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    • chiefie
    • By chiefie 15th Oct 16, 12:48 PM
    • 200Posts
    • 167Thanks
    chiefie
    Finding that balance
    • #1
    • 15th Oct 16, 12:48 PM
    Finding that balance 15th Oct 16 at 12:48 PM
    I read this forum every week and learn so much from other people's ideas. Some have a fabulous pot most can only dream of and others are just starting out and don't know whether it is worth it as retirement seems a lifetime away.

    What intrigues me is that as most of us that are getting older we have friends and family around us that are poorly or died early. So that means that not knowing when we are going to step off this mortal coil, or even worse (for me at least) need full time care means it's a gamble when we retire and with what.

    It seems for some there is a lot of temptation to stay past 55 even if they probably could afford to go - balancing the desire for moRe money with there being one less year to enjoy retirement.

    Does anyone have the answer (other than 42?)
Page 1
    • tacpot12
    • By tacpot12 15th Oct 16, 12:57 PM
    • 363 Posts
    • 289 Thanks
    tacpot12
    • #2
    • 15th Oct 16, 12:57 PM
    • #2
    • 15th Oct 16, 12:57 PM
    Ultimately it's a personal choice. And having a choice is a rare and valuable thing.
    • kidmugsy
    • By kidmugsy 15th Oct 16, 1:14 PM
    • 8,499 Posts
    • 5,475 Thanks
    kidmugsy
    • #3
    • 15th Oct 16, 1:14 PM
    • #3
    • 15th Oct 16, 1:14 PM
    Many people clearly plan to retire early, spend as much as possible, and then sponge off the taxpayer. Strangely, they rarely phrase their plans quite so bluntly.
    • Linton
    • By Linton 15th Oct 16, 1:24 PM
    • 6,935 Posts
    • 6,525 Thanks
    Linton
    • #4
    • 15th Oct 16, 1:24 PM
    • #4
    • 15th Oct 16, 1:24 PM
    The choice to retire should be a positive one.
    1) Decide what you want to do in retirement and when
    2) Work out how much money you need to do it
    3) Work out how to make the required money and the time it would take
    4) Iterate around 1-3 until you have an acceptable and practical plan and then implement it

    There seems little point in working longer to make extra money if you dont need it and you know you have something better to do with your time. Dont focus on friends and relations who have died early. Unless you know otherwise, better to assume you are pretty average and then add a few more years in case you are one of the 50% to exceed average life expectancy.
    • hugheskevi
    • By hugheskevi 15th Oct 16, 2:50 PM
    • 1,831 Posts
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    hugheskevi
    • #5
    • 15th Oct 16, 2:50 PM
    • #5
    • 15th Oct 16, 2:50 PM
    What intrigues me is that as most of us that are getting older we have friends and family around us that are poorly or died early. So that means that not knowing when we are going to step off this mortal coil, or even worse (for me at least) need full time care means it's a gamble when we retire and with what.
    I prefer to think in terms of uncertainty rather than gamble.

    Early death is of relatively little interest to me as there isn't much I can do to prevent it and I won't care about it if it happens - it is a low probability event that is easy and inexpensive to insure against to ensure impact on others is mitigated. Living longer than expected is a more challenging uncertainty (but a welcome one). That is where Defined Benefit pensions and State Pensions are great and to a much lesser extent, annuities.

    Care needs can be addressed in a variety of ways, but housing liquidation is a very good response, although less helpful if the first person in a couple needs care. However, that is lower probability (males tending to marry younger females and live shorter lives) and often couples look after each other and need to move into a care home only occurs when single. Also, stays in care homes are usually relatively short. So...with decent guaranteed income and a decent capital reserve, it is likely that care costs can be covered without undue difficulty in most scenarios. Personally, I plan to own my house until death, as it will provide convenience as well as protection via things such as equity-release against the worst scenarios, such as the first-to-die partner needing an extended stay in a care-home. That means I don't need to separately provide for some of the more extreme tail-risks.

    It seems for some there is a lot of temptation to stay past 55 even if they probably could afford to go - balancing the desire for moRe money with there being one less year to enjoy retirement.
    Agreed, and it is an odd sort of risk aversion. In almost all cases, a year at age 55 is going to be a healthier, more active year than any year in the future. Trading that year away to have more in the future is locking in the loss of your remaining best year(s). Caution in planning is fine, but a lot of people seem to be recklessly cautious.

