Reader Case: Keep Calm and FIRE On

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It’s Friday, and you know what that means: Reader Case Time!

Today’s reader case comes from Jolly Old England. Well, it used to be Jolly. These days English politics is more about acrimious name-calling and people throwing milkshakes at each other if the news is to be believed, but regardless let’s get into it, shall we?

Hello Guys,

Firstly, thanks so much for sharing all your knowledge with us all; it’s greatly appreciated. Secondly, we would love your help on evaluating how quickly we could be financially free based on our current situation ?

We live in UK; near London. We are 35 and 41. We haven’t got children and not planning to have them at all. Our current mortgage deal is coming to an end and after reading your blog and hearing many other successful stories we are considering selling our house and use the money to invest instead could be an option for us. We all know / hear that another recession is on it’s way which could be a good opportunity to get on to the market at the’cheaper’ rate but also, it will be more risky… We know, you are not fond of owning property but we could consider buying again during the next dip (just a thought) :)?

The numbers below represent combined income and expenses:

  • Gross/net annual household income:
    • Total gross salary £113k (£53k & £60k) incl. health care, travel insurance, matching pension scheme etc.
    • Monthly net income total: £5.8k (£2.7k lower as contributing £650/month towards a stock option scheme at work & £3.1k)
    • Annual bonus total: £5k net
    • Annual share dividends total: c.£1k per annum
  • Monthly household spending: max £4k incl. mortgage (£1,6k – it should be lower once we remortgage), other bills like water, tv licence, electricity, tax (£300), holidays/weekend away (£800 ) , food (£200), petrol (£250), phones (£30). We cook at home, take own made lunches, eat out – once or twice a month when there is a deal available (£100-£150) ?
  • Vehicle insurance / tax – £2k per year (2 cars)
  • Debt: no debt except the mortgage of £189k. Current rate is 3.19% but after remortgage (due in June) the rate could be between 1.44% (variable) or 1.89% (fixed for 5 years) with 3% penalty charge on the balance if we decided to cancel it before. The cost of remortgaging is between £999. Based on our rate of payment (we managed to pay 17 years of mortgage in 9 years), we could pay this mortgage off within the next 6-9 years if our job situation remains or improve.
  • Fixed assets: House value is between £500k – £550k. We have two cars: 13 years old Mazda MX 5 worth not more than £3k and 5 years old VW currently valued c.£12k). We use both cars to get us to work.
  • Investments and savings:
    • Pension:
      • me: £56.7k (maxed out by me and the employer, cannot touch it until I’m 55 & 65)
      • my partner: £230k ( this is to be double checked as it’s defined benefit scheme as we had a problem to find the value of his pension)
    • Stocks in companies we either worked or currently working in : £42k
    • Gold & silver (actual coins and bars): £26.6k
    • Crypto (I know your take on it but we have it so I am including it) £6.8k
    • Cash: £117k:
      • Me: £39k
      • £20k is in cash ISA which I need to move to stock & shares ISA (tax free savings account), £10k (in checking account to cover any emergencies)
      • £4k I’ve started trading options in plan to replace my full time job in the future,
      • £5k currently doing nothing in checking account (to be invested)
    • My partner: £78k
      • £18k will become available in June from share scheme (to be invested),
      • £20k in cash ISA to be moved to stock & shares ISA,
      • £40k in premium bonds (most likely it could provide better return invested in the market)

If we remortgage now our monthly rate would be £1.3k/month. If we sell, we would have around £300k in equity which could be invested long term. Instead, we could rent a 2 bed place for around £1k – 1.2k/month + bills £300. This will be a downsize from 4 bed detached house to an apartment or semi-detached property which we wouldn’t mind if this step could bring us freedom in the long run ?

Given that we have savings / emergency fund in place, we think that we could put an additional £2k/month towards investing.

So, how quickly could we potentially retire if we sell and invest the equity + top it up monthly by £2k vs. if we don’t sell and start investing with the currently available cash + monthly top us?

We are really interested to hear your findings 🙂

Many thanks!!!

If our scenario could help your readers, we don’t mind your sharing it in your blog.

PS. I am polish and I was so happy to read about your experience in my home country ?I am glad you enjoyed the food and your time in Poland and I hope I could show you some other parts one day, who knows? ?

