Errors everywhere but I did get one thing right

My early personal finance records are sparse at best; however I was undertaking a bit of (pre)spring cleaning this week and came across an early retirement planning spreadsheet that was last updated in November 2007.  That’s just a month or so after I started on my FIRE journey.  It made for some interesting reading given my current FIRE position, so much so, that I thought it worth sharing particularly in view of some of the comments here.

On my FIRE journey so far I've found that Saving (Earning minus Spending) has been one of the most powerful accelerators towards FIRE.  To demonstrate to the end of February 2016 68% of my wealth creation has come from Saving while only 32% has come from Investment Return.  Looking at the 2007 spreadsheet I thought I could save £16,000 per annum and I wasn't planning on it increasing through my journey.  To contrast that assumption in 2015 I saved nearly £100,000.  Errors included thinking my Earnings had peaked and that I wouldn't be able to spend less than I was at the time.

I thought my investment expenses would run to 0.75% per annum.  Now ‘way back then’ Vanguard in the UK didn't exist but even so in 2015 they were down to 0.27%.  I also I thought my investments could achieve a real annualised 4.3% after expenses over the long term.  So far I've only achieved 3.4%.

I thought that in Early Retirement a safe withdrawal rate would be the 4% Rule – 4% of my wealth on retirement day increasing with inflation annually.  Today I think 2.5% is more appropriate.  That is a big error.  For a person wanting to FIRE on £20,000 it represents an extra £300,000 of wealth that needs to be accrued which is a big chunk of change.

I thought that the UK would be home and that I would need £28,000 of earnings per annum to live well in FIRE.  Today I think I’ll need closer to EUR25,000 and we’re now 99.9% Continental Europe bound.

Crashing all those numbers above together plus putting some home considerations into the mix made me think I’d need a little over £700,000 to FIRE which included some mortgage payments.  Today I think I’ll need £1,000,000 which includes paying cash for a home early into FIRE.

Another pension’s consultation begins just as the last consultation ends

There were plenty of articles in the mainstream media this week musing about the potential changes that were coming to private pension’s in this month’s budget.  Would Osborne introduce a pension’s ISA, would he introduce flat relief on pension contributions, would he abolish salary sacrifice or would he just cut allowances?  As is so often the case with budget’s these days it looks like we don’t have to wait until budget day for the answer.  Osborne has apparently decided that “There won’t be any changes to tax relief at all in the Budget” (free FT link or Google Osborne scraps pension tax relief shake-up).  So it looks like for now I can just continue with Plan A which predicted no pension tax changes for ‘high earners’ in the 2016/17 tax year.

While all these articles were getting attention it was actually this article (free FT link or Google State pension review begins with John Cridland as head) that has had me more concerned.  This was the announcement that another review of state pension ages has kicked off, from which recommendations will be made in May 2017.  ‘Experts’ are predicting that millennials joining the workforce today might be waiting until their mid-70’s before they can retire.

Now for me it’s not the potential state pension age change itself that worries me, as all my FIRE (financially independent retired early) planning never includes the state pension.  This is because I never wanted to be held to retirement age gun-point by our ever tinkering government with any state pension I might (I actually believe I may never receive any as for example it will end up means tested) receive being an insurance policy only.