Tuesday, October 01, 2013

And done - I am now retired

I officially retired on 30 September, 2013.

Although I have been looking forward  to this moment for several years, I still feel a little bit apprehensive about the prospect of funding our family for a retirement that I hope will last more than forty years with no income from employment. I know that the numbers make sense, but no amount of financial planning can protect me from every possible negative event, so I spent a bit of time looking at the contingency plans.

1. Off balance sheet assets

We have a few assets which do not appear in the balance sheet for one reason or another:

(i). wine in bond in the UK: this was excluded on the basis that I was more likely to drink it than sell it. As the collection has grown and some of the cases are now too expensive to drink (at least for me);

(ii). gold coins/silver bars: I am not a fan of gold but recognise the metal's long history of being an asset of last resort. Initially the value was too small to bother with but every now and then I buy a little bit  of physical bullion and put it in the safe deposit box;

(iii). life insurance policy: many years ago (before I had even started working) my parents took out a whole of life insurance policy in my name. While whole of life policies are (like anything insurance related) a very bad investment, by the time I had educated myself on the evils of such policies, it had reached the point where it was better to keep it than surrender the policy. It matures in 2021. The amount is not large;

(iv). money in a joint bank account: this is used to collect rent and pay expenses on a property in our joint names. Initially there was very little in the account (in fact I often had to top it up whenever we had a vacancy) but as rents have risen and interest rates have fallen, cash has built up (and continues to do so). It is currently earmarked to pay for redecoration of our home as and when we get around to that;

(v). painting: I purchased one painting which is leased for a modest return. Eventually I hope to sell this but it is an uncertain proposition so I have not included this in the balance sheet.

Collectively, these five items would pay for at least a year's worth of living expenses (at worst case valuations) and could pay for up to 18 months worth of expenses.

2. Sources of funds

We have two main options - downsize our home or take out a reverse mortgage. The former is prohibitively expensive in Hong Kong due to the HKSAR government's war against home buyers and investors and (as far as I am aware), reverse mortgages are not currently available.

3. Reduce expenses

There is plenty of fat in the budget which could be trimmed if needed. We can cut back on holidays and a few other areas without feeling any pain.

At some point, my daughters will be off the payroll. Given that they are still very young, I have ignored this when crunching retirement numbers.

4. Get a job

If I have to I will (and I will still do a few hours a week for a year or so just to keep myself current), but even with all the bad things the market has thrown at me over the last few years, the portfolio has still done its thing. All that being said, if I need to get a job, I should look for one as soon as the possible need becomes apparent and not wait .until things get difficult

It helps that Mrs Traineeinvestor wishes to continue with her part time job although my financial model only assumes she continues working until the end of 2014.

All in all, I have a high degree of confidence in the private portfolio's ability to support us for 40+ years.


Anonymous said...

Congratulations on reaching early retirement!

Although i'm probably still 10+ years away from trying something similar, i look forward to reading how things work out for you.

Wishing you all the best


traineeinvestor said...

Hi beancounter

Thanks. It's a good feeling.

Looking at the rate your finances are going each month, I am sure you will get there sooner than you expect.


Fatt said...

Hi traineeinvestor

I enjoyed reading your blog. I am in my early forties and have achieved financial freedom due to business success. The irony is my business subsequently failed.

I am sure that you will enjoy your early retirement. Take care.

traineeinvestor said...

Hi Fatt

Thanks for dropping by and for the kind thoughts.

I have huge respect for people who have the guts to run their own businesses - I took a much more mundane path to financial freedom.