The Full English – Saving Money vs Saving Misery

What’s piqued my interest this week?
Hey look, FIRE made the mainstream last week as TEA got interviewed in the The Times (as screengrabbed by Firevlondon), prompting The Guardian to fire some shots and a Daily Mail banshee wail (1, 2, 3). A flurry of activity followed from Monevator Inc and TEA, and wonderment that worst kept best secret was out (4, 5). There was particular derision from the Daily Mail readers…
But collectively we shrugged it off. We were in the know, right? In TEA’s words:

Over the years, I’ve noticed that in life there are 2 types of people: the talkers and the doers.  Talkers talk and doers do.

You don’t get into FI club by talking about FI club.  Nor by arguing on the internet. You get into FI club by working hard, saving hard and investing wisely.   Its a marathon not a sprint and so getting to financial independence is temperamentally suited to people who get their head down and grind out the reps. Talk is cheap and actions speak louder than words. (4)

But amidst the derision in the comments there is a note, a chord, of caution. People wasting their “peak energy years” twiddling their thumbs. As the prize-winning laureate Nickw862003 says in the Mail comments:
“And who the hell, unless you are on a fair bit can save half a salary a year? I mean i done it while saving for a mortgage, but i was living like a hermit to cater for this!” (3)
Do we consider our appearance from the outside? Switch back to /r/UKPersonalFinance or /r/Financialindependence and see people with savings rates of 50-60%, countdown to FI of 4 years, lamenting boredom as they live their frugal lives. They’ve given up the consumerist forms of pleasure, but have not replaced them. At times the Financial Independence community has echoes of the Ancient Greek asceticism, austere minimalism, giving consumerist culture the cynical evil eye (6). In those halcyon days pleasure was derived from the act of abstinence and self-disciple. But we can’t all be Diogenes, living in our ceramic jars, pissing on those that irritate and telling Alexander the Great to bugger off (7).
What’s the point here? Eating basics beans on basics bread in the dark is not a recipe for a happy or healthy life (increasingly found to be interlinked). Ascetism died out in western culture because people are social creatures who seek fulfillment and enjoyment. The FI community helps with the former. The latter requires either moving the goalposts and finding enjoyment in sitting in the dark, or finding cheap interests compatible with the lifestyle. Light a candle, don’t shout in the dark.
Have a great weekend,
The Shrink
N.B. In keeping with the growth of my own gardening hobby, I’ll be adding a little section below once a month keeping an eye on gardening blogs.
Side Orders

Other News

Opinion/ blogs:

The kitchen garden:

What I’m reading:

Smarter Investing by Tim Hale – essential reading

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor.

Enchiridion by Epictetus – Bedside reading for a bad day

 

References:

