow down at which point I’ll be 56

i have a DC pension with work which will be worth around £200k by then, I have also started to invest spare cash each month into a S&S ISA with Vanguard, I’m hoping this will grow by at least 6% each year which should give me another £50-£80k depending how much I continue to put in

the question I have is that I also have enough in cash that i was going to use to put down on a buy to let , kind of a hedge against any inflation rises we may see over the coming years

am I sensible doing this or should I just plough this cash into my vanguard account ?

If I went this route the cash would be worth around £42k by 2030

A buy to let I would have 9 years rental income of around £3.5k after tax plus any gain in price I pay on the house , about another £20k by 2030

I'd ask yourself whether you honestly want to become a landlord.

I've asked myself that question previously and thought:

- the property industry seems to be chasing landlords out through taxes and better rights for tenants (Is it really a safe bet for the future?).

- Could I really be arsed being on the end of the phone at any hour to angry tenants?

- Are the tax implications worth it? You either pay tax on it personally or have to set up a limited company which comes with accounting costs and the like.

I'm sure there's still plenty of money to be made (especially if you do it at scale and build a large portfolio), but I'm not sure it's worth all the hassle. My view on becoming a Landlord is that you're buying yourself a job. It might be a very well paying job in some cases, but more often than not I think it's a lot of work, with more stress, for less money than what people think.

If I were you I'd chuck any spare money in your ISA until you hit the annual limit, then have a bit more of a think at that point.

 

[Manchester33]

Does anybody have experience investing in wasting chattels ?
i know there have been some ridiculous gains in fine wine and whisky over the last few years but it requires a certain amount of expertise to pick the right vintages etc....

As a rule of thumb, I always think it's sensible to avoid investing in anything speculative. At the end of the day, fine wine and whisky generate no money, they have no real value - their value is based on what another person thinks they're worth.

You're better investing in real businesses that are generating money and increasing their real value.

(I do appreciate some people like to flutter money on speculative things though. But it's literally the same as gambling and consequentially shouldn't be a serious part of a retirement plan - and shouldn't be done with the money that is relied upon).

 

[Wafty Cranker]

I’m working towards a date of 2030 to retire / slow down at which point I’ll be 56

i have a DC pension with work which will be worth around £200k by then, I have also started to invest spare cash each month into a S&S ISA with Vanguard, I’m hoping this will grow by at least 6% each year which should give me another £50-£80k depending how much I continue to put in

the question I have is that I also have enough in cash that i was going to use to put down on a buy to let , kind of a hedge against any inflation rises we may see over the coming years

am I sensible doing this or should I just plough this cash into my vanguard account ?

If I went this route the cash would be worth around £42k by 2030

A buy to let I would have 9 years rental income of around £3.5k after tax plus any gain in price I pay on the house , about another £20k by 2030

Stamp duty and various fees will easily wipe out the first 12 months of rent. Then if there is a high tenant turnover your rental income is quickly reduced. I wouldn’t really be banking on that rent.

Would you use the a mortgage for the BTL? If so, I don’t really see it particularly risky. I reckon we’ve got a few years growth in the market yet, with a drop in house prices around 2026. That ties in with the 18 year property cycle and also makes sense for a few years of growth given all the QE that has taken place recently.

I would think if you bought somewhere now then in 10 years the capital growth would be such that you could remortgage it and get your original deposit back and then some. By remortgaging you could take the money out with no tax due on the gain and keep the property.

 

[Wafty Cranker]

I'd ask yourself whether you honestly want to become a landlord.

I've asked myself that question previously and thought:

- the property industry seems to be chasing landlords out through taxes and better rights for tenants (Is it really a safe bet for the future?).

- Could I really be arsed being on the end of the phone at any hour to angry tenants?

- Are the tax implications worth it? You either pay tax on it personally or have to set up a limited company which comes with accounting costs and the like.

I'm sure there's still plenty of money to be made (especially if you do it at scale and build a large portfolio), but I'm not sure it's worth all the hassle. My view on becoming a Landlord is that you're buying yourself a job. It might be a very well paying job in some cases, but more often than not I think it's a lot of work, with more stress, for less money than what people think.

If I were you I'd chuck any spare money in your ISA until you hit the annual limit, then have a bit more of a think at that point.

Again, I agree with you for most of this. Even with a Management Company it is demanding of your time. Trying to find a property can do your head in. Manchester has gone nuts so if you’re looking further a field you need to spend your free time travelling to viewings, then it can be tricky to arrange viewings back to back. It means you end up waiting around for hours between viewings.

The main big plus I think a BTL has vs an ISA is that you can leverage your purchase.

 

[ChicagoBlue]

Back of the envelope:

How much do you need/want to live on annually in retirement?
Subtract any annual pensions or annuity income you might have.
Multiply the result by 25 (4% ROI), or 33 (3% ROI), or 20 (5% ROI), etc...

That’s how much money you need to have invested by retirement.

Then, double your annual target income and put that much in a bank account where you can easily access it, as a cushion against down markets and a few unexpected expenses. In good markets, replenish the account.

There or thereabouts gets you in the ball park.

 

[dickie davies]

Yes, when I first read about the subject it blew my mind. I think we're hard-wired to consider 'all debt is bad' and that one of your major financial milestones is to become mortgage-free.

I can completely understand people wanting their house paid off, but there are so many better (in my opinion) arguments against it.

If you offered most people an option of owning a house worth £500k or having £500k invested in index funds whilst living in a house with a £500k mortgage, people tend to go for the former. But when you tell people that they should expect to earn around £35k pa from the later option, they start to change their tune! :P

And what salary does one need to have to be accepted for a half million pound mortgage?

 

[stonerblue]

Retired 4 years ago at the age of 64 but had only worked 4 mornings a week from the age of 32.

Do as little as you can for as much money as you can and enjoy your freedom and your life.

If you are lucky enough to do it, it`s great.

Been part-time for last ten years or so now and it's given me the immense pleasure of seeing my grandkids grow and develop. Priceless.

 

[stevemacca]

Just to throw cat amongst the pigeons - has anybody any views/experience on the current spate of 'lifetime mortgages or equity release schemes' as a way of funding retirement.

It seems to me the major downside is the possibilitiy that offspring won't be getting full inheritance but my kids seem to be doing better than me anyway, so in 25 years time (hopefully!!!) it won't matter to them so much

Or are such products going to be the future 'PPI' scandal?