I actually enjoy these international ones quite a bit. The basic principles of FIRE are universal, but each country has their own specific quirks that need to be untangled and the UK is no different. First of all, apparently on OS X you can type the £ sign using Option-3. See? You just learned something new already!

And second, there are quite a few differences between the UK retirement system and US/Canada that affect the analysis. For example, like the US and Canada, they have a governent-run pension system named a State Pension. They also have employer-sponsored pensions named Occupational Pensions. Unlike the US/Canada, however, these tend to be defined-benefit schemes rather than contributory systems like we have, which is why our reader alluded to the difficulty in figuring out how much money was in there: To get a single number for a defined-benefit pension you have to do a present-value calculation which involves lots of math, actuarial tables, and what not. The point is, it’s not as straightforward to figure out how much is in there.

Most importantly for us, though, while in the US/Canada it’s possible to access those funds at any age (with some hoop-jumping if you’re American), in the UK there’s no way to get to it before the age of 55. This complicates our analysis.

But before we get into that, a few things jump out at me.

Pick an Investment Strategy!

UKFIRE’s investment strategy is, to use the technical terminology, a bloody mess.

They’re simultaneously trading options, owning individual stocks, have a safe full of gold and silver bars, AND crypto!

This is a recipe for confusion and will become impossible to manage as your portfolio gets bigger. Pick a single investment strategy and stick with it!

Here are we advocate for a balanced and diversified portfolio of index ETFs which we write about in our Investment Workshop as that’s the one we know best (and has worked out great for us). If you want to go about this doing options trading or crypto (barf), I can’t help you with that since I don’t do it myself, but either way your first step should be to consolidate your money into one strategy.

Beware Domestic Bias

US investors often take this for granted since their stock market is the biggest one in the world, but investors who live elsewhere have to be really careful of something called Domestic Bias. Basically, it’s the tendency of people to invest the majority of their wealth in their home country since it’s the one they’re most familiar with, and if you live in a smaller country like Canada this can make your portfolio overly concentrated on a relatively small market. That’s why the majority of our equity holdings are non-Canadian.

This is even more important if you live in the UK. I’ve been following the Brexit debacle with a morbid curiosity and it’s a right bloody mess (their words, not mine). For those of you who aren’t caught up, Westminster has been twisting itself in knots trying to extricate themselves from the EU, mostly because parliament can’t agree on how to actually do it.

The ruling Tory government’s plan has been voted down multiple times. A no-deal crash-out was also repeatedly voted down. Then a series of indicative votes were held to try to find a parliamentary majority for a way forward, which failed. Then the Tory government tried to reach out to the opposition Labour party to try to find a compromise, which failed. Then Theresa May suddenly resigned, paving the way for a leadership contest and a possible ascension of a hard-Brexit leader like Boris Johnson or Jacob Rees-Mogg. Meanwhile Jeremy Corbyn, the Labour leader, is facing increasing pressure to formally back a second referendum due to his party’s drubbing in the EU elections, which might overturn Brexit altogether.

In short, nobody knows what the bloody Hell’s going to happen in the UK, and as a result it’s even more important to make sure your investments are diversified outside your home country. Using a simple world index like Vanguard’s VT ETF would be a good start.

What To Do About The Bloody House?

So onto our reader’s central question: What to do with their house? Should they keep it and refinance their mortgage? Or sell and free up the equity?

The nice thing about doing a FIRE analysis is that it actually makes complicated decisions like this simple, because it translates a decision involving multiple confusing metrics into one metric that everyone understands: time. How long does it take to retire if I do A vs. B?

So without further ado, let’s MATH SHIT UP!

Income£113k gross, £69,600 net
Expenses£4000 per month
Debt£189k mortgage
Net Worth£500-550k house, £287k pension, £192k investable assets

Again, because the amount in the pension can’t be used until 55, we can only count the money in UKFIRE’s other investments towards early retirement. I’m assuming here that they liquidate all their different investment schemes and consolidate it into ETFs.

Now, that £4000 monthly expense looks pretty nasty, but they mentioned that after they refinance their mortgage payment should drop from £1600 a month down to £1300 a month. That makes their post-refi monthly expenses £3700. Also, they mentioned that they’re 9 years away from paying it off, so in 9 years that £1300 expense will go away completely, which drops their expenses down to £2400. That’s important since the £2400 amount is what they need their portfolio to cover each month.

