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  • FIRST POST
    • Marine_life
    • By Marine_life 5th Nov 10, 10:46 AM
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    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 178
    • michaels
    • By michaels 21st Nov 17, 12:07 PM
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    michaels
    Interesting, in my calculations I have also used 3% for inflation, with investments making 2% (but before IFA and Platform fees, though I'd like to see more than that), and 1% annual increases for SP, due @66 and 2 very small DB pensions due @65.

    In my spreadsheets I have used (1) 3.5% drawdown until RIP, and (2) a higher initial drawdown rate for 3 years until my DB and SP kick in to help supplement income, and then cut back on drawdown rate.
    Originally posted by ggmf
    I don't have an inflation assumption per se and instead just work in 'today's money'.

    I assume state pension will stand still in real terms, invested funds will grow by 2% in real terms (after fees), and cash will depreciate by 2% in real terms and that any real assets (basically only the house which might be downsized eventually) will stand still in real terms.

    Of course what this does not address is that when (if!) real incomes rise then a fixed real terms income becomes worth less relative to average earnings.
    Cool heads and compromise
    • gadgetmind
    • By gadgetmind 21st Nov 17, 3:45 PM
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    gadgetmind
    I'm hoping my retirement plans survive tomorrow's budget. We're 99.5% DC pensions (sliver of DB for my wife) and these have been under regular attack for many years. :-(
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • AnotherJoe
    • By AnotherJoe 21st Nov 17, 5:27 PM
    • 7,676 Posts
    • 8,289 Thanks
    AnotherJoe
    If it were me I'd want a bit more in savings/investments then what you've mentioned above. There may just be enough if all goes well, but it could get tight if things go a bit astray.

    My main concern is if there is a prolonged period of time when there is only one of you and there is only one state pension coming in (and being blunt here that is likely to be your wife's). Will there be enough other money available so she can live comfortably for possibly another 10 to 20 years.

    You've not mentioned whether your wife currently works, but if she doesn't then have you thought about both of you taking on some part-time work, or even just you finding some more relaxed part-time or even full-time work. It doesn't have to be the same company, or the same line of work, just something that you might enjoy or at least something that doesn't have the negatives of your present role.
    Originally posted by IanSt
    I agree, if it was me I'd be looking at an alterantive less stressful job for a couple of years, eg until OP is 50.
    • enthusiasticsaver
    • By enthusiasticsaver 21st Nov 17, 9:03 PM
    • 4,852 Posts
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    enthusiasticsaver
    You have a long gap to fund and are very reliant on investment return as your pension is DC but I guess if you are quite frugal it should be just about doable. If you are only 48 on retiring and plan on presumably drawing the cash free lump sum from the DC pot when 55 that is 7 years to fund on £200,000. I would be calculating inflation at 3% and investment growth at 3% which I know is conservative but worst scenario works best for me.
    1 week to go until early retirement. Debt free and mortgage free.

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • Mathes00n
    • By Mathes00n 21st Nov 17, 10:22 PM
    • 7 Posts
    • 12 Thanks
    Mathes00n
    Thanks for the replies everyone:
    - i do think frugality will become something of a hobby in itself but am happy there is room in the budget to flex as we need to.
    - I know they don't have too much meanng but it's good to see the rates others are using. We are all in similar ballparks.
    - i didn't say anything about earning income - leaving that as a buffer. We will be happy to look for seasonal work occasionally. To be honest we are in this position because of the career I have built up and I will have those qualifications to fall back on though that is definitely not Plan A. If the worst happens then I can consider the first few years of retirement as a career break. We may also explore options around a little property income.
    - If my wife is left on her own? Good point and I have wondered about this without going into the calcs. Need to look at that thanks. TBH she is way out of my league and will probably find someone else to look after her after I'm gone
    • Mathes00n
    • By Mathes00n 21st Nov 17, 10:31 PM
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    Mathes00n
    If you are only 48 on retiring and plan on presumably drawing the cash free lump sum from the DC pot when 55 that is 7 years to fund on £200,000.
    Originally posted by enthusiasticsaver
    Can I just check your thinkng on drawng the lump sum at 55? I was assuming I would leave it in there and drawdown income needs as I go to help minimise tax on income above the personal allowance.
    • Teaandscones
    • By Teaandscones 21st Nov 17, 11:18 PM
    • 121 Posts
    • 102 Thanks
    Teaandscones
    I'm hoping my retirement plans survive tomorrow's budget. We're 99.5% DC pensions (sliver of DB for my wife) and these have been under regular attack for many years. :-(
    Originally posted by gadgetmind
    Yes, I can cope with investment risk; it is political risk that worries me more.
    • ex-pat scot
    • By ex-pat scot 22nd Nov 17, 9:01 AM
    • 224 Posts
    • 257 Thanks
    ex-pat scot
    Yes, I can cope with investment risk; it is political risk that worries me more.
    Originally posted by Teaandscones
    Me too.
    The various political tinkering leaves me nervous, as I am rather concentrated on pensions as my savings vehicle.


