Our Early Retirement Viability Spreadsheet
A wee while back I wrote an article attempting, one year on, to answer four of the questions I asked myself at early retirement. After publishing it, a reporter at the Business Insider website in the US wrote asking whether they could publish some articles about us, which we were of course happy to help with, we’re keen to pass on any knowledge we’ve built up which might aid others. One of them was about the spreadsheet we used to assess whether early retirement was viable for us, or in other words, whether we’d really hit the point of financial freedom. Business Insider published the article earlier on today, and you can find it here on their site.
I’ve added a copy of the spreadsheet to this article too, in case it’s of any use to readers of this blog in the future. It’s a Microsoft Excel file, and is only about 50KB in size. To download the spreadsheet, simply right-click on this link and choose the appropriate ‘save’ option.
Please note: The spreadsheet is populated with dummy numbers – these aren’t our numbers and don’t reflect our actual financial status.
There are some notes below to try and explain how the sheet works.
- The overall purpose is to guesstimate whether our income over the coming years will be sufficient to enable us to live to 85 without running out of money.
- The Variables tab holds some of the things which will influence financial position long term – like cost of living increases and changes in the market value of properties. These are all, of course, educated guesses, nothing more – feel free to put your own ideas in there and see how they affect the rest of the spreadsheet.
- The Net Worth tab makes an estimate of overall financial worth. If we sold everything and paid off all liabilities (mortgage, credit card bill etc), how much would be left? In reality we’d have less than this as we’d likely pay capital gains tax and professional fees, so these are only rough figures.
- The Income and Expenditure tab makes an estimate at how much we spend each year versus how much we earn. The Variance at the bottom is the difference between the two, and needs to stay fairly consistently green, indicating we’re spending less than we’re earning. This is the sheet which is most important: our net worth is meaningless if we can’t afford to pay our bills.
The sheet is set up to reflect our overall financial strategy:
- To assume no windfalls
- To start taking some income from private pensions at age 55
- To claim no benefits other than NHS support and partial UK state pensions
- To not take advantage of any capital gains on property and shares – we will do this at some point in the future, but probably not until we are at least 55 years old
The sheet is, clearly, a giant guess. However, we do have over a decade’s worth of detailed expenditure figures, and Ju continues to track each penny we spend in a separate sheet, so we have a good degree of confidence in the costs. We also have over a decade’s experience of being landlords, so have a good idea what it takes to keep property in good condition, and the other costs involved.
Clearly the spreadsheet is highly-adapted to our particular position, but hopefully it’ll be of some interest to anyone else looking to leave full time work before their pensions kick in.
Thanks, Jason
Thanks for sharing. We are currently refining our calculations to retire and travel in our rig and this will help me to cross check our annual cost spreadsheet and forward plans.
I am actually working things through to year 100! Although I am assuming at that point we might have stopped travelling. LOL! We have half a plan that at some point we will find a place that will call out to us to be our place to retire to.
In the mean time. . . while like you, part of our plan is having property let to give income, we don’t have a room we can keep free. We are fortunate that we have a location that it extremely popular for tourism and therefore holiday letting. DO you have experience with anyone who goes down the route of AirB&B? There are specialist managers who look after the letting and then we could block out dates when we need to come back to do essential turn-arounds every year.
Cheers
Steve
Hi Steve
We know a couple who have holiday lets, who manage them from abroad for a few months of the year, then live in them when they’re not being let out. I don’t know of anyone who does airBnB to let out properties though I’m afraid. Good luck with the plan fella.
Cheers, Jay
Just looked at your spreadsheet…I am not sure if we have misunderstood but it looks like your expenditure is £10000 more than your income..sorry have we read it wrong ?
Hi Maureen, you’ve read it correctly but they’re not our actual numbers. If we placed our real numbers in there all the variances would go green, we have more passive income per year than we spend. Cheers, Jay
Hi Jay
Helpful spreadsheet – thanks. Do you have such a thing as an average daily spend on your travels?
Hi Paul. We aim at £15k a year all-in for our wanderings, which includes van depreciation, insurance, MOT and servicing, repairs, dog vet fees, buying new tech from time to time, clothes, ferries, the lot. Our costs are a little difficult to report as we have non-travel costs
like management fees for our rental properties, but if you ignore everything but the travel costs, we’re about right at £15k for 365 days.
We’re not experts at keeping costs down by the way – check out Craig and Joanne at ourbumble.com (they’re currently enjoying the fabulous Greec) who keep their costs way below ours.
Cheers, Jay
Hi J&J Quick question regarding headlights.I have a similar Hymer to yours, and have jus returned from my first trip to Geordieland from Switzerland…..3000 kms and not happy with he headlights….how are yours ? have you had any problems ? Very poor on Dip but full beam is super Even with the height adjustment its still a poor show :-(
Hi Bill
Sounds like a great drive, headlights excepted! Yeah, ours are pants too. We hardly ever drive at night, but did yesterday, and it’s not a great experience on unlit roads or tunnels. As you say, main beam is spot on, but normal headlights are more like sidelights, they hardly seem to light up the road, so I’m sticking to daytime driving.
Cheers, Jay
Hi what do you do about health insurance can you recommend one xx
Hi, we use a backpacker policy from Alpha. We got a two year policy to avoid restrictions about being in the UK for 6 months before taking the policy out. Cheers, Jay
You seem to have the same growth rate from your SIPP pre and post drawdown. I am relying mostly on my SIPP (so this has a bigger impact for me)and have assumed growth will be reduced by the drawdown percentage after drawdown starts.
Good point Robert. The spreadsheet for us was always rough and ready. As we hit FI without our pensions, they’re all an added bonus as and when they come, so we didn’t bother modelling them much. We didn’t model for tax either. Cheers, Jay
Not in your plan but I am relying on ISA’s pre 55 and again dropping the growth rate after drawdown starts. For aynone else trying to model this. TAX can play a bigger part here also so for others try to make sure you use up both your TAX free allowances from Pensions and Savings Income, by building up a SIPP and savings in both your names. You can engineer £16.5k income tax free each given enough funds.
Great points Robert. We had no plan to ‘retire early’ until in our 40’s, and really didn’t pay that much attention to long term tax planning. We did pay a reasonable amount into company pensions (not SIPPs), where they matched contributions so we did do some tax-deferred investing. At the moment the majority of our income is therefore taxable, although we are building up ISA-shielded investments and plan to shift more into them (assuming they remain available) as time goes on. Cheers, good luck with your plans and thanks for commenting, Jason