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  • FIRST POST
    • CeePeeBee
    • By CeePeeBee 12th Oct 17, 10:05 AM
    • 60Posts
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    CeePeeBee
    Early Retirement - Starting A Little Late - Help and Advice please
    • #1
    • 12th Oct 17, 10:05 AM
    Early Retirement - Starting A Little Late - Help and Advice please 12th Oct 17 at 10:05 AM
    Hi all,

    I'm hoping some of the knowledgeable people on this forum might be able to assist.

    A little background. I find life hard. That's not a statement to derive pity from the masses - I'm just stating it how it is. The everyday grind is difficult for me (whereas crisis situations are, strangely, more easily dealt with).

    My job involves quite a bit of travel and for me, as a person, a level of stress I simply don't wish to continue any longer than necessary. Whilst many of my peers and colleagues see work as part of their life, a part that is large and varied and positive, I find work a hindrance to a much more simple and peaceful existence. Suffice to say I'm fully aware that the social structure I'm in dictates I need to continue, but there's nothing stopping me having a plan is there

    So, here's a low down. I'm 37, and have worked since 21, and haven't ever really added money to my pension pot at either organisation I've worked for. I am currently looking to opt in to salary sacrifice at my current employer and hope that starts to bulk up my pension.

    Age: 37
    Status: Married with no dependants - Wife is part time (now) working 3 days earning c. £23,000 pa
    Mortgage: c. £40,000 left (constantly overpaying here with around a 3 year due date to completion)
    Annual salary: £42,000 pa
    Current old pension pot: £11,000

    I am awaiting the new details for my current pension to understand where that pot is and will then think about consolidating and perhaps changing a percentage of the pot to a more risky investment fund to see if I can bolster it as I know I'm playing catchup.

    Now, in my head, there is ZERO way I'll be working into my 60's - I feel (and have done for the last decade) that work will kill me way before that if things continue as they are. Therefore the magic number in my head is around 50.

    Now I'm not looking for any guarantees here - I'm not naive enough to think that I can put everything down on paper and then just watch it play out identically. There will be twists and turns, I might end up working part time instead of full time, etc, but I need to actually HAVE a plan.....this is where I'm hoping somebody might be able to point me in some quick win directions so I can get started.

    I need to lessen my stress for my own well being and I'd be quite happy slowing the pace of my life down somewhat, so any advice is greatly appreciated.
Page 1
    • bigadaj
    • By bigadaj 12th Oct 17, 10:53 AM
    • 10,286 Posts
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    bigadaj
    • #2
    • 12th Oct 17, 10:53 AM
    • #2
    • 12th Oct 17, 10:53 AM
    Best solution is probably find another job that you actually don't mind.

    You don't state any other savings but your pension provision is very minimal, state pension age is obviously increasing meaning that you won't be able to draw that until your late sixties.

    Even if you pull your finger out now you will be doing incredibly well to retire at 60 with anything like a reasonable lifestyle.

    Paying down the mortgage is probably costing you money rather than paying into a pension, as pension growth with tax relief is likely to be higher than your mortgage rate.

    To give an idea then assuming you could get by on ten grand a year you're looking at building a pot of well in excess of a quarter of a million in the next thirteen years, so need to be contributing in excess of ten grand a year and hoping for a lot of growth.
    • Triumph13
    • By Triumph13 12th Oct 17, 10:58 AM
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    Triumph13
    • #3
    • 12th Oct 17, 10:58 AM
    • #3
    • 12th Oct 17, 10:58 AM
    The key question is how much do you need to live on? That drives both how much you can save whilst working and how much you need to save before you can quit.
    Take a good long look at what you are spending now and agree with your OH if there is anything that can be cut to work out how little you need to have a happy and fulfilled life. Invest everything left over in the most tax efficient way possible consistent with being able to get enough of it out to live on before pension access age - which is likely to be closer to 60 than 55 by the time you get there.
    And check out Mr Money Mustache to get yourself enthused:
    http://www.mrmoneymustache.com/2012/01/13/the-shockingly-simple-math-behind-early-retirement/
    • Triumph13
    • By Triumph13 12th Oct 17, 11:08 AM
    • 1,070 Posts
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    Triumph13
    • #4
    • 12th Oct 17, 11:08 AM
    • #4
    • 12th Oct 17, 11:08 AM
    Best solution is probably find another job that you actually don't mind.

