We’re back with another interview with a Monevator reader who has attained financial independence and/or early retirement (FIRE). This month John explains how he achieved a very comfortable retirement by working hard, maxing out pensions, and buying property – all while raising a growing family. Plenty to chew on, especially for those aspiring to Fat FIRE…
A place by the FIRE
Hello John! How old are you and are you married?
I’m 53 and my spouse is 59. We have been together 30 years but only married in the last ten. (We didn’t want to rush!) Marriage does simplify things such as wills, defined benefit (DB) spouse pensions, ISAs, and so on.
We FIRE-ed about seven years ago and we still feel financially secure. But world events and double-digit inflation do concern me.
All this positive talk of inflation eating away at mortgages only works if you get inflationary pay rises. FIRE types may have ‘real’ investments such as property. But they probably don’t get many inflationary increases.
Do you have any dependants?
We have three kids and eight grandkids. The kids are 35-40, the grandchildren 3-23. All three of our children went to university and two work in the NHS. Their lives seem a little harder than ours in terms of getting on the housing ladder and settling into adult life. We still provide some financial help. Mostly interest-free loans and below-market rents.
Childcare can be expensive and we’ve helped out a lot during the last seven years. We even got NI credits for four years!
The little ones are now all in school so it’s more drop-off and pick-ups a couple of days a week. I’ve really valued time with the little ones this time round. The first time I was more selfish and work focused.
The older grandchildren seem like a different species. They just don’t grow up as quickly as I remember. Two of the older ones decided against university. One is an apprentice trades-person and the other works in the hospital, waiting for a suitable apprentice opportunity.
Whereabouts do you live and what’s it like there?
We are currently in East Anglia but have lived in the North and South following job opportunities.
The weather is fantastic compared to where I grew up. Rail links are good for the capital.
When do you consider you achieved Financial Independence (FI) and why?
By age 45 I thought I had enough for a fairly ‘Fat FIRE’ – around £5,000 per month – without running down investments in nominal terms, and hopefully not in real terms1.
FI to me means work is an option, not a requirement, and “how much is enough” to achieve that is a tough question for a young FIRE-ee. I needed to be confident that my living standard wouldn’t take too hard a hit and that we’d be robust to changes in interest rates and inflation.
The big question for me was about the gap between the work pensions and exiting date. I had ten years until I could access the defined contribution (DC) pension pot and 15 for the DB pension.
What ultimately decided it for you?
I resigned when I’d truly had enough of working 60 hours per week and being away from home for 150 days a year. The less you need the money, the easier it is to walk away.
Also, as your FIRE fund grows, each extra year of work moves the dial less. At some point you realise your assets earn enough to live off. At that point you start to think about things differently.
What about Retired Early?
I left aged 45 and haven’t returned to any full-time work yet. There has been some interim consulting and contract work and quite a bit of unpaid work with a tech start-up that eventually fizzled out. About 100 days in total paid work – things dried up post-Covid.
I’m still open to day-rate work and short contracts but the telephone calls are much less frequent than when I was working.
If I went back now, my earnings would be lower than when I left. A three to four-month well-paid winter contract every year would be nice. It would make the summers off even sweeter!
Assets: Fat FIRE
What is your net worth?
Current net worth is around £2.8m.
This roughly made up of:
- Four properties at £1.2m total (valued at 90% of the 2022 peak)
- Defined Benefit pension £900,000
- Defined contribution pension £450,000
- Cash £250,000
- ISA £500,000
- General investment account £75,000
- All minus two mortgages totaling £500,000 (@Jan23)
The DC pots have been set to retirement age 70 and I’m in the default funds. The ISA and General Investment Account are in the FTSE 100 and Pref shares (45/55% split).
I’m a sucker for yield. I should have bought a world tracker, I know!
The interest-only mortgages have been my friend for 12 years (costing the Bank of England’s base rate +.75% on average across two properties). But now rates have risen, the £1,800 per month interest is starting to hurt. I’ve had such a good run on ultra-low rates it’s hard to complain.
My main (and only) residence makes up about 20-25% of our net worth. It’s a four-bed detached house at 2,000 sq ft set on a quarter of an acre.
We will consider downsizing again soon. I just need to work out how to take the mortgage with me.
Is your home an asset or an investment?
I consider my home to be an asset. It’s an asset that pays your rent.
I often wonder what percentage of net worth is sensible to spend on your home? We have downsized once already and will probably do so again in the next five years. I’m keen to take advantage of the inheritance tax rules, so I will downsize in terms of size, but probably not value.
My three remaining buy-to-lets are clearly investments and a hassle I don’t need. I would like to sell at some point. But evicting family is unlikely, and a spare flat could be handy if we move abroad.
