Taking Account

I see that some celebrities have been struggling with FIRE this week. Ryan Giggs was quoted as saying, “Retirement is a big problem. I lost the energy I had and I needed other projects. People say “You have earned your money”. But money has nothing to do with it. You have still got a life to live.”

Then up stepped poor old Fred Goodwin, Billy No Mates. Well, he has one mate, who admitted to the press this week that Fred’s enforced retirement was leaving him “intellectually under-occupied”. (It seems to me that Fred didn’t do too well either when he was intellectually over-occupied at RBS.)

I mentally file away such comments. Having just returned from three weeks holiday to work, I walked into my dull little office while the sun beamed down outside to find the same pile of problems, issues and unresolved small conflicts that had been there when I left. Nobody, as ever, had tackled any of them in my absence, booting them into the long grass for my return. Deep sigh. But, as I pulled a chair up to my desk and turned on my PC, I mused, “You know, I could walk into the boss’s office right now and tell him I was off. Like right now, today. What could he do about it?” With that thought in mind, I was more able to face the day ahead. I was choosing to do this job, and I can thank FIRE for that.

Work versus Retirement. It’s all in the mind. Psychologically, you have to be ready for both. I thought I was ready for retirement and that I’d had my fill of the office, but that turned out not to be the case. It was a shock to me when I quit the workplace when I found that I could be on a bigger downer facing an empty day at home than I’d ever been at work, but it was a fact. This was largely because when I had an empty day in my “retirement” I’d give myself a hard time about it, feeling that I was failing, that I was doing nothing constructive, that I was fading from view, becoming inconsequential and achieving nothing. It really wasn’t fun. Work can be a lot of things, or at least the type of work I do can be, but the days are very seldom “empty”. And I always end the day feeling that I’ve accomplished something, even if it was just turning up. A lot of people don’t even achieve that.

Another psychological facet of work versus retirement is the financial one. I refrain from going into detail about my finances on this blog, but I will state that my retirement financial goal was to have the same net monthly income in retirement that I’d had when I was at my “peak” earning power. I felt if I could manage that, I’d be sorted. When I hit fifty and found my career at an end, a substantial “good leaver” package from my firm helped me achieve the goal I’d set myself. Or at least that’s what my spreadsheet forecasts indicated. Given that I no longer had to salt away a big part of my salary toward my retirement goal, my net income in not working was exactly the same as the net income I had previously received in pay. Nice one.

But in realising this goal, I had now to actually realise it. Every month I had to cash in investments equal to the amount my firm used to pay me. I didn’t have to “pay myself” this way, but that was the way I preferred to do it. At first, I got a big kick out of doing this, but it soon wore off. In fact, I came to dread “pay day”.  I’m just not a spender, I’m a saver, and the retirement role reversal was just so hard to take. I felt I was the type of person who didn’t reduce savings, I built them up! It was actually nothing to do with the amount of money that I had to withdraw because I felt I was “safe enough” in that regard. It was more the action of making the withdrawal with no proactive plan for the cash other than paying living expenses which was an existential shock to me.

Now that I’ve returned to work, I tell myself I’m spending every penny I earn because I deliberately don’t save any of my current salary, even the bit that I could afford to. I’m not depleting my investments, but I’m not adding to them either. I’m a lot more comfortable with this situation. I feel it’s a bit of a halfway house between the sublime (saving a load of my cash) and the ridiculous (spending a load of my cash).

I still have days at work when I ask myself if I’m ready to retire again? But the intellectual and social stimulation work brings, plus the cream on the cake of being financially compensated for it means that I’m just not ready for the retired life yet. When will I be? No idea. But I’ll let you know when it happens.

Minority Report

Over the last few weeks I’ve been delving back into the blogs, articles and podcasts posted by the FIRE community which I always find interesting, full of good advice and, occasionally, inspirational. But, after a month of it, I’m beginning to wonder if all that can be said about the subject has already been said? As ever, you can make anything over-complicated and repeat basic tenets in a million different ways, but it seems to me that FIRE boils down to a few simple concepts: avoiding debt, spending less than you earn (and the more you earn, the better) and investing regularly into passive Index Tracking funds over a longish term – so add to that the fact that the earlier you start, the better. Pretty soon it feels that it’s all rather obvious, common sense and hardly news to anyone.

Sometimes I have to pause and tell myself that no, hardly anyone is talking about FIRE and the subject is still a minority report. The evidence isn’t hard to find. List ten well-known blogs about FIRE – well, you could probably do that without too much difficulty. List ten well known UK blogs about FIRE and that’s a bit more of a challenge, although most of us on these sites could have a good go at it. I’m well aware, however, that I’m preaching to the converted here in the blogosphere – you’re reading this, no doubt, because you’re interested in financial matters and connected affairs.

What signs are there that the wider world is interested? A small test could be to go to the library and try to borrow five books on FIRE. Not Amazon, where you could easily find five books focused on the subject of the sex lives of Patagonian grasshoppers, but the local library. There will be a few books available that are devoted to investing and general money matters, but investing or being astute with money are not the same thing as Financial Independence, although they’re strongly connected.

