Early-retirement wannabe

atush · 2 July 2015 at 6:22PM

Stirfry wrote: »

My OH thinks he will be too old to do anything. For example he still likes skiing but with a hip replacement on the horizon some time in the future, he does not think he will be skiing when he's 70. In any case if state pensions kick in when we reach 66 along with our very small private pensions we will have some income to fall back on.:o

I know a woman who had a hip replacement. She was younger, but needed one. Her life was transformed afterwards.

So if anything, having one would make him feel younger? And keep him fit longer?

PeonySugar · 2 July 2015 at 6:30PM

Hi everyone. I don't know if this will sound stupid and my family think I am crazy for planning so far ahead, but my plans for retiring early are to try and work like billy o until I am 45, full time, saving as much as possible. I will then switch to part time with significantly reduced hours, still within the company to keep the very good pension payments up to as if I was working full time, and together with the interest I get from the saved up money, have something to live off of. Then when I get to 50, retire completely, living off of the savings and interest until I am 55 at which point I will take out my pension, and take out an enhanced annuity with a 25% lump sum, and then just when inflation starts to reduce the value of my pension, the state pension will add a lot back to it.

In order to save enough money to semi retire at 45, I would need to save around £330pm. This assumes an average interest rate over the next 20 years of about 5% which I took as an average from the interest rates each year since 1960. This will be difficult at first due to only just starting out after university but as I have just received a promotion to an office with far more opportunity to progress, this should be an easier to obtain target as time goes on, God willing.

If anyone thinks I am crazy please say so, I am open to all comments :rotfl:

Silian · 2 July 2015 at 7:55PM

Peonysugars, don't think you are crazy at all. Loads of people might tell you that you are young only once and that you should enjoy that instead.

While that is true in a way you also need to remember that you are the same person you are at 45 than you are now and the older you will thank you.

Your money also works harder for you when you start earlier. Saving £100 today will pay you +-£5 per year for +-80 years. Save at age 80 and it is hardly worth it.

Just one thing: for your timelines I would look to invest instead of save.

hugheskevi · 2 July 2015 at 8:23PM

my plans for retiring early are to try and work like billy o until I am 45, full time, saving as much as possible. I will then switch to part time with significantly reduced hours, still within the company to keep the very good pension payments up to as if I was working full time

Will that be the most tax-efficient arrangment? If you would be moving to a lower tax band after moving to reduced hours then higher pension contributions earlier in life and lower in that phase may be preferable.

and take out an enhanced annuity with a 25% lump sum

Is there a reason to anticipate being eligible for an enhanced annuity? That is a very young age to take out an annuity (mortality benefits don't really kick in until after age 70) - no consideration of drawdown?

In order to save enough money to semi retire at 45, I would need to save around £330pm.

What terms are you working in? The choices are largely cash, prices or earnings. Cash is a silly metric to use due to inflation, prices is okay, but not for very long periods, earnings is a sensible measure, but not as intuitive as prices.

To illustrate, assume you work out that you need an income of £25,000 p/a based on current spending patterns. If you simply plan to have an income of £25,000 p/a in retirement in today's price terms you will switch from living on an income which is just a bit below average earnings to living on income far lower than average earnings, which will have increased well above price growth over a long period.

This assumes an average interest rate over the next 20 years of about 5%

Are you planning cash savings - no consideration of investments, despite the long time period? A 5% p/a long-term investment return would be quite pessimistic.

I am open to all comments

Although it is good to have a plan, the only thing which is certain is that it will change multiple times. In the early stages keep everything flexible and open to change.

In the early stages, that is likely to mean a preference for taking what is on table, eg, higher rate pension tax relief, rather than committing to a long-term plan which will inevitably change.

Minimising expenditure is very important for early retirement - don't let your expenditure increase as your income/available money increases.

Goldiegirl · 2 July 2015 at 10:35PM

Just a couple of observations.

I reckon once your house is sold, there'll be another reason to wait another 6 months, and then another.