  1. https://www.thetimes.co.uk/article/modest-earners-find-formula-to-retire-in-their-40s-fbk3p63bk
  2. https://www.theguardian.com/money/shortcuts/2018/sep/17/retire-early-fire-movement-never-work-again
  3. https://www.dailymail.co.uk/news/article-6175445/How-retire-FORTIES-without-earning-fortune.html
  4. https://theescapeartist.me/2018/09/24/hold-everything-someone-is-wrong-on-the-internet/
  5. http://monevator.com/weekend-reading-fire-and-forget/
  6. https://en.wikipedia.org/wiki/Asceticism
  7. https://en.wikipedia.org/wiki/Diogenes
  8. https://www.moneysavingexpert.com/news/2018/09/economy-energy–to-honour–fixed-tariff-after-price-hike-blunder/
  9. https://www.thisismoney.co.uk/money/investing/article-6142957/How-check-performance-robo-adviser.html
  10. https://www.theguardian.com/lifeandstyle/2018/sep/18/your-fathers-not-your-father-when-dna-tests-reveal-more-than-you-bargained-for
  11. https://www.telegraph.co.uk/money/consumer-affairs/new-blow-landlords-177000-homes-face-new-test/#
  12. https://www.bbc.co.uk/news/business-45561908
  13. https://www.bbc.co.uk/news/uk-45520517
  14. https://www.bbc.co.uk/news/business-45634362
  15. https://www.thisismoney.co.uk/money/mortgageshome/article-6185301/The-20-fastest-growing-areas-new-housing-UK-past-7-years-counted-down.html
  16. https://www.thisismoney.co.uk/money/saving/article-6207595/How-Goldman-Sachs-banker-American-giant-launches-UK-account-paying-1-5.html
  17. https://theescapeartist.me/2018/09/19/eliminating-fear-with-bio-hacking/
  18. https://www.theguardian.com/business/nils-pratley-on-finance/2018/sep/19/aldi-and-lidl-wont-be-scared-by-tescos-new-discount-jacks
  19. http://thefirestarter.co.uk/liquid-superfood-huel-challenge-its-like-soylent-the-throwdown/
  20. http://thefirestarter.co.uk/august-income-expenses-report-a-bit-of-an-odd-one/
  21. http://monevator.com/its-an-emergency-fund/
  22. https://firevlondon.com/2018/09/24/complexity-costs/
  23. https://firethe9to5.com/2018/09/18/finding-the-fun-in-fire/
  24. https://firethe9to5.com/2018/09/22/the-do-i-have-enough-toolkit/
  25. http://www.msziyou.com/comfortable-being-the-product/
  26. http://diyinvestoruk.blogspot.com/2018/09/turn-back-clock.html
  27. http://diyinvestoruk.blogspot.com/2018/09/city-of-london-final-results.html
  28. http://diyinvestoruk.blogspot.com/2018/09/woodford-patient-capital-new-purchase.html
  29. http://www.realmensow.co.uk/?p=4702
  30. http://twothirstygardeners.co.uk/2018/09/how-do-i-tell-know-when-my-hops-are-ready-to-pick/
  31. https://clairesallotment.com/2018/09/06/harvesting-the-first-of-the-brassicas/
  32. https://urbanvegpatch.blogspot.com/2018/09/in-septembers-sweet-spot.html

 

 

 

 

 

 

 

 

 

 

 

 

 

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Musing On… Motivation: Are you running from or running to?

What motivates your financial choices?

Reading a variety of FI and finance writers, it has occurred that those who blog are a rag-tag bunch. You have to be a bit different to move away from the credit-to-the-eyeballs herd. The reasons to go down the various financial paths, and then write about it are even more nebulous. A scientific mind led to attempts to discern some patterns among the noise. One such pattern is the writers motivation, and where the drive to save/ live frugally/ be financially independent arises.

Running from

For some, it seems the drive to be frugal is innate, inherited, learnt behaviours from early childhood. LittleMissFire talks about it as leaving the ‘shop floor mentality’, the mindset of a household living week-to-week, month-to-month, without financial planning (1). The crux of her post about the ‘shop floor mentality’ is the drive to better oneself, and leave behind the stress, envy, anguish and heartache of poverty (1). Understanding financial planning and making frugal life choices are just a short psychological hop from FI, and there seems a lot of overlap between frugal living and so-called ‘lean-FI’.

This drive to leave behind an unpleasant situation also appears prevalent on the FI forums I frequent, but here it’s less about a memory or experience of struggling for money, and more miserable working environments. For example (2):

And an example reply (2):

Small talk, alarm clocks, office politics, performance reviews, managers talking about you behind your back, tracking metrics, spreadsheets, deadlines, cubicles, dress code, meetings, daily existential crises, passive aggressiveness, emails with manager cc’d, scrum meetings, being taken advantage of, erosion of self esteem, etc. Etc.

