In Part 234 I wrote down some projections for achieving FI, but fortunately, it was pointed out to me that I’d made an error in my calculations. I had failed to include the growth on the sum already accumulated, and when I do include it the figures look much more positive. Below is an extract from the post with the numbers corrected.
A few weeks ago I ran through some calculations regarding the State Pension without knowing where exactly those calculations would lead, and it was a popular part of that blog post. I’m going to do a similar thing here, where I work through the numbers assuming I retire at 47, and bridge until 58, and then assume I will be withdrawing over a 30-year period.
I’m now closer to 41 than 40, so to simplify things, I’m going to assume that I’m 41 in these projections.
Bridge fund required: 11 years at £21,600p/a (£1,800p/m) = £237,600.
Current bridge fund: £70,000, meaning I need to accumulate £167,600 in 6 years.
I would need to invest approximately £1,550 each month, with an assumed growth rate of 7% on the amount already invested and future investments to hit that goal. I can safely say that will not happen barring a major boost in income or coming into a lump sum of cash. Maybe if I sell the BTL or win on the Premium Bonds.
There’s one factor I’ve not considered above, though. As I draw the funds down, the remaining pot will still be experiencing growth. So, I’ve looked at this from another perspective. If I need £21,600 and am willing to go with a 10% withdrawal rate, Firecalc suggests this would work 72% of the time. Also, with this, I’d need a slightly smaller pot of money; £216,000 instead of £237,600. It’s still too high a figure for me to realistically achieve though.
Let’s move it back to 50 when I retire.
Bridge fund required: 8 years at £21,600 = £172,800.
Current bridge fund: £70,000, meaning I need to accumulate £102,800 in 9 years.
To achieve this I will need to invest approximately £310 per month, which is much more realistic.
Great spot, and it does mean that you’re in a position whereby if you looked at 8 years to FI from today, you’d need £194,400 for 9 years bridge, which would need approx £600 a month invested to achieve, which could also be achieveable.
Either way, regardless of it being 7 years, 8, 9 or 10 years, the difficult middle is a struggle for us all, but when you get out of the other side it’ll be an amazing achievement.
The difficult, boring, middle… Like you say, it’s all about getting to the other side.