    Personally, I think there are a few parallels between retirement planning and investment decisions. When I consider changing my portfolio I generally spend about a month thinking through why my existing assets no longer meet my investment goals, what investment categories would meet my goals and then re-searching the exact investments I want to switch to. It is hard to say exactly when I make final decisions, but the final decision is straightforward when I am completely happy. That is not too dissimilar to the process Linton outlines above about retirement. However, I think a lot of people haven't spent time fully considering the questions Linton poses. If you have been thinking about those questions in detail, modelling, etc, then the final decision should not be difficult to take, but I think it is something that needs thinking and refining for several years to be certain.

    One thing I anticipate is ensuring I am ready to take advantage of windfalls as I get close to being financially independent to retire. There will be a window of a few years where either myself or my partner would accept voluntary redundancy if available, and I hope that will end up determining the exit date, which will take the decision away from me (other than deciding to accept redundancy). That is my main concern at the moment - understanding when that window opens, and when it closes (which will be the point of financial independence).

    If I get to the end of the window, then it is just a matter of working out the best time to leave in the short-term (optimising tax year position, etc, things which may influence the decision by weeks rather than months) and then making it happen. By the time I get there, I will understand everything I might need to know, and the decision to walk away will be routine and will not take much thought.
    • enthusiasticsaver
    • By enthusiasticsaver 15th Oct 16, 6:13 PM
    • 2,543 Posts
    • 4,354 Thanks
    enthusiasticsaver
    • #6
    • 15th Oct 16, 6:13 PM
    • #6
    • 15th Oct 16, 6:13 PM
    We have taken the view that we should retire when we can afford to continue with the same standard of living we enjoy now while working. OH retires this month after 42 years of full time work (4 years apprenticeship included). He is 58. I am retiring the end of next year at 57. The decision about when to go is purely that we are still healthy so wish to enjoy an active retirement (my dad died in a very responsible job at 63 with no retirement so this played a part in our decision). We have saved since the 80s in pensions, savings, property, stocks and shares etc and have brought up two children who are now financially independent. Our pension forecasts show that they cover our outgoings with a significant TFLS as capital alongside our other savings. No debt or mortgage and sufficient property capital to sell at the end for care costs and provide decent inheritance for our children.

    Lots of people have said we are going so early our pensions will be reduced significantly but we have overpaid into them for just that purpose. So long as we have enough to live our life the way we want to why hold out for more?
    Last edited by enthusiasticsaver; 15-10-2016 at 7:32 PM.
    Debt and mortgage free and saving for early retirement
    • bugslet
    • By bugslet 15th Oct 16, 8:31 PM
    • 4,504 Posts
    • 23,436 Thanks
    bugslet
    • #7
    • 15th Oct 16, 8:31 PM
    • #7
    • 15th Oct 16, 8:31 PM
    Turns out I've been following Linton's blue print in a somewhat vague way.

    I've been putting money away since I was 25, though not much in the early years. Work for myself, so it's been a case of forgoing salary to be able to make payments into a pension. Planning to retire a few years from now when I'm a little over 55. Should have a pot of over 300k by then, plus enough in reserves to last for around 10 years without touching the pension.

    A close , in fact my closest friend, died at 56 a few years ago, and when you have no family, it does make you step back and think. I even pondered wrapping the business up and enjoying life without work, but realistically I will be around for a bit over 56!

    As for carrying on and on at work, well I mostly enjoy what I do, but that does have to be balanced on what I may be missing out on and the level of stress I want to continue with. I like to have structure in my life and can see me working in some capacity, I have started to take garden design courses and am part thinking that will form part of what I do.

    I would like to add that I mull things over in a very vague way and then just wake up and do something because it 'feels' right.

