Financial Independence Retire Early (FIRE)

EvilRob said:
Well, duh, of course it would be better if we just get insane growth every year forever and ever. That doesn't seem very likely to me at the moment though. Looks prices are hugely inflated which means a very long period of stagnation or a correction are likely. The point I'm making is if that is going to happen then I prefer correction to stagnation.
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Is this not just a case of late stage capitalism. Inflation for the many, but profits funnelled up to the highest of the pyramid. That doesn’t mean these prices are inflated, they represent the massive difference between the companies in a position to enjoy the system as it is?

Or are you saying that yes that may be, but it’s not sustainable?
 
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EvilRob said:

The Tale of Two Toy Shops​

Once upon a time, there were two toy shops: Crashy’s Toys and Lazy’s Toys. Both shops sold magical blocks that could grow in value, but one day, everyone started saying the blocks were worth too much.

Crashy’s Toys panicked. “Oh no!” said the shop. The prices of the magical blocks fell FAST, like a ball rolling down a hill. For a while, the blocks were super cheap! Kids who brought the same amount of money each week (like little Alex, who brought £5 every Saturday) bought WAY more blocks while the prices were low. When the prices went back up later, Alex had so many blocks that they became rich!

Lazy’s Toys, on the other hand, didn’t crash. “We’ll just wait,” the shopkeeper said. Prices didn’t go up or down much; they just stayed the same. Kids like Alex still bought blocks each week, but they didn’t get as many because prices didn’t drop much. Over a long time, the blocks slowly grew in value, but it took MUCH longer for Alex to grow rich.

The Moral:​

If you save and invest every week, you might make more money if prices crash first (like at Crashy’s Toys) because you can buy lots of magical blocks for cheap. But if prices don’t drop (like at Lazy’s Toys), you’ll still grow your savings—it’ll just take more time!
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Ehh, you really don't seem to understand how the stock market works at all.


Your example doesn't even make any sense since you seem to imply people are purchasing a physical commodity and hence are getting a discount at "Crashy", but this is false. A stock is a fractional ownership of a company, in Crashy's case the value of the company has crashed so the value of each stock is far lower, that is why you can buy more. This doesn't help you at all.

You have missed the most important part , how the 2 will grow going forwards. And this is where i see you have no understanding. You state of Crashy Toys:

When the prices went back up later,
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ehh, how exactly will the prices go back up later? There is no automatic mechanism to do this. The stocks are priced much mower for a reason, to increase to pre-crash value will require growth.

Why do you think the stock price would ever even recover, or how long it would take? What happens if the stock for Crashy never returns to pre-crash value?

Of Lazy you you said

Over a long time, the blocks slowly grew in value
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Why would Lazy's stocks grow slowly after the stagnation? Especially given their stock price didn't crash then evidently market investors didn't think their stock was over priced.



Moreover, Can you explain 1 single reason why there would be expected difference in stock growth between the 2? Let alone why this could possibly benefit Crashy vs Lazy.
 
D.P. said:
ehh, how exactly will the prices go back up later? There is no automatic mechanism to do this. The stocks are priced much mower for a reason, to increase to pre-crash value will require growth.

Why do you think the stock price would ever even recover, or how long it would take? What happens if the stock for Crashy never returns to pre-crash value?
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You've answered your own question . We're talking about investing in the market, not an individual stock. Think of Crashy's magic blocks as one "EFT" and Lazy's as another. When a market is overvalued, historically there are two main ways it can be corrected.

In a price decline correction scenario, the crash will bring the price back closer to the fundamental revenue, profitability and growth metrics of companies in the index tracked. The fundamentals of the companies will improve over time and the price will eventually return to and exceed pre crash value. Any ETF units you bought while the prices were lower increased in value and you obtain growth.
In a time correction scenario (stagnation), the price pretty much stays the same for as long as it takes for the fundamentals of the companies to catch up with the over inflated price. When that eventually happens, the price will start increasing again. But the price of any ETF units you bought until that happens stagnated and you did not get any growth during the correction period.
 
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What size pension pot are people happy to retire on? Taking the 4% rule into account and provided my mortgage is paid (and I'm old enough to retire) I reckon I could pull the trigger when I exceed £1M.
 
I kill Bunnies said:
What size pension pot are people happy to retire on? Taking the 4% rule into account and provided my mortgage is paid (and I'm old enough to retire) I reckon I could pull the trigger when I exceed £1M.
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1.5-2 was the sweet spot where you get the most logical tax advantage iirc. Something like max drawn down and 40k/year. Anything over and you start paying 40% tax.
 
