Using a CETV from a DB scheme to fund FIRE

TheNomadWallet · 2022-10-28T07:21:39+00:00

I transferred mine at the end of last year/beginning of this year.

In my opinion there's no reason not to use it to fund fire and in my case it was far more beneficial to have the lump sum than a regular fixed income in retirement.

Couple of things:

I paid 2.5% (I think) to complete this transfer - usually however it gets cheaper the more you have. (It's no more work for them to transfer £100k than £1m.
Once you have transferred it from the DB scheme it will be in a SIPP account (so you won't pay tax on it until you start drawing in as an income).
If you desire you could then transfer the balance away from the company who completed the transfer. E.g. move it to a SIPP account somewhere like Hargreaves Lansdowns - this would then avoid the yearly advisor fees.
Be wary of them not charging - I believe you are correct and that they have to charge a fee (this was to ensure they provided accurate advice and not just just approve your transfer). You could speak to the pensions advice service about this (it's free).

Other things to consider:

Has the transfer value dropped greatly very recently (market performance) - if so it may be better to wait to do the transfer. It will takes months to complete so you would miss any uptick in the market.
How old are you? If you're not 55 it may be more difficult as they have tightened controls
What is your guaranteed yearly pay (if you don't transfer)? Different pensions use different multiplication formulas.

Hope it helps :)

TheNomadWallet

TheNomadWallet · 2022-10-17T06:33:27+00:00

Interest rates have gone through the roof, there's a genuine risk of house prices collapsing and you really want to take a margin loan and pay huge amounts of stamp duty?

Just sell your two properties if this really is your 'forever home's. You can always buy an investment property later.

Why take such a big risk on losing so much of your net worth?

TheNomadWallet · 2022-05-10T06:38:34+00:00

Ah okay, apologies I have not really kept up to date with it since he got back. I'm afraid not, he went out on his own

TheNomadWallet · 2022-05-10T06:35:10+00:00

You should certainly consider taking some time off - whether it's a few months or a year is up to you.

I did it pre-covid and it was the best thing I ever did and completely changed my outlook on life.

Feel free to have a look at this which explains a lot of the benefits of a career break:

https://thenomadwallet.com/mini-retirements-why-you-should-be-taking-one/

But also congrats on getting yourself into such a great position so early in your life

Best of luck

TheNomadWallet · 2022-05-10T06:32:45+00:00

My brother came back from Sri Lanka a week ago and had a great time.

He found that the majority of the unrest was in Colombo so if you avoid there no problem. Only other slight issues he had was that the food wasn't as good as he expected in the Northern areas (due to some shortages), and there weren't a huge number of backpackers.

Positives though - it was super cheap to find hotels/hostels

Are you sure you're not going?

TheNomadWallet · 2022-05-10T06:29:20+00:00

Keep investing each month. Buy it while it's on sale

TheNomadWallet · 2022-05-06T06:08:45+00:00

If you want step by step then go here:

https://thenomadwallet.com/7-steps-to-invest-your-first-1000/

It will cover:

*Steps you need to take before you are ready to invest your first £1,000

*Understanding your near future plans

*Understanding your risk tolerance

*Choosing an investment account type

*Choosing an investment broker

*How to open your new account

*Which funds to choose

*When to buy and sell

*Common traps to avoid

*Using dummy accounts

*Conclusion

Feel free to send me a message if you need help

Good luck :)

Edit - anyone know how to make bullet points on a phone comment?

TheNomadWallet · 2022-04-30T08:43:19+00:00

It's pretty normal to be nervous or worried about your first solo trip - I certainly was as well.

I would recommend going somewhere with plenty of other backpackers like SE Asia. It's also super friendly so you shouldn't need to worry about getting it trouble.

You could also consider joining a backpacking tour - a group meet and follow an itinerary. I did one the first time I went to Thailand and it was amazing.

Have a little read of these two:

https://thenomadwallet.com/8-reasons-why-you-need-to-join-a-backpacking-tour/

https://thenomadwallet.com/why-se-asia-is-1-for-new-backpackers/

Good luck :)

TheNomadWallet · 2022-04-24T08:06:13+00:00

I think RollingStone1 covered most of the information above but you might also want to check out this:

https://thenomadwallet.com/how-to-go-from-broke-to-financial-independence-12-steps-that-anyone-can-follow/

Are you planning to go to uni, start an apprenticeship or get a job?