    Not sure if any of that helps!
    • OldBeanz
    • By OldBeanz 16th Oct 16, 6:16 AM
    • 540 Posts
    • 379 Thanks
    OldBeanz
    • #8
    • 16th Oct 16, 6:16 AM
    • #8
    • 16th Oct 16, 6:16 AM
    Having just retired I think that this discussion misses the pull of work. While I worked from home, did not define my worth as my job and had grown disaffected with the whole thing, I still found it difficult to retire. In a way retirement was for old people and I was not old; was retiring before SP age "correct". Having retired, being half pushed to go, I am grateful that I was sensible enough to stash away enough for me to do everything I want. It's highly recommended, however, it is not only a financial decision.
    • marlot
    • By marlot 16th Oct 16, 6:53 AM
    • 2,818 Posts
    • 1,948 Thanks
    marlot
    • #9
    • 16th Oct 16, 6:53 AM
    • #9
    • 16th Oct 16, 6:53 AM
    ...Some have a fabulous pot most can only dream of ...there is a lot of temptation to stay past 55 even if they probably could afford to go - balancing the desire for moRe money with there being one less year to enjoy retirement.
    Originally posted by chiefie
    I'm just coming up to 53, and facing exactly this dilemma.

    I'm one of the very fortunate people with some decent final salary pensions. Until my early-30s, I didn't pay that much attention to pensions, but from then on, every bonus would go straight into my pension. I overpaid my mortgage, and cleared it early. I then put the mortgage payment into my pension. At the peak I was putting 68% of my gross salary into my pension.

    I'm now able to have that most wonderful thing - choices. I could stop work tomorrow if I really wanted to. But the financial picture looks better if I work another year or two. Will I be one of those people who always say 'just another year'? Maybe - but at least its through choice.

    Did I get the right balance? I have friends who chose to spend more of their salary on expensive cars, holidays, etc. That's fine - that was their choice. I lived a fairly modest life most of my life [I still take a packed lunch to work], and can choose to enjoy my retirement. I'm the one who will look foolish if I die early!
    • chiefie
    • By chiefie 16th Oct 16, 7:22 AM
    • 200 Posts
    • 167 Thanks
    chiefie
    All very interesting views thank you. For me the balance also includes the impact on health and stress. I find work more and more stressful, not finding the time to exercise enough and I drink far less when on holiday which in itself tells a story. But i do know that after 6 months maximum I will miss the high levels of social interaction and opportunities to solve issues. I won't miss the early morning get ups though ! Darn this dilemma - I can see part time or voluntary on my path.
    • Kynthia
    • By Kynthia 16th Oct 16, 8:25 AM
    • 4,695 Posts
    • 6,712 Thanks
    Kynthia
    I'm no - where near retirement yet so my views are different and less formed. At the moment what is early retirement is probably different for my generation but many may not realise that yet. With SP age being 67/68 with a good chance of being pushed back further, many my age not putting much into a pension or the work schemes (including good public sector DB ones) becoming payable at SP age then I doubt retiring in our 50s is even an option.

    The other issue is having children later. Those of us having children in our late 30s or early 40s will have children still finishing university and not yet on the property ladder as we enter our 60s. If you plan to assist with fees, deposits, weddings, etc then retiring before paying for any of it seems unlikely.

    Despite this we still have the same concerns about life expectancy and seeing family/friends who didn't make it to 60/65. However if retirement before this isn't an option then enjoying life while still working seems to be the solution. So while I'm saving for my retirement and trying to make good financial choices, locking too much money away until I'm 68 doesn't seem the best idea. So some in my work pension, some locked away and growing until 55 (or ten years before SP age if that changes) for things needed then, some in savings accounts and in property equity that will improve quality of life and give options in 5-10 years (better home, holidays and family time), as well as enjoying life now seems like the plan. This way I'm not putting too much emphasis on retirement being the life goal in case it doesn't happen, while putting enough away to have a comfortable retirement if it does happen. As well as having enough money earlier to still have options to work less and enjoy life as I get older will be what I consider success.
    Last edited by Kynthia; 16-10-2016 at 11:26 AM.
    Don't listen to me, I'm no expert!
    • bugslet
    • By bugslet 16th Oct 16, 8:56 AM
    • 4,504 Posts
    • 23,436 Thanks
    bugslet
    All very interesting views thank you. For me the balance also includes the impact on health and stress. I find work more and more stressful, not finding the time to exercise enough and I drink far less when on holiday which in itself tells a story. But i do know that after 6 months maximum I will miss the high levels of social interaction and opportunities to solve issues. I won't miss the early morning get ups though ! Darn this dilemma - I can see part time or voluntary on my path.
    Originally posted by chiefie
    As marlot says, it's about choices.

    If you can retire early, you can then choose to take a part time job in an area that interests you. Or volunteer. Either way you still get that social interaction and time to do go to the gym/hike ten miles.

