Polliesdividend

When do I reach Financial Independence? – Post 2018

At what age do I reach Financial Independence?

Since the beginning of my blog, once a year, I write a post in which I calculated when I would reach FI.

In order to track my progress, I will do the same calculations with recent numbers. In this blog post I did the original calculations back in February 2015 and for the posts in the following years, just click on the corresponding year 2016 and 2017.

So this is a yearly returning blog post, and for my calculations I used the numbers of January 1th of each year.

I crunched these numbers and calculated the future value of my Vrijheid Fonds for the year I will turn 50 and for the year I will turn 65.

 

www.polliesdividend.com

 

 

Future Value of my Vrijheid Fonds

When I know these values I can calculate my future dividend in these years.  Last December, I have looked at my expenses, as I do every year, and came to the conclusion that my annual expense could be lowered while maintaining the same life style.

I’ll need about € 36,000 per year to keep up the same life style. If I use my current weighted average dividend yield (for more information on my weighted averaged Yield and DGR, please read my 2018 post Some metrics of myVrijheid Fonds), I calculated that my Vrijheid Fonds needs to be approx. € 1 M in value before I can live of my passive income.

A couple of days ago I calculated my weighted dividend Yield of my Vrijheid Fonds for 2018. It was around 3.58%. This is higher than last year, because of lower share prices in comparison to last year (and almost all dividend increases last year).

The weighted average dividend growth rate of around 3.66% and this is lower than last year. This is mainly due to the oil stocks that haven’t raised their dividend (significant). To compare the data with the past years I use the same overall yearly growth of 12%.

 

  2015 2016 2017 2018
Value €55,050 €63,965 €79,156 €88,166
Weighted average Yield 3.66% 3.57% 3.20% 3.58%
DGR 6.92% 6.86% 4.45% 3.66%
Yearly fresh capital €5,000 €5,000 € 7,000 €7,500
Yearly growth 12.00% 12.00% 12.00% 12.00%
Future value 2023 €185,000 €192,000 € 213,046 €203,305
Future Dividend €6,800 €6,850 €6,817 €7,269
Future value 2038 €1,200,000 €1,236,500 €1,427,081 €1,390,868
Future Dividend €44,000 €44,100 €45,667 €49,793
Possible retirement year 65 64 63 63

 

 

When do I reach FI?

Just as the last three years, I have to report that after 1 year of hard work for my Vrijheid Fonds, I still cannot retire when I turn 50 (booh, booh). And this reality check also learns me that for me, it will not be possible to raise the value of my Vrijheid Fonds in the coming 5 years to the point that I can retire ;-(

If we look at the data, I conclude that one year of hard work resulted in approx. €10,000 of less projected future value 🙁 (In 2023). My projected future value declined, but because my weighted average dividend yield is higher than last year, I will receive more projected dividend than with the metrics of last year.

What I did after last year’s calculations is that I raised my goal for donating fresh capital this year. This higher yearly fresh capital is used to fuel my beast. And after my review of Q1-2018, I can say that I’m on track to reach this goal.

 

Finally

These are some very simple calculations with lot assumptions. And I know that live happens when you make other plans. But I use these calculations solely for my own pleasure and insights. So these are not hard data. It just gives me a direction and shows me that I’m on the right track.

What can I do to speed this up? Keep pumping in fresh capital as much as possible and as early as possible. So this is what I’m going to do.

At what age do you reach FI? What is your advice for me, to reach FI sooner?

Cheers,

Pollie

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9 thoughts on “When do I reach Financial Independence? – Post 2018

  1. Jung in Rente

    Hi Pollie,

    Calculating the date of one‘s own (early) retirement proofs to be one of the most difficult tasks when talking about FIRE. That’s mainly because there are so many unknown variables:

    – How much will you be able to save in the future?
    – What will stock market and dividend yield performance look like?
    – How much money will you need after having retired?
    – What’s your tax rate after having retired?
    – Do you want to keep your portfolio balance stable or are you willing to live of your savings?
    – How much of an emergency fund are you going to need?
    – How long are you going to live?
    – etc.

    I guess you see where I‘m going…

    Having said the above, the best way to retire as early as possible is certainly to save as much as you can. So you can either try to earn more or reduce your expenses even further. At least, that’s what we’re doing at the moment without sacrificing all the fun.

    As we’re currently in our early 30s, I hope we‘ll be able to reach FI around 40-45. But you never know. Perhaps we‘re doing a sabbatical year somewhere along the way or something else unplanned is going to happen.

    And that is exactly why we – other than you – don‘t calculate our potential retirement age on a regular basis. Instead, we‘re just giving our best and hope that everything will work out in the end.

    – David

    1. Pollie Post author

      Hi David, thanks for sharing your point of view. A read a lot of great points and agree with you. Save as much as possible is the beat way to go. And of course investing this money.
      But never forgive to life and enjoy every day. Because life is happing while you ate making plans.
      Just keep up the good work

  2. Glenn

    Hi Pollie,

    This question is regularly on my mind. Dividend investing keeps me confident that I will reach financial independence at a certain point in time. I would love to stop working at 55, right now I’m almost 36 years old. So I have some time left for compounding to do it’s work.

    I invest and save by the following principles:
    – save as much as you can
    – invest as much as you can, immediately. The money you invest right now will have the biggest compounding effect
    – don’t make additional payments to lower your mortgage. Invest, invest, invest in these eary years.
    – also invest in a handful of companies which don’t pay any dividends (yet) such as BRK, AMZN, GOOG, etc.

    1. Pollie Post author

      Hi Glenn,
      Thanks for stopping by and taking the time to write a comment.
      What a great principles to follow and if you keep follow these principles you will do good. And I agree that some not dividend paying stocks can be a great addition to your portfolio.

  3. Mr. Robot

    Interesting calculation Pollie! I haven’t calculated anything yet but my goal would be full optional retirement at 55. Which gives me another 20 years to build my empire 🙂

    I’m not in any position to give you any advice Pollie, you’re doing great!

  4. Abhijit

    Hi,
    I would be interested to know if you calculated how much you lost to brokerage : due to getting dividends and then buying stocks again and paying brokerage.

    For my financial independence i am mostly buying ETFs (S&P 500 ) and just recently I moved from a dividend paying ETF to an accumulating ETF which reinvests the dividend automatically.

    These brokerage charges are the only reason I am not so very pro dividends. Maybe the difference is not much ( I admit i did not do any calculations myself but somehow I am very averse to paying to brokerages 🙂

    1. Pollie Post author

      Hi Abhijit,
      I don’t have to pay fees for receiving dividends. And I also don’t pay fees for dripping.
      For reinvesting normal dividend of Dutch stocks I pay 1%
      The fees for a normal buy are €1 +0.15%
      And by every buy I do, my fees are below the 1%
      So yes I do pay some fees, but I will keep them low 😀

      1. Pollie Post author

        And remember: you also pay fees with etfs, even if they reinvest the dividends them self. Only you don’t see them because they are incorporated in the share price

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