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  • FIRST POST
    • Marine_life
    • By Marine_life 5th Nov 10, 10:46 AM
    • 801Posts
    • 1,411Thanks
    Marine_life
    Early-retirement wannabe
    • #1
    • 5th Nov 10, 10:46 AM
    Early-retirement wannabe 5th Nov 10 at 10:46 AM
    I would like to create a topic (don't see it at the moment - other than the NUMBER thread).

    Who is aiming for early retirement (or who has retired early already)?
    When did you begin planning and what drove the decision?
    What is the strategy for getting there?
    How much of a relative decline in income are you prepared to take / did you take?
    What are your main concerns?
    For those already in early retirement - how is it progressing? What have been the good and bad surprises (financial and otherwise)?

    I will post my strategy but wanted to get some thoughts
Page 169
    • nearlyrich
    • By nearlyrich 8th Jul 17, 10:24 PM
    • 13,337 Posts
    • 16,542 Thanks
    nearlyrich
    I am no longer the wannabe.

    I am done (or rather we are done).

    Friday was my last day of full time work and after 31 years of work I am now hoping for at least 31 years of retirement.

    I'm not sure how I feel yet.

    But after almost seven years (since starting this thread) its time to put the plan into action.
    Originally posted by Marine_life


    Welcome to my world I have just done a year it's gone so fast I haven't missed work, even the money, at all. In fact I saved some money for the first year thinking I could delay claiming my pension, I still have around a third of it left and my pension has grown really well this year.


    We have done some travelling, looked after the grandson, I have started sewing again, I do some voluntary work that interests me. All good stuff.
    Enjoy !!
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    • Triumph13
    • By Triumph13 9th Jul 17, 7:07 AM
    • 1,028 Posts
    • 1,221 Thanks
    Triumph13
    In my book the essence of knowing when your finances support early retirement is entirely dependent on your view of investment returns and inflation. I had the luxury of being able to set my invest returns exactly equal to inflation (i.e. very conservative) and did not pull the plug until that showed me I would never run out of money. Some will say that means I retired 3-4 years later than I could have but at least I can sleep at night!
    Originally posted by Marine_life
    I know what you mean about sleeping at night and that's the reason why my own plan still has two more OMYs built into it. I look at the mechanics the other way round though and go for a more realistic investment return plus a nice fat contingency fund to act as the soporific. The fact that we will eventually have enough in DBs and SP to cover our core spend probably makes this easier as it's only the ten years until the first of the DBs kicks in when I really expect to be fretting.
    I am feeling definitely FI now, which means every single post tax penny we earn (including employer pension contributions) is adding straight to the contingency fund.
    • Gonzo230
    • By Gonzo230 9th Jul 17, 9:08 PM
    • 2 Posts
    • 9 Thanks
    Gonzo230
    Hey folks,

    My first post on MSE forums. I've been reading this thread for a few weeks, so thought I'd add in my situation. Apologies in advance if it's long and rambling!

    I'm 38. I was lucky enough to start employment in my dream job when I was just 19. I also know I'm incredibly lucky to be remunerated well for that employment.

    I have just taken the plunge on coming out of the company DB pension scheme and transferring my CETV into a SIPP.

    I did this for a few reasons:

    -Control of my pension

    -While my pension T&Cs are good, they are gradually being eroded at every pay negotiation. To be honest I cannot see me getting the pension I am currently forecast to receive due to this ongoing erosion. There has already been a cap on increase in pensionable pay in effect for a few years, and I can only see actual pay and pensionable pay continue to diverge in the future.

    -The CETV I have received is large enough to permit me to cease contributing if I so wish.

    -For coming out of the DB scheme, the company will give me a 25% uplift in pay in lieu of pension contributions.

    -And perhaps the main reason; cutting the tie between my work life and my financial situation in retirement. Previously, whenever I have thought about part-time working or early retirement, my immediate thought was always 'ah, but that will mean xyz for my pension'. This is the case no longer, and I find myself thinking and theorising a lot on what I might want to do in my mid-50s, if not earlier, instead of my current job.

    Now, I really do love my job! I work in a highly technical operational environment, that many outwith see as stressful but to me it's a highly pressured but very rewarding and, yes, fun environment. I not only work at the 'coal face', but I spend most of my time in an office where we develop the procedures and equipment used by the operational staff. Professionally I've advanced as far as I feel the need or desire, the next step would be a pure people-management role with no technical/operational work. Don't want that.

    I seem to have carved a niche for myself within the organisation, and also within the UK as a whole, in some areas of my work, which allows me quite a bit of flexibility in terms of working patterns (I can work the odd weekend and have days off during the week, I can work from home at least once a week, when I'm at work the hours are pretty flexible provided I can complete the work (which I generally set myself!))

