Early retirement - Discussion

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Neo_X

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I was busy looking into early retirement the last few months, and thought i should post an update - maybe it can catch on - ;)

Obviously lots of reading, mostly from this blog (US based, but still - tonnes of relevant information)
http://www.mrmoneymustache.com

I had some free time, and read from the first to the last post - only takes a few minutes a day, but WOW - what an eye opener it was.
You are welcome to start from the first post (less than 4 years ago) :
http://www.mrmoneymustache.com/2011/04/06/meet-mr-money-mustache/

Also look into the comments obviously to see peoples reactions, and discussions. the amount of relief/freedom that you experience by not having to stress about your next pay check is immense!!

I am only testing the waters the last 5 to 6 months, but already, by just cutting costs and looking at my spending habits, i have been able to save 25% of my salary on average compared the ziltch the months before that :o

I am hoping to get the mybroadband community involved as well , so that we can get a south african perspective, and assist everybody else to change their mindset

any questions is welcome - i will assist where possible, but i am quite sure there is a few other experts around as well ;)

Have fun

Neo_x


Other helpful websites :

Calculator including inflation : http://www.investorchallenge.co.za/calc_compound.php

Blog post giving more details :
http://investorchallenge.co.za/the-only-way-to-get-rich/


More detailed calculator ( Includes tax and other nice additions - all rolled into one) :
*CAUTION - some discrepencies was picked up - see post 5 for analysis
http://liberta.co.za/tools/retirement_calculator.php

Sample data: (used Satrix indi as a yard stick and lifted inflation with 2%)
libertas calculator.JPG


Note that by cutting my expenses with 18% /3000 ,and saving the difference i can reduce my retirement target by another 2 years -
libertas calculator 2.JPG

I am currently diversifying my investment across multiple sectors, and will possibly decrease that as time goes along. I really wish i could talk to younger me, and give myself advise (especially with regards to buying a home). But yes - so we learn.
 
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1,6 million?

You need like 5 million to get like a R25 000 (before tax) sustainable income...

I prefer the term Financially Free to the term Early Retirement.
 
supersunbird said:
1,6 million?

You need like 5 million to get like a R25 000 (before tax) sustainable income...

I prefer the term Financially Free to the term Early Retirement.
Click to expand...

I would estimate the same if I was 60 now and had to retire now.
 
I think the numbers are a bit optimistic. Sustaining 19% growth will be difficult over a long period or quite risky. But keep at it finacial freedom is quite liberating and if you dont have to earn a salary every month just to survive life tends to be much easier.
 
supersunbird said:
1,6 million?

You need like 5 million to get like a R25 000 (before tax) sustainable income...

I prefer the term Financially Free to the term Early Retirement.
Click to expand...

Financially free - yes that sounds much better ;)

lets check your numbers - cant hurt :)

My two examples is 17,000 and 14,000 after tax respectively (basically my expenses excluding bond/car).

Currently on investments, CGT is applied (after 3 years), thus max 15%.
My expenses before tax is 20,000 and 16,500 respectively (will be a little bit more in a few years due to inflation 31737 in 6 years and 22448 in 4 years.

Taking these two numbers:

Scenario 1 : 1.9 Mil Invested, withdrawing for 51 years - Will run empty after about 8 years - YIKES

Scenario 2 : 1.6 Mil Invested , withdrawing 53 years - will run empty after 9 years. - YIKES


almost started to doubt the libertas calculator, then i noticed the note...
** This figure is shown in today's Rand value. Because inflation is ignored, the actual figure is much larger. However, the value given represents the value of the figure in today's terms, so it is more meaningful.

thus actual invested amount before becoming financially free for Scenario 1 is 2,9 Million, and scenario 2 is 2,0 Million.

Taking these through the calculator again :

Scenario 1 : 2.9 Million invested, financially free for 51 years - Problem after year 15 - YIKES

Scenario 2 : 2.0 Million invested, financially free for 53 years - Problem at year 15 YIKES


I think the libertas calculator assumes expenses is before tax but with inflation.

thus :

Scenario 1 - expenses is assumed to be 26976 per month (17k in todays money) - Problem after year 25 - YIKES

Scenario 2 - expenses is assumed to be 19080 per month (14 K in todays money) - Problem after year 23 - YIKES



corrected investments :


Scenario 1 - 3.8 Mil invested, withdraw R31,737 (17 k in todays money before tax)

Scenario 2 - 2.68 Mil invested, withdraw R22,448 (14 k in todays money before tax)


Seems like the libertas calculator could be a bit wonky. Will update OP
 
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19% returns going forward? Surviving on R25K/month? Reality check required here for some people...
 
Last time I spoke to someone that actually does retirement planning for a living I gathered you'd need about 8 bar for 25k...and even that is going to eat into the capital amount (at a slow & tolerable rate though). Thats if some of that 8 bar is locked into home ownership.

Like SSB I just want to get to a point where I don't *have* to work if I don't want to. Keeping a job one is unhappy at just to pay the bills sounds like hell on earth to me.

Early retirement - unlikely for 99% of the people imo. Hell few will manage retirement age with sufficient resources.
 
JayM said:
19% returns going forward? Surviving on R25K/month? Reality check required here for some people...
Click to expand...

why? I know of a single mom raising 4 kids on 6k a month. where there is a will there is a way. she would give an arm and a leg to "just survive" on 25k a month. JayM, think you need that check...
 
Depends on expected lifestyle. e.g. I you want high end medical aid (not a bad idea when growing old) then 25k is indeed rather thin.
 
envo said:
why? I know of a single mom raising 4 kids on 6k a month. where there is a will there is a way. she would give an arm and a leg to "just survive" on 25k a month. JayM, think you need that check...
Click to expand...

I don't see the point in retiring early and living like a pauper. I'd rather just work and retire at normal age.
 
envo said:
why? I know of a single mom raising 4 kids on 6k a month. where there is a will there is a way. she would give an arm and a leg to "just survive" on 25k a month. JayM, think you need that check...
Click to expand...

A good medical aid for older people is about 6K already.
 
MickeyD said:
And die a year later?
Click to expand...

Yes, I'd rather work until normal retirement age and die a year later than retire 15 years early and live a miserable existence for those 15 years.
 
Beachless said:
A good medical aid for older people is about 6K already.
Click to expand...

I think there are going to be two very divergent views on what constitutes a comfortable retirement here. The MMM route is very much focused on frugality, and to be honest, as a retired couple with a house paid up and a healthy lifestyle, I would have no problem living on R10-15k nett, and I know retirees who get by no problem on that amount. They've driven the same vehicles for years, they holiday in caravan once a year or so, and their needs are met without much excess but also not penury.
 
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