I sold one property last year with a rental yield of 3% and bought preference shares at 6% yield, so I nearly doubled the income. But I subsequently lost the capital gains potential and about 15-20% in their value!
Earning: High-earner, SAYE, and property investment
What did you do in your regular income-earning days?
I spent my career working in the finance departments of insurance companies in senior technical and director-level roles.
In order to achieve pay rises, I frequently applied for external roles. Sometimes I left and sometimes I stayed with a pay rise.
In all I had about seven different roles over 24 years, and worked at five different companies.
For the first half of my career my average earnings were ~£40,000, including a car and bonus, but excluding the DB pension. The second half averaged around £170,000 (including car, DC pension, and bonus). Total career earnings excluding the DB pension was around £2.5m, before tax & NI.
Other income sources included Save As You Earn (SAYE) share schemes and similar discounted share buying schemes. I tried to invest the maximum. Free money is the best money! I ended up with around £250,000 of employer company shares in total. All sold now, with minimal CGT.
Buy-to-lets happened accidentally at the first, and then on purpose. We relocated with work and we didn’t sell the old house for a few years.
All told we’ve bought nine properties. Four main residences and five rentals. Across the properties there has been around £900,000 capital growth and £250,000 income. Costs are harder to total up!
Did thinking about FIRE influence your progression?
Planning to retire early didn’t impact my career. With hindsight I wish I’d moved jobs sooner and more often to get broader experience.
I should also have been more choosy about my first graduate employer. A good graduate training program can offer a great foundation and career springboard.
Saving: a saver born and bred
What is your annual spending? Do you stick to a budget or otherwise structure your spending?
We don’t actively stick to a budget, but I’m a value-focused Northerner who isn’t keen on waste, and who demands value for money. It’s probably to my own detriment. I’d rather go hungry in an airport than pay £15 for a burger! But your money DNA or blueprint stays with you.
I’m very aware of what income is coming in and try not to spend too far over that level. The large volatile number is travel and holidays. And also gifts to kids.
Our income will increase significantly when I can access my pension pot at 55 and final salary pension at 60. Until then we stick to spending the current income, but we probably could spend more.
What percentage of your gross income did you save over the years?
I don’t have good record keeping for savings and cash flows.
The first half of my career didn’t involve savings, apart from owning two houses, a DB pension, and some employer shares. I recall my net worth was around £250,000 after 13 years, excluding the DB pension. Roughly £200,000 was from the houses, which benefited from the fall in interest rates around 2001.
In the second half of my career I moved to DC pensions. I usually put in about 10% on top of the company’s 10-15%. Towards the end I also put in bonus payments.
Based on my DC contribution and the properties I bought for cash, I estimate my savings rate in the last ten year to be around 35% of work earnings. That includes the company pension element.
As earnings increased and then later as children moved out, our savings headroom increased. We never massively changed our lifestyle – yes to a nicer car, house, holiday, clothes (my wife) but not in a silly way. We’ve only ever bought one brand new car and my daughter has it now 12 years later. The cost of that car works out at about £4 a day so far…
Essentially, most of the money came when we were over-35. By then we were set in our financial ways. It isn’t always a good thing. I’m going to Tesco later to take advantage of an £8-off coupon!
That’s always a good thing in my book! But what is the secret to saving more money?
Earn more, earn more, earn more!
Maximise free money – pension contributions. Don’t buy new cars, learn to cook, avoid keeping up with the Jones’s, and aggressively manage your direct debits and bills.
Savings happen when you earn more than your lifestyle is costing you.
If you want money and freedom, you must focus on your market worth in the job market. Think long and hard – about what industry, qualifications, and training time are required – and then work hard to become expert and knowledgeable.
Add value, be flexible, and move companies often.
Do you have any hints about spending less?
Everyone is different and enjoys different things. I suppose actively think about the cost of something versus how much joy it brings. We don’t think about opportunity cost often enough.
Looking at the grandkids, they seem to have a problem with delayed gratification and labels. They have £100 a month or more mobile phone contracts, £14,000 car loans – this when they’re 20 and earning £300 a week or similar.
I have a friend who is a city lawyer charging £600 per hour. Listening to his lifestyle is completely alien to me (but hugely interesting).
Having too many friends a lot wealthier than you must cause some anxiety and extra spending. So pick your social circle thoughtfully.
Investing: not over-thinking or too taxing
I tend not to check share prices too often and intuitively like the invest-and-forget approach.
Rebalancing hasn’t happened yet. So, I’d say I’m passive in that I very rarely buy or sell.
Most of my investments were made before I found the FIRE websites and before I read the books. A big mistake was not buying world trackers to begin with.
Best investments – or rather lucky ones that worked out well:
- Discounted company share schemes. Put in about £75,000 investment, sold for around £250,000 over a 20-year period.
- Residential property – we must be close to £1m up over 25 years.