    I represent my both my own organisation at UK/European/World level, as well as the UK as a whole at others. I have contacts across the world (so consultancy work may be an option at some point in a 'wind down/semi-retirement).

    Well, that was a roundabout way of confirming that I love my job, but I want the ability to stop working in my early 50s, to give me the option.

    I'm currently working with my IFA but any other thoughts/experiences would be welcomed.

    If you had the opportunity to stop contributing to your pension/SIPP as it was a decent enough sum already, would you concentrate on developing wealth you could access in advance of that? I potentially have around £4k per month to devote to this.

    Oh, nearly forgot! I'm into the clawback of personal allowance zone on income tax, married (wife age 31, same organisation, but staying in the DB scheme). No children, and we are not planning to have them. 150k on the mortgage, no plans to move, but considering loft conversion and other home improvements. I have around £20k savings at the moment, up until very recently I was paying for parents' mortgage until they had an inheritance and could clear it.
    • atush
    • By atush 9th Jul 17, 9:29 PM
    • 16,236 Posts
    • 9,909 Thanks
    atush
    My first post on MSE forums.
    You are very much welcome

    I have just taken the plunge on coming out of the company DB pension scheme and transferring my CETV into a SIPP.

    I did this for a few reasons:

    -Control of my pension

    OK, what are you reasons to think you can do better investing than guaranteed DB pension?

    While my pension T&Cs are good, they are gradually being eroded at every pay negotiation. To be honest I cannot see me getting the pension I am currently forecast to receive due to this ongoing erosion.
    unlikely IMHO

    -The CETV I have received is large enough to permit me to cease contributing if I so wish.
    Which would be related to a lot of things we dont know like your Number, so figures are appreciated- esp if you want intelligent discussion of your assumptions

    And perhaps the main reason; cutting the tie between my work life and my financial situation in retirement. Previously, whenever I have thought about part-time working or early retirement, my immediate thought was always 'ah, but that will mean xyz for my pension'. This is the case no longer, and I find myself thinking and theorising a lot on what I might want to do in my mid-50s, if not earlier, instead of my current job.
    I understand why you feel this way, but this is an emotional response to investing and should be discouraged. AS emotional bias isnt logical

    For coming out of the DB scheme, the company will give me a 25% uplift in pay in lieu of pension contributions.
    Why do you think they are doing this? Out of the goodness of their heart? Or to persuade you to do something that is against your interest by appealing to your sense of greed?

    I have commented on quite a lot of your excellent post and there is more i should do, but I have to get on with something else lol. But I will say:

    I seem to have carved a niche for myself within the organisation, and also within the UK as a whole, in some areas of my work, which allows me quite a bit of flexibility in terms of working patterns (I can work the odd weekend and have days off during the week, I can work from home at least once a week, when I'm at work the hours are pretty flexible provided I can complete the work (which I generally set myself!))
    This sounds like you are very valued where you are, and are secure in your employment.

    Not a reason to not look elsewhere (after all you are very good

    But it is a reason to look at all the facts, incl a good DB scheme is worth 30% of your current salary.
    • Gonzo230
    • By Gonzo230 9th Jul 17, 10:21 PM
    • 2 Posts
    • 9 Thanks
    Gonzo230
    Hi atush,

    Thank you for the welcome.

    OK, what are you reasons to think you can do better investing than guaranteed DB pension?
    It's not necessarily that I think I can do better, it's the flexibility to weight the draw down to the earlier years of retirement, and the fact that on a DB scheme, apart from the spouse pension upon my death, that's it. I value both of those highly.

    “ While my pension T&Cs are good, they are gradually being eroded at every pay negotiation. To be honest I cannot see me getting the pension I am currently forecast to receive due to this ongoing erosion.

    unlikely IMHO
    I beg to differ sadly. The DB scheme was closed to new joiners 8 years ago, since then a DC pension has been in operation. In the last pay round there was already an attempt to provide diferent pay awards depending upon which pension scheme an emplyee was in. Sadly, many of the newer employees in the DC scheme see those who are on the DB scheme as 'shafting' the new joiners when the ballot went through to agree to the DB scheme's closure to new joiners. There is a feeling that there will be considerable pressure brought by the company as soon as the DC participants outnumber the DB participants.

    I can't go into too much detail here, but in some areas of my organisation's business, our customers have a direct say in the charging structure and what gets covered in terms of costs. Pensions are their number one concern when it comes to our costs. My company has already set up a 'low cost' operation, with very basic pension provisions. This offshoot is already winning new contracts, whereas the parent company is losing contracts due to cost.

