February 2023 Portfolio Update
Thursday 2nd March 2023
The Slow Transition to Semi-Retirement
Back in July last year, I challenged myself to build a portfolio of €500k by the time I was 40. However, the time has come for me to let go of this goal. I will likely hit the €400k mark over the next couple of months, however I am on track to reduce my monthly savings from €10k a month to €5k a month by June this year, as I look to slowly transition to semi-retirement.
My plan is to scale back to saving €5k a month for a while - as long as I feel I can maintain a work-life balance. If €5k feels too difficult, I will readjust - but I will wait and see how my work-life balance is saving €5k a month.
Ironically, even with me cutting back to €5k a month over the next couple of months, it doesn’t mean I won’t hit €500k by 40. I will likely fall somewhere just short - but either way, the big realisation for me recently has been that it is on me when I transition to semi-retirement, and waiting until my portfolio hits a certain number shouldn’t be the deciding factor on me doing it or not.
The “Die With Zero” FIRE Calculator
During February Tina from Money Flamingo shared this article titled ‘How to “Die With Zero” – The Math Behind the Mindset’. The article itself was interesting enough, but the big takeaway was The “Die With Zero” FIRE Calculator, which has had me playing with my own FIRE number during February.
The best part about this calculator, is that it takes into account The State Pension. It also takes into account the fact that my children will one day be older and no longer financially dependent on me. For the first time, I was able to define my FIRE number using a far more accurate calculator than the 4% rule.
I did adopt one key aspect from the 4% rule however. The calculator asks you to define a few metrics at the start. I keyed in the following metrics:
I used my current age, a life expectancy based on 100 (just to make sure I have enough coverage) and I used my FI Net Worth from December 2022. The key figure I used however, was 4% for the Expected Investment Return (Inflation-adjusted). The reason I used this, is that this is what is given in The Trinity Study as a safe withdrawal rate, so I figured while this calculator has nothing to do with the 4% rule, it makes sense to use it here to ensure that I am conservative with my expected returns going forward.
Based on my current expected savings rate over the next couple of years, and accounting for my expecting spending over my lifetime, my calculator looks as follows:
As you can see, it's pretty amazing that the numbers look good, and a portfolio of around €800k does indeed appear to be accurate!
The calculator is well worth checking out. For example, it helped me work out that if I were to stop saving now, and simply adopt Coast FI, I could retire at age 52 (14 years from now). Alternatively, if I adopted Slow FI and saved only €1,000 per month, I could retire at age 47 (9 years from now).
There was actually one really important takeaway from the calculator. It got me thinking about HOW I would withdraw from my portfolio. For example, if I stick on my current path, retire at age 42 and start withdrawing €40k from my portfolio, where would that money come from? Ideally I don’t really want to have to sell my investment properties anytime soon, so thinking about how to withdraw is important.
I realised that my best approach would actually be to focus on paying down two of our mortgages on our investment properties. This would give me some decent cashflow each month. As it is, I don’t see myself fully stepping away from work even in early retirement, so this doesn’t really fully matter at this stage. Given this calculator shows that even if I stopped adding contributions today, I could still retire at age 52, it just highlights the importance of compounding over the long run.
For example, I suspect that if I were to continue to make contributions until I was aged 41 and pay off two mortgages on our investment properties in that time, then my withdrawal would look something like this:
The idea being, that I adopt a Barista FIRE approach until age 50, working a little and withdrawing €24k a year. Once I hit 50, I can access my pension and withdraw another €12k a year, which should make up most of the difference.
I have so many different options available now, which is great. My main focus this year is to scale back and start the transition to semi-retirement, scaling back my work until I feel I am at a sustainable point - where I can still make contributions but where I am happy with my work-life balance. Anything else beyond that, is a bonus.
Solar Panel Update
We consumed 271 KWh of electricity during February, buying 169 KWh's. Our solar panels covered 38% of our electricity usage, saving us €37.74 before depreciation (based on 37c per kWh). We received a credit back of €2.52 from supplying 12 KWh's to the grid. Our total savings accounting for depreciation was €14.64, giving an annual return after depreciation of 2.15%.
I often say in Ireland we have four months of winter (November to February), so I am definitely happy to be in my favorite 6 month block of the year (March - September). I expect the panels to have a strong few months as the longer months kick in.