    My key concerns are:
    - access to pension at 55. This is a biggie. It switched recently from 50, and there has been occasional messages around how 55 is far too early to withdraw from the labour market.


    - restriction to tax relief. I "enjoy" a 62% marginal tax rate, so am equally blessed with that as my relief rate.


    - reduction in LTA. The LTA is broadly my "cutoff" point, ie the level at which I aim to stop work. If this were to come down substantially, then I would struggle for alternative approach.


    - reduction in AA. At present I contribute the max £40,000 pa as I get 62% effective relief. However I am close to the point at which the AA taper starts, and a possible change of job may throw me against this taper. I can quite see the taper being extended downwards


    - reduction in the starting point for 45% band. Not such a biggie (yet), but will still cost.




    Of these, the access age of 55 is the one I worry about.


    Most of the measures above will not actually save tax for the chancellor: it will merely bring its collection forward. After all, pension is simply a mechanism for deferring tax on income until consumption, and the so-called "cost" of pension tax relief is the delay in collection.
    • gadgetmind
    • By gadgetmind 22nd Nov 17, 10:56 AM
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    gadgetmind
    My key concerns are:
    - access to pension at 55. This is a biggie. It switched recently from 50, and there has been occasional messages around how 55 is far too early to withdraw from the labour market.
    Originally posted by ex-pat scot
    This is the last budget before I hit 55 and I'm really scared that I'll get screwed over.

    - restriction to tax relief. I "enjoy" a 62% marginal tax rate, so am equally blessed with that as my relief rate.
    I've been doing that for a few years, but ...

    - reduction in LTA. The LTA is broadly my "cutoff" point, ie the level at which I aim to stop work. If this were to come down substantially, then I would struggle for alternative approach.
    I recently sailed past it due to sterling being hammered by the threat if Brexit.

    - reduction in AA. At present I contribute the max £40,000 pa as I get 62% effective relief. However I am close to the point at which the AA taper starts, and a possible change of job may throw me against this taper. I can quite see the taper being extended downwards
    I (unexpectedly) hit full taper this year and have exceeded AA. So 45% tax on excess, doubt I can get scheme pays, then 25% tax for exceeding AA, and what's left is all mine, subject to income tax!

    Needless to say, retirement is being pretty much forced upon me. My position won't be replaced in the UK, so big loss of tax income for HMRC. Yes, this is what raising taxes and attacking pensions achieves!
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • mgdavid
    • By mgdavid 22nd Nov 17, 11:40 PM
    • 5,281 Posts
    • 4,466 Thanks
    mgdavid
    This is the last budget before I hit 55 and I'm really scared that I'll get screwed over.

