What caught my eye this week.
Those of you who needed a lie down in a dark room after the middle class etymology wars we had a couple of months ago might want to pre-load on painkillers before clicking though to hear what FIRE V London thinks it takes to be proper rich.
The ever-interesting F-ing-Fat-FIRE blogger has re-run his numbers, and he now concludes that:
“…based on the people I know who are at least 2x as rich as me, I would say the amount needed to be ‘enough’ is around £50m. That seems to be the number where conventional economic activity stops, and I don’t discern any perceivable ‘just a couple more years’ nor any obvious pegging.
£10m definitely isn’t enough to reset mindsets these days – though it might have been 20 years ago.”
Clearly bonkers numbers, even for most of the considerably more affluent than thou readers of Monevator.
But I’m sure plausible given the circles FvL moves in. London is like that.
Of course we can all see that the hedonic treadmill is permanently jammed on a steep incline – and that if we can afford sufficiently powerful binoculars then we’ll always be able to spot some Joneses down the road who are much richer than us.
Clearly it’s an infinite game you can’t win. Even the world’s temporarily richest billionaires invariably suffer reversals.
But it’s easier to sound wise about this than to consistently live it.
Doing my own thing. Mostly.
Personally, I occasionally get jealous of bloggers who made a fortune – or even just make enough – as well as university friends who made their nut at global banks (often in technical roles, not even profit centers) by their late-40s, and the fund managers I once daydreamed of becoming.
Not to mention all the self-made multi-millionaires I’ve seen do that deed in what we shall ironically call my professional life.
So the feeling is there sometimes, fine. But I acknowledge it and it passes.
To that extent, rather some of them than me.
Have a great weekend.
p.s. Judging by the comments last week, we have quite a few 1990s indie music fans among our subscribers. If that’s you, then you might be interested to read about what some cassette tapes from the era are fetching at auction. I once owned six of that top ten in physical form – and at least three as cassettes, including Pearl Jam’s Ten. Alas all sold long when I ‘liquidated my position in solid-state music’, as a friend put it at the time. Ho hum. Fine. Again.
From Monevator
Warren Buffett explains why passive investing is a winning strategy – Monevator
From the archive-ator #1: Stress testing your mortgage as rates rise – Monevator
From the archive-ator #2: An investor among the anti-capitalists – Monevator
News
Note: Some links are Google search results – in PC/desktop view click through to read the article. Try privacy/incognito mode to avoid cookies. Consider subscribing to sites you visit a lot.
Interest rates hiked by 0.5% by Bank of England in tenth consecutive rise… – Sky
…as CPI inflation comes in at 8.7% for a second month in a row – Which
BoE boss denies wanting a recession – BBC
UK lenders agree to 12-month grace period on repossessions – Guardian
Mortgage crunch sends average house price down £7,000 from peak – This Is Money
New Which? study puts comfortable retirement income at £20,000 a year – Which
Council four-day week trial may have saved £333,000 – BBC
Call to make short naps part of the working day – Guardian
Hong Kong’s multinationals and global funds prepare for the worst [Search result] – FT
A growing weighting towards target-date funds has driven higher equity allocations among participants in Vanguard’s defined contribution retirement plans – Vanguard
Products and services
What to do if you face mortgage misery as rates rise… – This Is Money
…and how other countries’ rates compare with the UK – Guardian
New one-year fixed-savings deal pays 5.7%; FCA protected – This Is Money
Open a SIPP with Interactive Investor and pay no SIPP fee for six months. Terms apply – Interactive Investor
Premium Bond prize rate increases to 3.7% in July – Be Clever With Your Cash
What really happens when you return an online purchase – Slate
Santander withdraws 1-2-3 product, launches new Edge account – This Is Money
Open an account with low-cost platform InvestEngine via our link and get £25 when you invest at least £100 (T&Cs apply. Capital at risk) – InvestEngine
Homes for sale near lidos, in pictures – Guardian
Comment and opinion
25 years of the £2 coin – Bond Vigilantes
What role should cash play in your portfolio? – Morningstar
“I moved abroad to save but still can’t afford a mortgage” – BBC
How one coupled unretired – Humble Dollar
Inaction is not inactivity – Best Interest
Five reasons to contribute to your child’s pension – The Orchard Practice
The joy of cooking – Money Talks
The science of happy retirement [Podcast] – Standard Deviations via Spotify
What is the safest investment asset? [PDF] – Cambria
When simpler isn’t better [Note: US tax issues, linking for the thought process] – Cullen Roche
Smart spending mini-special
Swimming pools make you happy – Klement on Investing
Looking forward – Humble Dollar
Naughty corner: Active antics
Active management is no ‘sham’ [Nice story, shame about the data. Search result] – FT
Will private equity blow-up in 2024? – Behind The Balance Sheet
Meet the ex-social worker turned short-seller – This Is Money
Excellence gone missing [PDF, essay] – Richard M. Ennis
Is Bitcoin worth the gamble? – Morningstar