    To maintain the DB scheme, the employer contribution is something like 40% of salary and likely to increase soon. There will come a point when something will give.

    Hopefully this articulates why there's also a defensive move in here for me.

    Which would be related to a lot of things we dont know like your Number, so figures are appreciated- esp if you want intelligent discussion of your assumptions
    Ha! Yes, that would have helped I'd imagine! CETV is £1.4m

    I understand why you feel this way, but this is an emotional response to investing and should be discouraged. AS emotional bias isnt logical
    I expressed it poorly. I hadn't really thought about it until I had actually gone through the process. Having done so now, I find myself energised by the possibilities. Financially I could easily go part time tomorrow, to give me more time to enjoy my hobbies and perhaps volunteer (National Coastwatch Institution is something that attracts me, and I've been toying with the idea of trying to become an accredited battlefield guide too). This door was closed to me up until now, in fact I hadn't really known it was a door at all, because of the perceived impact upon my DB pension of going part time.
    • seekstris
    • By seekstris 10th Jul 17, 2:01 PM
    • 19 Posts
    • 46 Thanks
    seekstris
    This is a very interesting thread indeed, having just completed my pension planning.

    I am at the tender of age of 28 but am aware how important it is to start early, and so far have been enrolled in my company pension contributing between 2 and 4% myself which has either been doubled or more by my employer.

    I also although started investing as a bit of a backup option. This is just in index funds at the moment. This is currently small as I have had to spend money on the house instead but am planning on ramping that up.

    So being an Engineer I did the typical thing and created a spreadsheet (yay!) to look at a variety of scenarios, but essentially the assumptions are similar to the public available spreadsheet, but just broken down year to year so I can vary input etc. I have a few questions I would love your opinion on (as I dont think there is a proper answer)

    When you guys are creating your plans how long are you assuming you will live to? I know that this is a bit funny but what do we plan for? I have put to 100, but is that wise?

    From what I see expenses are key but I suppose I am still figuring that part out. Is it reasonable to assume 2/3 of my current salary (so approx 30k) as we aim to have our mortgage fully paid off by then?

    What sort of growth should one predict (obviously on the poorer side of this is better to be safe)? I have done some "clever" (possibly moronic) stats and have come up with just under 4% growth as the most probable (after costs and inflation).

    Finally what % of salary do you think is sensible to put away? I understand this is a "how long is a piece of string?" question but his one has me a little confused as my alternative would be to invest myself rather than in the company pension. I basically have 15% contribution requirement to get to where I want but that seems a lot...

    Thanks for any help!
    • Triumph13
    • By Triumph13 10th Jul 17, 2:18 PM
    • 1,028 Posts
    • 1,221 Thanks
    Triumph13
    When you guys are creating your plans how long are you assuming you will live to? I know that this is a bit funny but what do we plan for? I have put to 100, but is that wise?

    From what I see expenses are key but I suppose I am still figuring that part out. Is it reasonable to assume 2/3 of my current salary (so approx 30k) as we aim to have our mortgage fully paid off by then?

    What sort of growth should one predict (obviously on the poorer side of this is better to be safe)? I have done some "clever" (possibly moronic) stats and have come up with just under 4% growth as the most probable (after costs and inflation).

    Finally what % of salary do you think is sensible to put away? I understand this is a "how long is a piece of string?" question but his one has me a little confused as my alternative would be to invest myself rather than in the company pension. I basically have 15% contribution requirement to get to where I want but that seems a lot...
    Originally posted by seekstris
    Thinking about what percentage of salary you should have as pension / contribute to your pension is getting the whole thing backwards. The real question is how much money do you need to live an efficient, but contented life? Once you have that 'number', everything else just becomes a function of it. It is the answer to how much you need in retirement and earnings less your number less 'temporary' costs such as commuting expenses and mortgage payments is the amount you have available to invest for the future. Stick that into your spreadsheet and crank the handle and you discover when you can afford to retire.
    • Spreadsheetman
    • By Spreadsheetman 10th Jul 17, 2:21 PM
    • 44 Posts
    • 33 Thanks
    Spreadsheetman
    This is a very interesting thread indeed, having just completed my pension planning.
    .....
    Finally what % of salary do you think is sensible to put away? I understand this is a "how long is a piece of string?" question but his one has me a little confused as my alternative would be to invest myself rather than in the company pension. I basically have 15% contribution requirement to get to where I want but that seems a lot...