I assume it was among those so miserable in their work that the term “Fuck You Money” arose (3). You’ve built up enough cash to say “Fuck You” to that miserable environment and walk away… but what then? How do you adapt your austere lifestyle out of work, with it’s focus on minimising all outgoings, to your new-found freedom (4):

Running towards

I sort of class myself amongst the running towards school-of-thought. I enjoy my job, to the extent that I am happy to go into work every day to perform it (especially after a slight change into a less front-facing role). I would probably keep doing it to some extent even if I wasn’t paid, because it is my ‘ikagai’ – a Japanese word whose closest translation is ‘the reason for which you get up in the morning’ (5, 6). Despite this I think the world is full of wonder, and I could spend whole other lifetimes doing different things. There are too many things to do and not enough time to experience them all whilst also working to support myself. FI, as The Frugal Cottage puts it, “gives you the option of spending your limited time however you want” (7, 8).

Just enjoying the run

This seems to be the final stage in FI nirvana fulfillment. Some suggest that by it’s nature, being frugal has a sort of contrarian cool (9). An echo of the counter-culture in a rejection of consumerism (10)More hippy than hipster I hope. Some bloggers, like TEA, enjoy the journey to FI and beyond because they developed an enjoyment of “the process of wealth building” (11) TEA writes about learning to enjoy these things by using conditional rewards; a big juicy carrot for the FI stick, training your brain to associate putting the financial graft in for a reward (11). Or writers like FIREvLondon, who enjoy the writing about their process, discussing ideas, commenting on experiences (12). This is a far better path to happiness, where any goal you set or any target you make can bring you fulfillment. Enjoying the process of blogging, the sharing of knowledge and community.

Why does it matter?

Understanding your motivation is inherently tied to your ability to complete the goals you set yourself for financial independence and frugal living. If your goal is off from what you truly want you’ll lack motivation, and if you’re motivated for only a specific purpose you may find yourself unfulfilled and lost when you reach that goal, or unable to reach it altogether. As I’m setting my goals, I’ve been noticing many are around things I’d do after being FI. I risk that there will always be one more goal or target. It’s time to think about my enjoyment of the pursuit, and I would urge others to ask, why do I want FI?

References:

  1. https://littlemissfireblog.wordpress.com/2018/03/24/do-you-have-the-shopfloor-money-mentality/
  2. https://www.reddit.com/r/financialindependence/comments/8ogyp8/people_who_are_trying_to_reach_fi_because_they/
  3. https://theescapeartist.me/2018/07/24/the-art-of-wealth-preservation/
  4. https://www.reddit.com/r/financialindependence/comments/94kmku/first_day_of_retirement_at_40_yo
  5. https://www.telegraph.co.uk/health-fitness/mind/finding-ikigai-japanese-secret-health-happiness/
  6. http://monevator.com/weekend-reading-what-is-your-reason-for-being/
  7. http://www.thefrugalcottage.com/everyone-early-retirement/
  8. http://thefirestarter.co.uk/early-retirement-in-5-years-in-the-uk-is-it-possible/
  9. https://www.psychologytoday.com/gb/blog/the-eclectic-professor/201102/the-psychology-thrift-why-not-frugal-cool
  10. http://thefirestarter.co.uk/about-me/
  11. https://theescapeartist.me/2018/02/13/get-rich-with-the-process/
  12. https://firevlondon.com/about/

 

 

The Full English Accompaniment – Diversification is sustainability stupid

Dear Readers,

A bit of a late Full English Accompaniment this week, as I’m working so typing away at posts in between seeing patients. MrsShrink and I have been for a holiday, a break from IT and a pause for reflection. I’ve finally been reading Tim Hale’s Smarter Investing (1), and this has prompted me to make some changes to my blogging process. One of the key points in the early chapters of the book is to turn down the volume; that most media reports, opinions and news about the market are confusing senseless noise and to make smarter investments you need to tune out the static. In a conscious effort to decrease my own contribution to that noise I’m going to reduce the quantity of my posts, and aim to  maintain a high quality. This means that the Full English will become an as-and-when type affair, for thoughts that aren’t significant enough to warrant a full Musing on… post. I’ll still aggregate other posts I’m reading each time, and other categories will continue at their current frequency. For now…

What’s piqued my interest this week?