- Joining the DB pension scheme on my first job, even though I thought I was leaving within two years.
It’s hindsight speaking, but while I was financially comfortable enough to have gambled a small percentage of my money on crytpo or tech shares in the recent boom, I didn’t do it. I lost £1,000 on Motion Poster shares in around 2000 and didn’t try my luck again!
I have no idea what my overall return has been. I mostly focused on the earnings and tax-efficient savings. Once I realized the size of the DB pension, the pressure was off a little.
Can you tell us more about your thinking about tax-efficient savings?
Tax incentives have had a big influence on my strategy. Pension tax relief at 40-50% was too good to ignore. My timing was fortunate in that the annual allowance taper didn’t exist – and I took Fixed Protection 2014 to preserve the £1.5m limit.
My plan is to drain the DC pot from age 55-60 tax efficiently – no 40% tax – and I will probably get close to hitting the £1.5m in aggregate.
DC pension contributions were around £250,000 for 2006-2014, including the company element. Avoiding 40% tax in retirement is also probably what led me to max out ISA for the last 12 years (for me and my wife).
I do wonder sometimes if I over focus on tax efficiency at the expense of growth.
Wealth: buying freedom
Did you have a target for when you’d consider you’d ‘made it’?
Between my late 30s and my early 40s my ‘number’ was around £800,000 plus pensions. But once I got close to this the number I revised it to £1.2m plus pensions. Mostly because 15 years is a long time to wait for the pension.
In real terms I’m broadly level with the 2016 position. I’ve given up potentially a lot of earnings, but I gained a lot of freedom and time.
There is still a niggling question around my children’s finances. Should I return to work to make their lives a little easier?
Things I wished I’d known sooner, or thought about more:
- Your spending habits change as you get older or retire. New shiny stuff isn’t that important – apart from a nice iPad obviously!
- Enjoy the journey more. Why rush? Some things are better enjoyed 25-40 than at 45-65.
- If you didn’t find time for it when you worked then you probably won’t when you retire. Fitness, learning Spanish, and so on.
- My working 60 hours a week for that last ten to 15-year stint was probably unnecessary.
Do you have any passions, hobbies, or vices that eat up your income?
We used to smoke, which was incredibly expensive. But we stopped after getting a cancer diagnosis. That was probably the catalyst for aiming to retire by 50. It also makes me think about selling the DB pension.
Our main areas of discretionary spending are family, travelling, holidays, and motoring. Motor homes aren’t cheap! I decided against flying lessons and I struggle mentally with the David Lloyd £120 per month membership. So I found one costing £32 with a monthly rolling contract instead.
We don’t have expensive tastes. That’s probably a good thing. An £8 bottle of red is good enough for us.
In the longer-term we are giving serious thought to moving to Spain or Portugal. The older I get the more I like spending time in shorts and in the sun!
Your money mindset
When did you first start thinking seriously about money and investing?
I grew up fairly poor on a council estate in the North. Since money was always short, I’ve always being focused on getting more of it. Probably over-focused.
Being relatively poor shapes you and your thinking, and it’s hard to change. I gambled quite a lot in my 20s but stopped when I started earning good money.
My 20s were focused on kids, career, and trying to get housing security. We spent five Christmas Days in five different houses. Tough with three kids.
Late 20s saw earnings increase. I took advantage of Save As You Earn share plan schemes (SAYE) to the tune of £250 per calendar month. This was probably my best decision as within a couple of years they were worth £60,000, though only briefly. I settled for about £30,000 in the end.
My 30s were about career, bigger houses, nicer cars, and a move from final salary pension to a money purchase DC pension.
From 40-45: my career, the four BTLs, and I started an ISA and maxed it every year since.
Around 45 I left work, downsized property, and tried to invest the proceeds sensibly.
Did any particular individuals inspire you to become financially free?
Mostly it was just that strong desire not to be poor – and to never be poor again.
The best FIRE resources are websites – Monevator, Indeedably, Simple Living in Somerset, and Retirement Investing Today. When I first found these websites it was like I’d found my tribe.
A lot of the old websites have died and their creators have (hopefully!) moved on to better things.
Other interesting reads include:
- Early Retirement Extreme – hardcore saving for retirement, with much to think about.
- The 4-Hour Work Week – read this around 2009 and loved the creativity and different style of thinking. Not sure about the podcast though.
- I’m also a fan of Nassim Taleb, Tim Hale, Mark Spitznagel’s Safe Haven, and The Psychology of Money by Morgan Housel.
What is your attitude towards charity and inheritance?
Seeing my father-in-law deteriorate quickly aged around 80 led my to see that the phrase “go-go years, slow-go years and no-go years” is probably correct.