Here is a breakdown of our solar panel usage since they were installed in July:
| Solar Panel Return - August to Febuary | ||||
|---|---|---|---|---|
| Month | Percentage Covered by Solar | Electricity Saving (after depreciation) | Credit from Supplying the Grid | Annual Return |
| August 2022 | 83% | €29.42 | €34.86 | 7.95% |
| September 2022 | 62% | €28.90 | €7.98 | 4.57% |
| October 2022 | 45% | €22.98 | €4.20 | 3.38% |
| November 2022 | 31% | €12.05 | €2.10 | 1.76% |
| December 2022 | 24% | €1.69 | €1.89 | 0.45% |
| January 2023 | 20% | €0.95 | €1.47 | 0.30% |
| February 2023 | 38% | €14.64 | €2.52 | 2.15% |
| Monthly Average | 43.2% | €15.80 | €7.86 | 2.94% |
February 2023 Portfolio Report
We finally got the keys for our third investment property in February and went to work on some renovations to get the property ready for renting. We expect to rent the property in March.
Stocks were slightly down during February, but it was another month adding €10k to the portfolio. I expect to continue to contribute €10k to the portfolio between now and May, before downshifting to saving around half of that thereafter.
| Portfolio Summary (as at 28th February 2023) | |
|---|---|
| Opening Balance | €359,408.00 |
| New Contributions | €10,000.00 |
| Portfolio Growth | €578.89 |
| Closing Balance | €369,986.89 |
Monthly Portfolio Growth Report
| Monthly Portfolio Growth Report | |
|---|---|
| Real Estate Income & Capital Gain | €923.61 |
| Capital Gain + Dividend Income from Equities | -€344.72 |
| Total Growth | €578.89 |
| % Return | 0.16% |
Portfolio Breakdown
The table below shows the breakdown of my portfolio into the various asset classes:
| Portfolio Asset Breakdown (as at 28th February 2023) | ||
|---|---|---|
| Equities (Stocks) | €131,278.38 | 35.48% |
| Real Estate | €238,040.80 | 64.34% |
| Cash | €667.71 | 0.18% |
| Total | €369,986.89 | 100.00% |
Equities (Stocks) Breakdown
I currently have three different brokers that I use for buying Equities. At the moment, 100% of my equities are within a pension, though this might change in the future. The breakdown for equities is as follows:
| Broker Name | Value |
|---|---|
| Irish Life | €52,809.59 |
| Davy Select | €38,512.62 |
| Aviva | €39,956.17 |
| Total | €131,278.38 |
Real Estate Breakdown
I calculate the amount of equity I have in each of my properties, by estimating the market value of the property and subtracting the mortgage balance. My real estate investments can be broken down as follows:
| Investment | Equity |
|---|---|
| Property 1 | €115,124.89 |
| Property 2 | €57,402.50 |
| Property 3 (in progress) | €61,769.41 |
| An Dúlra | €3,744.00 |
| Total | €238,040.80 |
2023 Year to Date Returns
Here is a summary of my year to date returns for 2023.
| 2023 Year to Date Growth Report | |
|---|---|
| Opening Balance | €342,734.85 |
| New Contributions | €20,000.00 |
| Equities Capital Gains + Dividends | €5,911.29 |
| Real Estate Capital Gains + Rental Income | €1,340.75 |
| Closing Balance | €369,986.89 |
| Portfolio Return | €7,252.04 |
| % Return | 2.00% |
Lifetime Portfolio Returns
Here are my returns since I started in 2018.
| 2018-2023 Growth Report | |
|---|---|
| Opening Balance | €0 |
| Contributions (Money Added) | €276,445.78 |
| Equity Release* | €41,220.21 |
| Real Estate Capital Gains + Rental Income | €47,780.15 |
| Equities Capital Gains + Dividends | €8,405.48 |
| Other** | -€3,864.73 |
| Closing Balance | €369,986.89 |
| Portfolio Return | €52,320.90 |
* In 2020, some of the new contributions came in the form of an equity release, as we turned our primary residence into a buy to let and purchased a new home to live.
** In 2018 & 2019 I made several bad investments in peer to peer lending, forex trading and unregulated investments, which resulted in losses overall.
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