Part of our recent holiday was spent in an AirBnB on a rural farm. Coming from a country background I was to be found discussing the owners business strategy and farming approach. Their (relatively) small acreage struggled under intensive farming methods to produce a profitable crop; the soil would need continuous improvement for arable, the setting meant high winds were common with minimal cover and they lacked the scale required to make cattle or similar sustainable. To make ends meet they had diversified. The farm now had a small sheep herd, a deer herd and a small number of hardy cattle. The owners had also converted farm buildings to cottages and flats for AirBnB, and worked a part time job for the local government. For many small farmers this is the only way to survive. Big farms in areas of poor fertility also struggle to find profits, as this fantastic comment piece in the Guardian outlines (2). As consumers, diversification of our food intake is healthier too. In agriculture, just as in finance, diversification brings sustainable profits.
Have a great week,

 

The Shrink

 

Side OrdersOther News

Opinion/ blogs:

What I’m reading:

Smarter Investing by Tim Hale – essential reading

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor. This is turning out to be real heavy-going.

Enchiridion by Epictetus – Bedside reading for a bad day

 

References:

  1. https://www.amazon.co.uk/Smarter-Investing-Simpler-Decisions-Financial/dp/0273785370/
  2. https://www.theguardian.com/commentisfree/2018/aug/25/veganism-intensively-farmed-meat-dairy-soya-maize
  3. https://www.telegraph.co.uk/business/2018/08/18/interest-rise-leaves-first-time-buyers-facing-extra-mortgage/
  4. https://www.theguardian.com/money/2018/aug/20/no-deal-brexit-personal-finance-what-does-it-mean
  5. https://www.newsweek.com/donald-trump-says-windmills-are-bird-killers-he-tries-revive-coal-industry-1079910
  6. https://www.bbc.co.uk/news/business-45244761
  7. https://www.theguardian.com/environment/2018/aug/23/europe-to-ban-halogen-lightbulbs
  8. https://www.independent.co.uk/environment/scotland-floating-turbine-tidal-power-record-sr2000-scotrenewables-ofgem-a8503221.html
  9. https://www.theguardian.com/society/2018/aug/19/governments-care-isa-plan-dismissed-by-sarah-wollaston-tory-health-committee-chair
  10. https://www.bbc.co.uk/news/health-45354846
  11. https://www.fool.co.uk/investing/2018/08/20/a-ftse-100-dividend-stock-that-should-pay-you-for-the-rest-of-your-life/
  12. https://www.physicianonfire.com/early-retirement-doesnt-suck/
  13. http://awealthofcommonsense.com/2018/08/a-short-history-of-emerging-market-corrections-bear-markets/
  14. http://awealthofcommonsense.com/2018/08/buying-emerging-markets-after-a-disaster/
  15. http://www.thisismoney.co.uk/money/investing/article-6078749/Top-income-investments-trusts-revealed-British-American-tops-table.html
  16. http://www.thisismoney.co.uk/news/article-6092439/Half-Britains-bank-branches-closed-five-years.html
  17. https://theescapeartist.me/2015/03/02/the-aggregation-of-marginal-gains/
  18. https://theescapeartist.me/2018/08/28/to-defeat-your-enemy-you-must-first-know-your-enemy-part-2/
  19. https://www.ukvalueinvestor.com/2018/08/ted-baker-dividend-growth-stock.html/
  20. https://www.ukvalueinvestor.com/2018/08/sage-dividend-growth-stock.html/
  21. https://deliberatelivinguk.wordpress.com/2018/08/29/why-you-should-calculate-imputed-rent/
  22. https://youngfiguy.com/when-cash-was-king/
  23. https://youngfiguy.com/insolvency-and-carillion/
  24. https://youngfiguy.com/was-carillion-like-a-ponzi-scheme/
  25. http://quietlysaving.co.uk/2018/09/02/august-2018-plus-other-updates/
  26. http://monevator.com/weekend-reading-automatic-for-the-people/
  27. https://firevlondon.com/2018/08/20/overdiversity/
  28. https://firevlondon.com/2018/08/13/recalibrating-my-portfolio/

 

 

 

 

 

 

 

 

 

The Full English Accompaniment – A nation of preppers?