    Thanks for any help!
    Originally posted by seekstris
    You are probably not far off at 15-20% assuming you don't retire far below state pension age. There are lots of variables though and you might want to push that higher to give yourself more options as careers can get very rocky / insecure over 50.
    • seekstris
    • By seekstris 10th Jul 17, 2:40 PM
    • 19 Posts
    • 46 Thanks
    seekstris
    Thinking about what percentage of salary you should have as pension / contribute to your pension is getting the whole thing backwards. The real question is how much money do you need to live an efficient, but contented life? Once you have that 'number', everything else just becomes a function of it. It is the answer to how much you need in retirement and earnings less your number less 'temporary' costs such as commuting expenses and mortgage payments is the amount you have available to invest for the future. Stick that into your spreadsheet and crank the handle and you discover when you can afford to retire.
    Originally posted by Triumph13
    Hi Triumph13,

    Thanks - It is something I am in the process of doing, but as I mentioned for now I have used 30k and part of my question thinking that being higher is much better? At the moment my expenses are around £18k per year but that obviously includes mortgage repayments, commuting and I do spend a lot on sports.

    I guess that highlights an issue already, although in my head I was thinking would travel a lot (as thats the aim) although whether it would be to that extent I dont know.

    You are probably not far off at 15-20% assuming you don't retire far below state pension age. There are lots of variables though and you might want to push that higher to give yourself more options as careers can get very rocky / insecure over 50.
    by Spreadsheetman
    Yes, and then the idea would be that the extra investment on top of that will bring the age forward.
    • MallyGirl
    • By MallyGirl 10th Jul 17, 2:42 PM
    • 1,892 Posts
    • 6,315 Thanks
    MallyGirl

    Finally what % of salary do you think is sensible to put away? I understand this is a "how long is a piece of string?" question but his one has me a little confused as my alternative would be to invest myself rather than in the company pension. I basically have 15% contribution requirement to get to where I want but that seems a lot...

    Thanks for any help!
    Originally posted by seekstris
    Better 15% now than a lot more later. As a bare minimum put in as much as you need to in order to get the maximum contribution from your employer e.g. I have to put in 5% to get the max 10% contrib from mine.
    I focused on mortgage payoff for a while and as a result of just doing the above (5% me, 10% them) I have recently realised that this is not going to make me my 'number'. As I am 50 I have had to add another 20% in as sal sac AVCs to try and make up for taking my eye off the ball when I was younger. So much of it is about 'time in the market'.
    • beaker141
    • By beaker141 10th Jul 17, 3:44 PM
    • 450 Posts
    • 182 Thanks
    beaker141
    When you guys are creating your plans how long are you assuming you will live to? I know that this is a bit funny but what do we plan for? I have put to 100, but is that wise?
    Originally posted by seekstris
    I have modelled mine out to living to age 100, but also checked out the average life expectancy given I'm 43 now, which gave a life expectancy of 82.

    So my pot has to cover until at least 82, ideally it should cover until 100, but at present it runs out at age 90 !
    • ex-pat scot
    • By ex-pat scot 10th Jul 17, 4:32 PM
    • 205 Posts
    • 224 Thanks
    ex-pat scot
    I have modelled mine out to living to age 100, but also checked out the average life expectancy given I'm 43 now, which gave a life expectancy of 82.

    So my pot has to cover until at least 82, ideally it should cover until 100, but at present it runs out at age 90 !
    Originally posted by beaker141
    There are plenty of resources that can guide to a good estimate for your longevity. Some are based on age alone; others add lifestyle factors to refine the score somewhat.

    Oh and you might want to check the calc based on your initial one above, which looks rather low.
    I'm 48 and the guides generally place me between 86 and 90.
    For you as 43 then I'd expect yours to be higher again than me (slightly)
    http://visual.ons.gov.uk/how-long-will-my-pension-need-to-last/


    Beware that you don't want to plan for the 50th percentile (ie what does the calculator tell me is the best estimate) - you will want to plan for your funds to last a while longer.
    Frankly, if you run the numbers through something clever like cFireSim, then you'll see that the %success figures won't change / deteriorate much if you stretch out the duration a few years longer (ie probability of pot success won't drop much for a 30 vs 35 year retirement).
    • atush
    • By atush 10th Jul 17, 6:30 PM
    • 16,236 Posts
    • 9,909 Thanks
    atush
    This is a very interesting thread indeed, having just completed my pension planning.

    I am at the tender of age of 28 but am aware how important it is to start early, and so far have been enrolled in my company pension contributing between 2 and 4% myself which has either been doubled or more by my employer.
    Well you havent completed your pension planning, you keep updating and changing your plans as life goes on

    If you put in 3% (halfway between your figures), and the double and a bit, I make that 10% in total (but exact % from you w ould have been helpful here). At 28, if this is your first pension, then you should put in 14% in total as a rule of thumb. But if you started at these percentages when you were 20, they may be OK.

