Financially Independent retirement

[MoominMammasHandbag]

Through a combination of hard work and good fortune DP and I have built up a fairly successful business and, as we've always lived fairly simply, have managed to save a decent amount of money.
So, as my health isn't great, and we've no desire to be the richest corpses in the graveyard, we've decided to cash it all in and retire early.

So what are the best ways to turn our capital into an income? We have a buy to let, and will probably get another, but we don't want all our money in one type of investment. I'm a bit sceptical about the stock market too.

Anyone else done this and what have your strategies been?

I'm a buy to let person. I have always come off badly from taking financial advice from the suits.

Exactly Rosh, we don't want to be paying someone to sell us some dodgy investment product, but I kind of feel we need something apart from property. We have a couple of fairly rubbish pensions but they don't kick in until we are sixty.

First, well done for being financially astute and building up some decent capital.

I'd be wary of sinking it all into BTL, particularly when houses are expensive relative to average salaries. I don't see much scope for capital appreciation there. We have a BTL but I don't want another...feels like too many eggs in one basket.

I'd suggest putting at least half of it into equities, investment trusts (which are funds traded on the stock exchange, if you're not familiar with them; not a packaged product) and ETFs (exchange traded funds - also traded on stock exchange). If you pick the right equities, that pay a decent income, you could live quite comfortably on the dividends.

Good luck, and I hope you find the right solution. I agree that you don't need a financial adviser. I think that with a bit of research, most people can make their own investment decisions.

The right equities used to include all of the banking sector and their bonds.

Has anybody here actually ever taken this sort of financial advice from the internet ?

Poppy

Did you read the bit about not putting all your eggs in one basket?

I agree that you don't need a financial adviser. I think that with a bit of research, most people can make their own investment decisions.

Well, I think most people did not make a good investment choice on buying a house which is now in negative equity...

I couldn't do a good investment decision as an amateur.... Just like I couldn't do my own plumbing/roofing or electricity. I would get in an expert.

Thing is, you need to know a good one....

I think that if you are going to have BTL then you need at least four properties to help you if there is a void period on one of the properties.

I have to admit that I have found that investment trusts a disaster. If the stock exchange performed then you would have a decent income from your pensions.

I agree its an idea to diversify investments, but no one has a crystal ball.

There are different types of rental properties. A holiday let is a completely different type of investment to a long term let in England. Buying a holiday let abroad is complex because of different laws and the euro is very strong against the pound at the moment. However property is depressed in Greece and Spain. You would really have to do your homework as people have lost huge fortunes in the past.

I was dreaming about buying a holiday appartment in the French alps as you can rent out all year round. However French inheritance laws and a complex tax system would put me off.

I don't think I would be brave enough to buy property abroad but buying a holiday let is an interesting idea. Somewhere like the Lake District probably has a long season.
We put a decent sum into the stock market straight after the crash about four years ago, and obviously it has done really well now. But it seems a bit mad to buy shares when the stock market is on a high.
Has anyone on here taken the plunge into early retirement?

With help from my IFA I have a mixture of commercial property, shares and bonds.
I like commercial property a lot yes it's value doesn't change a lot, but it does tend to have a much better yield (that's why pension companies like it so much). My commercial property I spent 125K on it then 50K refurbishing and get £13,000 rent per year due or review next year and have a lovely long term tenant on a 25 year repairing lease - yes commercial it is not uncommon for the tenant to have to maintain the property..

With respect, Ananda, buying a house to live in isn't an investment decision. A home is not an investment.

I maintain that most people don't need a financial adviser. I find it strange that so much of the language used to describe different assets and investment products is complex and obfuscatory when the concepts are really quite simple.

Good luck with your choices, Moominmamma.

"With respect, Ananda, buying a house to live in isn't an investment decision. A home is not an investment."

A home can certainly produce money when you downside.

Yes, if you're lucky. It still doesn't make a home an investment. Ananda appears to suggest that people who bought a house at the top of the market and now find themselves in negative equity made poor investment decisions, which they may not have made had they consulted a financial adviser. I disagree, because 1. you buy your home to live in, not as an investment and 2. financial advisers are no better able to predict the future prices of assets than anybody else; actually, most would have taken the opportunity to flog a mortgage and various insurance products!

A financial advisor does not have a crystal ball. If anyone could find a way that was guarenteed to make money then they would. I suggested a holiday home as the poster could get enjoyment in retirement from having a holiday home as well as money.

We are in a not dissimilar position in that we ended up with some unplanned BTL about 15 years ago which has done extremely well. Apart from that and some work pensions we are only just now in a position to start putting money aside.

Our first thoughts were to try to rebalance our portfolio by putting as much as we had into a SIPP through HL. Rather than pay for advice we planned to use a conservative distribution (mainly UK but some European, US and Asian shares etc) and rely on trackers.

However change of plan and we are buying a holiday let close to my mum. A bit like your own home, not really an investment. However we will get more utility as we can use and lend to family during the off-peak, and gain some return by letting through peak season.

The real problem with BTL is that you either lose a lot of your potential return by paying agents to manage, or you do it yourself and so become pretty tied. It is no fun sitting in a ski chalet with dodgy reception trying to sort out a locksmith or a plumber.

I would start out by deciding how you see your retirement and fit investments to match. If you fancy a round the world cruise you are better with stocks and shares. If you dont mind a bit of DIY and quite like dealing with tenants, then BTL allows you a practical part time retirement job and if you are sensible, can produce both income and capital returns.