So by taking this post-mortgage amount, their FI target is £2400 x 12 x 25 = £720k. How does our projection look?


11 years.

Note that the table shows 2 savings rates. The first 9 years UKFIRE should be able to save £5800 – £3700 = £2100 per month or £25,200 a year. After the mortgage is paid off, their savings should jump to £5800 – £2400 = £40,800 a year.

And for shits and giggles, I also ran the analysis if they paid off the mortgage and that actually made it worse. It’s because their new mortgage rate is so low (1.89%) that they’re better off not paying it off and investing it instead.

Now let’s see what happens if we sell the house.

Our reader estimates that after fees, they would net £300k from their equity. They would then rent a 2 bed place for £1200 per month. That changes a few things.

First, their monthly expenses would become £4000 – £1600 (old mortgage) + £1200 (new rent) = £3600. Because the rent is permanent rather than an expense that goes away like the mortgage, that raises their FI target to £3600 x 12 x 25 = £1,080,000. Yikes.

BUT it also increases their savings rate to £5800 – £3600 = £2200 per month, or £26,400 per year.

And most importantly, it raises their starting portfolio balance from £193k to a whopping £493k!

So how do all these factors come together and affect UKFIRE’s time to retirement?


A little over 8 years! Looks like selling and renting will save them 3 years to retirement!


So there we have it. 11 years to retirement if UKFIRE refinances and keeps the house, or 8 years if they sell and invest.

Oh and let’s not forget about that Occupational Pension. In 8 years, UKFIRE’s partner will be 49, so just 6 years later that pension gets unlocked and dumps another giant bucket of pounds into the bank account. This is one of those few times that I go “Eh, don’t worry about sequence of return.” Having a couple hundred thousand pounds rain on you does that.

So what do you think of UKFIRE’s retirement plan? Let’s hear it in the comments below!

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43 thoughts on “Reader Case: Keep Calm and FIRE On”

  1. As someone who lives in London you might already be aware there’s already been a dip in property prices. Because of all the Brexit uncertainty there’s rarely been a time in recent memory that’s as good as this for buying, but not for selling (strictly talking London, not the rest of the UK). A standard 1BR in my neighborhood near Greenwich was about £450k two years ago. This week my partner just had an offer accepted for £330k.

    And contrary to all the moaners and whingers in the city I also have a friend who paid off his mortgage and is essentially FIRE. He and his wife (both in their late 30’s on decent but mostly average salaries) are still working pretty much just to top things off. He’s quiet about it, most of our friends don’t know. So don’t let all those whingers in London tell you it can’t be done, people are doing it right now.

      1. Not that we are aware of. None of the people we know is doing it but it doesn’t mean it isn’t happening though.

      2. With the exception of my active currency day trader friends I haven’t heard this from savers / people on the path to FI, most likely due to two reasons:

        1. Our lives are entirely in pounds. We get paid in pounds, our rent is in pounds, etc so very little of our lives are in Euro unless we go on holiday.

        2. What you are suggesting is that we buy Euros as an investment to protect us from the falling pound. However buying Euro because you “know” the pound will go down is the same thing as trying to time the stock market– if everybody “knows” it will go down then the price will go down. Instead the market rate at any given moment is equally balanced between expectations that GBP will go up AND down, so by definition it is just as likely to go either way. (So no we would rarely just buy the currency itself. If anything we would rather buy stocks or funds in Euro so we get the benefit of company profits AND the currency hedging.)

  2. Really happy to see a fellow UK FIRE up in here. Finding a good UK blog with the relevant information is hard but this helps. The Brexit drama drags on and frankly I’ve lost interest in that particular s**t storm, talk about a country collectively shooting itself in the foot!
    Thanks for all you do

    1. Lots of countries are shooting themselves in the foot these days, though I must say yours has been the most entertaining so far, so that’s something 🙂

  3. Those were my thoughts exactly. There’s a lot going on in that story that seemed (immediately) like it could be improved by a little consolidation.

  4. I say downsize, buy something smaller as they are 2 people only but keep original house and rent it. Or rent out the extra rooms in your current house to increase mortgage repayments or put towards shares.