I plan to help the kids into their own houses. One has already bought a buy-to-let off me, with a 25% discount. As an aside, filling their LISA accounts is great tip for free money from the government.
We also currently help with childcare, holidays, after school activities, and so on. I see this continuing.
An inheritance unknown is the grandchildren. We have about eight, but the number grows! They are aged between 3-23. My gut says to focus on their parents as they are not comfortable enough and let them sort out the grandkids.
Most of my giving or charity is within the family. This may change when I’m older and the kids are sorted. I admire those who tithe but I’d worry about what if I need it later myself? Growing up poor stays with you.
What will your finances ideally look like towards the end of your life?
My assumption is I have 25-30 years left.
I’m aiming to spend or give away down to around £1m in the ISAs and then maintain at that level. We will also probably have £1m in property – which is above the inheritance tax (IHT) main residence allowance – so there will be IHT to pay. I haven’t really given IHT enough thought, I tend to over-focus on income tax.
When we have a greater understanding of our spending patterns as we age, I can see gifting accelerating, because my DB and State pension together should be more than enough.
Mental abilities fade so I want to simplify and de-risk in later life. I’ve thought long and hard about selling the DB pension, as it dies with us. But keeping it also simplifies things. I can’t spend it, I can’t lose it, and it’s guaranteed (mostly).
My ambition is to give my kids the option to retire a little early. Two work in the NHS and should have decent pensions. I’d like them to be mortgage-free by 60 and have the option to give up work 5-10 years before the state pension. I probably don’t have enough to make that happen but I should be able to help.
The money game took a lot of my energy and focus from a young age. It’s funny how once you have ‘enough’ it’s just not important anymore.
Perhaps I’m lucky not to know many very rich people. I can see how that would make you more competitive.
But if £2m is your ‘enough’, and you have £3m, then wasting your life (and time) chasing £10m seems a bit nuts to me.
Lots of life lessons in there readers. Of course John’s balance sheet is at the higher end of the FIRE spectrum and will be out of range for many. But equally lots of our readers might well get there in the long-term. Besides, enough is enough, whatever your enough is, as John concludes. Questions and reflections welcome. As usual please remember John is not a regular Internet commenter and he is just sharing his story to inspire others, not to provoke nastiness. Of course you can disagree on practical matters constructively, but please keep that in mind. One particular person’s situation isn’t a comment on yours. Thanks!
- That is, inflation-adjusted. [↩]
53 with 23 year old grandkids? Are these typos? Ages are pretty central to whole story hence the question..
Hi Rhino, step-children.
Not to dig too deeply but…His partner is 59, the oldest kid is 40 and they’ve been together for 30 years, so I guess the oldest is from a previous relationship of hers. Both her and the oldest would’ve been quite young to have a kid, but not impossible.
Thanks for contributing John. Great reading and especially resonating with me as I can see myself walking along a similar path a decade or so behind.
I’m not topping out earnings yet and very interested in the lesson’s learnt around continued career advancement. In hindsight was the push on with the career progression worthwhile or do you feel it may have been better to draw the line at a higher than average salary, but not well over £100k, and mainly keep the hours and travel more reasonable?
Its something that I continue to wrestle with myself so my motives for asking are entirely selfish!
There is no way we had the money you did at such a young age to be able to FIRE. There’s no jealousy, just nosiness – our first house was 75k and I worked two jobs (hubby one job) to just pay the bills. Did the children’s father contribute, which allowed you to save lots, so young? I have vivid memories of £20 a week to feed the four of us. Whilst I do have the utmost respect for people who can FIRE, I read an article about a young couple who had and waxed lyrical about it, until the end of the article where it stated they didn’t have children and Grandma had left them the mortgage-free house they lived in. Well, yes.
Another landlord. Another inspiring story from this cursed isle.
Surely we can all feel that something is deeply broken with this economic system. Matter of time before it crashes or it crushes us all.
That £900,000 equivalent DB pension that took the pressure off “a little”. Noted that he joined a DB scheme in first job and apparently up to first half of career after which many employers and DC pensions. Retired at 47 so could not have been in the DB scheme much more than 12-13 years? Does not compute?
@David — This is the first time we’ve featured a landlord in this series, although I’m sure there will be more to come in the future. The series is not about the rights and wrongs of how people make money (within limits, I don’t imagine we’ll feature criminals in here anytime soon!) but rather how people played the game with the hand given to them to achieve their own goals. With the aim of educating / inspiring / provoking others.
I’m leaving your comment up because fair enough, it’s a point of view and I do understand where it’s coming from, given the affordability of housing in this country, especially for ordinary young people.
But other readers should note that I’m trigger-happy about deleting negative/pile-on type comments on these FIRE-side chat threads, featuring as they do guest authors who have kindly given us a glimpse behind their closed doors in some detail, who are not regular posters, and who didn’t do it so other people can air their pet grievances.
