GUEST COMMENT: The eternal question - how much cash do you need to retire?
How much cash do you need to retire? That was the perennial question colleagues and I asked in the early stages of our City career. I suppose the fact we were debating this issue suggested our jobs weren't completely fulfilling but then none of us had any illusions that our daily toil was motivated by anything other that the wish to accumulate as much cash as quickly as possible.
We even referred to work periods in the Square Mile as if they were prison sentences ... someone who'd got out after a decade had done a 'ten year stretch' whilst those still in the game at 50 were called 'lifers'.
I, and many of those in my 'inner circle of trust,' were frustrated artists and scientists. We'd sold our souls to the City merely because the pinstriped demons there were offering us the best price. We knew full well that life was short and that slaving away at spread sheets or talking to obnoxious clients was not how we'd choose to spend our years on this planet, but we struck a bargain with Mammon: you can have some of our youth but only so that our later years are truly free and joyous.
In 1998, we sat down to try and cement a figure that would allow us to live a reasonable life of few major extravagances but no financial worries until we'd shuffled off this mortal coil. Although there were differences of opinion the average net asset value (gross assets minus all liabilities like mortgages etc) we all agreed upon was ... 2.5m.
For that, we figured you could buy a decent house out right in London (700k) and a small gaff in the country (300K). We then assumed that you could make an average annual post-tax return of 5% on the remaining 1.5m (75K per annum). Combine this with 25K of annual income from bits and bobs you and your partner made as you tripped the light fantastic and you have a yearly post-tax 'salary' of 100K without even dipping into your capital.
Of course, you couldn't buy Ferraris, get divorced too often, send your kids to Eton, but you could travel endlessly, drink fine wines, eat at restaurants regularly and never feel truly constrained by cash.
In February 2008 (7 years later than originally planned), at the age of 35 my net assets reached this mythical figure and I walked. Whilst the return I've achieved so far on my capital has been negative due to weak markets it has been without doubt the best decision I've ever made.
Money's main role should be to grant you freedom to do what you want when you want. The endless pursuit of ever-flasher possessions merely builds a gilded cage that traps you and postpones your joy to when you're not fit and healthy enough to truly enjoy it.
It may be a cliché but it's true: no-one on their deathbed wished they'd spent more time in the office!
'Geraint Anderson is the author of Cityboy - Beer and Loathing in the Square Mile.' You can visit his website here.