    1. Maybe one day, yes 🙂 We could be FIRE in Poland right now but we love travelling too much so we need more £ to be globally FIRE 😉

  5. Sorry to say this, but every time I see DINK – Double Income, no kids… I kinda of shut down, and don’t read the rest. Mathing up $117,000 a year between 2 single people, isn’t much of a challenge.

  6. What about renting out the 2 extra rooms? They could possibly turn their house into income. Rent is very high in the UK, as they well know.

    1. We were thinking about it but didn’t like the fact of some random ppl being around. Maybe one day we will buy something that could more adaptable for sharing.

  7. All makes sense to me! My only comment is if they FIRE in 8 years vs 11 by selling the house, they have to be comfortable living in a smaller apartment long term vs their current 4 bedroom detached home. As a couple with no kids, this should be fine and doable, but something to consider when comparing the 8 years vs 11 years. There are obvious pros and cons to both situations so just whatever you’re more comfortable with in the long term. And worst case – move back to beautiful Poland where the cost of living is much lower! 🙂

    1. We have been considering selling / getting comfortable with this idea for the last 1.5 years. It wasn’t an easy decision but being FI is far more important than having a house. We used to live in 1 bed flat before the house but I won’t lie – it will be challenging from the beginning to adjust to the space but I am sure people have bigger problems to deal with!
      And yes, there is always an option to move back to beautiful Poland 🙂

  8. We Brits don’t say ‘bloody’ all the time. But, yeah, most of the bloody time! Especially when talking about Brexit (I’m impressed with how up-to-date you are!).

    About those defined benefit pensions. They’re still common in the public sector, but sadly most private sector employers have closed them down, or are doing so – they cost them too much! For a handful of people, it might make sense to turn the notional DB pot into a real wad of cash and invest it themselves, but the rule of thumb is: don’t! It would be interesting to hear from UKFIRE how much per year the DB pension is expected to pay out – it’s a nice safety net to have.

    By the way, I hear you’re coming to the London screening of Playing with Fire. I’m going too. Hope to see you there.

    1. To the best of our knowledge the annual income from the defined benefit pension should be £16k which will be great once we get there!

    2. I was going to comment to say this too – I used to work in marketing for a pension company, so my technical knowledge isn’t amazing, but my understanding with DB Scheme is that you don’t tend to get them anymore for the most part, like Luke said, because they are so expensive, and so they are not the norm but they do still exist, and they can actually end up being like someone winning the lottery with their own pension – people have them and don’t realise that they’re sitting on an absolute fortune! The financial advisers at my work always used to get excited whenever someone had a DB scheme because it potentially meant a very nice commission for them! So it’s definitely worth finding out how much the DB scheme is worth – sometimes it’s worth cashing it in, but you want to be very careful about it – definitely do your research and ask around for advice. Generally, we have the same kind of contributory pension system as the US/Canada nowerdays!

  9. Interesting. I didn’t know that mortgage rates in the UK are so low. I’d be thrilled to get less than 2% in the U.S. I think this couple is doing very well. In the long run, 8 vs 11 years probably do not make much of a difference and there can be so many alternatives for something in between or make things go faster (e.g. increase savings rate, renting out a room or two).

      1. Pending approval as we need to presell ~70 tickets in advance. But tentatively planned for July 23rd from 7:00-930pm at the Cineplex Odeon Eau Claire Market Cinemas. If you join the ChooseFI-Alberta or ChooseFI-Calgary Facebook pages you’ll be able to find all the info there 🙂

  10. I think not including the pensions is wrong. They are going to be way overfunded when they kick in. in order to retire they need to be funded to reach the pension and allowing for some money to be carried over if the pensions aren’t sufficient. A downsize in house with the new rate and the current equity and factoring in the next stage income from future pensions will see a much shorter timeline. They have no kids. Pension needs to be considered and spent. Thanks for covering a British scenario.

    1. My private pension value was included in this calculation. The DB, which should be around £16/ year, maybe wasn’t included as we weren’t sure about the value at the time of sending the info over. The state pension wasn’t included in the calcs at all which is £8.7k / year pp (this won’ t be happening until we reach 67 as of today but I am sure they will pus the age even further up). Good point though

  11. I wonder, you always refer to Vanguard ETF. I do believe these are perfect ETF’s, but living in Europe I would like to have ETF’s valued in Euro to avoid valuta risks (especially with the spendig rates and debts building in US). Maybe you could teach us some rules in one of your great FIRE posts. Enjoyed reading all of them.