The impermanence of permanent capital – Capital Allocator
What sectors are seeing the most seed-stage startup funding? – Crunchbase
Kindle book bargains
A Man for All Markets by Edward O. Thorp – £0.99 on Kindle
The Tetris Effect: The Cold War Battle for the World’s Most Addictive Game by Dan Ackerman – £0.99 on Kindle
Liar’s Poker by Michael Lewis – £0.99 on Kindle
Love, Pain, and Money: The Making of a Billionaire by John Caudwell – £0.99 on Kindle
Environmental factors
ESG investors play the long game [Search result] – FT
Coastal flooding will be more extensive sooner than we thought – Hakai
Farm the ocean (and soak up carbon) – Uncharted Territories
How America solved its first air pollution crisis – Vox
Mosquito-borne diseases becoming increasing risk in Europe – BBC
The silent rise of solar power – Contrary
Robot overlord roundup
AI is a lot of work – The Verge
The man behind Alexa’s voice on what AI can, can’t, and shouldn’t do – Semafor
“I used AI to double my income in a year” – Business Insider via MSN
Psychedelic reboot mini-special
Psychedelics reopen the social reward ‘critical learning’ period [Paper] – Nature
Easier take: the scientist who sends brains back to childhood – Wired
How a dose of MDMA transformed a white supremacist – BBC
The history of psychedelics and why it matters – Open Access Government
Off our beat
The happy art of grandparenting… – The Atlantic via MSN
…and the best workouts to do with your aging dad – Inside Hook
How the Brexit vote would go today [Spoiler: Remain] – Guardian
Five stars or bust – Oversharing
Cultivate optimism – Abnormal Returns
Why you believe the things you do – Morgan Housel
Avoid these six sunscreen mistakes – NPR
The rapid decline in global birth rates [Infographic] – Visual Capitalist
Nick Drake at age 75 – The Honest Broker
3 Body Problem official trailer [Video] – via YouTube
And finally…
“Why can’t people have what they want? The things were all there to content everybody; yet everybody has the wrong thing.”
– Ford Maddox Ford, The Good Soldier
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F-F-FIRE. Love it, got a feeling that’s going to stick around!
Like most things, this is not new, here is Felix Dennis’ definition of wealth from over a decade ago (I guess you can at least double these numbers for the effects of inflation). I think you’ve even quoted this before somewhere in the blog:
“Net worth Definition
£1m – £2m The comfortable poor
£3m – £4m The comfortably off
£5m – £15m The comfortably wealthy
£16m – £39m The lesser rich
£40m – £74m The comfortably rich
£75m – £99m The rich
£100m – £199m The seriously rich
£200m – £399m The truly rich
£400m – £999m The filthy rich
Over £1bn The super rich”
https://www.fnlondon.com/articles/felix-dennis-rich-definitions-20100317
Love it! I know the familiar caveat that historical results are no guarantee of future result but as it has been 9 yrs…. Historical Brexit polls have not been a reliable indicator of previous results….
But… This time could be different…..?
My feeling is that FvL should keep ‘any obvious pegging’ behind closed doors, regardless of how rich he is?
@Rhino
“FvL should keep ‘any obvious pegging’ behind closed doors”
That made me snort my beer out of my nose
Linking together the buying a swimming pool and the Fire V London article…
I am lucky enough to own a swimming pool and being in it with my family on a weekday afternoon helps me cope with the comparisons to previous bosses who, may have a net worth of about 80x of mine but, are still in the office without their families.
I realised many moons ago that geoarbitrage makes a huge difference to wealth. A London based billionaire cannot buy the view, peace and quiet that I enjoy in my rural location – and I would not swap places with them. I have no need of a swimming pool with all of the accompanying hassles when I have my choice of two wild swimming spots within 2 miles of here, and the sea no more than 3. I have enough to cover all of my modest costs/hobbies for the remainder of my life. It’s not to say I haven’t tried some of the more expensive things in life, and still occasionally indulge. But mostly I’m not that interested.
50m? What use is that? I couldn’t even run a lousy 30m yacht properly with 50m.
The embarrassment would be unbearable.
@Naeclue
At a yacht safety training event in the 1980s I remember an instructor saying if you can’t afford all the safety gear buy a smaller boat. Teenage me obviously wasn’t buying any.
What drew me to FIRE in the first place was at least as much the ‘consume less, ffs’ awareness as the financial or retirement stuff. Obviously that ‘less’ is relevant – I recently retired on a small fraction of kinds of figures the ever-entertaining FVL is talking about, but it’s still a substantially bigger stash than most people seem to manage and I think my spending is more or less in line with national averages. Still, I have noticed a recent fashion in Fire blogs is ‘learning to spend’ – overcoming the frugality which got someone to FIRE in the first place. Probably just misplaced romanicicsm, but I do somewhat miss the earlier incarnation of the movement which seemed to have more of a commitment to a simpler way of life as a foundational component. Horses for courses, I guess; striving to get to 11 million in London would be a nightmare for me, but equally I’m pretty sure driven urbanites would quickly tire of my ascetic existence oop North. More pushbike than yacht!