What’s piqued my interest this week?

This week that bulwark of British strength Theresa May advised us all we should start prepping for a “no-deal” Brexit, just as the Government had by stockpiling food and medication. We should “take comfort” in the Government’s actions (1). “It’s right to prepare for all eventualities” (2). Unfortunately the actual understanding of how they’re going to do this is lacking (3). Currently the EU supplies 31% of the UK’s food, and Brexit will have huge implications across the supply chain (4, 5).

This led to lots of media outlets running pieces on ‘what to stockpile’. The Guardian recommended olive oil, pasta, pepper, rice, spices (6)The BBC warned of the threat to our sandwiches (7). Heavens! Anything but the sandwiches! Even The New Scientist got in on the act (8). Plenty of organisations are piling on the warning bandwagon. The UK dairy industry has warned that butter, yoghurt and cheese will be occaisional luxuries (9).

My solution to this problem is to gradually move my consumption to more local suppliers. Coming from a farming family I’ve always tried to support UK growers. For at least the past few years I’ve only bought UK grown seasonal veg, and cooked based on what is in season. Very middle class yes, but healthier, more varied, and often cheaper. This year I’ve tried to take this further, using a local butcher and market garden co-operative (feel free to roll your eyes) delivery. It appears I’m not alone. We all saw Blue Planet 2, the anti-plastic movement gains traction, and people are finding ways of reducing their packaging usage. One of these ways is going back to the local milkman with his bottles. Milkmen are seeing a surge in demand throughout the country (10). Fresh local milk served in retro glass bottles delivered by an electric van does sound pretty ‘now’. Expansion has not been without it’s problems for the national Milk&More, but these appear to be teething problems (11). The traditional local trader milkmen are doing better (12). We’ve come full circle with convenient deliveries from local producers. Everything old is new again.

Have a great weekend,

The Shrink

Side Orders

Other News:

Opinion/ blogs:

What I’m reading:

Eric by Terry Pratchett – light relief

Religio Medici by Sir Thomas Browne – the theological and psychological reflections of a C17th doctor

Enchiridion by Epictetus – Bedside reading for a bad day

References:

