Early retirement at 41: €250,000 and two value funds

€250,000 at 41: the arithmetic of someone who wants to stop rowing

A married couple from northern Spain, both working in the technical and industrial sector with 15 to 20 years of seniority, earn a combined €86,000 gross a year —€50,000 her, €36,000 him—, own their main home outright, have a second flat also paid off and rented out, and save around €50,000 a year. At 41, with two children under ten, the question is not whether they can stop working, but when and at what cost. Their accumulated wealth: €250,000, of which €200,000 sits in two value funds —Cobas and Azvalor— and €50,000 in cash. Their stated intention is early retirement in five or ten years, or at least a reduction in working hours.

The discussion this plan has sparked is a portrait of how Spain's upper middle class invests today: plenty of conviction, little diversification and an unshakeable faith that time is the one asset you can't get back.

What to do with €200,000 parked in two value funds

The most frequent criticism goes straight at the concentration. Having nearly all your wealth invested in two actively managed value-oriented products reads as a red flag, even among those who share the thesis that these funds are cheap. The argument is twofold: on the one hand, that the fund managers live off a fruta from another era and their supposed alpha has failed to materialise; on the other, that value does not necessarily protect you in downturns, as the performance of some classic funds in 2008-09 showed, when they fell just as much as the market.

Some go further and argue that for certain value portfolios to rise sustainably, circumstances would have to occur that may not be seen for fifteen or twenty years. The alternative gaining ground is indexing: a fund tracking the S&P 500 or MSCI World, with the promise of beating 95% of managers over the long run and a historical average of 8-9%, enough to justify a 4% annual withdrawal rate. The objection to that route also appears: indices may be very high and miccionan reversion could work against you for the next decade, as peine between 2000 and 2009.

The author of the plan himself acknowledges the problem with his funds: one buying plenty of junk with debt, and the other turned into a commodity sector fund with extreme volatility. And he rules out growth funds like Seilern or Fundsmith as too expensive, though not everyone agrees: some argue both beat the World index.

Dividends, property or index funds? The rentier's menu

The growing dividend strategy comes up as a third way. The advantage is recurring income; the drawback, the tax bite. The most repeated suggestion is not to limit yourself to the IBEX —the author rules it out for its make-up of regulated, old-economy companies— and to build a portfolio with US dividend aristocrats, well-known companies with a track record of treating shareholders well. Dividend-focused index funds and ETFs covering global markets are also mentioned.

Property divides opinion. For some it is a rentier must-have because of the regularity of income; for others, an illiquid, opaque product where picking the wrong area or the wrong moment can't be fixed by dollar-cost averaging. The author is clear: he already owns two flats and expects an inheritance in property, so he is not considering buying more unless someone can change his mind. The ensuing discussion is about where to buy: Madrid and its M30 ring road come up as liquid assets but with prices above €300,000 for anything at all; Málaga or Valencia as areas with Mediterranean appeal; Zaragoza or Valladolid, ruled out for lacking perceived prospects. The sanest recommendation to emerge is to buy near where you live, not dumps in faraway cities.

The real cost of raising two children to 23

One of the most contested calculations in the thread puts the cost of raising two children until they finish university and stand on their own feet at around €300,000, with a minimum unit cost of €98,000 up to age 18. The figure is immediately questioned: with no private school, no nanny —grandparents cover that gap—, no horseback riding or ski extracurriculars, the annual cost per child stays well below the €6,000 that calculation would imply. The author sums it up with dry humour: he doesn't know whether he'll buy each of them a car at 18 or send them to study at Eton.

The conclusion that wins out is that children don't prevent early retirement, but they do shape it: single, you can tighten your belt to the extreme; with children, not so much, at least not voluntarily. And some flatly state that quitting the rowing with children is a bad idea, because of the example you set and the conflicts it can create with your partner.

Part-time work, the most repeated consensus

The recommendation that comes up most often is neither retiring nor carrying on as before: it's cutting back hours. Working part-time and devoting the rest to the children, who at that age still want to spend time with their parents, is put forward as the smartest option. It's also suggested to improve your rowing technique before letting go of the oar: clock in and out on time, don't take work home —mentally or otherwise—, and let younger colleagues take on part of the load.

The scenario nobody rules out is uncertainty. Some remind us that life is more than making plans, citing the example of an aunt who organised her retirement for years and died at 46. The author's answer is blunt: precisely because the future is unpredictable you have to plan; if he were a fortune teller, he wouldn't need to.

The disconcerting fact: with €50,000 in annual savings and two paid-off flats, the decision of whether or not to keep working doesn't depend on the portfolio, but on how much more time he is willing to trade for money he may not even need.