Never has that Joseph Heller quote seemed so apposite.
We can all have something the 50m chasers will never have.
And I speak as someone who has far more than I will likely be able to spend, and I do feel grateful that I can effectively spend without worrying about the cost Which I generally do ( feeble efforts to reduce carbon intensity notwithstanding).
I think if you’re spending a lot of effort coming up with new ideas to burn through cash, something has gone very wrong. As we saw this week, sadly.
I’m reminded of Bloomberg (the American billionaire) who didn’t think he was rich, just well off. It turns out that there are nine other billionaires better off than him living in his apartment building.
I went for a swim in Petersfield Lido just the other week and can confirm it is absolutely glorious. It’s heated, which is unusual for outdoors, so particularly luxurious. If anyone wants to meet up there for a few lengths and a coffee then shout! I went on a Friday morning and pretty much had the place to myself – off peak living..
Surely it’s how much you spend i.e. consume, that determines how much you need in retirement? And we should all be consuming less.
As for FvL, his lifestyle is not relevant to me. And I always think there’s a dissonance in a his blog. Ho-hum.
@brod it’s ghoulishly fascinating though…
My comment on second homes, yachts, swimming pools – they are so time consuming and tedious to maintain.
I have been actively considering a second home but I always come down to – do I want to spend more time maintaining a second house and all the domestic tedium that involves? How much of it do these guys actually do themselves rather than outsource to wives or staff? (In my experience there’s a limit to what you can outsource, you still have to oversee and guide staff/agents).
The joy of the simpler life is freeing up time. The ultimate scarce resource
Your health is your wealth and no amount of millions or billions can make up for the loss of it. The same can be said for family and close friends. Too much focus on stacking up enormous wealth seems to me a sign of having lost one’s way, though I can understand that could happen all too easily depending on circles mixing in, and perhaps any real understanding of what truly matters in life only comes naturally with age and/or unfortunate experiences.
Thank you @monevator for the spotlight! And thankfully you haven’t triggered any body image issues, quite.
I am feeling a bit guilty that I forgot to namecheck your excellent piece ‘Earning learning’ about your £600k income mate in my post. That was the prompt for me to publish my post – which has been gestating for quite some time.
“New Which? study puts comfortable retirement income at £20,000 a year”
Sounds about right. My parents are probably on about that much between them and they’re quite happy.
“Council four-day week trial” & “Call to make short naps part of the working day”
Surely this calls for at least one avocado-toast millennials gag?
@Neverland, guess I’m comfortably poor though ‘comfortable’ just means you have replaced one set of concerns with a different and less ‘physical’ set.
There should be a law of the conservation of worry.
Thanks for the links. One item that struck me this week was an article in the FT about declining sperm counts globally over the last 50 years. Plastics are in the frame. When did plastics become truely unbiquitous, the 1950’s ?
It is hard to grasp how revolutionary technical changes have been over the last 80 years or so ( just a bit more than my life time), nevermind since the industrial revolution ( about 3 of my lifespans back to back). Hang on, it could be a rough ride!
@TI always look to the left, never to the right. To the right lies only the path to unnecessary frustration and avoidable unhappiness. No good can come if it.
Under Felix Dennis’ 2010 scheme (not updated for inflation), as reproduced above by @Neverland (#2), I’d be categorised as ‘comfortably poor’, and our household somewhere inbetween that and the very bottom of ‘comfortably off’. But I just feel immensely grateful and very fortunate for what we’ve got, and quite guilty about it when I see the country immiserated by 13 years of Tory misrule, corruption, incompetence and self-centred cruelty; with the health service on its knees, rough sleeping visibly up, and so many millions reduced to a state of precarity.
I’d be quite prepared to pay a reasonably and progressively tiered wealth tax, and would even be happy to do so if I could be assured that those who are hundreds to many thousands of times wealthier could not avoid it, and that the money was spent where it was most needed (and not on ill thought through and poorly executed vanity projects, like HS2).
@G’s (#7) & @JP’s (#17) comments have it right. Focus on what brings happiness, not on what others have or may think of you. Money is useful (at least up to a point) for giving security & in its utility to create easier options. But envy, regret, looking to others for worth and greed are all toxic, and best avoided.
BTW: If any of this seems a bit disjunctive with avidly reading an investment blog, then all I can say are:
1. That finance and economics are both important subjects per se.
2. That this is the most thoughtful, original and independent finance site that I’ve found anywhere in the UK; and, in over 15 years reading it, it has always stood out for its unrivalled quality, practicality, good sense, & clear consumer focus.
3. From an intellectual PoV, I enjoy the macro, the technical & the philosophical aspects of finance & financial markets. I’m not in finance, but it seems a rather more interesting & engaging area than my own profession.
Looking at the links, the Cambria article is well worth reading and internalising, especially in the context of the discussions in recent threads on ‘safe’ assets.
