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Weekend reading: More FIRE fighting

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Like Lennon and McCartney, sweet and sour pork, and Matt Hancock and his job, there are multiple tensions at the heart of Monevator.

The biggie probably isn’t active versus passive these days.

Following the lead of Macca in his prime, The Accumulator has produced hit after hit on why and how to use index funds.

Whereas I’ve – metaphorically – taken my naughty stock picking and left the band. At least for now.


No, I’d say our biggest on-site difference of opinion is the RE part of FIRE.

We’ve debated that in the past, too.

In short I nowadays believe that early retirement is a rubbish goal, ill-suited to most who can reach it.

The Accumulator, on the other hand, is living it.

And loving it, apparently.

FIRE in the hold

Of course, both of us are full-square behind achieving financial independence – the FI component of FIRE.

That goes without saying!

Being so ill-versed in the FIRE community and lingo I only just discovered that the kids call my version of reaching it ‘Slow FIRE’.

Monevator reader Ian pointed me towards an article from Business Insider, which explains:

Slow FIRE practitioners focus on designing and achieving their FIRE lifestyle now.

This may include working remotely in order to create more flexibility in their lives.

It’s also a nod to the fact they will work longer in order to hit their FIRE number.

There’s no work-shaming because work factors heavily into Slow FIRE.

Yes! This is what I was trying to get at in You Don’t Have To Go Nuclear On Working For a Living. (In retrospect not such a catchy name for a movement, compared to Slow FIRE.)

Back then I wrote:

I often read retirement bloggers saying they quit work because they couldn’t take kowtowing to The Man anymore.

Yes – The Man sucks – but it’s not a good reason to quit working.

Especially if you’re impoverishing yourself for the rest of your life to do so.

I believed that mostly working from home, mostly on projects I enjoyed, and on my own schedule was a more sustainable way to spend my life than:

  • killing myself in the rat race, or
  • jumping off a cliff like an exhausted lemming as soon as I believed I could meet my minimum spending requirements from some vast pool of cash I’d accumulated, just out of sight of my bedsit or RV.

I’ve got nothing against people retiring in their 40s after 20 years of frugality if they choose.

I don’t think it’s morally wrong, or anything silly like that.

You do you.

I’m just saying be sure you’ve thought about all the options first.

Not so shy and retiring

Someday I’ll make my case for this Slow FIRE business more coherently.

In the meantime, Party at the Moontower this week explained why he too is against the ‘retire early’ part of the mantra.

Despite his apparently just now retiring early!

Like me he’s sceptical that sustainable withdrawal rates (SWRs) are a golden bullet to ‘the hardest problem in finance’:

Solving for how much you need to save and for how long, solving for how much you can withdraw annually and for how long, all so you don’t outlive your money.

If you have walked through the Moontower Retirement Model you learned the levers — savings rates, longevity, and post-tax inflation-adjusted returns.

Every one of those terms is impossible to forecast. The problem suffers from intractable amounts of garbage inputs.

The value of the exercise is not the outputs, it’s for articulating the problem in the first place and gaining a low-res appreciation for the sensitivities.

Thinking about your likely SWR is indeed super-valuable. It makes you consider all the variables.

Also, if you’ve never encountered the idea of living off your investments before, then applying 4% to a pot of ‘some number’ can be mindblowing.

Fighting FIRE with fire

However beyond their thoughtprovoking, SWRs only do a perfect job of telling you how you would have done in the past.

Worse, they crumple the edges.

Their fans declare “of course you wouldn’t actually spend your money if you saw it was running out”

Um, okay.

I’m practically a dinosaur in that I believe investing for income is a more intellectually credible way to prep your finances for a long period of living off them. I also hate the idea of spending my capital.

This means more money is needed, and perhaps some active management. Again, more on that some other day.

But none of this is to discredit The Accumulator’s wonderful work on SWRs.

I think his is probably the most readable deep take on the Internet.

The Accumulator has read widely – proper academic research papers and all . In contrast, as ever I’m a bundle of notions and hunches.

So you should certainly read through everything he says on the subject – it’s a goldmine – even if you reach a different conclusion.

Fee FI fo fum

The other solution to getting an income in your later years is to keep doing some work for money.

RE goes out the window, but FI remains front and centre in giving you options and buffers.

To again quote Moontower:

The idea that you can work until you are 75 or 80 is freeing IF you can do it on your terms. If you can take a break for a year sometimes. If you can work 4 days a week, or from wherever you want. If you actually enjoy bringing your uniqueness to the job to be done.

The definition of a sustainable life is one you actually want to sustain.

Nobody wants to sprint forever, and sprinting for a short while doesn’t make the scarcity mindset go away even if you “win”.

This is partly why rich people fear inflation. They thought they were “done”. What is “done” anyway?