I consider @David to have made that comment on behalf of everyone who would want to. (Practical questions about the pros and cons of being a landlord with respect to FIRE very welcome of course. 🙂 )
Enough said!
My philosophy on friends and social circles is to hang around with the most successful (which generally means wealthier) people I can. The time I spend around my billionaire friends is like a free university class on making money. They don’t decide how much I spend, I do. But wealthy people with eight, nine and ten digit net worth’s can teach seven digit net worth folks like me a great deal about achieving wealth.
@Steveark — With my hat on as ‘comment moderator’, I confess I don’t know what to make of your comment. 🙂 I have friends of all sorts, and in a previous life met very wealthy people. But from memory I’ve only ever met a couple of billionaires, and then only briefly (and in a professional context). Clearly they have friends, maybe you’re one of them, but this is the Internet where people claim all sorts of things. So a bit flummoxed. 🙂
Thanks for sharing John, fascinating insight into your earnings later in your career.
“If you want money and freedom, you must focus on your market worth in the job market.”
The reality of this statement only really dawned sunk in over the last 24 months. Realising your value and then marketing your value to employers gets you paid. Head down, working your ass off fixing things, solving peoples problems, producing things way above a job spec does not.
Once you bring your head up and reflect on your value, you may just have a great CV to negotiate with.
The confidence to walk into, and walk away from, that negotiation, I got from pursuit of FI (and FU money).
For #9 & #10 – I’ve worked for a couple of billionaires in different industries and I’d agree with @Steveark that while we’re never going to be able to keep up with their private jets, their approach to how they run their businesses, approach opportunities and manage risk is a lot different to the mainstream. It’s often interesting to see how they approach things with a scale mindset (i.e. if I need something, so do others – can I kick off a new business line with existing resources to try it?)
@Alex
Eldest (step) daughter came home on her 16th birthday letting us know she was pregnant – it was a stressful time….
True there is a lot of nonsense on the internet but in this case I just happen to live just outside of a small town in a rural area that sits on an oil field. Two large Fortune 500 corporations grew out of a family business and made some local people billionaires. Two of these are friends I have worked with on various economic development and charitable projects. I also worked for a family of billionaires who owned the company I managed for them and remain friends with the one who managed the group of companies that mine was part of. My jogging buddy is in the $100 Million club, he owns an oil drilling company. My other friends include several CEO’s of large banks, or in one case, of a Fortune 500 corporation. We go on annual baseball and pro football weekends. They are in the $10-25 Million dollar range. Some of them are retired now, like me, and we serve in the same volunteer groups. I only have a few million but they have always treated me as an equal.
@badger
Yes, 12-13 years DB service (60th scheme, NRA 60)
Pensionable salary on leaving £65k and the deferred pension increases by 5% pa fixed – after 25 years this means ~ £45k pa
Last 2 CETV were £8-900k and I prefer the conservative 20x rule the HMRC use (I didn’t discount the next 7 years because the 20x rule is conservative)
@margaret
Maintenance was £15 per child per week – I don’t recall him being ultra reliable, it helped at the time but didn’t move the FIRE dial
@david
I’m not happy about the housing market myself – things a so out of grasp for the younger generation, hopefully 5% interest rates will calm things down
I bought extra properties mostly to house my daughters – i struggled to get on the ladder and wanted house security for them. Their rents have have being fixed at 2006 rent levels – so I consider myself a semi-charity
Nice one, sir!
> Perhaps I’m lucky not to know many very rich people.
That may be key in some ways. I take Steveark’s point about leaning from others and it probably depends on your personality, I can see that those aiming for FAT fire would benefit. Depends where you want to end up, though, because the guys in this Telegraph article about £125,000’ers feeling poor show the hazards.
I wonder if some of the difference is how you grew up. When I come to London now the place stinks of money, and I feel like I did as a kid where everybody else had a colour TV and we didn’t for a long time. And it’s not even like I want the stuff on sale, though getting out of a pub with only bending a £20 note would be nice…
@John, my goodness! You seem to be an amazing person! I want to acknowledge the family values you unconditionally and unconsciously role model in this interview.
I’m also interested in your response to Margaret’s reflective question?
There are sacrifices worth paying and those that aren’t, and sometimes it’s difficult to know the answer at the time?
Apologies, I meant Rosario’s question….
@Steveark — Fair enough, thanks for clarifying. It was only the billionaires that stood out, can’t move for tripping over millionaires in London. 😉
@Alex — Absolutely agree, as per my comments on @Finumus’ pension/IHT article regarding the wealthy couple last week. If you want to learn about fishing, learn from a fisherman. If you want to learn about money, learn from people who’ve garnered money!
I love these articles.
Brings it all to real life. Chapeaux to anyone having the courage to pull out of work early.
