Friday 1st October 2021
Last month I gave my presentation titled "Early Retirement Made Possible". I love presenting and I always find I learn so much about my own journey when I need to prepare for a presentation.
Up until recently I've been frustrated with FIRE because I felt that to follow the 4% rule was so difficult in Ireland, largely due to the high tax rates. Yes, we can push everything into our pension, but that then rules out early retirement, with no option to retire in our 30's or 40's.
It wasn't until I dug a little deeper, that I realised that perhaps we don't need to apply the 4% rule so strictly in Ireland, largely for the following reasons:
1. We have this exceptionally generous state pension. While it may not be as generous in real terms as it is today by the time we hit traditional retirement, it's unlikely just to fall off a cliff. When we factor this from say age 68 to 70, then it makes a huge difference to your retirement plan.
2. We have free health care from age 70. Follow any US FIRE influencer and all you hear about is "rising health insurance costs". In Ireland (and Europe), we have the opposite - health care is typically free once you hit a certain age. Even if you have private health insurance the amount it can increase is capped. It's a cost we typically wouldn't lose sleep over!
3. We can always return to work before we hit our traditional retirement age. This is probably the biggest consideration. With FIRE our worst case scenario is that we return to work at some point. Imagine you retired early in 2007. A year later your portfolio is worth half of what it was the year before. Are you really going to stand by the 4% rule in this case, or are you more likely to pull up your socks and return to work? I know I would return to work if this happened, so perhaps we can be more aggressive with our withdrawal rate knowing that we won’t withdraw from our portfolio during a bad year.
4. We will likely work in retirement anyway. Keep in mind that so many people who achieve FI end up continuing to work in some form or another! Even a small income will make a huge difference to your withdrawal strategy. In my own case, I have income from passive income sources, income from hockey coaching and I will likely continue to freelance as a web developer even once I hit FI. Based on all of this, there is a good chance I could likely cover most of my living expenses anyway just from small consulting work, hockey coaching and some passive income.
5. We likely have some sort of inheritance due to us at some point. For many of us, we may benefit from their assets being passed on to us one day!
Based on all of the above, it is likely that we don’t really need that much to hit our traditional retirement portfolio. Even a small pension of anything over €200k would likely be more than sufficient to live off once you factor in the state pension and an inheritance. So what if we aimed to withdraw 4% once we hit traditional retirement age and be a little bit more aggressive before then, knowing we can always return to work if there is a major market correction.
As for what we withdraw before then, well it's largely up to you and your own personal situation. I suspect anything between 5-8% would likely be safe enough if you managed it correctly and aimed to withdraw only in the good years.
I am pleased to report that I raised €100 for charity from my online presentation last month. I have been in touch with Help the Homeless Limerick who are delighted to hear about the contribution - so thank you to those who used the affiliate link last month and came to watch my presentation.
|Portfolio Summary (as at 30th September 2021)|
|Monthly Portfolio Growth Report|
|Capital Gain + Dividend Income from Equities||-€2,374.11|
|Real Estate Income||€277.54|
The table below shows the breakdown of my portfolio into the various asset classes:
|Portfolio Asset Breakdown (as at 30th September 2021)|