subspace Posted July 12, 2015 Share Posted July 12, 2015 (edited) Like many people in their 30s, Stuart Owen and his partner Louise are beginning to take a keen interest in their finances, with plans to pay off their mortgage and secure a decent income in retirement. Neither has built up much in pension savings. In fact Stuart, 33, only just joined his company pension this year and while Louise, 33, has paid into a public sector scheme for a number of years, her part-time wage is low so her savings are modest. Over the next 15 to 20 years, the couple hope to build a small buy-to-let portfolio that will produce a good income in retirement to subsidise their pension, allowing them to retire at age 50. http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11724160/We-earn-47000.-Can-we-get-into-buy-to-let-and-retire-at-50.html Edited July 12, 2015 by subspace Quote Link to comment Share on other sites More sharing options...
thecrashingisles Posted July 12, 2015 Share Posted July 12, 2015 File under 'Questions to which the answer is no'. Quote Link to comment Share on other sites More sharing options...
olliegog Posted July 12, 2015 Share Posted July 12, 2015 their current house is 'worth' £130K (2 bedder) and they expect to be able to buy a 3 bedder for £160k in 3 years time (is the price of a 3 bedder now £160K) - deluded. right to buy is the work of the devil Quote Link to comment Share on other sites More sharing options...
pipllman Posted July 12, 2015 Share Posted July 12, 2015 whilst I am in no position to advise, if I was asked I would say have 12 months cash in instant access accounts depending on the company pension scheme, I might prioritise that over pay off your own mortgage as quickly as you can, especially now whilst rates are low if / when that leaves any spare money, load up both your ISAs to the max if / when that leaves any spare money (it won't on £47k) I would also say emphatically that BTL is such a bad option for them that if they even mentioned it in my presence I would nip them until they cried Quote Link to comment Share on other sites More sharing options...
wish I could afford one Posted July 12, 2015 Share Posted July 12, 2015 (edited) Is this what they call news these days... So they want to retire in 15 to 20 years. Let's call it 20 years to give them a chance given their low savings rate of £1,000 per month. Stuart earns £39k which is £29.6k after tax and NI. Louise earns 8k so she keeps all of it. Their mortgage must have started at close to £40k given they only bought in 2013. Let's assume a 22 year mortgage and 4% interest so it's paid off by retirement. Annual payment will be circa £2.8k. Let's assume: - they want to keep that income in early retirement - less the amount they save so £12k - less the house repayments amount of £2.8k - they forget the new 3 bedroom house - they forget BTL and instead build a series of diversified assets covering bonds, property, equities, commodities and cash which earns a real after inflation 4% per annum. So they need a salary of £22.8k at retirement. Roll on 20 years and they may have built real after inflation wealth of circa £357k given the above investment assumptions. Drawdown on that at something like 2.5% and their annual 'salary' will be nearly £9k. FAIL! If you want to retire early you need to: - focus on maximising earnings which requires hard graft - learn how to live well below your means - do everything possible to minimise investment expenses. Every 0.01% matters over 20 years. - tax avoid via NISA's and Pensions - build that balanced portfolio I'm chasing very early retirement in less than 10 years. I'm currently 7.5 years in and today have 82% of the wealth I need. My experience tells me it takes tenacity, commitment and hard work. I really don't think a 'small buy-to-let portfolio' is going to cut it given the current state of taxes and the property market. I also don't think anybody with wealth will get a State Pension 20 years from today. DYOR and all that. Edited July 12, 2015 by wish I could afford one Quote Link to comment Share on other sites More sharing options...
wish I could afford one Posted July 12, 2015 Share Posted July 12, 2015 Look, it's not house prices that's the problem, it's longevity in this case. If we all died at 40 like the good ole days, this wouldn't even raise its ugly head. I'm planning on living to a very old age and my investment plan reflects that. That way: - If I die early then no problem, someone else/charity/HMRC gets some wealth - If I die old it didn't occur because of hypothermia from living under a bridge Quote Link to comment Share on other sites More sharing options...