A couple of these articles – including this one (did I miss it) have missed off the state pension no? That’s £20k. Big +ve buffer it seems?
Negative comments are generally tinged with the envy, which is a very strongly inbred human trait.
Agreed that a world tracker should be bought.
I also have a soft rule to keep my house at no more than circa 20% of total assets.
the 4% rule doesn’t really work here as a ‘rule’ as your investment assets are different to the research.
once a saver always a saver…
choosing your friends is key as you rightly say….
There’s a 10% chance of one of you making a 100 based on mortality tables so worth being aware of that time frame all being equal……
A fascinating read and some great advice for young folk early on in their careers and thinking about FIRE to earn more and know their market worth. I sadly didn’t do this, which is where I am now, but your story is nonetheless still inspiring.
Nowt wrong with being a landlord and certainly no need to justify to anyone why you have your properties – they were investment opportunities.
Thank you for sharing your story.
Chapeau John – good work fella!
Really appreciate individuals being willing to put themselves out there – and also Monevator to offer up the fire side chat model (but for us Blighty dwellers).
Always great to have real life stories offer a yard-stick to our own plans and philosophies (not suggesting I hold similar assets or levels) – but useful nonetheless.
No cheap shots here – just thanks & good luck.
In the meantime, Keepon….
>I’d rather go hungry in an airport than pay £15 for a burger! But your money DNA or blueprint stays with you.
That resonated with me and made me smile. I will pay more for things that are worth it, but resent paying over the odds for rubbish. (Though having said that, these days I enjoy my £8 pound red wines but have begun to appreciate what you get from increasing the limit occasionally).
But a great personal story, there is a certain amount of luck but also a certain amount of generosity to family.
Maybe worth re thinking the order of spending down assets? Hold on to the DC pension, spend down ISA first? You may have more than you need and pension then useful from an IHT perspective?
It is impressive you could cut off such a high salary so early. OMY so tempting in that position. That takes a lot of guts. But then again, maybe the workload meant it was a necessity?
Thanks for sharing John and congrats on creating the lifestyle you have. As someone who is childless, I always marvel at those who seek to provide for their progeny.
I was interested in your comment about money DNA. I grew up poor too, and I am sure that is what drove me to secure FI, because now I know I “should” never need to worry. However, now when my wife wants to scrimp on something I find myself reminding her we’re technically millionaires, so maybe we could stretch to that £9 bottle of wine!
Best wishes for your ongoing retirement.
@ Rosario @London a long time ago (thanks for the kind words)
Thanks – it’s a tough question.
There’s a few things to balance:
– being happy that you pushed yourself hard enough and didn’t “underachieve” v your potential
– Risk of pushing too hard and “damaging” yourself (Peter principle is a real risk)
– What makes you successful at X doesn’t always work at (x+1)
– Not many well paid jobs are divisible or paid hourly (working 60 hours full time doesn’t mean 17.5 hours is possible)
Could I have earned more “yes”, could I have got one more promotion “perhaps”, were their family and health risk doing 5+ more years “probably”. Would I have regretted not doing my last big job “definitely”
Personally, I felt the time sacrifice became too high versus the extra money I probably didn’t need.
I do think it’s important to enjoy the journey – and if success, personal live and financial aspirations can be met without selling too much of your soul, then it sounds worthy of a lot of thought.
Ps it can be tough on the Ego to forgo a promotion only for one of your peers to become your boss…
Pps keep your technical (and software) skills if possible, it makes contracting easier, and that is paid by the day/hour
I think what makes this difficult to replicate is the DB pension. It provides a floor at £45k/annum from age 60. John values it as £900k but given the best 3% escalation annuity for a 60 year old is 3.7% then a 5% escalation annuity would have to be more like 3% max. So the DB pension is really worth £1.5mm+. A 5% escalation annuity is very generous.
Plus if John is 53, and has had the deferred pension for 25 years but also worked for 12-13 years (see #15) before that then he must had been enrolled at 16. To get enrolled in a DB pension paying 5%/annum at 16 was an incredible “investment”. Nicely played John!
Well done John!
60hr weeks, 150 days away at senior level with 3 kids and relocations? I think some people need to reflect on how hard and all consuming that is. You earned your fat fire, I hope you get out to Portugal and wear your flip flops with pride.
FWIW I tried the 2-3 month a year consulting thing for a while but found the transition going into a project way more stressfull than I wanted to deal with.
Impressively fat FIRE given you took on a family at a very young age. I guess you got a few lucky rolls : employer share price rises, house price boom but you needed to have the stake amounts there in the first place
Thank you for sharing your journey and observations John.
It is always interesting to see what others have done and are considering doing next.
Great achievement to be where you are at your age and all self earnt. Top stuff.