    !5% is probably reasonable, but dont forget the rest of your life- you need emergency cash of several months outgoings, and can use your S&S isa allowance too.
    • justme111
    • By justme111 10th Jul 17, 11:11 PM
    • 2,788 Posts
    • 2,669 Thanks
    justme111
    What if one lives on 50% of one's income now and that including work expenses and mortgage? The rule of half ones age would not apply and would lead in the best of cases to a big review of one's plans and in the worst to many years of unnecessary and damaging frugality and years wasted in a not enjoyable job
  • jamesd
    If living on fifty percent then that fifty percent would be a better starting point for whole income. The usual rules of thumb don't do very well for people highly committed to early retirement.

    For a 28 year old a hundred to a hundred and ten is likely to be a reasonable thought for planning horizon at the moment but life expectancy trends need to be monitored. It doesn't make a lot of difference to the safe withdrawal rate, though. It's also quite unlikely that both people in a couple will live to a sensible final planning age, with that perhaps being a one in twenty event, depending on age chosen. That implies that while provision is needed it would be a misallocation of resources to allocate the same amount of money for it as for younger ages when probability of being alive is still high. If using a tool like cfiresim you can add fake income at various ages to simulate a deliberate cut in income target.

    Compound growth is the great friend of those who start early. Don't sacrifice unduly but the more you can put in early, the easier it is overall and the better your options will be for early retirement.

    While a higher retirement income can be good, there's a significant trade off between income level and age of retirement. You need enough and ideally some more but being retired while relatively young and healthy is very good.

    The historic average return for the main UK stock market is about five percent plus inflation before fees. Four percent or so is a reasonable value. Small cap stocks might do one percent or so better and use of them is a good long term move. They do well near to the start of an economic cycle - say 2009 on - and more badly than large caps at the end, which we're probably fairly close to now.

    I suggest picking a desired income level and early retirement age on the ambitious side and using flexibility in those things to adjust based on how things go. If you make a really determined first five to ten years the effect of compounding makes it far easier for the rest.

    Investing instead of making mortgage overpayments can really help a lot. The longer you make the mortgage term, the better, because it maximises your compounded gain on the difference between mortgage cost and investment returns. Also as part of that it helps inflation do its job of reducing the real value of the debt, which stays the same instead of increasing with inflation. One major exception to this is if the mortgage loan to value is above 75% because the interest saving on the whole mortgage balance of getting below that can be substantial.

    Also learn about VCTs, a form of smaller company investing with tax benefits that can greatly cut your effective income tax rate. Thirty percent initial relief capped at tax paid during the year of purchase that has to be repaid if you sell within five years. At 28 you can recycle the money many times to repeatedly get that 30% on the same money, or a gradually increasing amount. Way better than the once only pension relief, though you do need to keep a balance of investments.
    Last edited by jamesd; 11-07-2017 at 12:45 PM.
    • Marine_life
    • By Marine_life 11th Jul 17, 9:25 PM
    • 801 Posts
    • 1,411 Thanks
    Marine_life
    A new travel post in the blog!

    http://earlyretirefree.com/dubrovnik-july-2017/
    Something witty goes here
    • The_Doc
    • By The_Doc 12th Jul 17, 11:08 AM
    • 19 Posts
    • 17 Thanks
    The_Doc
    @Gonzo230:
    Having a CETV of £1.4m at age 38 means a significant LTA charge when you come to crystallise this, which you may have got away with if you had stayed in the DB scheme. What was the DB scheme expected pension at scheme retirement age and what was that age?
    • atush
    • By atush 12th Jul 17, 11:23 AM
    • 16,236 Posts
    • 9,909 Thanks
    atush
    Originally posted by Marine_life
    I've always wanted to go there, here's to retirement so I can too lol
    • atush
    • By atush 12th Jul 17, 11:49 AM
    • 16,236 Posts
    • 9,909 Thanks
    atush
    Interesting, think i'll try may or june so as to have less in the way of crowds.
    • atush
    • By atush 12th Jul 17, 11:50 AM
    • 16,236 Posts
    • 9,909 Thanks
    atush
    @Gonzo230:
    Having a CETV of £1.4m at age 38 means a significant LTA charge when you come to crystallise this, which you may have got away with if you had stayed in the DB scheme. What was the DB scheme expected pension at scheme retirement age and what was that age?
    Originally posted by The_Doc

    Yes, I w as thinking that, there is going to be a pretty big tax bill therefore reducing this tidy sum.
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