Exiled Canadian Posted July 12, 2015 Share Posted July 12, 2015 Is it me, or is that Al Murray AKA "the pub landlord"? Quote Link to comment Share on other sites More sharing options...
martymcfly Posted July 12, 2015 Share Posted July 12, 2015 Is this what they call news these days... So they want to retire in 15 to 20 years. Let's call it 20 years to give them a chance given their low savings rate of £1,000 per month. Stuart earns £39k which is £29.6k after tax and NI. Louise earns 8k so she keeps all of it. Their mortgage must have started at close to £40k given they only bought in 2013. Let's assume a 22 year mortgage and 4% interest so it's paid off by retirement. Annual payment will be circa £2.8k. Let's assume: - they want to keep that income in early retirement - less the amount they save so £12k - less the house repayments amount of £2.8k - they forget the new 3 bedroom house - they forget BTL and instead build a series of diversified assets covering bonds, property, equities, commodities and cash which earns a real after inflation 4% per annum. So they need a salary of £22.8k at retirement. Roll on 20 years and they may have built real after inflation wealth of circa £357k given the above investment assumptions. Drawdown on that at something like 2.5% and their annual 'salary' will be nearly £9k. FAIL! If you want to retire early you need to: - focus on maximising earnings which requires hard graft - learn how to live well below your means - do everything possible to minimise investment expenses. Every 0.01% matters over 20 years. - tax avoid via NISA's and Pensions - build that balanced portfolio I'm chasing very early retirement in less than 10 years. I'm currently 7.5 years in and today have 82% of the wealth I need. My experience tells me it takes tenacity, commitment and hard work. I really don't think a 'small buy-to-let portfolio' is going to cut it given the current state of taxes and the property market. I also don't think anybody with wealth will get a State Pension 20 years from today. DYOR and all that. Something as sensible and well researched as that would make the average BTLers head explode... Quote Link to comment Share on other sites More sharing options...
thecrashingisles Posted July 12, 2015 Share Posted July 12, 2015 Is it me, or is that Al Murray AKA "the pub landlord"? It's not Al Murray, so it must be you. Quote Link to comment Share on other sites More sharing options...
wish I could afford one Posted July 12, 2015 Share Posted July 12, 2015 Something as sensible and well researched as that would make the average BTLers head explode... Took me about 5 minutes to realise/calculate they haven't a hope. This really isn't difficult maths. Still I suppose it's good to dream... Quote Link to comment Share on other sites More sharing options...
TheCountOfNowhere Posted July 12, 2015 Share Posted July 12, 2015 one for the propaganda thread Quote Link to comment Share on other sites More sharing options...
martymcfly Posted July 12, 2015 Share Posted July 12, 2015 Took me about 5 minutes to realise/calculate they haven't a hope. This really isn't difficult maths. Still I suppose it's good to dream... Absolutely it's obvious its unaffordable. Just nice to see it laid out so plainly in black and white. Still it's maths the standard BTLer would struggle with. Quote Link to comment Share on other sites More sharing options...
wish I could afford one Posted July 12, 2015 Share Posted July 12, 2015 Absolutely it's obvious its unaffordable. Just nice to see it laid out so plainly in black and white. Still it's maths the standard BTLer would struggle with. Agreed. Why does (did?) BTL work? It works simply because of leverage which of course works until it doesn't... If BTL'ers understood how this principle works going both up and particularly down we might not be in the mess we're currently in. My journey to Early Retirement has been and will be achieved without leverage/debt. Now that I'm near the end of the journey I think very few would ever make it even if the way was carefully explained. It's all too hard for most. Of course the alternative is to Retire when the UK government say so which for the young today is a very very long way off IMHO. Quote Link to comment Share on other sites More sharing options...
acer Posted July 12, 2015 Share Posted July 12, 2015 (edited) Agreed. Why does (did?) BTL work? It works simply because of leverage which of course works until it doesn't... If BTL'ers understood how this principle works going both up and particularly down we might not be in the mess we're currently in. My journey to Early Retirement has been and will be achieved without leverage/debt. Now that I'm near the end of the journey I think very few would ever make it Of course the alternative is to Retire when the UK government say so which for the young today is a very very long way off IMHO. I've read your blog, and admire what you're doing, however... If the first step of "the way" requires saving 60 % of your income, most people will fail there and then, no matter how frugal they live. Edited July 12, 2015 by acer Quote Link to comment Share on other sites More sharing options...
martymcfly Posted July 12, 2015 Share Posted July 12, 2015 Agreed. Why does (did?) BTL work? It works simply because of leverage which of course works until it doesn't... If BTL'ers understood how this principle works going both up and particularly down we might not be in the mess we're currently in. My journey to Early Retirement has been and will be achieved without leverage/debt. Now that I'm near the end of the journey I think very few would ever make it even if the way was carefully explained. It's all too hard for most. Of course the alternative is to Retire when the UK government say so which for the young today is a very very long way off IMHO. Most people would like to retire young as you do. Few are prepared to do the work and make the sacrifices to make it possible. As you say the numbers aren't difficult - making it happen is the hard part. Quote Link to comment Share on other sites More sharing options...
lid Posted July 12, 2015 Share Posted July 12, 2015 is having kids factored into this early retirement malarkey? Quote Link to comment Share on other sites More sharing options...