    You don't state any other savings but your pension provision is very minimal, state pension age is obviously increasing meaning that you won't be able to draw that until your late sixties.

    Even if you pull your finger out now you will be doing incredibly well to retire at 60 with anything like a reasonable lifestyle.

    Paying down the mortgage is probably costing you money rather than paying into a pension, as pension growth with tax relief is likely to be higher than your mortgage rate.

    To give an idea then assuming you could get by on ten grand a year you're looking at building a pot of well in excess of a quarter of a million in the next thirteen years, so need to be contributing in excess of ten grand a year and hoping for a lot of growth.
    Originally posted by bigadaj
    That all seems a bit negative to me. OP and wife are pulling down nearly £50k pa post tax. If they are happy living on half that and saving the rest, then retirement at 50 is not that far beyond the bounds of possibility.
    • xylophone
    • By xylophone 12th Oct 17, 11:18 AM
    • 23,074 Posts
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    xylophone
    • #5
    • 12th Oct 17, 11:18 AM
    • #5
    • 12th Oct 17, 11:18 AM
    No dependants - is there any reason why your wife should not work full time?

    Have you only just changed jobs? If so, why have you chosen a job which seems designed to make your life a burden?

    Have you obtained a state pension statement?

    https://www.gov.uk/check-state-pension

    What is on offer via salary sacrifice?

    And you won't be able to draw on your private pension at age 50.
    • CeePeeBee
    • By CeePeeBee 12th Oct 17, 11:20 AM
    • 60 Posts
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    CeePeeBee
    • #6
    • 12th Oct 17, 11:20 AM
    • #6
    • 12th Oct 17, 11:20 AM
    Hi all,

    Thanks again for the replies. You're right I didn't give much info in the original post.

    I put £100 a month away in savings but frankly that goes at Christmas and I start again in Jan.

    My actual short term aim is to go part time as soon as we have paid off the mortgage - I want to live life and enjoy time with my Wife now - who knows what the future holds. However, I'm also happy to live on less than half of my income as I get older.

    My Wife is a lot older than I so the chance are (being realistic) I'll be living on my own from about the age of 65 anyway. I want to use the time we have together now to actually enjoy ourselves (that's not necessarily buying everything and splurging...but spending time together) so as long as I can cover modest outgoings I'll be happy.

    It's a weird set of circumstances I grant you...thanks to @triumph13 for being a little more positive
    • Triumph13
    • By Triumph13 12th Oct 17, 11:39 AM
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    Triumph13
    • #7
    • 12th Oct 17, 11:39 AM
    • #7
    • 12th Oct 17, 11:39 AM
    My actual short term aim is to go part time as soon as we have paid off the mortgage - I want to live life and enjoy time with my Wife now - who knows what the future holds.
    Originally posted by CeePeeBee
    That does rather conflict with the aim of giving up entirely at 50!
    My Wife is a lot older than I
    Now that IS a useful fact. It means your wife will be hitting the point where she can access pension funds much earlier than you and therefore opens up the chance to bung most of your savings away in her pension without having to worry about what you live on until you can access them.
    If you do want to target early retirement then I would seriously consider trying to live on your income alone and putting 100% of her pre tax income into a private pension. She would get tax relief on all of it, even though she'd only paid tax on half.
    The best option of all though is probably to try and find a job you might actually enjoy. It's a long way to go until you reach 50 and it will seem a lot longer if you spend it in a job that does your head in.
    • Mnd
    • By Mnd 12th Oct 17, 11:42 AM
    • 150 Posts
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    Mnd
    • #8
    • 12th Oct 17, 11:42 AM
    • #8
    • 12th Oct 17, 11:42 AM
    If she's earning 23k for 3 days why would she want to work full time. Between you you could aim to save 20k a year into your pensions as long as you are happy living on the difference
    • xylophone
    • By xylophone 12th Oct 17, 12:02 PM
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    xylophone
    • #9
    • 12th Oct 17, 12:02 PM
    • #9
    • 12th Oct 17, 12:02 PM
    How old is your wife? What pension provision does she have?

