“Retirement is the withdrawal from one’s position or occupation or from one’s active working life. … Retirement is generally considered to be “early” if it occurs before the age (or tenure) needed for eligibility for support and funds from government or employer-provided sources. Early retirees typically rely on their own savings and investments to be self-supporting, either indefinitely or until they begin receiving external support.” Source
It’s an exciting time in the RIT household as I’m now calling myself FIRE, Financial Independence Retire Early. I’ve worked my notice period, completed a professional handover of responsibilities, was given a fabulous send off by the company I worked for, surrendered my identification card and then walked out the door.
I guess that confirms I’m now jobless but am I really FIRE? Do I really have enough savings and investments to be self supporting ‘indefinitely’? Let’s start with the level of wealth that I go into the next stage of my life with:
Click to enlarge, RIT progress towards FIRE
That’s just a whisker over £1.3 million.
We intend to start this adventure by relocating from the UK to Cyprus and will be cautious early on by renting for the first 6 to 12 months to make sure it’s right for us. During this time we’ll research areas and decide on exactly what we’re looking for. If it’s what we hope and think it is then our plan is based on us buying a place to live. Something like this doesn’t look to shabby:
Click to enlarge, Maybe a home where the priority is some land and a pool…
After buying a home I’m now down to just under £1.1 million. With that I need to generate enough income to fund the lifestyle we desire while also hopefully not running out of money before we run out of life. To calculate the maximum that can be I’ve consistently talked about using two criteria to set my annual spending.
The first is based around the 4% or 25x spending rule. This rule is much bandied around within the FIRE community, many times without context, and now with FIRE potentially starting to go mainstream is starting to be bandied around in the more traditional media as well. Under the 4% rule I can now start spending a little over £43,000 per annum and then live happily ever after… Except I personally think that the 4% rule is too bullish a number which I’ve covered in a number of blog posts over the years. I’m much happier starting out spending 2.5% plus my investment expenses of around 0.2% giving me something closer to £30,000 annually.
The second is based around living off the dividends in early retirement. Actually I was a little bit more conservative than that and said I wanted to live off 85% of my dividends. I’m attracted to this method as psychologically I think (of course I don’t know) it might be very helpful during a bad bear market where if history repeats I may never need to sell assets when they’re in a depressed state. My dividend situation currently looks like this:
Click to enlarge, RIT annual dividends
Doing the maths on that and I’m now closer to £24,000 annually.
So is that no FIRE, lean FIRE, fat FIRE or as an early reviewer of my book ‘kindly’ suggested “…”penury”, and with some justice”? The Office for National Statistics tells me that as far as total income before tax goes it would put me in the 52nd percentile of taxpayers in the UK but that’s not really helpful either. Instead I’ve tracked my spending for years and then built a spending plan for retirement which includes 47% discretionary spending and which tells me today that to live the life we desire we need EUR27,593 annually which at worst case historic exchange rates is £24,571. I’d call that just about right FIRE.
So now I enter the wealth drawdown phase of my life with one of my planned tracking methods being to compare current spending to both of the rules I’ve set above. That gives me a new chart going forwards:
Click to enlarge, RIT’s drawdown tracker
So we’re set financially, now we just need to get ourselves packed up over the next few days and get on that one-way flight to Cyprus. Fortunately, our approach of focusing on quality of life, which leads to a certain level of minimalism, is making that process not overly stressful.
But before that it’s time to pop a cork as a small celebration is in order.
As always DYOR.