Past experience tells me that plenty of you will disagree (which is fine!)

Smart and articulate people tell me they couldn’t do work they half-like on their own terms, although I’ve done just that for 20 years. Their only option is to cane it at a job they hate for the best years of their life, and to smell the roses at the weekends. And then to hope their SWR doesn’t blow up.

Again, okay…

Just be aware what you’re saying: can’t, won’t, will.

You’re just saying it in a different order to me.

Maybe it’s all a question of where we choose to put our limits and our faith and to see the uncertainties.

Happiness is a warm run in the stock market

I’m no zealot. The truth is after quitting my ‘big gig’ last year I’ve not put a lot of effort into ramping up my hours and income to replace it.

So maybe I’m leaning a bit more towards RE than I care to admit?

To his credit The Accumulator has also shifted over the years. He is at least trying out doing some work post-retirement.

Again, financial independence lets us both look for our middle ground.

I suppose I’m saying that 40-50 years is a long time to plan to drop out. I doubt even Lennon would have managed that, though sadly he never got the chance.

Too much leisure time is probably counterproductive, anyway. Studies suggest there’s a sweet spot:

Employed people’s ratings of their satisfaction with life peaked when they had in the neighborhood of two and a half hours of free time a day.

For people who didn’t work, the optimal amount was four hours and 45 minutes.

Working for just a couple of hours a day – or a couple of full days a week – leaves you abundant time to learn Swahili or to see your grandkids.

And a small amount of income is worth a lot. Many years ago I pointed out that £5 a day was worth around £90,000. Today it’d be even more.

Earning to keep FIRE burning

Consider planning to earn a couple of hundred quid a week indefinitely. I suspect you’ll be happier.

It doesn’t have to be working from home or side hustling, either.

A sociable friend of mine wants to retire in her 50s to do a couple of days a week in an independent coffee shop. Some of her fondest memories are of part-time work at Starbucks as a student.

There was seeing the regulars, the free coffees, the short walk to the ‘office’, the lack of responsibility, and being usefully whacked at the end of the day.

It’s not my bag. But then, writing this post on a sunny Saturday morning in bed wouldn’t be hers.

Let’s all find our own way.

Have a great weekend (and Cymru am byth!)

From Monevator

What goes into an ESG index? – Monevator

It’s too late to get into buy-to-let – Monevator

From the archive-ator: How you can enjoy the profits of 2,267 companies around the world for free – Monevator


Note: Some links are Google search results – in PC/desktop view you can click to read the piece without being a paid subscriber. Try privacy/incognito mode to avoid cookies. Consider subscribing if you read them a lot!1

Government mooting less generous pension lifetime allowance and tax relief – ThisIsMoney

UK facing summer food shortages on lorry driver shortage due to Covid and Brexit – Guardian

Millions of pensioners could receive a record rise in their state pension next year – Which

Bitcoin fell below $30,000 this week; first time since January… – Coindesk

…with a China crypto mining crackdown blamed – CNBC

Brexit blast from the past mini-special

Five years on from the Brexit vote, the UK is more divided than ever – CNN

The key Leave and Remain campaign claims that never happened – Politics Home

The real ‘Brexit dividend’? Minus £800m a week, and counting – Independent

Rejoining the EU is now unthinkable, except for a diehard minority – New Statesman

Why the EU is not missing Britain that much – Guardian

Views from Boston, Britain’s most Eurosceptic town – BBC

Fifth anniversary of Brexit vote marked by inane North Korean-style children’s song – Business Insider

“The most embarrassing anniversary since a sexual health clinic told me to come back in 12 months to check if anything had regrown”The Investor

Non-EU immigrants have replaced EU immigrants since Brexit referendum, almost one-for-one – ONS

Products and services

Post-Brexit, EE reintroduces roaming charges for UK customers in Europe – Guardian

New flexible train tickets will save this commuter just £7 a year – BBC

Secta lets parents take second mortgage to pay for school fees – ThisIsMoney

A quick review of digital piggy bank apps for kids – ThisIsMoney

Sign-up to Freetrade via my link and we can both get a free share worth between £3 and £200 – Freetrade

New £50 note featuring Alan Turing goes into circulation – Guardian

We both get £50 to invest at Seedrs if you sign-up via my link and invest £500 in 30 days – Seedrs

Homes for sale in former churches, in pictures – Guardian

Comment and opinion

Lessons learned after decluttering 300-plus items – A Lawyer and Her Money

What to watch for in onerous employment contracts – Indeedably

How much do you need to be financially independent? – Of Dollars and Data

The ups and downs of stocks, and stock markets – Humble Dollar

How wealthy Americans are taught to protect their wealth – MSN

Americans are quitting their jobs en masse: great – Slate

The fastest way to £100,000 – Banker on FIRE

Some quantitative portfolios that go beyond stocks and bonds – Validea

Naughty corner: Active antics

How to listen to Dr Copper – Verdad

Venture capital firms target retail investors for funds [Search result]FT

Luck – Enso Finance

WallStreetBets lingo decoded [Oh to be 23!]Business of Business

Building Berkshire 2.0 with Chamath Palihapitiyah [Podcast]T.I.P.