    Has she obtained a state pension statement?

    If she likes her job and would be willing to work full time, could you then work part time?

    Or would this permit you to work full time at a job you would enjoy/find less stressful/both?
    • atush
    • By atush 12th Oct 17, 12:15 PM
    • 16,294 Posts
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    atush
    First of all, stop overpaying your mtg.

    Second, as wife is older, she can put 23K into a pension each year, and access at age 55. The TFLS could pay off your mtg then?

    So bung enough into her pension to fill her AA, and put more into yours if you want to give up working early.

    You arent going to do it by overpaying a mtg.
    • CeePeeBee
    • By CeePeeBee 12th Oct 17, 12:18 PM
    • 60 Posts
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    CeePeeBee
    Interesting - my assumption was that without a mortgage within 3 yrs or so I'd have more disposable income with which to invest eleswhere.
    • Terron
    • By Terron 12th Oct 17, 1:24 PM
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    Terron
    Paying off your mortgage isn't bad. but isn't the best strategy.

    Paying £1000 off a 3% mortgage saves you £30 per year
    Paying £1000 into a pension gets you £250 in tax relief plus it is then likely to grow at 5% a year or more.

    That only applies for income taxed at the basic rate, but half your wife's income would get that tax relief. Even without it it is still probably better to save into a pension.
    • Triumph13
    • By Triumph13 12th Oct 17, 2:25 PM
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    Triumph13
    That only applies for income taxed at the basic rate, but all your wife's income would get that tax relief. Even without it it is still probably better to save into a pension.
    Originally posted by Terron
    Fixed that for you. As long as it's contributed to a private pension (rather than a work's pension arrangement where you contribute from pre tax income) she can put in 80% of her entire taxable earnings and have HMRC add the other 20%. Strange, but true.
    • lisyloo
    • By lisyloo 12th Oct 17, 2:41 PM
    • 21,166 Posts
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    lisyloo
    Fixed that for you. As long as it's contributed to a private pension (rather than a work's pension arrangement where you contribute from pre tax income) she can put in 80% of her entire taxable earnings and have HMRC add the other 20%. Strange, but true.
    Originally posted by Triumph13
    Might also be worth checking if there is salary sacrifice at her work.
    Mine saves my own 12% national insurance and also my employer passes on their 13.8% employers NI as well.

    Your employer does have to pay you minimum wage by law though so would only apply to around £10K of her wages.
    • Terron
    • By Terron 12th Oct 17, 2:46 PM
    • 79 Posts
    • 85 Thanks
    Terron
    Fixed that for you. As long as it's contributed to a private pension (rather than a work's pension arrangement where you contribute from pre tax income) she can put in 80% of her entire taxable earnings and have HMRC add the other 20%. Strange, but true.
    Originally posted by Triumph13
    That's indeed strange, but is it all or only 80%.
    Presumably you could do it part through her employer - to get any matching contributions and part through a private pension.
    • bigadaj
    • By bigadaj 12th Oct 17, 3:01 PM
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    bigadaj
    That's indeed strange, but is it all or only 80%.
    Presumably you could do it part through her employer - to get any matching contributions and part through a private pension.
    Originally posted by Terron
    Contributions to a private pension are always 80% of the desired gross amount as the provider automatically reclaims basic rate tax from Hmrc.

    So given total flexibility then contributing all salary down to minimum wage level or personal allowance, and then contributing the balance to a private pension at 80%.
    • bigadaj
    • By bigadaj 12th Oct 17, 3:03 PM
    • 10,286 Posts
    • 6,601 Thanks
    bigadaj
    Paying off your mortgage isn't bad. but isn't the best strategy.