@Rhino #14
> It’s [Petersfield outdoor Lido] heated, which is unusual for outdoors
heated? In a June heatwave? WTF? I know we get softer the further south we go in the country, but that’s seriously slack. Even the sea’s probably tolerable off the south coast. Enjoy!
I don’t doubt that FIRE v London’s post was sincere, but I suspect that to most people outside the City of London and/or personal finance worlds I’d imagine it sounds like a ridiculous parody.
As others have said, financial wealth isn’t the only kind of wealth, and I’m fairly sure that other kinds are significantly more important in the long run (health and relationships to name two).
In some circles (often those with higher incomes in my experience) people can collectively lose sight of that and sacrifice a great deal in other areas of their life in order to ‘keep up with the Joneses’ financially. Ultimately if that really does bring them joy then who am I to judge, but the people I’ve known with the highest incomes/net worths have, in general, been far from the happiest.
I suspect the financial comparison game is one where the only winning move is not to play.
@TLI. “I see the country immiserated by 13 years of Tory misrule, corruption, incompetence and self-centred cruelty …. and so many millions reduced to a state of precarity. I’d be quite prepared to pay a reasonably and progressively tiered wealth tax”
I have much sympathy with what you say and I would have agreed a decade ago. I still like the idea of a LVT on undeveloped land.
Let’s be clear though: the country voted Tory 4 times in succession. If once is a mistake and twice is a decision, what the hell is 4 times? They had two chances to vote Corbyn and move the narrative to the left. They preferred BoJo, JRM, Patel, Braverman etc. They wanted what the Tories were offering, and they got it.
They can’t keep blaming their woes on politicians, bankers, immigrants, the “other”. A significant proportion of this country need to look in the mirror, see the problem and take responsibility for changing it. Until then why do I want to pick up the tab?
@ermine – I did ask and they aim to keep the pool at 27 degrees, that’s possibly not requiring too much additional work from the boiler with this very warm weather we’re enjoying. They’ll be happy to keep their gas bills down. It’s a community run thing. I swam Brockwell Lido (unheated) in early March once at a balmy 6 degrees. That’s a different kettle fish altogether. I have a feeling the sea is going to get very warm again this year (as was last year).
Super interesting post (both this and FvL’s) and comments.
I’m still unsure about my personal FIRE aims but I get the feeling most important to me is the freedom and lack of dependency. Can I continue to live my rather ordinary semi-rural northern commuter lifestyle without the need to work full time? Once I get to that point then it really is a trade off. How much time (years working) is a small increase in lifestyle or safety net worth? I honestly think beyond the comfortably well off range it’s not worth it.
For an early 40’s few years to go before FI type who earns a top 5-3% salary I don’t think it’s worth what I’d have to give to earn more, and not worth working another 5-7 years of my 50’s to double my nett worth.
Wealth has such diminishing returns almost all the value comes up to £5m for me perhaps, £10m in London. With 80% of it up to £2-3m. Beyond that it’s really not worth bothering if your income is anything other than maybe the top 0.5%.
What was Tom’s comment to Greg in succession about 1m being a terrible amount of money.
“couldn’t even run a lousy 30m yacht properly with 50m”
Always figure these vast sums are less about keeping up with the neighbours or running yachts and much more about ensuring your household, children, and their children never need to work as long as they live.
I was talking to a legit rich friend a few years ago, and he said a big thing you worry about once you reach ‘that’ level is more or less state failure.
Mildly, currency collapse or Corbyn-ism on steriods. Maximally, full coup.
So at a certain point they want to duplicate everything in another country, and then have another wodge in a Swiss / Cayman / whatever vault just for luck.
It’s understandable on some level I suppose, but it sort of underlines how the goal posts never stop moving.
(Also arguably why some of these guys (clearly not all, or even most IMHO) can seem to become a bit disassociated from the wider community, especially if they started out pretty isolationist.)
@TI. The main reason for accumulating more in the last decade is really the kids. When your dream vocation was ruined by lack of cash, you want them free of such a constraint. Plus, when you’ve sat next to enough people from wealthy families in UK/US/Europe, you realize that somebody having your back financially from birth completely changes the way you perceive risk. I always go back to one guy from Eton who I sat next to about 20 years ago. He considers himself self-made (worth probably £100mm) but the £5mm house he inherited from Grandad in 2002 plus the knowledge he would get at least another £10mm from his Father at some point just made him take career risks I could not have imagined.
UK state failure has only really reared it’s head since 2016. There is a rise in nativist / neo-fascist type politics pretty much everywhere. The US, parts of Europe (Hungary most clearly, but now Italy, Poland etc). It’s easy to see the UK drifting the same way (and the Tories play to that). The answer is to have bolt holes and money stashed offshore. You’ll know you’ll lose most of it, but hope some of it makes it through and allows you to start again.
@ZXSpectrum48k (#24): would you feel differently about wealth taxes if the monies raised by one in the UK were ring fenced into a Sovereign Wealth Fund with, say, 70% invested into ESG global equities via direct indexing (perhaps with the benefit of some clever hedging from your colleagues in the City) and the balance of 30% used to fund the state’s share of a ‘half and half’ Public / Private partnership controlling a UK equivalent of the US Advanced Projects Research Agency (1958-72), with a go anywhere & do anything mandate to raise the UK’s trend non-inflationary growth rate/Total Factor Productivity?