Is QinetiQ a good dividend growth stock? – UK Value Investor

Bubble expert Jeremy Grantham on ‘epic’ equities euphoria – FA Mag

Covid corner

‘Delta plus’ Covid variant found dozens of times in UK – Evening Standard

Dr Fauci on the thread of the Delta variant – NPR

Balearics and Malta added to UK’s green list – BBC

China is vaccinating 20m people a day – Nature

Nearly all US Covid deaths are now among the unvaccinated – AP

The less than welcome return of social obligations – Axios

Kindle book bargains

The Joy of Work: 30 Ways To Fall In Love With Your job Again by Bruce Daisley – £0.99 on Kindle

Legacy by James Kerr – £0.99 on Kindle

Think and Grow Rich by Napoleon Hill – £0.99 on Kindle

Liars Poker by Michael Lewis – £0.99 on Kindle

Environmental factors

A slimy calamity is creeping across the sea – The Atlantic

Majority of UK homes now served by green energy suppliers, but is it all just rebranding? – ThisIsMoney

Off our beat

US government reveals it can’t explain 143 UFO-like flying objects – NBC News

Blood test that finds 50 types of cancer is accurate enough to be rolled out by NHS – Guardian

Jeff Bezos and Elon Musk want to burn their cash in space – Vanity Fair

Mystery of the wheelie suitcase – Guardian

An interview with the tech pioneer and VC Marc Andreessen – Noahpinion

Ricky Gervais on Twitter [Video] – on Twitter

And finally…

“Never mind that Britain has a German royal family, a Norman ruling elite, a Greek patron saint, a Roman/Middle Eastern religion, Indian food as its national cuisine, an Arabic/Indian numeral system, a Latin alphabet and an identity predicated on a multi-ethnic, globe-spanning empire – ‘fuck the bloody foreigners’.”
– Akala, Natives: Race and Class in the Ruins of Empire

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  1. Note some articles can only be accessed through the search results if you’re using PC/desktop view (from mobile/tablet view they bring up the firewall/subscription page). To circumvent, switch your mobile browser to use the desktop view. On Chrome for Android: press the menu button followed by “Request Desktop Site”. []
{ 36 comments… add one }
  • 1 PC June 26, 2021, 11:28 am

    Thank you for coming out as not believing RE is the be all and end all. I couldn’t agree more.

    I’ve read too many posts from people who hate their work and think RE is the golden bullet that will solve their problem.

    And yes I acknowledge that I’m in a fortunate position to be working from home, doing something I enjoy mostly.

  • 2 Gentleman's Family Finances June 26, 2021, 11:38 am

    As someone who has fixated on building wealth for 20 years and now at 38 is FI or at least self sufficient and probably have enough money for life, my perspective on the RE is that it doesn’t make any sense to spend 20 years doing something that you don’t like to then give it all up to do something different.
    Better instead to phase out from devoting all your energy to work and into something that you don’t need to be paid to do.

    Individual results may vary.

  • 3 Thomas Elliott June 26, 2021, 11:54 am

    Thank you as always, TI, for your wise and thought-provoking weekend read!

    My partner and I are junior doctors and both work full-time. For us, working still invariably means a commute to hospital or other health centre for a fixed shift, and I find myself glancing wistfully at other professionals who have gained more flexibility in their working patterns as a side-effect of the pandemic.

    It is also the norm in medicine for one’s entire life to be consumed by the vocation, with the expectation that we do academic, teaching and managerial work on top – usually unpaid and encroaching on free time.

    Despite these pressures, I’m lucky to love my job overall and could see myself continuing, in some capacity, beyond the state retirement age. RE isn’t for me!

    But how to continue sustainably without burning out? Less than full time work is one obvious remedy. Academic or private work could break up the week and is more easily done remotely. As in my investing, I’m thinking about diversifying!

  • 4 IanT June 26, 2021, 12:42 pm

    From the archive-ator link, how ridiculous does that Apple market-cap of $82bn look now?

  • 5 Jura June 26, 2021, 1:23 pm

    Thomas Elliot- once you CCT, depending on where you choose to work and your specialty, life-work balance can improve considerably. SPA time can be done from home. 10 sessions is not onerous and some of my colleagues work less.