  12. What if they kept the house and sold at the end of year eight. If the house is worth 550,000 seems like they would be a bit better off. If the house increases in value, they may be a lot better off. If they like living in a house they own, they could move to a less expensive home or area. Or liquidate and travel the world. Either way I think this is another option to consider.

    1. We thought about this option as well but the house market is slowing down and if recession hits, the value will decrease and it will be even more difficult to sell if needed + brexit 🙂 We’ve decided to go for more liquid assets than a house but appreciate this is not everyone’s cup of tea. I would say 95% of people like to own a house – we may go back to that at some point, who knows 🙂

  13. Their salaries are so far from the UK average that mathing this up would be of little interest to anyone but them. Average salary £29k.
    Not a case study that others could relate to and learn from. Sorry not into this one ☹️

  14. Will you be attending/hosting a Playing with Fire screening in Toronto? I don’t see that city listed. I’d go to that!

  15. Hello All,

    Firstly, thanks so much to our investing guru, the Wanderer, for looking in to our case 🙂 I agree, our money is in some many buckets but we’ve only found your blog recently and were working hard to put this all together for the case (as you can imagine).
    We are going through your Investment workshop and working on a plan to get everything consolidated – one step at the time 😉
    Secondly, it’s great to hear all the comments and suggestions as well, thank you all!

    There was some progress since our numbers were put together – the house is on the market and we got our first offer this morning (higher than our initial estimation), I was promoted so we will have higher income = more to invest.

    Thanks again for the blog and your ideas – we have clear plan in place and there is possibility of becoming FIRE even sooner – fingers crossed!!!

  16. Hi all,

    My take is that it will be more worthwhile to opt for rent whilst using the fund for investment portfolio which will provide the dividend on continuous basis. Such plan is foolproof as long as one invest the fund into the shares on a continuous basis. The generated dividend can be used to channel back into the investment portfolio if one is still in the full-time employment. One will be immune to the psychological damage derived from the threat of retrenchment with such investment portfolio on pilot on-going basis. If the retrenchment does not occur, continue to make hay while the sun still shines. If the retrenchment occurs, it is still ok and it will be likely to be a compensation for the retrenchment. While the lingering circumstance of looming retrenchment continue, one can still have the option of quitting at any point of time at his/her own disposal.

    The above are two cents of views.


  17. I didn’t read all the comments but after reading the article my first thought was why not sell the house, take the equity and purchase a smaller place outright and live mortgage free now? You would still have the shorter time frame to FIRE with the benefit of insurance long term if the rental costs were to shoot up in subsequent years. My two cents (pence LOL).

  18. Nice of you to visit the UK! Yes we are in a mess all of our own making. My additions to the excellent response and comments are

    1) Valuing Defined Benefit Schemes. What I did was work on income from DB rather than its value. You then can work out a “shortfall fund” to cover from the date you FI to the date you can get at the DB. So for example if your target income is 50K and your DB will be 20K but you can only access it in 5 years time then you need 30K for FI PLUS a shortfall fund of 20K * 5 = 100K for the five years. This allows you to include the DB in your calculations. Add in some inflation assumptions in your ssheet.

    2) Selling sterling. Yes some people did this explicitly (and before Brexit vote in 2016) but not so much by buying Euros. There are reasons many in the UK want to leave the EU and it is not because they think EU is going to go gangbusters any time soon. More likely to have gone to US$. Also it happened implicitly as the majority of earnings from FTSE 100 are non UK so as Sterling falls FTSE goes up (all other things being equal) as does Sterling value of Gold etc

    3) Domestic Bias. This is a tough at present. All things being equal you would indeed buy a global ETF. Makes perfect sense long term. But today? FTSE has a dividend yield north of 4.5% – take that 4% rule! – and may be considered very cheap relative to S&P which would be the largest constituent of a global ETF. So very tempting to be overweight in UK stocks – which have a large element of overseas earnings anyway. But is this effectively stock picking? I am not sure. I do have S&P, Australia and EURO ETfs in addition to FTSE (I did not realise a global ETF existed until recently) but am still overweight in UK.