Plus, I think you need to think about changing the quote in your signature. 'Someone may beat me, but they're going to have to bleed to do it', isn't really a good motto for a happy retirement!

When I first came across this thread, you were due to retire way before me, yet I've been loving my retirement for six months and you're still slogging away at the coal face.

I just don't get why someone who wants to retire and has the money (you have enough) keeps delaying.

My gut feeling is, you're not ready yet.

Goldiegirl · 2 July 2015 at 10:39PM

Stirfry wrote: »

to chris_m
I believe that I have got my work/life balance right and in the end working two days a week has become rather inconvienient

That's exactly what I was saying this time last year.

Work had become a nuisance, so I was pleased to give it up

gallygirl · 3 July 2015 at 7:20AM

PeonySugar wrote: »

Hi everyone. I don't know if this will sound stupid and my family think I am crazy for planning so far ahead, but my plans for retiring early are to try and work like billy o until I am 45, full time, saving as much as possible. I will then switch to part time with significantly reduced hours

Have you come across Mr Money Mustache? They'd think you were crazy for working so long

. Your plans are very detailed and life/law changes etc may get in the way. The important thing is that you have a plan to deviate from rather than just bumbling along with the vague hope that £50 a month in a works pension will do. Save as much as you can, but at this stage not in savings accounts - and 5% is unrealistically high I'm afraid, apart from the odd 2k here and there you won't achieve that. Look to low cost index trackers and possibly buy to let.

You have years of accumulation ahead of you. Good luck :T.

eagertolearn · 4 July 2015 at 10:56AM

atush wrote: »

Eager, if you are both of poor health (well have life limiting conditions even if health now) have you considered transferring one of your DB pensions?

Or will the spousal pensions still be enough?

We are both in good health now thanks with no risk of "early exit" (no more than anyone). I am a financial numpty and research into what to do with the TFLS, redundancy, savings and shares is high on the list of priorities. I didn't know I could transfer a DB pension

green_man · 4 July 2015 at 11:32AM

It seems so much easier making other peoples decisions than your own! For me Marine_Life seems the most cautious guy in history and I suspected his retirement may have been pushed back from his original date, but I am very envious of his financial position.

For me my last day employed is this Sunday (5th) when I retire after 27 years at the company. I am 49. I was offered redundancy and decided I could afford to take it so accepted. My 'number' is £1500 per month (so obviously somewhat lower than ML). Morgage is payed in December this year, Wife will retire in approx 1 year on a DB pension of approx £2100 per month.

For my own income my DC pot is currently around £430K 80% of which is in equities. To bridge the gap to when i can drawdown this I have around £230K in cash (various ISAs). I cashed out Stocks and Shares ISAs a couple of years ago when the Greek Crisis initially took hold and I saw a potential large downside, (FTSE was at 6650 at the time) I am currently averaging just under 2% in various cash accounts but I will be unable to maintain this so will be looking to feed some back into income generating equities/funds over then next couple of years as and when I feel the market offer decent value.

Overall I think I should be able to maintain £1500 per month growing with inflation.

Marine_life · 4 July 2015 at 10:41PM

Goldiegirl wrote: »

Just a couple of observations.

I reckon once your house is sold, there'll be another reason to wait another 6 months, and then another.

Plus, I think you need to think about changing the quote in your signature. 'Someone may beat me, but they're going to have to bleed to do it', isn't really a good motto for a happy retirement!

When I first came across this thread, you were due to retire way before me, yet I've been loving my retirement for six months and you're still slogging away at the coal face.

I just don't get why someone who wants to retire and has the money (you have enough) keeps delaying.

My gut feeling is, you're not ready yet.

Well....I think you can look at the world as black or white....but around the edges of both is a little grey ;-) By that I mean that the sense of being trapped is partially the feeling of loss of control. Once you have the control back then the trap opens.

I like my plan and its closer than you might think

Early-retirement wannabe

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