  • 6 Fremantle June 26, 2021, 2:25 pm

    I prefer the idea of Financial Independence, Live Life. Working for income is living off of capital, the only capital everyone has access to. If you can find your edge in applying your labour, why would you throw away that earning potential? Balance is the key.

  • 7 Whettam June 26, 2021, 2:51 pm

    Thank you @TI really enjoyed this post, as @Thomas Elliott June says, really thought provoking.

    I do think self employment vs. “working for the man” and your personal general life experience / events, makes a big difference to your perspective on RE. I’m really lucky to have a well paid job and the “man” (UK division of large US corporate) I’m working for is actually pretty reasonable, but the job is pretty full on and I do want to stop work early, at a positive ancient (in FIRE terms) age of 55, if I can afford it. I experienced a cardiac arrest at 45 and the convalescence period, before returning to work was actually really enjoyable, just to be able to do what my wife and I wanted , when we wanted, I saw this as a bit of a ‘practise run’.

    I like the idea of doing some work, but I’m not sure what yet (or if I could get anyone to pay for it) and I will also volunteer a bit. We will probably move, possible to a home with annex which can be let for holidays, so this will give something else to do and a bit of extra income. I sort of agree with you about income from portfolio vs. SWR, I’m not worried about depleting capital (as long as it lasts long enough), but I do think think income assets have a role to play in retirement portfolio construction and give more flexibility / options to selling down capital at a bad time. I can’t remember where, but read an article a few years ago which suggested a withdrawal of dividends + 1% capital. I’m not intending to do that and my approach will be similar to @TA’s total return + dynamic asset allocation approach, but my equity allocation is more aggressive than his and the portfolio will have income assets in it (especially on growth side), as I think this gives more options.

    As an aside, when I first started to plan for FIRE and read about 4% rule, like lots of people I set a portfolio target. I have just done my monthly spreadsheet update and have just ticked past this number (for first time anyway), fortunately partially thanks to your and @TA’s writing, I now realise that was too ambitious and (unfortunately) have a higher target. Thank you both.

  • 8 SemiPassive June 26, 2021, 2:52 pm

    I would like to see more articles on investing for income on here, which you seem to hint at as a preference (in contrast to The Accumulator) when the time to start drawing down comes.

    My own strategy is heading this way, but to get adequate diversification of income – and sufficient overall yield to live on – you just can’t completely shun actively managed funds and trusts. So you have to accept stumping up higher fees on at least part of your portfolio.
    I still think most people should use global trackers earlier on, at least until they get close to their planned FIRE age, or semi retirement age.
    I would prefer to work a 2-3 day week over the big bang approach of completely stopping work, but either way would feel more comfortable spending dividends than selling down units to live on.
    With the major index valuations as high as they are it makes the decision to invest for income even easier.

  • 9 never give up June 26, 2021, 5:07 pm

    I really enjoyed reading this. It really does strike at the heart of how best to construct a way of living that represents the best version of our life. I enjoyed the Monevator debate from Christmas 2019 on this subject. Over the last few years after finding FIRE/Monevator, I’ve seemed to flit between wanting to get my head down and fully FIRE, versus going part time as soon as possible. Although this will involve taking a longer route to get to FI, it allows a better way of life much earlier. I found that depending on how work was going I would favour one way over the other!

    This has led me to believe that the best way forward is to stay engaged in one way or another with earned income, providing it’s on our own terms and most importantly that it’s something we can enjoy. I think enjoyment wise the working environment is arguably more important than the work itself.

    I’m therefore following a policy of Financial Accomplishment Reduce Time. I’m currently in year four with an 80% SR. A four or five year blast of doing that buys a lot of flexibility and options going forward. I hope to go part time next year. Saving 20 years expenses or so isn’t enough for full FI, but it’s essential a huge emergency fund, a good enough financial accomplishment that allows part time work and the escape from the grind/rat race.

    The other benefits of this approach I see are less tax paid, protection against sequence of returns risk and more years of state pension qualification. Of course I wouldn’t criticise any other approach. There is more than one way to do this and we all have different careers, situations, and possibilities available to us, all with their own limitations. The key to all of it are low expenses and a really good understanding of our relationship with money.

  • 10 Bill G June 26, 2021, 5:09 pm

    I’m obviously missing something about Bitcoin. I had thought that a restriction in supply might lead to an increase in value of the existing coins.
    Obviously not, so why has demand for the coins fallen in tandem with supply?

  • 11 David June 26, 2021, 7:19 pm

    Interesting. For me the FI piece is the most important bit, the RE may or may not happen (actually the early bit won’t happen if early means “before 55”) depending on how I feel when(/if) I get to an FI (ish) number. I’m most focussed on the FI bit not because I hate my job but because I hate feeling that I’m beholden to it (and the stress of thinking about what would happen if I didn’t have the income that comes from it to deal with the expenditure – some of it leveraged – that I have to try and build the FI nest egg). Like most things, if you don’t have to do something it becomes that much easier to do it (procrastination = doing something I don’t have to do to avoid / delay doing something I do have to do).