As far as books on Early Retirement go, I’ve never found any at the local library. Sure, you’ll find a few books on retirement in general, but pretty much all I’ve seen are aimed at pensioners.  

What other sources do we have in the mass market that are talking about FIRE? At the weekend, I always have a good two hours reading the Sunday Times and have done this for years. After browsing the main paper I turn to the supplements, and my second choice of reading is always the Money section. I often wonder how many people do likewise, because when I visit the gym (where they stock free daily newspapers in their cafe) it’s generally the Money section that’s available to read, sitting unopened and unloved on the rack while just about everything else is either missing or well-thumbed.

For a few years now I’ve looked forward to reading something about FIRE within the Money pages, but it’s yet to happen. I wonder why not? To me, it’s an interesting and appealing concept and I know I’m not alone in this. It touches on loads of the subjects that are featured regularly in the Money section – pensions, investments, property, taxes and so on – but as yet FIRE doesn’t seem to have a mainstream market even within the broader financial community.

This may be changing. I recently wrote about our guru, Mr Money Moustache, being profiled in the New Yorker and he’s recently been interviewed in the much downloaded Tim Ferriss podcast. I’ve also seen him being interviewed on American TV, so if the FIRE movement is going to have a Buffett-like figurehead and cheerleader then it looks like he’ll be the one. Which is great, but I’m not so sure that the coverage will necessarily be as focused on the subjects that most of us are likely to hope it will be. TV is much more interested in image over message and style over content. Nobody will really care about how MMM reached his goal, they’ll be more focused on what it means in terms of what he has got – how big is his house? What’s he got in the bank? What does his wife look like? Does he have a big flat screen TV?

Recently, like some other UK bloggers, I’ve been approached by a UK TV company who seem to be interested in making a pilot about Early Retirement. I doubt I’ll participate, but I would be interested in seeing the output of the show, and I would hope they’d focus on the simple principles that underpin FIRE which I outlined in the first paragraph. It’s about clearing debt, spending less than you earn, saving hard and investing simply but astutely. Even I’d admit that these aren’t very sexy or appealing concepts. They look like hard work and they are hard work, done over a long term. There’s no quick wins, instant celebrity, millions to be made overnight. Nothing that TV really likes. I’d hope it would be a positive show, but I fear it could be a “Look at this guy, living on lentils and knitting his own socks in an effort to retire at thirty five”. (Either that or “Matched Betting Ruined My Early Retirement Dream”)

In fact, thinking about it, I’m not sure I’d want FIRE to become mainstream. Would I want to be bombarded by adverts in the Money section promising to help me retire at forty? Would I want to see Mr Money Moustache torn to shreds in some sort of “You’re alright Jack” expose that unpicks the financial underpinning and background to his story? Would I want the Daily Mail to reveal how FIRE is just an upper middle class dream that’s basically impossible for anyone earning the UK average wage these days?

No, I think I like it as it is at the moment, where the people interested in the subject are interested in it for the right reasons. After all, isn’t it true that the best clubs are the more exclusive ones, the best bands were always better before they became popular, the best books are seldom bestsellers and the best films are either indie, arthouse or foreign? The mainstream ruins everything, doesn’t it, so maybe we should keep FIRE to ourselves?



Maggie, Maggie, Maggie

A couple of times this week I’ve read the same statistic, that a young person leaving University to begin a career that pays enough to allow them to start repaying their student loan is going to be taxed at 41% from Day One they cross the earnings threshold of £18.5k.  Simply put, it’s 20% basic income tax, 12% National Insurance and 9% student loan repayment.

It seems that Jeremy Corbyn has twigged to this, and thrown the abolition of tuition fees in the ring as a potential vote winner, and this will certainly appeal to a lot of people. But my question is: where are all the young people protesting about this phenomenal tax burden they’re going to have to carry? Ye Gods, when I was at University, every single time our student grants were threatened we were out on the streets, stopping traffic, chanting “Maggie, Maggie, Maggie, Out, Out, Out” and occupying the library until it was clearly time for a deserved pint or six down the Mandela Bar (i.e after about twenty minutes of sitting in the library cafe.)

To me, it’s absolutely incredible what has happened in terms of the cost of education with, as far as I can see, hardly a peep from the general public or the students themselves. Okay, maybe it’s killed off the Liberal Democrats in the short term, but the fact that Clegg felt he could renege on his promise to end tuition fees as quickly as he did just shows the complete disdain and disconnection many politicians have for ordinary people. Clegg and his ilk are from a background where thirty thousand pounds of debt is play money. Surely most people spend around that amount each year on holidays?

But, after a short vent of middle class fury against Clegg taking them for a ride, it seems that everyone has accepted that we’ll just have to get on with it. When you think about it, if your degree does help you gain a decent career, then actually the loan system is fantastic value for money. Isn’t it?