In Oxfam’s January 2023 briefing paper “Survival of the Richest How we must tax the super-rich to fight inequality” they estimate (using data from Wealth-X and Forbes for 2016-21, see figure 17, on p.41 of the report, and methodological note 3.17 on p. 27 of the accompanying Methodology Note) that an annual rate of wealth taxation of 12.8% would have been needed to keep the wealth of the world’s billionaires constant in real terms during those six years.
They also calculate (methodological note 1.4 on p. 5) that for every $1 in wealth which was gained by the world’s poorest 90% (numbering 7,121,399,400 people in 2020) between 2020 and 2022, the world’s billionaires in 2020 (1,812 people) gained a staggering $1,682,709 extra wealth by 2022 (that is a $623 per capita increase over those two years for the poorest 90% of the world’s people, set against an incomprehensible increase of $1,048,589,704 per capita for the world’s billionaires). I’d argue, even if you believe passionately in capitalism, that unless you are full on Ayn Rand here, the practical and ethical situation means something has to be done.
On your point about collective guilt for 4 Tory wins, the Labour party can’t escape significant blame here. They put up a clearly weak and underwhelming Ed Milliband and then the rank and file members put in Corby, who was so hopelessly out of depth and utterly out of step with the voters who Labour needed to keep and to win over that they all but handed the Tories those wins. Corby’s treatment of antisemitism was also deeply shameful. BoJo was very widely and rightly disliked and distrusted by the public (I loathe him deeply myself), but giving the public a ‘choice’ between him on the one hand and Corbyn on the other in 2019 was no choice at all. I appreciate that I probably sound like a “centrist dad” here (although Mrs TLI and I have no children), although according to the Guardianistas that label has now been retired and replaced with “Waterstones’ Dad” :
https://www.theguardian.com/commentisfree/2023/jun/24/behold-waterstones-dad-and-hurrah-for-britains-new-demographic-stereotype
[NB: unlike this latest figment of political stereotyping, Mrs TLI and I don’t have a second home, nor have we taken any holidays abroad since 2019. However, I recognise all of my reading choices and biases in there, so as a characature, it’s got something going for it].
“£1m – £2m The comfortable poor”
Well, I don’t even make the cut and won’t make it when I FIRE, yet I certainly don’t feel poor!
The £20k a year in retirement cited by Which sounds about right for me, I’ll likely spend more in the early days of retirement, less as I get older.
Interesting debate…….
If I double Neverlands numbers for inflation, our family combined is just just shy of the comfortably off levels.
I’m well aware that puts me in the 1% according to official figures (although I can’t help but feel the figures underplay numbers a little) but
– I don’t feel more than comfortably off….at all. I think I’d need twice that to be comfortably wealthy…..you see what I did there…Why?
20% of it is in a London house (very very modest by most people’s standards – <1500 sq ft), 20% in pension, 10% in BTL property with around 40% in liquid investments. Pumping out about £100k dividends / rents pre tax now for not doing too much – rentier here we come. Although I did work 80hr a week for 25 years to get there 🙂 Enough for a comfortably off lifestyle just about for a family of 4 when factoring in the school fees.
A market crash could easily wipe half of that out and then I'd just be well…..according to Neverland's numbers…poor 🙂
Another £5m would give me (a) the house we deserve 🙂 (b) enough cash to definitely pull the plug (c) more options in case of a tail risk event. At the moment, I'm going down with all the other suckers if the titantic hits an iceberg (perhaps poor choice of analogy here given recent events), another £5m and I can hire a boat to travel alongside me :).
I'm acutely conscious that 99% have much less and frankly speaking a lot of people in this country are dirt poor. Kind of weird that we're not therefore as a nation focussed on growing economic wealth but hey ho. I'm also very frugal – there's no better holiday experience than fish & chips with the kids on a late evening in the UK, barbecue on the local beach, paddleboarding etc etc. Maldives I am not. I'm very confident if I had another £5m I'd drive the same car, wear the same clothes and my discretionary number wouldn't move very much. My parents grew up on the breadline – literally, the british legion stepped in to stop one side being broken up. Never far from my mind.
If asset prices double, someone with a mil is going to have two and someone with fifty is going to have a hundred, the difference between a mil and two isn't much imho, the difference between fifty and a hundred is a lot. There's a lot you can do with another 50 to influence things around you. I guess that's why the tail right has disappeared over the horizon, wealth wise so to speak.
Have a gape at the right but look to the left and be super super thankful. I don't think with a million, I'd be much different in my lifestyle.