    The other piece for me is that I have one of those city jobs that, while well paid, is incredibly demanding on my time and doesn’t lend itself to stepping back to part time or a regular hours version of the job. Once you step off the treadmill you’re off – you might (and it is a might) be able to get back on if, within 6-12 months, if you decide that stepping off wasn’t the right thing. However, getting back on, if you can find a way to do it, means back to the 70+ hour weeks, being accessible at all times and no generally letting the job dominate (or at least influence) most of your waking hours.

    Everyone I know in this kind of position has a different view on how long it’s sustainable for. And there are a range of different drivers affecting people’s thinking on that (expensive hobbies/habits, keeping up with the Joneses, an attachment to the status of the position, an outrageous (discuss) view on what an FI number looks like, family demands, genuine joy in what they do, disliking what they do less than they dislike the family/spouse and so on). But, for most (there are a few who can target part time type roles in industry or on boards but for most this isn’t really an option) once the retirement or RE trigger is pulled that’s it for the career they’ve spent so much time and energy building. Some might find a different, 2nd, career but it’s generally perceived that such a 2nd career will be a lifestyle option – not necessarily easy or non-demanding etc. but with very different demands and rewards. And, any such 2nd act isn’t expected to contribute to the FI bit anywhere near as much as staying on in the city for an extra year or two would.

    So, definitely FI as a target. The RE is more complex. And, what exactly retire means is very uncertain. Hopefully it means doing something less all consuming but the nature of what that might be and how to find something that is satisfying to fill that space is very much an unknown.

  • 12 IP June 26, 2021, 8:04 pm

    Yes, yes and yes. The journey is the destination. I left the corporate world aged 32 and moved into the non-profit sector. Much more fulfilling and I’ve never looked back. Slow FIRE is for me.

  • 13 Rishi June 26, 2021, 10:26 pm

    Hey All,
    This is a topic close to my heart. I want to be financially independent ASAP (who doesn’t). But I I will never be comfortably FI if I am selling units to fund my needs, as in, I have to sell assets to fund my expenses. The psychological pressure involved in doing this would keep me from ever spending the right amount, and by a miracle, even if I do it, I don’t think I will be happy spending that money. Also, when you are dependent on selling units, the risk of a collapse is early yrs of retirement can lead to catastrophic outcome.
    I have therefore abandoned any thoughts of RE in my 40s. At least early 40s.
    My strategy is to build my investments in the form of income bearing investment trusts, in all sectors+geographies. In my accumulation phase, I am not really paying attention to the dividend yield, as long as it is a non-zero number and rising. I track the income every year and over the years (11 and counting) have tracked the growth in income.
    Currently this portfolio has a natural yield around 3%. I will be FI when I have £50k in passive income. This gives me a target of £1.67M.

    Never selling, and being ok with it, is the only way, I think, I can truly be FI and contemplate RE. This obviously means I am not using my resources optimally, but I am ok leaving it as inheritance.

    Any comments or shoutouts are welcome


  • 14 SurreyBoy June 26, 2021, 10:34 pm

    I presume that because FI is a very individual and somewhat subjective term, the benefit of RE put an absolute metric around it. It made it simple and absolute. The RE suggested “freedom”. Lets face it, you can only really call yourself FI if you can RE in my view. (I can hear keyboards being tapped furiously at this point…..)

    For reasons I don’t understand there now seems to be a question of: but what if I’m FI and I don’t want to retire early? Then don’t. It really is as simple as that. Or, what if I am FI and I cannot find a meaningful way to occupy my life outside of work? Thank your God for a first world problem and find something meaningful. Or carry on working and don’t overthink it all.

    I wonder if the FI or FIRE movement has now developed to a level of proponents that there is now scope for essentially pointless philosophical disputes. (Again, the keyboards are rattling like a busy day on the Somme)

    Earn what you can without destroying your life, stop buying crap, pay off debts, save the FU fund, then invest in something and do not sell when the panic arrives. Rinse and repeat for years until one day you can walk out of your job if you want to or sit there working and be more relaxed than before.

  • 15 E&G June 27, 2021, 12:27 am

    Slow FIRE is surely what most ordinary folk (without the City job or inheritance and with the 2+ children family) is aiming at. In my case at just shy of my 36th birthday then 58 is my early retirement age (and at 10 years before my – current – state pension age is very definitely early despite what you read) with the prospect of a pretty lean FIRE from my early/mid-50s with a very fair wind. Had I been earning good money in my 20s and socking money away at the bottom of the market then things would likely be different but all in all it seems a reasonable deal to me. (And I have no idea why people voluntarily want to trade in all the best and healthiest years of their lives in their youth for the prospect of getting some of it back when they are old).