I kill Bunnies said:
What size pension pot are people happy to retire on? Taking the 4% rule into account and provided my mortgage is paid (and I'm old enough to retire) I reckon I could pull the trigger when I exceed £1M.
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Anything over £500k I guess, I'll probably have way more than that in my pension by the time I can use it, the problem is I need to build up the ISA to fund years before 57, which totally depends if I can find/keep jobs in this **** show job market over the next 5-10 years.
 
dlockers said:
1.5-2 was the sweet spot where you get the most logical tax advantage iirc. Something like max drawn down and 40k/year. Anything over and you start paying 40% tax.
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I'll be aiming for the max drawdown without hitting 40% too. Think I worked it out the other day at 67k a year including 25% tax free allowance. Things may change obviously, but I think I'll probably go with 5% withdrawal rate with a decent buffer and and make adjustments based on market performance if needed.
It's obviously really difficult to land at just the right pot amount to support that.
 
EvilRob said:
I'll be aiming for the max drawdown without hitting 40% too. Think I worked it out the other day at 67k a year including 25% tax free allowance. Things may change obviously, but I think I'll probably go with 5% withdrawal rate with a decent buffer and and make adjustments based on market performance if needed.
It's obviously really difficult to land at just the right pot amount to support that.
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Need to model it based on state pension too.

I assume someone will have nailed this maths previously?
 
Slam62 said:
The stock market like the housing market appears to be very carefully monitored by central banks and both are very unlikely to see major corrections, that is imo, although those in the know might say different.

Personally I have absolutely no confidence in the stock market at all so put all my savings in cash. That means I won’t get rich but I will know how much money I have. That may be not enough for someone to retire on though.

The market is all about timing tbh, however after a crash and logic says it can only go up, all confidence is gone so it’s hard to invest.
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This seems crazy. But each to their own I suppose!
 
I kill Bunnies said:
What size pension pot are people happy to retire on? Taking the 4% rule into account and provided my mortgage is paid (and I'm old enough to retire) I reckon I could pull the trigger when I exceed £1M.
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This does also depend on what other investments/assets outside of your pension you have. The real question is, how much do I need to live on each year in retirement and what percentage of that needs to come from my pension? Then you work forward from there to determine what pot size you need to support your SWR.
 
I kill Bunnies said:
What size pension pot are people happy to retire on? Taking the 4% rule into account and provided my mortgage is paid (and I'm old enough to retire) I reckon I could pull the trigger when I exceed £1M.
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500k I think.
For me it won't be a hard stop.
I plan to taper down.

Health permitting, my plan will be to move to less hours over a number of years.
This will allow me to not need a massive pension pot.
It will avoid any mental health issues going from work to no work.
It will allow me to make a decision closer to time. If things look bad I can work longer. If I get inheritance.. I can spend more in retirement.

No way I can fully plan. I mean everything is changing so fast now, climate change may have a big say in things.
 
dlockers said:
Need to model it based on state pension too.

I assume someone will have nailed this maths previously?
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True, it pretty much looks like changing from 5% to 4% withdrawal rate so shouldn't be too hard to model required pot size. It does feel like trying to land a dart at a very distant target, though - very difficult to actually land on the number you model.
Also, probably do not want to rely on SP.
 
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throwaway4372 said:
Yeah, moving my sipp to ii atm, wanted to do the move anyway so it's free money, and referral offer on top.
Other platforms have offers too so shop around.
There are usually similar deals for moving isa too.
Couple of examples:
https://www.ii.co.uk/special-offers

Current offers | Offers and benefits | Fidelity

Offers and benefits to help your money go further. For smarter investment decisions.’
www.fidelity.co.uk www.fidelity.co.uk
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I love free money!
Will have a look, thanks.

Do cashback sites offer pension switching bonuses too? :D
 
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413x said:
500k I think.
For me it won't be a hard stop.
I plan to taper down.

Health permitting, my plan will be to move to less hours over a number of years.
This will allow me to not need a massive pension pot.
It will avoid any mental health issues going from work to no work.
It will allow me to make a decision closer to time. If things look bad I can work longer. If I get inheritance.. I can spend more in retirement.

No way I can fully plan. I mean everything is changing so fast now, climate change may have a big say in things.
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It sounds nice but what well paid jobs allow you to gradually taper down? If you can't taper down in a well paid job then it's a huge shift to a probably close to NMW job.
Possibly contracting I guess.
 
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