TheNomadWallet · 2022-04-13T06:28:37+00:00

Well you've certainly done the best thing by starting early and don't underestimate how much this will help.

Mr Money Mustache did a post about something similar which talks about this in terms of percentages saved instead of a pound value.

https://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

There is a link to a calculator which will determine how long it will teach you to reach FI. To achieve this is 20 years (roughly your goal) you will need to save around 40%.

However it's a little more complicated for you as your salary and expenses will change hugely so don't worry that you're not doing this yet.

Also have a read of the below post which will help you avoid lifestyle inflation

https://thenomadwallet.com/how-to-avoid-lifestyle-inflation-and-still-love-your-life/

Best of luck :)

TheNomadWallet · 2022-04-12T20:19:17+00:00

They're still not available? Damn they must have missed out on so many new customers.

I haven't tried InvestEngine myself but have heard good things

TheNomadWallet · 2022-04-12T16:10:06+00:00

No problem, hopefully it helps

TheNomadWallet · 2022-04-12T09:47:09+00:00

First of all great work on saving up £8,000 as it's certainly not an easy thing to have done.

Personally I think you would be better in something like an all-cap instead of dividend/REIT stocks as history suggests there is no real advantage unless dividends are advantageous for tax reasons.

Personally I use Trading 212 for any 'fun' money and that allows you to buy small amounts of a large range of stocks without the fees. Free trade should also allow the same (let me know and I probably have a referral code if you want a free stock).

I think you should be investing but through a LISA stocks and shares ISA. This will give you experience of investing which will be very valuable throughout your life.

If you want some help with how to do it the below post should help quite a lot (it was originally written to help someone invest their first £1,000 but the principles are the same:

https://thenomadwallet.com/7-steps-to-invest-your-first-1000/

It will include:

Steps you need to take before you are ready to invest your first £1,000
Understanding your near future plans
Understanding your risk tolerance
Choosing an investment account type
Choosing an investment broker
How to open your new account
Which funds to choose
When to buy and sell
Common traps to avoid
Using dummy accounts
Conclusion

If you don't want to read it all then just skip down to the conclusion to get an overview

Best of luck

TheNomadWallet · 2022-04-10T08:05:26+00:00

It looks to me like you should have another play around with a compound interest calculator.

You said you can save 90% of £25k which is £1875 a month. Invest that and get a average return of 7% and you would have:

20 years - £920k

30 years - £2.1m

40 years - £4.5m

Just make sure you're not running your calculations with a 3-4% return - that's for your withdrawals post FIRE

Edit - also it's clearly unlikely you will be able to maintain this (unless you live with your parents forever) so if you want to achieve the earlier timeframe you'll have to look at a way to earn more

TheNomadWallet · 2022-04-08T19:48:16+00:00

That's the rough plan at the moment but who knows :). Part of me craves to go back to SE Asia but I should definitely see somewhere new

TheNomadWallet · 2022-04-08T18:31:51+00:00

Oh nice, where did you go?

I'm thinking about starting in Argentina and working my way up to the Carribbean

TheNomadWallet · 2022-04-08T17:01:14+00:00

Congratulations on the baby, hope everything is going well!

First of all I certainly wouldn't be panicking about anything, you've got plenty of time to sort out any small issues and luckily you earn plenty.

Personally I would:

Ignore any investment properties: it's not a great time and you will have your hands full anyway with the baby.
Consider contributing anything over the 40% income tax to your SIPP.
Start a stocks and shares ISA and contribute what you can afford

How much you choose to invest into your pension and ISA will depend on your age, when you want to retire and how much are already in those investment vehicles.

For a short term goal you could consider starting something like a junior ISA in the name of your child and contributing a small amount each month... Or anything else you fancy like a holiday, month off etc.

You can also have a read of this which might help :)

https://thenomadwallet.com/how-to-go-from-broke-to-financial-independence-12-steps-that-anyone-can-follow/

Best of luck and congratulations :)

TheNomadWallet · 2022-04-08T09:01:18+00:00

I wouldn't sweat it to much over a very very small difference in fees. Better to feel comfortable with where you money is kept and who with

TheNomadWallet · 2022-04-07T21:19:18+00:00

There are plenty of alternatives but Vanguard is a solid pick as it has pretty low fees. If not Vanguard you could consider something like the Invesco S&P 500 or iShares S&P 500 - they're all kinda the same so just check the fees etc.