Thanks for sharing John, really interesting and congrats that all the hard work paid off!
I say this every time but I love this series. Its a nice dose of encouragement as well as a good opportunity to celebrate someone’s success!
@John
Yes tough question and a tough decision. As you allude to it’s a very complex choice especially if you are mindful about balancing a family and career. Many don’t think about the balance, they are head down, ego driven and progress as hard as possible at the cost of family relationships. You seem to have struck the balance of maintaining a healthy family life whilst progressing beyond where I currently am career wise. As comment #30 that’s bloody hard work and all credit to you. I’m not sure I’ve got it in me hence the question. It does demonstrate the value in these posts, its not just the numbers that are important, it’s the story behind them. Thanks again for sharing, very interesting and valuable.
Another very interesting read.
Good to know I am not the only one trying to steer clear of 40% income tax!
Really great series @TI.
Thank you John nd TI, I really enjoyed comparing my journey with yours. A lot of it rhymed!
I’m going to go out on a limb here and say I don’t find these sort of stories very inspirational. The problem for me is nothing actionable comes out of them. I much prefer stuff like the recent article on ISA’s vs SIPP’s. There is a choice that I will be making next month whereas I can’t go back in time and tell my 16 year old self to chose the other job because it has a DB pension scheme.
I’ll hold my tongue on being a landlord.
@ Rhino
I’ve not given IHT enough thought and have been focussing on avoiding HRT.
ISAs are hugely attractive for this purpose, even recognising IHT is likely – if I assume making it 75+ years then the kids will pay income tax on withdrawals anyway. So I’m not sure if the real life difference is significant.
It also feels counterintuitive to spend tax free income/assets to end up drawing down SIPP income at 40% tax. My current plan is to empty as much of the DC pot over 55-60
I probably did 2xOMY before the next round of internal merger pushed me to make a decision – commit to 2 more years or leave now and let someone else have the job
@Fage
DB pension earned between ages 22-35. The 5% fixed escalation only from ages 35 to 60 (while deferred), then RPI up to a max of 5% when in payment. Pension starts when aged 60 (<7 years time)
@Nathan
Yes, 2 relocations, not all with kids. All consuming is an accurate description of how it felt.
@other
Agree that year of birth, intelligence, choice of employer, employer pension scheme are mostly good fortune.
Money role models are a gap in most peoples lives, especially for the working class – we should have a “money” GCSE, who wouldn’t be interested in money aged 14-16.
@John:
I agree with your preferred order of emptying SIPP before ISA. Having said that, I consciously put IHT to one side when considering this matter.
IIRC, you are at least the second person in the last few months to explain [in Monevator comments] that they have a generous fixed rate of revaluation for their DB pension. Nice! I am sure the scheme would be more than happy to get you off their books via a CETV!
Can you take the DB earlier than the NRA? I ask as this could be one way to manage your HRT but at the cost of shortening the window available for running down your DC. Alternatively, can you delay starting your DB too? A tricky balancing act – but not the worst problem to have.
Have you considered transferring the deeds of the properties your kids are living in to their names? Would that not mean no capital gains tax and also the properties won’t be subject to IHT if you live for 7 years? Your kids could pay you rent in a roundabout way.
Really interesting to compare one’s own life journey with others.
The work life balance aspect is something I did the opposite with I turned down promotion to avoid working longer hours and the higher up the ranks there seem to be more workaholics that expect everyone else to be workaholics and available 24/7. I didn’t really want to deal with those sorts of people on a daily basis.
Not sure this was the right thing to do as I maybe could have retired early…. so is it better to have less time when you are younger when your kids are growing up or less time when your grandkids are growing up …
I guess it’s each to their own.
Thanks for sharing.
@marco – gifting properties to the children would certainly be a disposal for CGT purposes. Stamp duty would be payable too aiui.
It would help with the IHT though, assuming no untimely death.
Ah, those private sector DB pensions. That was certainly a moment in time for some people in a lucky generation. Frankly with a deferred annuity of £45k arriving at age 60, who wouldn’t be able to FIRE?
@A1Cam
Taking the pension early looks fair but I need the time to run down the DC at ~15% tax. I thought briefly about taking it later but have some concerns about longevity.
I’m erring on the side of taking the DB tax free lump sum too – as it creates some headroom in the 20% tax band, and the multiple is ~ 24x lost pension amount
@marco
I’m updating the Declaration of Trust currently to give my wife 90% of the beneficial interest in our property income, and gifting 20% to my daughter (of the house she rents)
As VGF says, gifting can still give rise to CGT (hence the 20%). I’m not ready to gift 100% – and if we did I wouldn’t be able to charge rent (legally), so I will probably gift a % per year to minimise CGT (and sell to her when she’s ready)
@kwaker
We had a Board awayday with various “sharing” sessions – i thought I was hard and unfeeling but most were borderline sociopaths..
