Hasn’t Brexit been great? The FTSE is back above 7,000, the fabled point that I swore, if it ever reached it again, I’d flog my UK Index funds and buy…and buy….what? Dollars? Euros? A Ferrari? Maybe I’ll wait and see if it hits 7,500?
I have a bad habit of checking my funds on a daily basis when the markets are going up. “Wow! I’ve ‘earned’ another five grand this month!” is a nice reminder of how clever I am. Meanwhile I can ignore all the furore about Sterling falling through the floor as I have only a vague notion about the ramifications of that, including that it’s connected to the rise of the FTSE. I know that this “head in the sand” attitude on currency is probably not the best approach, but after years of investing I’ve become bored with so-called financial “catastrophes”. After all, I was riding out the storm of 2008 when my investments probably tanked if I’d bothered to look that closely at them, but I just kept saving away, telling myself that it was a good time to amass more units in my chosen funds. (Although I check the markets daily when they’re on the way up, I can ignore them for weeks when they’re going the other way). I remember one night in 2008 just after the collapse of Lehmans, standing in a London pub with my mate, a fund manager in the City who was looking much paler than his normal self, when he suggested to me that I should remortgage the house and buy as much of the American market as I possibly could. In his view, it couldn’t go any lower. Hmmm, maybe, but I had another pint of London Pride instead, and continued with my chosen investing strategy of steady as she goes. And, as far as I know, he didn’t remortgage his house either.
I tell myself that I “invest for the long term”, while avoiding the question of what duration the long term actually is. The need to try and answer that question becomes more pressing as you enter into your fifties, and you increasingly wonder when you’re going to choose your moment and cash in your chips? One of my pension funds is doing fantastically well right now in terms of growth, but it’s three years before I can take it. I wonder, if I was 55 today, if I’d be cashing it for the tax free gain? Or would I hold on, wondering if better things were coming? I was reflecting the other night that the state pension seems quite far off in the future to me at the moment, kicking in when I’ll be 67. On the other hand, when I reach that age I’ll be looking back at my current 52 year old self and thinking it was only yesterday. “I was young then”, I might reflect, “Why didn’t I spend some of the cash then when the markets were great, Brexit was still a dream and I was young enough to enjoy it?” Of course, I might be saying, “Thank God I didn’t sell at 52 when the FTSE was at 7,000, given it’s at 21,000 now.” But you can’t take it with you and at 67, really, how much cash do you need? I won’t even be able to get into a Ferrari at that age, even if I could buy one.
This is a question I’ve been vexing over recently, how much do I need for a comfortable retirement? And how much for each stage? Thanks to my recent year out, I think I can quite solidly budget for the years between 55 and 60. I can have a decent stab at 60 to 65 too, but 65 to 70? And beyond 70? My mum is 77 and, after covering the essentials to live, spends about a tenner a week – never mind a Ferrari, we took the car off her as she wasn’t safe to drive. She’d love to go loads of holidays too, but she’s just not fit enough for them.
You can’t see into the future and I suppose you have to stay positive and think that you’ll be one of the lucky ones still throwing cash at cars and holidays well into your eighties. That’s my plan anyway, but it’s not something I focus on too much because I think that doing so might hold me back from enjoying the moment today in preference of having plenty of cash for tomorrow. I’ve had about thirty years of that, and I increasingly want to break the habit of saving for the rainy day and start spending while the sun’s still out.
This is easier said than done and it’s a path I’ve walked before. I sometimes look back and think that I didn’t enjoy the fruits of my labour when I was a serious earner, forever on the “Save Save Save” track as opposed to the “Spend Spend Spend”. But now, in many ways, I think that tomorrow might have arrived, and it’s time to break that savings habit of a lifetime and start spending. My first attempt at “de-accumulation” wasn’t very comfortable, and was part of the reason I went back to work, but at some point I’m really going to have to take the plunge and take some cash.
sex health money death 
We’re in a similar position – in the last few years, we’ve sharply increased the frequency and duration of the holidays we’re now taking, because who knows how much longer we’ll be fit enough to enjoy travelling especially on longer journeys. And I’ve recently bought a second car, simply as a toy to play with – it’s not exactly a Ferrari, but great fun nonetheless…
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I don’t know, as I grow older I’m finding I’m less inclined to travel! I still love the idea of it, but the hassle, the hassle. I also think that I don’t really know Britain all that well either, so why jet off somewhere else that I might enjoy less? On the other hand, I love the idea of heading off in motorhome to Europe or the US for months on end. I sometimes wish I had the gumption or single-mindedness just to go and do it.