    As I said, I still plan to work in a different field and less hours, but I can be really choosy.
    Last edited by bugslet; 16-10-2016 at 9:33 AM.
    • robin61
    • By robin61 16th Oct 16, 9:39 AM
    • 489 Posts
    • 371 Thanks
    robin61

    I'm now able to have that most wonderful thing - choices. I could stop work tomorrow if I really wanted to. But the financial picture looks better if I work another year or two. Will I be one of those people who always say 'just another year'? Maybe - but at least its through choice.
    Originally posted by marlot
    I can definitely relate to this. Last year I was finding work very stressful and had pretty much decided that if an early retirement scheme was offered in March 2017 then I was going to grab it.
    However since then there has been a reorganisation and now my job is less stressful. I don't know how long that will last but as long as it does then I will probably just stick with it for another year at least. Unless of course I get an offer I just can't refuse.
    In fact working a bit longer will mean I don't neceserally have to wait for an early retirement scheme to be offered. Although I'd obviously prefer to get this working a bit longer means I will be able to choose my time to go on my own terms if necessary depending on my health and well being.
    I have been offered more responsibilities and it's been suggested that my job will be more secure if I take these on. However I know I will not enjoy this and that it will most likely be very stressful so I have said that I would rather just stick with my current role and if they decide they don't want me then fair enough.
    As you say it is nice to have some choices. If I hadn't been putting extra into my pensions I would have felt under pressure to take the new role.
    Last edited by robin61; 16-10-2016 at 9:47 AM.
    • Triumph13
    • By Triumph13 16th Oct 16, 3:28 PM
    • 714 Posts
    • 656 Thanks
    Triumph13
    The other issue is having children later. Those of us having children in our late 30s or early 40s will have children still finishing university and not yet on the property ladder as we enter our 60s. If you plan to assist with fees, deposits, weddings, etc then retiring before paying for any of it seems unlikely.
    Originally posted by Kynthia
    That's not the only impact of having your kids late. If we didn't have kids, we'd probably retire now - in line with the points made earlier about enjoying your best years rather than having more money but less healthy years to spend it. Our youngest has only just turned 11 though and as the main thing we want to do with our lives is travel, that completely changes the equation. We can't travel for another 8 years anyway until he finishes school, so it makes more sense to keep working for a few more years now, to have the funds to travel more when we are free to travel (and of course to help out the kids). Makes for a very tricky decision on when the call it a day.
    • ex-pat scot
    • By ex-pat scot 16th Oct 16, 5:59 PM
    • 124 Posts
    • 116 Thanks
    ex-pat scot
    There's a natural caution in making sure that you will be OK.
    £20,000 per year sounds fine, but then £21,000 would be a bit more comfortable etc... So you work another year. Repeat.

    Then something comes along to shake you out of your rut.
    It could be an internal opportunity: redundancy perhaps, or a restructure with a new weak manager.
    It could be personal - the sudden loss of a friend or family member, or care responsibilities. (my uncle worked his socks off for early retirement, only to keel over aged 49. That was the siren call for all my uncles and aunts to reassess their own circumstances and most went early retirement soon thereafter).
    It might be the call of the empty nest. My youngest will be 18 and off to university when I turn 56.

    I suspect many hang on for fear that the decision to stop is a one-way door. It will for some, but then again if things turn financially difficult, there's always something to do to earn enough to top up your meagre retirement funds. I am lucky enough that I could go part -time contracting/consulting in my field, and earn enough in a couple of months to cover us for the year. Even if that's not an option, there'd be something low-stress and sociable I could hopefully do, as long as i retained sufficient health and didn't have care responsibilities.

    I would split people into three groups:

    - those with non-pension savings, who #can# stop any time, once they consider they have sufficient.
    - those with savings built up in DC pensions, who can do the same but with a minimum access at 55 (at the moment...)
    - those with DB schemes who cannot access earlier than scheme retirement age, or who cannot transfer (eg govt unfunded schemes). (These people might have AVC schemes alongside, which could be perhaps released ahead of scheme retirement age).

    Depending on your own arrangements (marginal tax rates, company matching schemes etc etc), you may have a mix of the above, or have all your funds in one of three above groups.

    The sensible approach would be a mix of all three if possible, to give max flexibility. Then it's down to your own risk appetite: how much you want, and how flexible you are willing to be in retirement, before you decide to go.
    Last edited by ex-pat scot; 16-10-2016 at 6:06 PM.
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