Having enough and peace of mind is a very personal state
However humans have certain similarities in the way they achieve their personal “Nirvana “
You need enough cash -oil in the engine of life-many studies on this -£70000 pa being mooted by one US paper as earnings beyond this level appear to have diminishing returns -many obviously get by on a lot less
After cash is sorted it gets more difficult -humans are very much more than machines
A marriage,kids and a vocational job is one tried and tested successful route-not an easy thing to pull off
Having a big purpose in life seems to be life sustaining and satisfying -if you can find and maintain one etc etc
I am not surprised by the Conservative’s long run-the human condition is by default conservative and more so in perceived chaotic times -anarchy is no fun -perceived break downs in law and order ( the Chinese leaders nightmare due to numbers of people involved and an explanation of their extreme police state-extreme conservatism works for them) drive peoples into conservative positions
The current Media hype,24 hour news and all day and night social media seem to be very destabilising to the human psyche
We probably miss the psychological social cohesion the religion (a historically proved method) used to provide with its main emphasis on mental well being
Something I regret as a 60s “yoof” -is that we probably threw the “baby out with the bath water “ re religion in those oh so exciting times
Enough from me!
xxd09
interesting to see people hint at their net worths here. I’m 33 and broke a mil last year so technically a millionaire but I definitely don’t feel that well off, I don’t feel poor but I don’t mix in high net worth circles at all. I would say 2 – 3 mil right now would be all I would ever need. Problem is when/IF I ever get there, inflation would have taken a big bite out of that and its likely to be more like 5 – 6 mil so you are forever chasing. I guess its all relative
Im not a huge earner so I just keep slowly and steadily accumulating I guess in true FIRE fashion. some of the figures mentioned above are eye watering but again it really is all relative. Money might not buy happiness, and they say you’d rather cry in a Ferrari but id rather not cry at all. If I had a Ferrari that of course would just be a big bonus lol
I don’t honestly feel that articles such as the FvL cited are that helpful other than as an insight into highest earners live. They rather seem to me to try to disrupt any ambition of FIRE in the plebs. Kinda saying oh you thought £700k or £1m or £2m would be enough, you’ve no chance of a comfortable retirement little people.
Obviously for any of us with lesser means even if we have houses paid off the spectre of uncontrolled inflation is facing us. I think we’re probably as a country in a number of different worlds. The 1% can probably afford not to be too concerned except for total bug out ex UK scenarios, the next 9-19%? will probably still make it and for the rest it might be a struggle without DB pension.
Are you preparing a piece on Harry Markowitz ?
Echoing @weenie (#32), £20k per person functional minimum for fairly decent retirement in UK (outside London & SE). If you move abroad potentially doable for less. Within the EU Portugal, Bulgaria and Romania all score highly on quality of life and cost of living, with rural Italy and parts of Spain not too far behind. Further afield, pretty much all of central and South America, South Asia, South East Asia and the Asia Pacific rim comes out well, but climate could be an issue (away from the coast and at low altitudes) for some during summer.
On a very best case (with no margins for error), as little as £400k could generate a ‘natural yield’ of about £20k p.a., i.e. with conventional gilts now over 4% and value stocks yielding some 5%. I’d personally be very uncomfortable trying to generate £20k p a. off of £400k. A SWR of 2.5% to 3% p.a. at age 60 looks about right to me and gives what I would regard as being reasonably acceptable odds of success. This would translate to circa £650k-£800k invested per person to generate £20k p.a.
Personally I think I’d be really happy generating a 4.5-5% natural yield right now from a bunch of equity income investment trusts, a smaller allocation of fixed income trusts and/or a government bond ETF or two (IGLT, INXG etc) and even perhaps a bit of infrastructure (gasps at the back from the old-timers, but it’s on a discount now! Definitely issues of course).
Maybe I wouldn’t do it if I genuinely thought I had zero options if something went adrift (i.e. it was for orphan home or similar) but my guess is you’d probably get that 5% pa nominal as income and 7-8% long-term total return in practice, with crucially a pretty smooth ride as far as the income is concerned.
As always, I stress I am not saying equity ITs would ‘beat the market’. They might, especially on today’s discounts, but after fees and adverse selection they probably won’t.
However I’d be pretty confident about the 5% natural yield buying on today’s prices, excluding existential AI changes everything risk etc. 🙂
The generally higher yielding environment does make at least make this side of the equation a lot more appetizing than 2-3 years ago. 🙂
@TLI. The correct “SWR” is an interesting one. A 60-year old can get an RPI linked annuity at 3.75%. The major risk the individual would run is that they are hedged against CPI and not wage growth. If you get a period where wage growth outstrips inflation by a substantial margin, that is when your standard of living going to fall badly.
A 60 year old has to think they are going to live another 25 years, quite possibly 35 years. Over a 10-year rolling period, there have been times in the last 200 years where earnings have not kept up with inflation. One is the last decade or so. The issue is that earnings have always outstripped RPI over a 25-year rolling period. On average by around 35-40% or 1.3%/annum. If you then imagine it was CPI and RPI then it would have been over 2%/annum.
This is what makes me still somewhat leery on linkers. If we get a period like the last 30 years, then a 3.75% annuity is a gift. Technological advances (AI) could easily force us back to low wage growth and low CPI.
