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And the possibility of saving is.....?

Discussion in 'Teaching overseas' started by percy topliss, Nov 5, 2017.

  1. MayaJones

    MayaJones New commenter

    I was saving 1300 UKP per month in southern Europe last year. I am now in Switzerland and saving around 1100 UKP. That is after all deductions, holiday fund, rent, bills, fuel, and all other expenses.
  2. T0nyGT

    T0nyGT Lead commenter

    So if you started saving seriously at 31 that means in 15 years of saving you have saved / invested enough to retire for a 30 year retirement? Wow, I guess you must have some pretty savvy investments as that probably wouldn't even be possible saving even a huge amount of just cold hard cash
  3. tiler

    tiler New commenter

    It's intended to last 'forever', so the capital will continue increasing during our retirement phase.

    Early retirement is more achievable than it may initially seem. The table below shows how many years you have to work (right column) based on your savings rate (left column). For example, a 60% savings rate (meaning your living expenses are 40% of your net income) requires 12.5 years of work.

    Savings Rate (Percent) Working Years Until Retirement
    5 66
    10 51
    15 43
    20 37
    25 32
    30 28
    35 25
    40 22
    45 19
    50 17
    55 14.5
    60 12.5
    65 10.5

    More information here: http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/

    Now this calculation is based on the assumption that your living costs will remain similar in retirement as they did during your working years. Research shows living costs actually decline for most people during retirement due to decreased commuting costs, fewer dependants etc.

    However, as expat teachers, we find ourselves in a unique and somewhat unenviable position that our living costs will possibly increase during retirement. This is because we will incur the added costs of housing, medical insurance and flights - benefits that were provided during our working years.

    Our savings rate is around 55% (equating to 14.5 working years) however we also earn a substantial clip above the assumed 8%pa. on our investments. So balancing the increased retirement spending with the increased investment returns beings it comfortably to about 15 working years.

    Keeping in mind, this assumes never earning any additional income or gaining any inheritance for the remainder of our lives. Both of which (particularly the former) are unlikely with such an early retirement.

    I hope that provides some more clarity on how achievable an early retirement can be for us humble expat teachers.
  4. tiler

    tiler New commenter

    There appears to be an issue with formatting the table. To view it clearly, visit the link provided above.
  5. gulfgolf

    gulfgolf Established commenter

    It’s great that you’re getting above the assumed 8%. But right now, pretty much anyone in the market is getting well above 8%. The Dow is up 19% ytd. No way will that continue for 15 years. A correction will come, and it will hurt.
    Right now the booming market has put my stock-bond ratio so out of whack that I’m buying nothing but bonds each month to correct for it. When the correction comes, I’ll thank myself for buying all those cheap bonds and eschewing the overpriced stocks.
  6. tiler

    tiler New commenter

    You're right, above 8%pa returns have been a breeze in the share market for the past 8 years (apart from a small blip in 2011). Medium term future returns are unlikely to be so rosy from a broad based index perspective.

    We have 80% of our investments with two small funds that actually underperform the market during strong monthly rises. Conversely, they outperform during market falls. So we see the next market correction or even crash as a great opportunity to allocate more funds.

    They're both small funds with Buffet style value investing philosophies. One (EGP) has averaged 16%pa. since 2011, whilst the other 16%pa. since 2007. The latter fund (Pie Growth) actually opened a few months prior to the GFC, which makes the returns even more remarkable. Being aware this may sounds like a sales pitch, I should add both funds are closed to new investors.

    Your fixed stock/bond allocation should serve you well in any market condition. Is the plan to alter the ratio with a stronger leaning toward bonds are you get older, or to keep it roughly stable?
    Last edited: Nov 7, 2017
  7. okmohito

    okmohito New commenter

    investments can go down as well as up. George Soros made a mint on Black Wednesday or whatever it was called. He won but everyone else lost!
  8. gulfgolf

    gulfgolf Established commenter

    It’ll become slightly more conservative but I lean towards those who think that too conservative just cuts out opportunity without lowering risk.
    Which approach requires having enough extra money in our assets to withstand market fluctuations during our retirement.
  9. tiler

    tiler New commenter

    There's a mountain of statistics to support your position in that regard. The high risk comes from not being invested in the market and seeing returns diminished in a term deposit.

    It's simply a matter of overcoming the psychological flaws/biases innate in us humans. Once that's overcome, investing becomes a breeze.

    For anyone that's interested, 'The Little Book of Behavioural Investing' by James Montier is an informative, interesting and accessible read for the laymen.
    Last edited: Nov 8, 2017
  10. StrangePanda

    StrangePanda New commenter

    Any insights into how a Brit abroad can approach investing? I’m sure there are some tax issues/residency issues. I have looked into Vanguard, for example, but index funds are a no-go without residency. I find myself going round in circles. Thank you!
  11. gulfgolf

    gulfgolf Established commenter

    Mutual funds are a no-go for non-residents, but ETFs are open to all. Your harder task will be convincing Vanguard to take you on as a client. There are options.
  12. clovispoint

    clovispoint Occasional commenter

    You can buy ETFs with a brokerage account- a UK based one or an overseas one that has UK trading. Some brokerages also allow you to buy Vanguard funds directly.
  13. gulfgolf

    gulfgolf Established commenter

    Vanguard has ETFs. Those can be bought by anyone, though you may need a broker other than Vanguard itself. Their ETFs are essentially the same as their mutual funds but they are technically different and hence legal for non residents.
    Mutual funds are not legal for non residents and no one should be willing to sell them to you. Anyone who does is risking their business and your money.
  14. okmohito

    okmohito New commenter

    where have all you lot got all this spendable cash from to invest thousands in all these stocks and stuff from? You must be on 100k GBP a year then I guess.
  15. clovispoint

    clovispoint Occasional commenter

  16. percy topliss

    percy topliss Occasional commenter

    It would appear that I have reared a monster here....lots of these posts are a little of the subject....

  17. makhnovite

    makhnovite Occasional commenter

    Another pissing contest! "Mine's bigger than yours!"
  18. T0nyGT

    T0nyGT Lead commenter

    Yeah this turned very boring, very fast
  19. clovispoint

    clovispoint Occasional commenter

    It was always going to as there is no straightforward answer. It is not the headline salary or the place. There's saving to be made anywhere you work- even the UK. People I work with here in HK earn the same as I do, or more, but are in debt.

    Go frugal and you can retire early (but on a frugal budget). You can invest in the hottest funds but they are only hot after the fact, picking them before they are hot is the hard bit. Best plan is to save a good bit, invest broadly and enjoy what's left over.
    tiler and gulfgolf like this.
  20. gulfgolf

    gulfgolf Established commenter

    Yep. If anyone promises you a captivating read on retirement savings, one or both of you must be either gullible or nerdy. The truth is it’s a boring hard slog, and anyone claiming differently might as well be selling bridges.
    tiler likes this.

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