| Home | Numbers | I Like |

Thursday 16 January 2020

My Early Retirement Plan - 4 Years Down

Counting down to financial freedom. 
2020 is now fully locked and loaded, which means I am now more than 4 years in to my original plan for financial freedom. The financial wrecking ball known as Junior 2.0 will be crashing through our budget any day now, and in preparation for his grand entrance I made some changes to our original plan.

This new plan still sees me targeting financial freedom by 2030, but it is going to be tough going – especially in light of how we have been tracking against our original plan. This post will explore our progress.

2019 actually saw some decent returns on the JSE. The All-Share Index returned a little over 12% including dividends. Not quite at the long term average of around 15%, but considering the flat returns of the previous years I will gladly  take it!

Interestingly enough, the Rand was stronger for the year. Yes you read that right – despite all the pessimism, headlines of doom and gloom, and talk of junk status, NHI and Land Expropriation Without Compensation, the Rand ended the year stronger against the dollar (up 2.5%). It just goes to show, no one can predict what is going to happen, so just stick to your plan and ignore the headlines and media experts.

The S&P500 had a power year and returned a fantastic 28.9% (excluding dividends). Nice!

Will the offshore markets beat the JSE again this year? Well, if I knew that, I would be charging a lot of money to tell you. No one knows, and the best strategy is to stick to your chosen asset allocation. Make sure you are diversified across countries, currencies, asset classes and sectors, and then just be patient.

Keep making those monthly contributions, and remember trying to be clever often leaves you looking stupid. As always, consistency, patience and discipline is what it is all about!

How Is My Early Retirement Plan Going?

Ok let’s take a quick peek at the scoreboard.

I started 2019 close to 28% behind where I had hoped to be. So I was on the back foot before the year had even began! As the year progressed I remained at more or less the same percentage behind and ended 29.2% below where I wanted to be, with a total investment value of R1.56 Million (versus a projected value of around R2.2 Million).

Although I was hoping for a better outcome, I am encouraged by the progress made and in many months, the value of our investments reached a new high. So despite being behind where I want to be, I need to remind myself that forward movement is still progress!

Here are some more details on how 2019 played out…

Planned vs Actual

The first chart below shows the planned value of my investments in grey, and then the actual value of my investments in blue. You can see Timmy (the blue worm) is trying his best to follow the grey line, but he needs to up his game a little. I’m hoping that this year he is able to get a little closer to that grey line!

Taking a closer look at 2019, you can see the gap is more or less constant, but just widening a tad more at the end.

In the next chart, you can see the percentage deviation from the planned amount on a monthly basis. I will be starting 2020 at a serious disadvantage.

Then this next chart shows how much income I could draw from my current investments, using the 4% Rule, versus my estimated monthly retirement expenses (in today’s money). The long term goal is to have the income line match the expenses line. At that point I will be financially free!

And finally, the below chart shows the value of my investments as a percentage of the amount I would need if I were to retire in that year. The idea is that this should grow with each passing year and hit 100% at the end of 2030 (or in a perfect world even sooner!). As you can see, financial freedom crept a little closer in 2019, after a teeny tiny gain in 2018.

Other Charts

Below you can what percentage of our investments are in each investment vehicle/product. Charts for each year from 2015 to 2019 are shown to indicate how this has evolved since I started the blog. I need to be conscious of trying to minimise my tax bill once I become financially free and try remain as tax flexible as possible. (You can click for a larger image).

I am really liking the trend of a growing percentage allocated to our TFSA’s. This part of the portfolio has grown from just 4% in 2015 to 21% at the end of 2019. I want this portion to be as large as possible, because it will remain Tax Free leading up to and throughout my Early Retirement.

On the flip side, I want to reduce the weighting of my Government controlled investments (Pension and Preservation funds). These will take a tax hit once they are cashed out, and legislation will force me to convert some of the funds into an annuity product which could result in income tax. So while these investments have tax benefits now, there will be tax implications later on. This portion of the portfolio remained at a little under 60% in 2019.

Our discretionary equity allocation dropped to 15%. This is because I make minimal contributions to this part of our investments these days since there are no pre- or post-Tax benefits. However this portion of the portfolio could provide a certain degree of tax flexibility in future – for example the funds in my wife's name could be invested into Local Property since she won't have any annuity income in retirement, and she could use the REIT dividends as the exempt portion of her income.

2019 again saw some benefits in terms of my company’s share matching scheme. I again cashed out some of those shares and invested the money elsewhere, because I would like to keep this single company exposure below 5% of the overall portfolio.

I continue to target the following overall asset allocation (as per this article)
  • 40% Local Equities
  • 40% Offshore Equity
  • 10% Local Property
  • 10% Offshore Property

At end 2019, my asset allocation was as follows (if you would like to calculate your own asset allocation, check this article). Click for a larger image.

I am really chuffed at the progress I made in 2019 in terms of getting my asset allocation more in line with where I want it. CoreShares decided to morph their Equally Weighted Top 40 ETF into something which I did not like, and so I used the opportunity to sell out of some of that ETF and buy more Local Property and Offshore Equity ETFs. This reduced the weighting of my Local Equity exposure and upped the weightings of Local Property and Offshore Equity.

My offshore equity exposure remains below where I would like it to be, and so that is where I will be concentrating my buying in 2020.


Going forward will be more of the same for me. I will continue to keep a close eye on expenses and we will be doing our absolute best to max both my wife and my TFSA accounts. This could be tough given that we are currently living on one income, with a second child on the way.

My wife should return to work towards the end of the year,/early next year and from there it should be back to all systems go!

It seems there is a little bit of life in our local market, so here’s hoping for some stellar returns in 2020.

I wish you and your finances everything of the best for the coming year - onward and upwards!

Till next time, Stay Stealthy!
 - ~ - ~

If you enjoyed this post, it has been scientifically proven that you have a 96.78% chance of liking future posts.
Don’t argue with statistics, sign up to the mailing list and get the newest stuff delivered to your inbox!