  • 16 Steve B June 27, 2021, 1:45 am

    Great comments from SurreyBoy & E&G.

    I don’t read the more excitable corners of the FIRE blogosphere but can absolutely imagine the true believers as you describe SB. Your last paragraph sums it up very succinctly.

    E&G makes a very valid point I can relate to as similar age and very “normal” circumstances (Child, mortgage and a single earner for last 5 years) mean embracing FIRE as a concept to organise my financial affairs did not mean I’m forcing hairshirts on the family.

    Frankly when many people have nothing saved for retirement a professional wage earner saving 30-40% for 20 years whilst paying a mortgage and enjoying life (A pleasant holiday every year and simple treats here and there) is still pretty much knocking it out of the park.

    If you don’t feel any real pain and avoid the hedonic adaptation trap you are not going to burn out either. On the flip side an 80% saving rate in my 20’s would have been a sorry state of affairs.

  • 17 LukeM June 27, 2021, 8:56 am

    I’ve happily embraced the ‘RE’ bit, but, yes, it can mean different things. To me, it means retire from earning/doing paid work. I still do loads of things that constitute work – things I enjoy doing for no money.

    I know it’s more to type, but I think you should always spell out *paid* work when you mean paid work.

  • 18 Saudisimon June 27, 2021, 9:11 am

    I am just coming to the end of an experiment in retirement. I’m going back to work. It turns out 45 was too early to call it a day, that I feel lost and unfulfilled without some more direction to my life (don’t judge me on that, I’m just not as independent and interesting as I thought I was), and that I actually enjoyed my job more than I thought, and I hadn’t really got enough to never work again. I’m very glad I did the hard yards early and got to a good place financially, and the lessons learnt and mindset of making the money count will not be forgotten. I am also glad that I tried not working and now appreciate the world of work again. I know that I’ll have to prepare better mentally for when I next call it a day, and I’ll be investing more for income over the next few years. Looking forward to more Monevator exclusives on the subject!

  • 19 PC June 27, 2021, 9:24 am

    @SurreyBoy sums up my philosophy exactly –
    “Earn what you can without destroying your life, stop buying crap, pay off debts, save the FU fund, then invest in something and do not sell when the panic arrives. Rinse and repeat for years until one day you can walk out of your job if you want to or sit there working and be more relaxed than before.”

  • 20 The Investor June 27, 2021, 10:08 am

    @Saudisimon — Thanks for sharing your experiences, it’s always brave when someone admits to missing work on a personal finance or financial independence orientated blog. I’m not at all surprised you miss aspects of earning money/work. I applaud you for noticing it.

    @all — All well-articulated comments are very welcome, including the ones I’m about to slightly glower at 🙂

    But I’m not as hugely impressed as some others when somebody writes a comment along the lines of “yes it’s obvious, just don’t retire if you don’t want to, why are people blogging about it?” or whatnot.

    Clearly these are complicated / thorny issues, otherwise people wouldn’t be writing blogs about it, or chiming in with amplification in the comments.

    If you don’t find them so, then either (a) they’re not issues for you, in which case great or (b) you don’t really understand what the issue is.

    This whole website could be summarized as “spend less than you earn, save the rest in an index fund (and by the way you shouldn’t have voted Brexit… 😉 )”

    There are doubtless a lot of people — including most of my ex-girlfriends — who think it should have summarized as such. But I doubt many of them are regular readers! 😉 🙂

  • 21 EcoMiser June 27, 2021, 10:29 am

    I’m the same. In theory, you only sell assets valued less than or equal to the Total Return on your whole portfolio, so your wealth doesn’t decrease. But, I now own a smaller proportion of the wealth generating businesses than I used to, even if the value is the same as what it was last year, so it is going to have to work harder to give me the same returns next year. Also at some point you’ll run out of shares (in a particular company or fund) to sell.
    For this reason, since I don’t need to sell assets to fund my everyday needs and wants, I’m not selling assets, though I probably should be, to fund some one-off experiences or a bit of hedonic adaption.

  • 22 Middling June 27, 2021, 10:43 am

    I also take the middle road when it comes to the RE bit of fire.

    What I know for sure though is that if it wasn’t for the debate around fire and this site, I would still be under the impression that everyone works until state pension age – I had no idea that ‘normal’ people get to retire early (thought it was only rich people who got to do that)

    I would class myself as below average in terms of salary and position in life – thoroughly ordinary – but I am on the road to an ‘early’ retirement that I would never have imagined possible ten years ago.