The other scenario though is less attractive. If demographic inversion, protectionism etc outweighs disinflation from technology, then wage inflation is sustained. Annuities/linkers hedge the cost of living but not standards of living. Equities may well also struggle since the balance between capital and labour moves back toward labour. Only asset to own is a job!
Thanks @TI.
I find it hard to adapt mentally after a decade of ZIRP and financial repression to a higher interest, higher yield world. It’s not yet 1981 on rates, but it very definitely is no longer 2021 (or as Dorothy says in The Wizard of Oz, ‘were not in Kansas any more’).
Some years ago now, I used the excellent info. on this site (and a couple of other sites which were nowhere near as good as this one) to draw up a draft retirement allocation. I’m still not retired yet, and so it remains firmly a paper only exercise presently, but UK equity ITs were at its core. This is what it looked like (NB: the OCFs might have changed a bit):
Retirement Allocations
1. Income centric – 50% allocation, of which:
a). UK Equity Income Investment Trusts – 30% allocation:
City of London (‘CTY’), OCF: 0.36% – 3% allocation
Temple Bar (‘TMPL’), OCF: 0.49% – 3% allocation
Law Debenture (‘LWDB’), OCF: 0.3% – 3% allocation
Bankers Plc (‘BNKR’), OCF: 0.52% – 3% allocation
Finsbury Income & Growth (‘FGT’), OCF: 0.64% – 3% allocation
Murray International (‘MYI’), OCF: 0.61% – 3% allocation
BMO Capital and Income Plc (‘BCI’), OCF: 0.58% – 3% allocation
Murray Income Trust (‘MUT’), OCF: 0.64% – 3% allocation
Merchants (‘MRCH’), OCF: 0.59% – 3% allocation
Dunedin Income Growth (‘DIG’), OCF: 0.59% – 3% allocation
b). Corporate Debt, Loans & Bonds – 5% allocation:
TwentyFour Income Fund Ltd Ordinary Shares (‘TFIF’), OCF: 0.96% – 1% allocation
TwentyFour Select Monthly Income GG00BJVDZ946 (‘SMIF’), OCF: 1.13% – 1% allocation
NB Global Monthly Income Fund Ltd GG00B3KX4Q34 (‘NBMI’), OCF: 1.16% – 1% allocation
Henderson Diversified Income Plc (‘HDIV’), OCF: 0.91% – 1% allocation
Royal London Sterling Extra Yield Bond Fund Class Y Income, OCF: 0.4% – 1% allocation
c). Global Property Income (REITs) – 9% allocation
HSBC FTSE EPRA/NAREIT Developed UCITS ETF (‘HPRO’), OCF: 0.4% – 3% allocation
iShares Property ETF (‘IUKP’), OCF: 0.4% – 3% allocation
iShares MSCI Target UK Real Estate ETF (‘UKRE’), OCF: 0.4% – 3% allocation
d). Infrastructure – 6% allocation:
First Sentier Global Listed Infrastructure Fund, OCF: 0.79% – 3% allocation
M&G Global Listed Infrastructure Fund, OCF: 0.85% – 3% allocation
2. Quality Factor – 20% allocation equal weighted between:
iShares MSCI World Quality Factor, 0.3% OCF ‘IWQU’
db X-trackers Equity Quality Factor, 0.25% OCF ‘XDEQ’
3. Capital Preservation – 30% allocation:
Either Investment Trusts:
Personal Assets Trust Plc (‘PNL’): OCF: 0.86% – 5% allocation
Capital Gearing Trust (‘CGT’): OCF: 0.84% – 5% allocation
RIT Capital Partners Plc (‘RCP’): OCF: 0.68% – 5% allocation
LF Ruffer Total / Diversified Return Class C Accumulation: OCF: 1.19 / 1.13% – 5% allocation
Troy Trojan Income Class X Accumulation: OCF: 0.62% – 5% allocation
CG Absolute Return Fund Income GBP Class M: OCF: 0.6% – 5% allocation
Or Global sovereign debt:
iShares Global AAA-AA Government Bond ETF (‘SAAA’), OCF: 0.2% – 15% allocation
db X-trackers iBoxx Global Inflation Linked ETF GBP (‘XGIG’), OCF: 0.25% – 15% allocation
I have ended up with some CGT, RCP and PAT as a result of opportunistically discount shopping amongst the bargain basement ITs (relative to their normal discount or premia) earlier this year. Not part of any thought through plan, but the hefty discounts were starting to look irresistible.
@TLI — Glad the comment was useful. Also, I know I said keep commenting the other day (and I meant it!) but to be honest I wonder if you’re straying a little into over-long-commenting territory now. This post in particular is going to be very offputting to most readers I feel, with all the OCF detail etc. (Maybe on a different thread that was purely on-topic for allocations it’d be alright?)
It’s a difficult balance to get right and I definitely don’t want you to take this as “please don’t comment” at all, but perhaps dialing back from ‘9’ on the scale to a ‘7’ would be helpful. 🙂
(Please do keep up the comments though!)