Well, maybe. But when you take the 9% repayment, lump in a further 32% of taxes, then add whatever you’re going to have to put by for a pension – and you’re absolutely going to have to put by for a pension, unless you’re insane – well, if I was a youth today, I’d be damn angry about it. Especially if I read blogs like mine where Baby Boomers in their fifties ponder early retirement and the most tax efficient ways to drawdown their pensions while wondering if they can be bothered taking two long haul holidays a year? A Baby Boomer, that is, like me who was given a fantastic free education, who took out a mortgage as soon as he started working (required deposit, fifteen hundred quid and a 95% loan) and sat back to watch property rocket over his working lifetime. Nice work, if you can get it. Which you no longer can.

The repayment burden of student loans is one thing, but the underlying message that debt is necessary, and maybe even a good thing, is even more outrageous. Debt is the one thing that everyone should be trying to minimise and avoid. Instead, what we have is a system that’s telling us that debt is fine, it’s manageable, it’s a fact of life and it’s nothing to be frightened of. Your Student Loan debt, it’s just like a mortgage really – which, dear student, you’re never actually going to have, unless the bank of mum and dad step in. As far as I am aware, your outstanding student loan debt will be taken into account whenever you’ve finally scraped enough together to put down a deposit on a property. In your forties. When most half decent “starter” homes are going to be coming in at around two hundred grand. Good luck with that. (They’re probably already more expensive than that in London.)

Corbyn will probably win a few votes in promising to abolish tuition fees, but I doubt it will make much of a difference to the election result. Why should I get angry about though? It’s not my problem. I’m alright Jack. I think. But I see Theresa May is starting to muck around with pension commitments. She better watch out. We are Thatcher’s Children in more ways than one. There really is no such thing as society, except the Baby Boomer’s pensioner one, and these days we don’t protest on our feet, we do it at the ballot box with a pen.


Le Triple Lock

I see that one of the carrots being dangled by Marine Le Pen before the French electorate is a retirement age of 60. Meanwhile, here in Blighty, we are looking at ending the “Triple Lock” on pensions as the Tories realise that even the Oldies probably won’t vote for Corbyn under (m)any circumstances. Time to fill your boots, raid the pension pots of the great British public while kicking the more thorny problem of how to tax Google, Facebook, Starbucks, the banks et al into touch. It would make you puke. The paucity of original thought and ideas in Government is breathtaking. It’s a never ending retread of the same paths where the outcome is always that Joe Public will pay. Meanwhile a pint of milk or a gallon of petrol costs the same for Philip Green as it does for my old mum. This is what we voted for. Or rather, this is what we voted for?

Hey ho. Enough of politics. Retiring at 60 for everyone though, is that a good idea? I’m not sold on it. I think we need to be thinking more about how people’s lives after 60 can be more worthwhile and can be seen in a more positive, fulfilling way than merely putting the feet up in retirement. Ageism is a massive issue and was something I had a taste of myself when I tried to re-enter the job market in my fifties. When your CV covers more years that the headhunter interviewing you has been on the planet, you can’t help but feel a wee bit uncomfortable. This suddenly dawned on me when I explained a project I’d once led to a young “recruitment consultant” and realised that she was probably four years old when I’d completed it. But, to me, it seemed, and still seems, like recent history. To return to politics for a second, Tony Blair being elected for the first time seems like yesterday, never mind it was twenty years ago. Twenty years ago!!

Deep sigh, there I go, sounding like Grandpa Simpson. It was a lot better in my day, mostly because I was twenty years younger then! Those years have gone by quickly and, based on experience, the next twenty to come will speed by even faster. I always liked the Tony Robbins statement that the only sure things about your future years is that you’re going to live through them, so how do you want them to look? Thoughts like that keep me going to the gym on a regular basis and, to be fair, the pub. I want to be healthy enough to still enjoy a decent pint of ale down my local in my seventies!

The thought also pertains to my work. When I “retired” at fifty, I found I really wasn’t psychologically ready for it. I still wanted to work, to contribute, to be part of a team and to be rewarded for a job well done through a pay packet. After all, that is what I’d known, and on the whole enjoyed, for the best part of thirty years and, when it disappeared, I missed it. I also didn’t choose it, because I lost my job through redundancy, and perhaps that was part of my problem. Now that I have returned to work, however, it often hits me with a start that I only maybe have a good ten years of a career left, if I choose to stay in it (or my company allows me to stay). Ten years? That’s a blink of an eye. For me, part of a job was always trying to progress within it, gain the next rung of the ladder, take on more responsibility and stretch myself. It still is, but I recognise – have to recognise, maybe – that perhaps I should now try to progress in a different way. What I should be looking for is maybe not the next promotion and wage increase, but to gain the next set of skills or network that will help me better when I next face “retirement”. Mentally, I can’t see myself much different in ten years from where I am today. My mum, facing eighty, still maintains that she thinks like a twenty year old, despite all the evidence against it. She still is who she is and will always be who she was. Why will I be any different?