    4) Property. There is a downside to renting in UK which is the rental market is very variable. Buy to let (i.e. private people becoming Landlords) is being clobbered by a Tory Government and will get worse under Labour. This may sound a good thing for renters – and may turn out that way long term – but short term it just adds more volatility. If you are not planning on moving nd you already own a house and an get such cheap finance then why sell – especially in a market that is falling due to the Brexit uncertainty.

    5) Gold. I hold some Silver but I do not include it in my FI calculations. I call it my armageddon fund!

    6) Wealth taxes. Seldom mentioned on FI blogs. But, in the UK, I think they are definitely coming sooner or later. In fact it was one of the two primary reasons I triggered my own FI. (The other was our ridiculous pension fund rules which can potentially impose a tax great than 100% if you work past ge 55!) If you are wealthy enough to FI then you will be subject to these taxes when they emerge. Impossible to quantify but one to think about.

  19. in terms of American dollars, how much money do you think a person needs to live and survive there annually? Or talking about rent, food in the refrigerator, money for clothing, and money for gasoline or public transportation.

  20. The UK case was very interesting, especially with the huge untouchable pension figure.

    Some companies allow you to contribute 0% to pension, which means you pay 40% tax when taking that money as part of take home pay, but can invest into lets say 7% ROI and recover the 40% tax within 8.5 years, with profit thereafter. This works if you are not like 8.5 years (or less) from the ‘government defined’ retirement age.

    We are also facing the Brexit debacle currently. Most of our planning did not involve either the share market or any kind of ETFs. I am now learning via this blog how to invest in those, so thanks a lot for all the excellent workshops. As I was originally from India (where they have 7.3% fixed rate deposits), I simply took a mortgage out in 2011 in UK at 2% and invested any surplus amount in the Indian fixed deposits without any early repayments into the mortgage.

    This created a pool of money that I liked to call ‘salary automation’ as I simply created long term fixed deposits and forgot about them. They deposit quarterly interest directly in my bank account, which means I actually don’t even need to track them and simply create more fixed deposits when there is enough in my bank to create more. They do fluctuate according to Fx though, so in those terms are a bit risky if £ value increases.

    The reason I want to now invest in ETFs (or other forms that I am still learning about) is that even though we have money in 2 currencies (UK and India), the UK money hardly generates enough ROI, and has risk associated even for a 4% return. I am pretty sure there must be more intelligent ways to invest in UK, just that I don’t yet know enough about them, so hopefully I can learn more about these ways to invest.

    For UKFIRE, if they did want to retain their house (as someone else pointed out), then they could try to borrow more at 1.89% and invest into their portfolio.

    As an example if they borrowed £400K against their £500-550K house,

    Year Balance Savings ROI Total
    1 £404,000.00 £21,972.00 £24,240.00 £450,212.00
    2 £450,212.00 £21,972.00 £27,012.72 £499,196.72
    3 £499,196.72 £21,972.00 £29,951.80 £551,120.52
    4 £551,120.52 £21,972.00 £33,067.23 £606,159.75
    5 £606,159.75 £21,972.00 £36,369.59 £664,501.34
    6 £664,501.34 £21,972.00 £39,870.08 £726,343.42
    7 £726,343.42 £21,972.00 £43,580.61 £791,896.03

    I have assumed your mortgage rises to £400,000 (25 years), so you have a starting amount of £193,000 plus £211,000 (additional borrowed funds) in the table above.

    Your monthly repayments then increase to £1,669, and hence savings decrease by £4,428 per annum.

    Once you reach year 7, you still have an option if you want to sell the house. In fact, if you borrow additional money on a low rate mortgage, you pretty much have the option to sell the house anytime between year 1 and year 7 whenever the Brexit tornado calms down and you get a good rate (which in today’s volatile market may mean a huge fluctuation on your house prices).

    So for example, you reach year 6 and sell the house for a good rate, lets say £700,000, then you can pay off the balance £320,249 mortgage and add £350,000 to your year 6 amount, bringing it to ££1,040,267.07, achieving FI in year 6 itself.

    In either case, I do agree with FIRECracker that you will need to sell the house to bring the number of years to FI down, its just the approach you decide to take based on the volatility of house prices due to Brexit that may vary slightly.

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