Apologies @TI. Do feel free to delete it, or to move it to another thread if any use. I should have just perhaps linked to your own UK Equity Income IT table of some years back, but I didn’t have the link to hand.
@TLI – No need to apologize and I’d rather have your comments long than not at all. I’m just aiming for perfection / not crowding out other readers’ thoughts. 🙂
Re: “4.5-5% natural yield right now from a bunch of equity income investment trusts, a smaller allocation of fixed income trusts and/or a government bond ETF or two (IGLT, INXG etc) and even perhaps a bit of infrastructure (gasps at the back from the old-timers, but it’s on a discount now! Definitely issues of course).”
Much of my portfolio is as described, including quite a few from Time like infinity’s list. Current portfolio natural yield is about 5.5%.
Infrastructure is taking a battering at the moment as interest rates and gilt yields rise. HICL Infrastructure plc is my worst performer (from average purchase price) – but is on a big near 22% discount, 6.8% yield and will probably make a nice buy once interest rates get closer to topping out. Will try and top up in Q4.
But this year and next I’ll be mainly buying bonds of all varieties.
@TI (39). I’m pleased to have a natural yield of around 5.75% from an actual portfolio that has some overlap with both virtual portfolios mentioned, i.e. TI (39) and TLI (41). I’m less pleased with recent capital returns but I’m hopeful of getting back to long term total returns of 8% per annum at some point. In the meantime that income seems reliable.
Considering the average UK wage is 30-40k talking about how many millions make someone just comfortable or not seems absurd. Monevator has definitely changed over the years.
@Matt — Hey Matt, I thought you’d unsubscribed as you said you would. 🙂
It’s a discussion. We’re not saying anyone needs £5m. It’s an open conversation, with various views.
If readers want dogmatic sites telling them money is evil and to eat baked beans for 30 years then they’re out there.
Equally, nothing against strategic frugality per se at all: https://monevator.com/live-like-a-graduate-student-and-save/
We try to consider all angles. 🙂
Well I did pay for the annual membership at the higher level to support the site after so many years of reading.
My family income is around £200k pre-tax yet to have wealth of more than a couple of million isn’t achievable unless I sell a company or something like that. So how many people are you really appealing to?
There is a huge difference between the beans on toast brigade and those with 5m+ wealth. Even so called high earners will see their wealth eaten by house prices in the UK even if less than 40 years old.
@Matt — Thanks so much for the support! 🙂
Yes, I agree there’s a lower number of people targeting a couple of million. But as I always say in these scenarios, I wouldn’t assume every post is just right for every reader. It’s definitely not and that’s not the aim of this site. Rather, I am trying to create a venue for exploring everything about money and investing at all levels.
Similarly, we have readers who I know for a fact are worth £10m+ but they comment on posts about frugality, and often with insights.
I can’t comment on your finances directly, but I’ve never earned anything like that and seem to have higher net worth aspirations then you’re suggesting here. On the other hand I don’t have kids (if ‘family’ implies that) which I fully concede makes things much easier (except motivationally, perhaps? 🙂 )
There a Newcastle BS savings account – easy access, Base rate Tracker less 0.7% (currently paying 4.3%)
Nice alternative to offsetting – and saves a lot of faff changing savings accounts
– delete if off topic –
Nice one Boltt!
Few restrictions. I just signed up for 50K. Thanks
TP2
Makes you appreciate the sheer scale of wealth potentially surrounding you, especially in places like London. Even when you’re doing (relatively) well compared to your peers/family/the UK population as a whole, the talk of required millions and earning >£1b in a single year makes you realise the sheer scale of wealth at the top end – it’s a different world.
I appreciate posts like this. How much is actually enough is a lot about opinion. The views said here about how much is enough is not what I’ve seen. A retired family member is on £25k pa in a VLCOL area and is not particularly comfortable. No car, doesn’t travel, but needs to spend a lot on house upkeep when things like trimming the one tree in the garden is now £1k and replacing a gap in the fence is another £1k. This is not SE and is VLCOL place as I said (yes, she did compare quotes).
The difference between guaranteed income which most retired have now, and income that may massively slump because it’s from investments or DC pensions is also a thing. One needs more cash in a non-guaranteed scenario. Things like annuities are almost always paid for from a pension pot, and if one doesn’t have access to a pension pot (eg. been restricted to 2880pa pension contributions because of the rules like I have), it’s very different. I really cannot see £20k pa being remotely enough and I am quite content to live in a small space that’s shabby and not replace my kitchen every 3 years (why are people replacing kitchens more than every 15-20? It’s insane). Council tax alone is nearly £2k pa.
So since that’s where I am, I really appreciate reading the discussion from a multi million viewpoint as it’s fabulous for clarifying issues. It’s also a refreshing change and I loved following the completely bats saga of the house leverage purchase which was amazing for clarifying one’s own risk appetite (ie. is he INSANE?) and the saner Coastal Folly purchase. Bit like watching Margin Call – a rare glimpse into another world that’s very educational.