    Paying £1000 off a 3% mortgage saves you £30 per year
    Paying £1000 into a pension gets you £250 in tax relief plus it is then likely to grow at 5% a year or more.

    That only applies for income taxed at the basic rate, but half your wife's income would get that tax relief. Even without it it is still probably better to save into a pension.
    Originally posted by Terron
    Little point saving into a pension with no tax relief.
    • Mathes00n
    • By Mathes00n 13th Oct 17, 1:46 AM
    • 3 Posts
    • 6 Thanks
    Mathes00n
    A little background. I find life hard. That's not a statement to derive pity from the masses - I'm just stating it how it is. The everyday grind is difficult for me (whereas crisis situations are, strangely, more easily dealt with).
    Originally posted by CeePeeBee
    I share your pain. I could have written this. My suggestions:

    - 13 years to your target is a long time when it's hard to get through the working week. I went down to 4 days a week and it was the best thing I ever did. Knowing that the week is shorter helps get through it and 3 day weekends with OH are fab.
    - I know the above means less income so look at your spending. We are on a big minimalist push at the moment. This isn't about depriving ourselves but makng sure we get value and enjoyment for every hard earned £. Sure you've read this all before here - but we've been seriously challenging ourselves not to waste money and the idea gathers pace quckly once you focus - espcially when you look around your house and realise how much crap you've accumulated over the years and how much it cost you.
    - We are also downsizng the house. Again we don't need the space and we don't need an extra bedroom for relatives that will stay 7 days a year. Just saying it's worth evaluating what you want and need from your house and where you live and make sure it is workng for you.
    - Get yourself a spreadsheet to plot your way to retirement. It can be therapeutic and motivating as well as helping sense checking your assumptions on your spending in particular.
    - Have you looked at coping strategies to help get through the workng day? E.G. Ways of reclaming work-life balance? Trusted people at work you can talk to or vent at? All these have helpd me.
    - Do you make the most of your time outside of work? I found running and mentally that has really boosted me.
    - Finally, is there something more radical you could do on the work front. I have to admit to soldiering on through 21 years of work stress (1 more to go hopefully). But is there a less well paid job you would be happy to do past the age of 50 in order to obtain that simple and peaceful existence you are searching for?

    Hope that helps a bit.
    • k6chris
    • By k6chris 13th Oct 17, 7:15 AM
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    k6chris
    I went down to 4 days a week and it was the best thing I ever did. Knowing that the week is shorter helps get through it and 3 day weekends with OH are fab.

    .......I found running and mentally that has really boosted me.
    Originally posted by Mathes00n
    I have been working 4 days a week for many years (apart from one year when I moved employers and I rudely had to accept a 5 day job ..soon got back to 4 days. Four days working rather than 5 means 50% more time not at work for a 20% reduction in pay . Also +1 for the running, or indeed any physical outdoor activity...which you have more time to do as you have 3 days rather than 2!
    EatingSoup
    • Alexland
    • By Alexland 13th Oct 17, 10:06 PM
    • 438 Posts
    • 258 Thanks
    Alexland
    I am late 30s and reduced to a 4 day working pattern last year. They are long 10 hour days but I am still paid full time and it means I can look after our young son while my wife is at work.

    Because of my specialist knowledge and ability to apply myself I am identified as a key individual in a long term customer contract so my employer has an all reasonable endeavours obligation to retain my employment. In addition they both seem to like me anyway and give me a lot of freedom to manage my area of responsibility.

    It has saved me a few hours in travel each week as I am now avoiding the peak traffic. My annual leave was reduced from 25 to 20 days but I was able to buy 5 extra days via salary reduction to compensate.

    My take home pay is limited by the 40% tax and child benefit cap so I already make substantial pension contributions (and have probably already contributed enough for an ok retirement at 60ish assuming modest growth above inflation) so thought why not.

    So far the working pattern has been great (although I do get tired towards the end of the working day especially if our son has been keeping us awake at night) and I am hoping to reduce my responsibilities and earnings over time but not sure how yet.

    Alex
    Last edited by Alexland; 13-10-2017 at 10:40 PM.
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