So wise move and your part – grandkids are best, you can give them back when you’ve had enough!
@ vanguardfan
Harsh but true – Just that troublesome 14 year gap to fill, and earning the pension
The DB was ‘earned’ by having the right sort of middle class job at the right moment in time. It didn’t need savings discipline or luck with investment returns. And I would count retiring at 60 as early, given everyone under 50 has a SP age of 68…
Don’t take the comment personally, it’s the very opposite (I myself have a DB coming at 60, not quite as generous as yours but it gives me the similar privilege of longevity insurance and very adequate floor income). Its simply pointing out the massive role of cohort effects, and what a fortunate generation the over 50s have been (look at the data!)
When I look at the cost of housing and childcare, and the lack of structured career opportunities, it seems many young people will struggle to have a home, a family and a retirement. My own kids included.
@John (#43):
I am pretty familiar with that playbook, and I would have asked you next about the DB PCLS options – so thanks for the info. Is 24 the gross commutation factor (CF) at age 60; ie what it costs the scheme, rather than the net CF – ie what it costs you? IMO DB commutation is clearly best VFM to a HR tax payer! Also, CF’s are usually age dependent; the normal relation being the younger you are when you start your DB the higher the CF. FWIW, I have seen a lot worse than 24 for the gross CF at age 60!
I assume your DB does not allow you any form of partial CETV or phased retirement? Both of these options, if available, could also be worth examining.
The other thing that occurred to me was that you may not actually be able to fully run down the DC scheme at BR in the time available (especially if you have other income sources, such as rent). In which case I would want to understand what exactly my reliefs were on the way in. This is because I think you mentioned tax relief above at up to 45-50% and leaving that money (plus growth, etc) in a DC scheme liable for HRT would still be a win in my book!
Lastly, whilst the LTA has gone for now you I reckon you will need to do a bit of crystal ball gazing and IMO your first decision may revolve around exactly how you liberate the DC e.g. in a staged manner or one big bang. And then how you draw down each such liberated [IIRC, crystallised is the correct term] tranche ie flexible drawdown or UFPLS.
Lastly, if any of your cash is held in cash ISAs this may provide some additional flexibility as these can be converted to stocks and shares ISA’s.
@a1cam, thanks
I can see online all the options for ages 55-62 – pension with/without lump sum, lump sum and can calculate the implied commutation factor (cash free amount / gross pension reduction). They currently range 25.5-21.3 (22.5 age 60), all down 15% versus 2022 numbers!
I asked about selling 50% of the DB benefit a few years ago but it wasn’t possible.
The DC pot is likely to be £150-£200k after taking the 25% tax free lump and 6x £45-50k pa between ages 55 & 60 (rental income is being passed to my wife) – I’ll need to take a view on stomaching some 40% tax or letting it roll up, hopefully the HRT threshold will move or the DB lump sum will create £10k extra space in the 20% tax band
Isa is virtually 100% shares and the cash outside of ISA is with YBS earning 3.25%, waiting to fund future ISA subscriptions or paying off some of the mortgages
It’s an interesting optimisation problem…
Do you have a Dc/DB/lump sum/ISA plan?
@John:
Re: “It’s an interesting optimisation problem…”
Indeed it is. And provided you have a good idea of your future income needs then (at least in principle) it is entirely solvable.
I am six plus years into my plan and the frequent changes in the “rules of the road” and unprecedented “events” are notable. IMO staying flexible will be important for you too.
Thanks for clarifying the split of your DC pensions.
It now looks doable and assuming you take a DB PCLS such that your annual gross DB pension is c. £35k then there should be BR headroom out to when you start your SP too.
As I am sure you appreciate, any such plan is very sensitive to inflation & inflation differentials too, e.g. tax bands (when not frozen) have usually been linked to CPI; but your DB indexation is RPI related and the SP has the triple lock too. IIRC, RPI becomes CPIH is 2030 and who knows how long the tripe lock will survive. Changes are already to some extent built in!
A few questions / points for consideration:
Is your DB indexation solely related to limited RPI or are there collars, fixed rates, etc involved too?
Does taking a PCLS from your DB impact any survivor pension?
I assume you will be using the lump sums to pay down some of your mortgages?
Well done @John
A successful family man who knew where to draw the line with money vs everything else. I tip my hat to you sir.
Im 33 and currently sitting at around 1.1 mil. I hope to be in a position similar to you in 20 years. A lot of the sacrifices I made were intentionally before I was settled and had kids.
You can sell your soul, and even with the success you’ve had, you haven’t.
Congratulations, and all the best for the future to you and your family.
Thank you John and The Investor for this interview. John, I appreciate your sharing your journey and insights on personal finance.