  1. https://www.telegraph.co.uk/politics/2018/07/25/plans-stockpile-food-blood-medicine-case-no-deal-brexit-sensible/
  2. https://www.bbc.co.uk/news/av/uk-politics-44972582/brexit-is-uk-planning-to-stockpile-food
  3. https://www.theguardian.com/commentisfree/2018/jul/26/stockpile-food-no-deal-brexit-dream-on
  4. https://www.independent.co.uk/news/uk/politics/brexit-latest-food-supplies-shortage-warning-policy-failure-supermarkets-imports-eu-a7844751.html
  5. http://www.sussex.ac.uk/spru/newsandevents/2017/publications/food-brexit
  6. https://www.theguardian.com/politics/shortcuts/2018/jul/12/a-no-deal-brexit-survival-guide-what-food-to-stockpile
  7. https://www.bbc.co.uk/news/business-44960293
  8. https://www.newscientist.com/article/2175259-the-scientific-guide-to-stockpiling-food-for-a-no-deal-brexit/
  9. https://www.independent.co.uk/news/business/news/brexit-dairy-products-butter-milk-cheese-industry-warning-lse-study-a8452501.html
  10. https://www.theguardian.com/lifeandstyle/2018/feb/07/return-milkround-plastic-problem-glass-bottle-deliveries
  11. https://www.theguardian.com/money/2018/apr/02/milk-and-more-grocery-delivery-delays
  12. http://www.itv.com/news/wales/2018-05-02/milk-bottle-sales-booming-as-consumers-turn-their-backs-on-plastic/
  13. http://www.bbc.co.uk/news/business-44926442
  14. https://www.bbc.co.uk/news/business-44950610
  15. https://www.bbc.co.uk/news/business-44202542
  16. https://www.telegraph.co.uk/personal-banking/savings/basic-savings-rate-would-reward-loyal-customers-banks-wont-take/
  17. https://www.telegraph.co.uk/personal-banking/mortgages/concern-thousands-mortgage-borrowers-fall-immediate-financial/
  18. https://www.telegraph.co.uk/investing/bonds/new-retail-bond-fund-pays-45pc-year/
  19. https://www.theguardian.com/money/2018/jul/25/uk-pensioners-income-growth-outstrips-wage-rises-ons-estimates
  20. https://www.bbc.co.uk/news/business-44732847
  21. https://www.theguardian.com/business/2018/jul/28/uk-interest-rates-finally-rise-bank-of-england
  22. https://www.bbc.co.uk/news/uk-44943672
  23. https://www.theguardian.com/money/2018/jul/26/household-debt-in-uk-worse-than-at-any-time-on-record
  24. https://www.bbc.co.uk/news/business-44926447
  25. http://monevator.com/find-the-best-online-broker/
  26. http://www.thefrugalcottage.com/what-would-you-do-if-you-won-the-lottery-giveaway/
  27. http://www.thefrugalcottage.com/life-update-20/
  28. http://www.msziyou.com/identifying-as-xennial/
  29. https://theescapeartist.me/2018/07/24/the-art-of-wealth-preservation/
  30. http://www.retirementinvestingtoday.com/2018/07/sobering-retirement-income-drawdown.html
  31. https://www.ukvalueinvestor.com/2018/07/measuring-investment-performance.html/
  32. http://monevator.com/death-to-the-lifetime-isa/
  33. https://youngfiguy.com/why-the-lifetime-isa-is-not-a-simple-to-understand-product
  34. https://youngfiguy.com/palms-up-or-palms-down-person

 

Musing on… Long-term care costs and financial savings

This post has been mulled over for a long time, trying to discern and distil a direction. It began (as these trains of thought often do) with an idle r/financialindependence post. If you’re not familiar with that, it’s a subreddit for FI-types, predominantly populated by Yanks (Reddit being a sort of forum-cum-meta-aggregator of internet waffle). In this post a group of our ex-colonial cousins were discussing long-term costs (1):

So far, so not our problem. The UK may have significantly higher tax rates (ignoring ISAs etc), but it pays for (in theory) the NHS and social care, the cradle-to-grave support system for when times are bad. The NHS and social care system are what makes FIRE and any sort of fuck-you to working possible in the UK. Check out the video and post TEA and Rhik Samadder did on the matter (2).

National, personal cover

As we celebrate the NHS’ 70th birthday, it’s worth reflecting on where this all came from. Before the birth of the NHS all doctors services were private in the UK. If you needed something, you went to your local doctor, hoped they had been trained adequately, paid your money, got your treatment, hoped it worked. There were no guidelines. There was no standardisation. This worked fine for the wealthy, who could afford the best, but for the poor would die from an inability to pay the doctor. You can find plenty of stories from that time, but if you read one, I recommend the recollections of the wonderful Harry Leslie Smith (3). He remembers a doctors visit costing half-a-weeks wages, which they sadly did not have (3). This private price has scaled with inflation. A 15 minute private GP consultation will set you back £70 (4). As a profession we remain a rare commodity, and on an open market our hourly rate is such. The NHS affords the government a position of power and collective contractual employment which, despite press vilification, means we still come relatively cheap.

In the days before the NHS, workers would club together to pay for ‘self-help’ organisations, to provide medical care for one another. Beginning in the late 1800s, the Tredegar Workmen’s Medical Aid Society was one such successful organisation (5):

By the 1920s, the society employed the services of five doctors, one surgeon, two pharmacists, a physiotherapist, a dentist, and a district nurse. For an extra sum each week, members could also benefit from hospital treatment.

During the inter-war depression, the society continued to provide services to unemployed people, even though they could no longer afford to pay a subscription. By the mid-1940s, the society was providing medical care for 22,800 of the town’s 24,000 inhabitants.