    .......
    Originally posted by gadgetmind
    seems you got away with it :-)
    A salary slave no more.....
    • atush
    • By atush 22nd Nov 17, 11:52 PM
    • 16,386 Posts
    • 10,139 Thanks
    atush
    And the LTA will get a small rise
    • haf63
    • By haf63 23rd Nov 17, 8:47 AM
    • 200 Posts
    • 50 Thanks
    haf63
    good result in the budget and hopefully i will be well out of all this by the time we get the next budget.
    • michaels
    • By michaels 23rd Nov 17, 10:25 AM
    • 19,949 Posts
    • 91,500 Thanks
    michaels
    Most of the measures above will not actually save tax for the chancellor: it will merely bring its collection forward. After all, pension is simply a mechanism for deferring tax on income until consumption, and the so-called "cost" of pension tax relief is the delay in collection.
    Originally posted by ex-pat scot
    As a chancellor your time horizon is at most 5 years so bringing forward taxation has only upside...
    Cool heads and compromise
    • gadgetmind
    • By gadgetmind 23rd Nov 17, 11:22 AM
    • 10,657 Posts
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    gadgetmind
    And the LTA will get a small rise
    Originally posted by atush
    Unfortunately I'm likely to have to crystallise most of mine before the April 6th rise as I need to get £400k back into our ISAs by the 5th. Other options are inlaws sell old house (ISAs drawn down to provide bridging loan) or we take out mortgage our property for a short period, but this is expensive. PITA!
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • gadgetmind
    • By gadgetmind 23rd Nov 17, 11:23 AM
    • 10,657 Posts
    • 8,472 Thanks
    gadgetmind
    seems you got away with it :-)
    Originally posted by mgdavid
    Yes, a budget without those saving for their old age getting a kick in the teeth, how unusual! I'm 55 in mid March so it looks like their chances to really screw me over might be dwindling!
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • gadgetmind
    • By gadgetmind 30th Nov 17, 3:13 PM
    • 10,657 Posts
    • 8,472 Thanks
    gadgetmind
    Other options are inlaws sell old house
    Originally posted by gadgetmind
    They've sold it and buyer claims he can complete before xmas! Mind you, this is the 3rd time they've "sold" it ...

    Assuming all goes ahead, then I might be retired by mid-2018.

    Wow.
    I am not a financial adviser and neither do I play one on television. I might occasionally give bad advice but at least it's free.

    Like all religions, the Faith of the Invisible Pink Unicorns is based upon both logic and faith. We have faith that they are pink; we logically know that they are invisible because we can't see them.
    • dunroving
    • By dunroving 30th Nov 17, 3:27 PM
    • 596 Posts
    • 284 Thanks
    dunroving
    Who is aiming for early retirement (or who has retired early already)?
    - I have recently taken voluntary severance/early retirement (in September), at age 60.

    When did you begin planning and what drove the decision?
    - I began planning about 5 years ago while stranded like a beached whale on the sofa during rehab from total knee replacement. The whole experience gave me the opportunity to do the maths, and reevaluate what is important. What drove the decision .... (a) the realisation that I could, having done the maths, and (b) a whole host of reflections on life expectancy among males in my family, the fact I have worked like a dog for the past 42 years, and other personal reflections on the meaning of life. I didn't work in pensionable employment until age 40 and just assumed I'd be working until I dropped.

    What is the strategy for getting there?
    - prior to the decision, I was already saving everything I could into ISA, SIPP, and AVCs. My strategy changed 4-5 years ago in a more strategic placement of my investments. I pulled over money from my US defined contribution scheme to subsidize living expenses, and for two years ploughed everything into pensions up to my total salary amount, using carryover allowances.

    How much of a relative decline in income are you prepared to take / did you take?
    - in terms of gross income, huge, but (a) I live very modestly and (b) I was paying most of my earnings into savings and pension anyway so relatively speaking it's a zero sum game. I'll use "savings" to tide me over to state pension age, and at that time I will have the equivalent of about £20k income, no mortgage, and a healthy cash buffer for emergencies. Quality of life is more important to me than quantity of income.

    What are your main concerns?
    - That I will run out of life before I run out of money.

    For those already in early retirement - how is it progressing? What have been the good and bad surprises (financial and otherwise)?
    - so far, so good. Financially, I'm still waiting for some of the financial dust to settle and will need to make further strategic decisions about US investments, when to take my (small) US social security pension, etc. and come up with a final spreadsheet with planned timelines, etc. After 2 months of doing not much I must admit I am already a bit bored but I'm out walking the hills every day and do intend to come up with something more purposeful to do with my life, but I'm in no rush to take on commitments at the moment!
    • hugheskevi
    • By hugheskevi 1st Dec 17, 11:18 PM
    • 1,925 Posts
    • 2,335 Thanks
    hugheskevi
    Time for a mid-year update...2017/18 has been interesting, starting off with a 3 month trip across Africa. The trip route is at this link for anyone interested. Having previously spent the best part of a year traveling across Africa there weren't many surprises, although there was some great gorilla viewing, and climbing Mount Kilimanjaro was very good too.