@contradevian Posted July 12, 2015 Share Posted July 12, 2015 Never an article about those wanting to work/rent forever so a few rentiers can retire early and live off them. Quote Link to comment Share on other sites More sharing options...
South Lorne Posted July 12, 2015 Share Posted July 12, 2015 http://www.telegraph.co.uk/finance/personalfinance/investing/buy-to-let/11724160/We-earn-47000.-Can-we-get-into-buy-to-let-and-retire-at-50.html ..did they not read the budget...?..... Quote Link to comment Share on other sites More sharing options...
Scunnered Posted July 12, 2015 Share Posted July 12, 2015 The comments are pretty brutal! Was there a special HPC outing to the Telegraph or something? Quote Link to comment Share on other sites More sharing options...
wish I could afford one Posted July 12, 2015 Share Posted July 12, 2015 Good I hope Stuart and Louise read them and then DYOR. Who knows they might learn something more than BTL is the road to riches. For me property currently forms 10% of my wealth. The difference is that mine is all Industrial and Commercial REIT's so I'm not blocking anyone from having access to a simple home for their family. Quote Link to comment Share on other sites More sharing options...
Le Grande Fromage Posted July 14, 2015 Share Posted July 14, 2015 Is this what they call news these days... So they want to retire in 15 to 20 years. Let's call it 20 years to give them a chance given their low savings rate of £1,000 per month. Stuart earns £39k which is £29.6k after tax and NI. Louise earns 8k so she keeps all of it. Their mortgage must have started at close to £40k given they only bought in 2013. Let's assume a 22 year mortgage and 4% interest so it's paid off by retirement. Annual payment will be circa £2.8k. Let's assume: - they want to keep that income in early retirement - less the amount they save so £12k - less the house repayments amount of £2.8k - they forget the new 3 bedroom house - they forget BTL and instead build a series of diversified assets covering bonds, property, equities, commodities and cash which earns a real after inflation 4% per annum. So they need a salary of £22.8k at retirement. Roll on 20 years and they may have built real after inflation wealth of circa £357k given the above investment assumptions. Drawdown on that at something like 2.5% and their annual 'salary' will be nearly £9k. FAIL! If you want to retire early you need to: - focus on maximising earnings which requires hard graft - learn how to live well below your means - do everything possible to minimise investment expenses. Every 0.01% matters over 20 years. - tax avoid via NISA's and Pensions - build that balanced portfolio I'm chasing very early retirement in less than 10 years. I'm currently 7.5 years in and today have 82% of the wealth I need. My experience tells me it takes tenacity, commitment and hard work. I really don't think a 'small buy-to-let portfolio' is going to cut it given the current state of taxes and the property market. I also don't think anybody with wealth will get a State Pension 20 years from today. DYOR and all that. Amen to that,15 years ago perhaps,but anybody entering in now and leveraging is mental Quote Link to comment Share on other sites More sharing options...
Austin Allegro Posted July 15, 2015 Share Posted July 15, 2015 I've read your blog, and admire what you're doing, however... If the first step of "the way" requires saving 60 % of your income, most people will fail there and then, no matter how frugal they live. It's not the saving that's difficult - it's the rejection of the consumerist mindset that's the hardest part for most people. It wasn't so difficult to me as I have dour Scottish blood and was brought up on mending things, buying second hand etc even though we didn't really have to. Quote Link to comment Share on other sites More sharing options...
Nabby81 Posted July 15, 2015 Share Posted July 15, 2015 The comments are pretty brutal! Was there a special HPC outing to the Telegraph or something? Doesn' t help their cause they they benefited from RTB to pay 50k for a home valued at 130 and now they are just waiting to cash in on the savings they made. Quote Link to comment Share on other sites More sharing options...
sPinwheel Posted July 15, 2015 Share Posted July 15, 2015 It's not the saving that's difficult - it's the rejection of the consumerist mindset that's the hardest part for most people. It wasn't so difficult to me as I have dour Scottish blood and was brought up on mending things, buying second hand etc even though we didn't really have to. My average paid job relies on people (customers) with the consumerist mindset... Quote Link to comment Share on other sites More sharing options...
200p Posted July 15, 2015 Share Posted July 15, 2015 But you want the latest iphone, a Mercedes, a BMW, a VW, A new Mini, holidays abroad, a new watch, branded clothes, eat out, take aways, Star Bucks Coffee, Ready Made Sandwiches, you want it all, you want it NOW! Quote Link to comment Share on other sites More sharing options...
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