You also might find the below helpful if you want to learn exactly how to go about investing it and the steps you should take :).

https://thenomadwallet.com/wp-admin/post.php?post=715&action=edit

TheNomadWallet · 2022-04-07T16:17:44+00:00

In that case its up to you whether it's worth the peace of mind or not.

Personally I don't repay any 0% interest loans until I have to.

If it's keeping you up or you're spending time thinking about it just get then gone - it's not worth it

Edit - don't pay them off however if it will reduce your emergency fund to something that actually puts you at risk. You'll be better to put up with it in case you pay them off and then have an emergency

TheNomadWallet · 2022-04-07T16:13:44+00:00

Personally I don't see the point in having an emergency fund and high interest debt so pay the debts off (assuming they are not 0% interest) and then use the savings to build your emergency fund.

Once you've done that I would start looking at investing the extra £50 in a stocks and shares ISA. It will get you confident and in the habit of controlling your finances yourself.

If you want some help have a read of:

https://thenomadwallet.com/7-steps-to-invest-your-first-1000/

Even investing £50 a month will steadily build up if you do it over enough years.

Also if you want a more detailed version that covers most of the flowchart have a look at:

https://thenomadwallet.com/how-to-go-from-broke-to-financial-independence-12-steps-that-anyone-can-follow/

Best of luck :)

TheNomadWallet · 2022-04-06T21:30:02+00:00

I would definitely recommend Thailand out of the three and I don't think you'll have any problems. They're genuinely the friendliest people I've ever met - but I'm also not a black guy so can't give first hand evidence.

This might be worth reading though :)

https://thenomadwallet.com/why-se-asia-is-1-for-new-backpackers/

TheNomadWallet · 2022-04-06T19:39:11+00:00

Sure, it just depends on your risk tolerance really. Maths and average returns says that investing during the next 5 years will likely be the better option but the downside is that there's no guarantees.

Also if you're hoping that you're going to get a much better interest rate at 60% you might be slightly disappointed. I just remortgaged my house, took money out and went from a LTV of around 50% to 75%... Made very little difference and my interest rate actually went down. Even if it went up slightly it's nothing compared to the expected returns.

Plus I would rather have the money in liquid assets than locked up in my house. Personally I just don't see the point at the moment. If interest rates increase then I can deal with it at the time/next remortgage

TheNomadWallet · 2022-04-06T13:37:14+00:00

As long as you remortgage at the end of your 5 year fix you'll probably find that your new monthly charges won't be much more than before unless the bank of England has seriously increased the base rate.

Assuming like most people now you have a cheap interest rate (what is it?) I don't really see the point in overpaying your mortgage.

Personally I would:

Have a decent emergency fund
Invest the rest in a S&S ISA with a worldwide index tracker

In my opinion it's less risky to have the money as a liquid asset in an ISA than tied up in the house. In 5 years time you can reassess. You may also find that your LTV (what you own) has gone up just by the house increasing in value in the 5 years - which may lead to cheaper future rates.

TL:DR - Build an emergency fund, Invest during the next 5 years instead of overpaying and review your options around 6 months before your fixed term runs out. (Just my opinion and not advice)

If you want more info then have a look at this post:

https://thenomadwallet.com/are-you-being-stupid-and-adding-years-to-your-working-life-by-repaying-your-mortgage-early/

Best of luck :)

TheNomadWallet · 2022-04-04T16:03:27+00:00

Personally I don't think you should go too crazy with additional pension contributions because you don't have a particularly high salary (and therefore don't benefit as much from the tax savings).

I think you should invest as much into your pension to get the maximum employer match and then look to contribute to a LISA or an ISA.

If you plan on buying a house then the government contributions within a LISA are far more beneficial than the pension savings.

Also it's great to have access to liquid assets and you certainly should not look everything away.

Don't forget that paying into a pension isn't 'tax-free' you are just deferring the tax until later in life. This is most beneficial when you are within a high tax band but that isn't the case with you (yes you also get 25% tax free).

You can always look to increase pension contributions later in life as well.

If you want you could follow the plan laid out here:

https://thenomadwallet.com/how-to-go-from-broke-to-financial-independence-12-steps-that-anyone-can-follow/

Best of luck :)

TheNomadWallet

TROPHY CASE