So on one of my early posts, Mike from 7 Circles asked me how far I was and what my number was to get to FI. Well with 8 years to my declared target date, this seems like the perfect time to answer that. For the purpose of my retirement numbers, I don’t include my home equity as I need somewhere to live! This number is purely based on pension and ISA savings (note: Excluding emergency cash).
So I do have a number in mind (which I am afraid I am not sharing), and right now I am about a third of the way towards it when you count pensions and ISAs. If I discount my pension then I am only 13% of the way there. I know I can’t hit my number with the ISA, even with maximum contributions to both my and my other half’s ISA, unless I get some truly stellar returns from some of my self select purchases. At some point I will have to work out how to address that, but that’s for the future.
Provided I get an average of 7% returns per year then I should hit the number pretty much to the month if things continue as is – something I wouldn’t have believed a year ago. I actually forecast my returns at 4% as part of the mental games with myself – if it looks like I won’t make it I will keep trying harder, and I also withdraw cash from my other half’s ISA to pay down the mortgage (income not capital). Anything above that is a real bonus. The challenge then is that quite a large chunk of this will be in my pension which I won’t be able to access at my chosen date. That gives me (currently) a 5 year gap.
I honestly have no idea right now how I will make that work (cash, selling down ISAs, unexpected extra cash from pay rises and bonuses in taxable brokerage accounts etc.). For now I just need to keep throwing money into my investments.
The other element I have in my back pocket is any bonuses I may get at work. Last year was a good year and my bonus went straight into my pension (tax refund still to come through although I finally got my P11D so I have submitted my tax return but I won’t get as big a refund as I had hoped). The same will happen with any bonus I get for this year – as always I assume nothing, but if I have a good year it could help to bring me closer to that magic freedom! This also assumes no increase in savings, which is hopefully not realistic – any pay rise I do get should go into savings. If I am lucky and get similar bonuses for the next 8 years then I really will be able to hammer those savings and mortgage overpayments.
One of the things I have started looking at more closely is my progress in my ISAs and how they are tracking against my original base forecast as I don’t want to have to sell down my ISA to survive through to my pension, so I am really pushing to get my ISA as high as possible. The more I can get into ISAs the better, and with two allowances (mine and the other half’s) that is a lot of money I can put to work. I am behind my original forecast and most months that difference keeps extending. Another target I can fail 🙂
How will I retire? Well I have a whole series of posts to come on that about options and so forth but the short answer is right now, I don’t know. Yup, you read that right, I don’t have a clue how I will make it work. I am not going to let that stop me saving as hard as possible. The biggest blocker to me retiring is the mortgage. It is by far my biggest expense, and has a long time to go on it. Realistically I don’t believe I will be able to clear it by 2025 which means I will still have some outgoings for housing when I retire.
Now I know that I am writing this after a long steady increase in stocks and my portfolios so of course it looks good. As it stands I do feel positive about it, I don’t think I will hit it, but I think it will be close. How will I feel after a major market crash? Most likely highly depressed and thinking it will be impossible to make it. That said, I won’t change my regular investments so I will buy more shares, cheaply, but it won’t be easy.
I know I will really enjoy looking back on this post over the years as I see how it progresses against my base expectations!
How are you getting on towards your target retirement date? Have you got it all perfectly mapped out, or only as far as “I need to save”?