    I have been SLOW FIRE when I’ve done lots of travelling (one year spending 100% of my free salary) Ive also been SUPER STRICT FIRE in the years between because FI is extremely important to me. I strike a balance between the two but ensure I cover all my dreams because tomorrow is uncertain (I don’t have an infinite list of dreams either which helps)

    I work in a sector that has yearly bouts of redundancy and live in fear of it being me, I have tried to move position (really tried) but was never successful, so some of us are stuck in a situation that doesn’t make us happy, and sometimes FIRE really is the thing that can make everything better.

    The RE bit of FIRE scares me though – not the no more work part – the turning off the money tap part. I would love to hear if anyone has overcome this (apart from the usual plan your expenses out, SWR etc) I’ve done this and it doesn’t make me feel better!

    Thanks TI for the great articles – investing isn’t easy and Monevator is like coming across a friend in a storm. TA thanks for the recent bond articles l see where I may have dropped a clanger! – sometimes it’s good just to spell it out and I find bonds the most confusing

  • 23 The Investor June 27, 2021, 11:12 am

    @Ecomiser @Rishi — While I’m far more minded towards investing for income than is typical around here, it’s important not to get confused about what is happening when you get, say, dividend income from a company. 🙂

    You write:

    In theory, you only sell assets valued less than or equal to the Total Return on your whole portfolio, so your wealth doesn’t decrease. But, I now own a smaller proportion of the wealth generating businesses than I used to, even if the value is the same as what it was last year, so it is going to have to work harder to give me the same returns next year.

    I understand where you’re coming from here. But remember that the cash you receive if you get a dividend was ‘part of the business’. It was cash on its balance sheet.

    That cash may have provided some ancillary benefits to the company (it may have enabled it to get better credit terms, for instance) or it may have provided existential benefits (e.g. the company may have felt more able to take risks, or to be in a position to opportunistically acquire a rival).

    In the Good Old Days a company’s cash also earned its interest. 😉

    When that cash is transferred to you, it is no longer part of the company. The company’s value has decreased by *roughly the amount of capital it paid out to you.

    It may also now have less ability to, for instance, invest for future growth — and hence for future profits and higher dividends. Often that’s fine, because the company has reduced growth opportunities due to its maturity or whatnot. But again it’s not a free lunch.

    *I say roughly because I believe cash has some non-cash value for a company, alluded to above, but that’s a bigger topic beyond this brief comment!

    I believe there are various behavioural and psychological reasons why investing for income in drawdown has benefits. But a free lunch isn’t one of them. 😉

  • 24 John @ UK Value Investor June 27, 2021, 11:30 am

    I’ve never really understood the need for a hard cut-off between work and retirement. FI just means you don’t *have* to work, not that you won’t ever work.

    For example, my wife recently started working for Age UK, spending about an hour each day driving round the local area delivering hot lunches to a dozen or so old people. She gets paid a bit of pocket money, the old people get fed and wife gets lots of emotional value from chatting with the oldies.

  • 25 BerkshirePat June 27, 2021, 1:59 pm

    ‘there’s multiple tensions ‘
    Tsk tsk! There are….

  • 26 The Investor June 27, 2021, 3:46 pm

    @BerkshirePat — Thanks, fixed now. 🙂

    I’m glad I have one sub-editor out there, I just wish you could get to the errors before they get emailed out! (All the other Monevator contributors get me! 😉 )

  • 27 David June 27, 2021, 4:27 pm

    I didn’t realise you wanted readers to point typos out!

    In last week’s Weekend Reading post you wrote “Monevator is the spiritual home of ‘two cheap diversified tracker funds in a tax-wrapper and your done’ investing”. It should have been “and YOU’RE done” – but I thought it would be annoyingly pedantic to mention it!

  • 28 Algernond June 27, 2021, 5:13 pm

    Great piece this week @TI, and so many great links. At that stage, especially with the shenanigans of the last 1.5 years, of wondering the RE part is actually going to mean. Loads of great comments to mull over.

    ‘Government mooting less generous pension lifetime allowance and tax relief ‘ – sounds rather kind to me. Words like ‘theft’ and ‘scumbags’ come to me.
    More & more, I am heavily regretting sacrificing so much of my salary into my SIPP. Now don’t now why anyone with more than 5 years to 55/57 risk more than matching their employers max. contribution.

  • 29 Jonathan B June 27, 2021, 5:38 pm

    @Algernond, I was intrigued by that article too. I can only imagine that someone in Government keeps feeding the papers with these scare stories – but why?

    The crazy thing is that the LTA doesn’t make any sense in the first place. The point of pensions is to provide an income in retirement – the capital required to generate that income will vary according to the type of pension and the prevailing economic circumstances (DB versus DC, and annuity rates being dependent on bond yields for example). It ought to be sufficient to limit the use of the tax benefits through the annual allowance, though I see there is a case for applying a single rate of tax relief on pension savings regardless of a person’s marginal tax rate.