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I am finding all this very interesting from a personal perspective as I have hit the buffers in my current job and will be unemployed from 1 January 2017 unless I find new employment before then. At that point I will have 2 1/2 years to go to my 55th birthday, and am trying to think about all the options, including accepting the situation and taking early retirement rather than looking for new work. And financially it just about works: my husband is still working albeit earning a lot less than I do, we have adequate savings and no debt other than an affordable mortgage on a ridiculously low tracker rate, we are not planning to stay in our ridiculously expensive house in prime commuter belt Herts after the children finish school (last A levels in June 2020…), we are in line to inherit a share in the estate of 3 relatives in their 80s (one of whom at 88 is not in the best of health). I am not desperately worried that I will feel the need to go back to work for non financial reasons as you did- although time will tell on that one!
But the thought of moving from an accumulation to a decumulation mindset, and of deciding how much we can afford to spend is terrifying. Do I assume that I have to eke out our savings until age 55, or better still age 60 when my bit of DB pension becomes payable? What will I want/need to spend when not working? Obviously work related costs like travel, lunch or drinks with colleagues, work clothes, tights, and even expensive highlights could be stripped out. But teenagers ain’t cheap, uni is looming, and I might want to do more travel, for instance to visit friends and perhaps scope out likely areas we might move to. And markets are not helping- sure the numbers in my Sipp and Isas are looking good right now but is the £ going to stay this low, what does that, and Brexit generally, mean for inflation, will my funds fall as fast as they have risen? #FirstWorldProblem- but it is still difficult!
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I have real trouble with that “FirstWorldProblem” syndrome in writing this blog. On the other hand, it’s the life I lead and I don’t have any other to write about. I did want to point out that there is more to life than money and also that work is more than just a route to earning it, something you don’t think about too much until it stops.
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Indeed- I have friends who will be working until their state pension age whether they want to or not so I am very lucky. I also agree about the non financial benefits of work, at least in principle. Right now I am feeling burned and burnt out so the idea of not working is appealing!
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“But you can’t take it with you and at 67, really, how much cash do you need? I won’t even be able to get into a Ferrari at that age, even if I could buy one”
I would say don’t assume you’ll be that inflexible by 67!…Both my parents are in their early 70’s and either could easily get into a Ferrari if the opportunity arose! 😉
Hopefully you can use this time back at work to think about how you will tackle your next de-accumulation attempt.
OR
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What I should have said was that I could get into a Ferrari. Getting out of it would be the challenge!
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One of the advantages of spending on stuff now is that one has more years to enjoy the fruits of the expenditure. . Eg a new music system which I desperately ‘need’ (well ok, not need as such) if bought now at age 52 (my age) has maybe 28 years to be enjoyed – (average ish life expectancy assumption at work ). Every year I put the spend off is one less year’s utility.
Yet my existing music system is not broken, gives me an adequate music listening experience, being a tight wad, and having the aim of maintaining FI (something the post brexit stock boom has temporarily helped me achieve) makes me highly likely to delay the spend.
Funny old world…
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The conversation about getting in and out of a Ferrari highlights an area well worth spending money (and time) on:
Expenditure on health and wellbeing may give you a return in quality and length of life which is surely justifiable.
It is as good a time as any to get any niggles sorted out with the physio, get some personal training, maybe build a garage gym (I have one and they are great). Even if you are not a fan of exercise you can now afford to have it spoon fed to you and to try many different sports until you find something you enjoy?
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Lifetime cashflow forecast. Determine your goals, your assumptions and plug in your numbers (inflows and desired outflows). Output will provide indication, based on the assumptions (all of which will turn out to be wrong, but you have to start somewhere. Cautious assumptions are a good starting point), of the rate of return your long term investments need to achieve to meet the cost of your goals. Simples 😉
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