Aneurin Bevan, who was born in Tredegar, took the Workmen’s Medical Aid Society as his inspiration for the NHS, saying: “All I am doing is extending to the entire population of Britain the benefits we had in Tredegar for a generation or more. We are going to ‘Tredegarise’ you.” (5)

The fragmentation of the NHS, gradual privatisation and reduction in care available deserves a separate post. For now, with a sense of perspective, we can look across the pond and be smug about our NHS (6). Cradle to grave cover, in our most frail years, maternity and care home. Isn’t it marvellous. Except… have you ever been in an NHS care home? And how much do you think that care home costs?

Who wants to live forever?

Time and again bloggers discuss their financial plans, how they’re 50 now, and they see themselves having 30 more good years. They fall into a common trap, recent research shows 8/10 of those over 50 underestimate their life expectancy (7). Most people guess they’ll live to 82-ish, whereas the data says more like 88 for men, and 90 for women*. We have got much better at keeping people alive for longer. Those aren’t necessarily going to be good years though, and so people trot out those bleak jokes; “oh just roll me off a cliff at 80”; “I’ll just head off to Switzerland”; “I’ll just pop my clogs then”. Except those are all to varying degrees illegal/ unethical. We doctors can’t just settle you off in a dignified way when you decide you’re not much use or aren’t enjoying things anymore. How do you decide when that is? Death is so very final. As a culture we have developed a fear of discussing or even considering our own mortality.

(*N.B. You can’t actually use ONS life expectancy at birth figures for this. Infancy through to teenage years (and early adulthood for young men) still have higher mortality. Once you pass your mid-20s your life expectancy actually statistically increases to accommodate for this.)

So for our friends the FIRE-savers, that’s an extra half decade of savings to account for. Suddenly retiring at 55 with a 4% SWR estimating a 30 year retirement isn’t quite enough (8). Life expectancy has increased in the 20 years since the Trinity study was published (9). A 45 year-old sitting down now and estimating for a 4% withdrawal starting at age 55 may well have a good 40 years ahead of them. It’s not just the %withdrawal that’s a variable in this calculation, it’s the duration too. For some really interesting drawdown calculations, check out RIT’s recent post (10).

The final splurge

How much do you think your living costs will be too? The common practice appears to be to take roughly your current living expenses, and times that out for the number of years you need. Some people estimate less, as they figure their homes will be paid off. An interesting piece of research by investment firm Schroders casts doubt on that. It found that savers underestimated their living costs in retirement by 15% (11). Only half of people surveyed had enough to live on comfortably (11).

Coming back to people facing their own mortality, and a decline into frailty, did you include the care home fees in that cost? The answer to the previous question is that the average care home price per year in the UK is £29,270 for a residential home, £39,300 for a nursing home (12). That’s average too, as with everything the South is more expensive, and we all like to imagine ourselves in our twilight years in a beautiful peaceful home, and not being roughly manhandled by someone on minimum-wage with no dignity or care, before being hauled up on a CQC newspaper expose (13). If you want to see what it’s like in your area, the UK Care Guide has a number cruncher and area analysis (14). You can decide to stay in your own home, but there the costs can mount up too. 24 hour care can be more than £150,000/year (13). And again for perspective, your life expectancy from a diagnosis of dementia in your 60s – 6.7 years, in your 90s – 1.9 years (15).

Where’s my cradle to grave?

Too right, where’s the NHS and social care system in all of this? Broke, that’s where. Historically there were jobs that provided care and nursing homes for their retired workers as part of their payment plan (although I can’t imagine anything worse). Now the burden falls on the social care system. The boomer population is ageing, and everyone is living longer. Social care reform remains a political football as no side wants to try to tell people that their lifetime of NI contributions and tax wasn’t enough to pay for their care (16). The “squeezed middle” baby boomers (le sigh) are already paying up to £10k a year to look after their ageing parents, and this will only get worse (17).