    In fact, if there is to be a lifetime allowance at all it would make more logical sense applied to ISAs (not that that would be popular among Monevator readers).

  • 30 ZXSpectrum48k June 27, 2021, 6:25 pm

    The pension life time allowance is fairly illogical. You should constrain the tax relief on the amount going in, not the amount at the end.

    Nonetheless, the direction of travel on LTAs has been clear cut for a decade. People can’t act surprised anymore if these ideas get floated every time the fiscal position deteriorates.

    I took the opportunity to protect my LTA at £1.8mm in 2012. Most on this board had exactly the same opportunity. I has to forsake any further pension contributions, including employer ones to do that. I was still in my late 30s. I’d also note that even a £1.8mm, what I will receive at current annuity rates is only comparable to what a public sector worker would receive with the current LTA of just over £1mm. They are not hard done by with a 25x multiple.

  • 31 Seeking Fire June 27, 2021, 7:03 pm

    @ Rishi 13 – “Currently this portfolio has a natural yield around 3%”. Given a global tracker is paying out around 1.3% then you must be directly or indirectly taking a substantial active tilt in your portfolio? Which may or may not turn out to be an optimal decision – am just flagging. Over the last decade that’s probably been a sub-optimal decision but who knows going forward. And I can only echo the Investor @23 – the fallacy that somehow dividends are a free lunch has fed the UK investment industry for decades, which has led to poor results for many investors (me included in the early years…..). I make no forecast about the future and totally buy into how it can create a perception of peace of mind – not fun watching a 50% suck out of your SIPP in a global tracker which will at some point occur. But it’s probably costing a few bps from a SWR at least.

    Really surprised The Investor didn’t pull this from the Credit Suisse wealth report……

    “The contrast between India and the United Kingdom is interesting. Total wealth in the United Kingdom currently corresponds to that of the United States in 1959. It is expected to reach USD 17.7 trillion in 2025, an improvement of only three “USA years,” reflecting the likely effect of Brexit and the COVID-19 pandemic on the economy. As a consequence, we expect total household wealth in India to overtake that of its former colonial ruler within the next five years”

    Now that is an advert for the UK!

    The article was great. I’ve bust well through what most reasonable people would need to be fired but haven’t pulled the trigger for all the reasons highlighted in the Moontower article and a few more. Once you’ve made it you start wondering if you have REALLY made it, what can go wrong and then what’s next. It’s a highly complex issue and a ‘business class’ first world problem – people who are there really are incredibly lucky compared to billions of people across the planet and those who have gone before them too.

    Oh well…one more year 🙂

  • 32 Jon June 27, 2021, 8:03 pm

    Applying both annual allowance (AA) and lifetime allowance (LTA) to both DB and DC pensions just makes no logical sense, and indeed many lobbying groups continue to voice this to the (deaf) treasury.

    LTA for DB. scrap AA
    AA for DC. scrap LTA
    THAT makes a little bit of sense. Still frustrating, but at least it conforms to some sense of proportional taxation, rather than tax on pseudo-growth (AA in DB) or tax on uncontrollable growth (LTA in DC).

  • 33 The Investor June 27, 2021, 8:56 pm

    @David — Thanks, I’ll go fix it haha. The trouble is I’m invariably exhausted by the time I finish Weekend Reading (besides what I read in the week, I do a 3-4 hour burst of reading of my favourite resources, only about 25% of which at the most makes it into the links) so my self-sub-editing is a bit more hurried. Not that I don’t make typos in the other posts (Warren Buffet, anyone?) but Weekend Reading is particularly susceptible!

  • 34 Marco June 27, 2021, 10:36 pm

    It seems likely that many DB pension schemes will need to become AA and LTA exempt. This happened for judges already. NHS will have to follow to stem an exodus of senior doctors.

  • 35 EcoMiser June 28, 2021, 10:45 am

    @TI #23
    It’s partly psychological, don’t spend your capital, as was taught to Abigail Disney; partly behavioural, an automated income is easier than regularly selling assets.
    While it’s true that dividends are paid from ‘part of the business’, in most cases they’re from current profits, so haven’t been ‘part of the business’ long. The cash that’s paid out could have been used to grow the business, but some businesses have matured and don’t really have anywhere to grow to, and paying out a nice dividend helps keep demand for the shares up.

  • 36 Getting Minted June 29, 2021, 12:28 pm

    I think your approach can work for you. A 3% yield is actually a compromise between an all-out growth approach that would yield between 0% and 2% and my own income growth approach that is currently yielding 4.8%. I have followed this approach for fifteen years and have averaged a 4.3% yield and 4.3% capital growth each year. The total of 8.6% beats the UK market but not the World market.

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