    The main thing which surprised me was the impact on fitness levels. After 13 weeks of no real exercise the effects were significant when I got back, losing a staggering 6 minutes off my usual 5K running time. That in turn led to overdoing exercise to recover resulting in an achilles injury I'm recovering from now. My wife and I may only be 40 and I will recover in full and hopefully manage to get under 20 minutes for 5K soon, but it has been a warning about what lies further down the road Previously my worst injury only took about 4 weeks to recover from whereas this will be about 3 months in total. I think a lot of people neglect fitness at this stage of life, and although I cannot temporarily run, I can fortunately go 100% at cycling, swimming and aqua-jogging so am in good shape, making sure I get in around 10 hours of decent fitness training a week ideally.

    Financially, it now feels a bit like the beginning of the end. I have reached the point where I have sufficient pension, and could repay all debts (including mortgage) if I wished. So that just leaves the period between retirement and age 55 to fund (58 if minimum pension age is increased to SPA minus 10 years and planned SPA changes for 2037-39 are enacted). I don't have a firm exit date planned, but I think it will be between 2021 and 2023, by which time I will be getting on for 45 years of age. I very much doubt I'll still be working at the age of 46 (lots of plans for then, including a long trip around the world, not sure how long, probably 1-3 years).

    Current accrued pensions are:



    Household expenditure over the last few years has been a bit under £28,000 p/a (excluding saving, debt repayment, taxes and mortgage, ie, that is what we spend on consumption and would expect to spend in retirement). In hindsight, we are over-pensioned now (or I suppose you could say we are under-consuming from an optimisation perspective), but I was keen to put a lot away in fear of Annual Allowance and tax relief restrictions. It does mean we will be very likely to commence our pensions with protected minimum pension ages of 50 at age 50, particularly as our DB pensions are increasing each year by over £4,000 p/a of new accrual. But that is the type of pension problem it isn't too bad to have.

    I have very high hopes for a consultancy business I plan to start in the new year, although I'll remain in full-time employment. It is the perfect missing piece to our financial affairs, as I can retain assets within the business and then decumulate them after we leave employment but before pensions commence which would be extremely tax efficient. It is by no means essential to my plans, but would be a very welcome boost if it is successful, with most revenues likely to come in mid to late 2018.

    There might also be some games to play with re-mortgaging house, letting it out when traveling and porting mortgage to new property upon return and paying mortgage from pension to effectively bring forward pension income. That is a bit complicated by wanting to travel overseas for several years, as I doubt I could be sure of being able to port mortgage if I had left employment. But it may well be possible to take unpaid leave (with no intent of return) which could make things easier. Something to consider closer to the time.

    I think plans are all on track. I can't see any major risks, and there is the possibility of a few positive financial shocks (redundancy as we both have excellent cover, inheritance or new business doing well).
    • westv
    • By westv 2nd Dec 17, 5:37 PM
    • 4,373 Posts
    • 1,994 Thanks
    westv
    Something I can't quite decide on when sticking numbers on spreadsheets is would I have a cash pot purely for emergencies/big spend items or would I have a cash pot which both contributes to income(the usual 4% or whatever) and is available for the former?
    • melanzana
    • By melanzana 2nd Dec 17, 5:59 PM
    • 2,443 Posts
    • 6,813 Thanks
    melanzana
    [QUOTE=dunroving;73489879Who is aiming for early retirement (or who has retired early already)?
    - I have recently taken voluntary severance/early retirement (in September), at age 60.

    When did you begin planning and what drove the decision?]



    Hi there.

    I took early retirement mid fifties. There was a package available and all good.

    But I knew there would be one of those incentives for a few years. So I paid down debt, cleared the mortgage, did all the house maintenance while on full salary, and when I departed I had no outgoings apart from the usual bills etc.

    However, what I did was to cut down my hours at work for a year before going, my income on reduced hours was nearly the same as my pension would be. Took an actuarially reduced pension just to mention.

    I'm four years in now and it is all great. Life is short, go for it. But you do have to plan a bit.

    My reasons for going are many. The main one is I had realised that working and the stress of the politics of it all for no real return were ridiculous.

    I have never looked back. Honestly.

    Best of luck to you. It will be fine.

    No more Sunday night angst is one of the major advantages!
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