To try and at least partially cover care home fees, the central and local Govs have created an Orwellian masterpiece of committees with opaque criteria to make decisions about who gets support and who doesn’t. It’s called NHS Continuing Healthcare when the NHS is involved, i.e. if there is ‘sufficient medical need’ (17). If you can’t qualify for that you get means tested by the local social care trust/ provider (18). AgeUK make a fair stab at explaining it on their website (19). I’ve seen people die before any decision on who will pay has been reached.

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The final stretch of this little essay is about the means testing that social care can use. It’s not actually free at point of care. The system used is fairly complicated in it’s own right, but the Money Advice Service has a good page breaking it down (18). Your income and capital are assessed. If you live alone, and in certain other circumstances, your home will be counted as part of your capital (18). The local authority can and will sell your home to pay for the fees, even if you don’t want them to (20. 21).

If the local authority deems you have deliberately disposed of assets, for example by gifting your child your home, to avoid paying means tested fees, it can claim them back. This quietly introduced piece of legislation is called Deprivation of Assets (22). The rules have subsequently got much tighter around gifting any asset; housing, jewellery, money, objects (23). As always, do your own research.

We can’t take it with us

To summarise, as a culture we fear death and avoid considering our own mortality or old age due to the association. This is a shame, as people are more active in their old age and living longer than ever before. We underestimate the costs and expenditure we will have in retirement. Old age will cost more than we collectively think. The last few years cost A LOT MORE. Don’t ignore your final years, embrace those calculations, and spend them in luxury if you can.

Have a morbid time!

The Shrink

References

  1. https://www.reddit.com/r/financialindependence/comments/8fyu65/do_longterm_care_costs_factor_into_your_fire_plans/
  2. https://www.millennial-revolution.com/freedom/early-retire-uk/
  3. https://www.newstatesman.com/politics/2014/10/hunger-filth-fear-and-death-remembering-life-nhs
  4. https://www.bupa.co.uk/health/bupa-on-demand/gp-services
  5. https://www.theguardian.com/healthcare-network/2018/may/22/south-wales-town-forged-nhs-points-future-tredegar
  6. https://www.reddit.com/r/financialindependence/comments/8zx7iq/health_insurance_as_a_barrier_to_fire_in_the_usa/
  7. https://www.ftadviser.com/pensions/2017/11/28/most-over-50s-underestimate-life-expectancy/
  8. https://www.madfientist.com/safe-withdrawal-rate/
  9. https://en.wikipedia.org/wiki/Trinity_study
  10. http://www.retirementinvestingtoday.com/2018/07/sobering-retirement-income-drawdown.html
  11. https://www.moneywise.co.uk/news/2018-07-03/savers-vastly-underestimate-the-cost-retirement
  12. https://www.moneyadviceservice.org.uk/en/articles/care-home-or-home-care
  13. https://bit.ly/2OiBuIN
  14. https://ukcareguide.co.uk/care-home-costs/
  15. https://www.bmj.com/content/341/bmj.c3584
  16. https://www.independent.co.uk/life-style/health-and-families/nhs-social-care-uk-reform-aneurin-bevan-health-poverty-andy-burnham-a8429571.html
  17. https://www.moneyadviceservice.org.uk/en/articles/are-you-eligible-for-nhs-continuing-care-funding
  18. https://www.moneyadviceservice.org.uk/en/articles/means-tests-for-help-with-care-costs-how-they-work
  19. https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/
  20. https://www.ft.com/content/34c336e8-3e5c-11e8-b7e0-52972418fec4
  21. https://www.telegraph.co.uk/finance/personalfinance/insurance/longtermcare/11441163/Why-you-WILL-have-to-sell-your-home-to-pay-for-care.html
  22. https://www.ageuk.org.uk/information-advice/care/paying-for-care/paying-for-a-care-home/deprivation-of-assets/
  23. https://www.which.co.uk/elderly-care/financing-care/gifting-assets-and-property/343063-what-are-the-rules-for-gifting-assets