How much capital enough to retire/start again

[bridie69]

Hi
DB is 41, single, will never have children. He is fed up with his job which is relentless and sees it as a waste living in a £500k house while watching the pennies. I have become increasingly worried about the long term damage the stress of his current lifestyle is doing to his health. He is amd has always been very very careful with money and reckons he spends ca. £13000 a year on everything excluding his mortgage. He wants to relocate to Ireland where a maiden aunt recently died and left him and me a small cottage in a place he really loves and would be happy living in. His thinking is release his ca. £300k capital from the house by selling it and investing the capital elsewhere to generate say 5% a year giving him around £13k a year pre tax. This covers his basic outgoings and he will have no mortgage(he bought me out of the inherited property) . Then he wants to look into a small business or part time work there or indeed here (he can stay here with me if he needs to). He will eventually age 65 also get a guaranteed pension of £9000 p.a.plus I suppose state pension. I think he should at least try, he has no dependents only himself and is risking his mental health in a big way if he carries on like this.

I would urge him to go for it, but the biggest issue with your planning is that he would be amazingly lucky to get a return on investments of 5%. The truth will be nearer 1.0 - 1.5% and the financial press is currently buzzing with talk of interest returns falling to 0% or even becoming negative in the future.

However, he is young. The 300k will be a fabulous cushion and the lack of interest a real incentive to start his business or find part time work.

I jumped from a highly paid, stressful job to nothing, moving across country in the process. I has nothing like the cash he has, but have made it work and am happier than I have ever been.

Can he actually get 5% anywhere at the moment.
And don't forget the effect of inflation. He might live on £13000 currently, but in 10 years, he will need more.
Sounds like a great idea tho. Does the house need major renovation at any point, eating further into capital?

Well re interest one option is keep it in the London SE property market. Flats in up and coming Croydon not too far away for example seem to be delivering close to what he needs yield wise plus he has some contacts in the property industry. The house is in pretty good shape,relatively recent roof, small garden where he plans to grow some veg, windows ok, reasonable oil fired heating. But really it is about a better life. Things have been awful for him at work recently and he doesn't want to die young like our DF and my DH RIP.

he should certainly do something, and selling up/chucking it in is a great start. (been there!) Just do it. This is not a rehearsal.

if he just spends the money (assuming zero inflation which is NOT the case of course) he's got 23 years of living expenses, which will take him to his pension. Of course it doesn't work like that, and as mentioned there are no guarantees with investments. There are UK bank accounts where you can average 3% on about 50k, but I'm not sure of the Irish situation.

I would say - get out now. The finances give him plenty of time to look for alternatives. He'll need to be careful but it sounds like he knows about that.

imagine those mondays where he doesn't have to go to that job. Worth every penny.

God yes. He is in a very conservative working environment eg people stay there 30 plus years and spend their lives wishing them away and talking about their pension. I think he will just about get through with his health intact now if he has he carrot of leaving in July. I think part of the problem is people who are actually trapped eg have young children or massive mortgages or both don't really want others to be free so it is very hard to get any reassurance from anyone just naysaying.

I don't think he'll get 5% interest on his capital. It's a lot of money but he has to think in the long term such as 30 or even thirty years ahead. He doesn't need to live in a £500K house so downsizing would be a start. But I don't think it's a good idea to rely completely on capital these days. Could he not reduce his hours in his present job as a start rather than resign completely. And at 41 his state retirement pension age won't be 65 more like 68.

Investments over the long term are shown to yield 3% above inflation - risk premium. Clearly you can generate more, but you would advise anyone to seek risk in his situation. Reverse Lund cost averaging would be the main issue. I think a defensive position while investing for income using a 'natural' income structure, will protect him in the longer term. He needs investment advice IMO, because putting it in the bank is just going to lose him money.

wouldn't seek risk!

oh yes, good point about the delayed state pension.

but at 41 he's got plenty of time to ride out stock market ups and downs. I agree he needs some proper advice to understand the risks and issues.

Can be think about renting a room out in his house now or even when he moves? A nice extra income for very little effort and there are good tax breaks too.

We aim to do similar to your brother in the next 5 years and have read a lot around the subject (see Mr Money Mustache's blog and associated forum for example). People that have done this frequently comment that they actually live on LESS than they thought they could as they have the time to save money by doing jobs themselves and helping people in their community out for the price of some beers/dinner etc. Plus they usually end up doing some work/set up a business for the fun of it rather than because they have to.

I don't have any investment advice but he can at least afford himself some breathing space with the money he will have.

You can't buy back your health.