Early Retirement Offer

LGH29

Fed up with the rat race we have the chance to retired early at 56 and 55 -both pensions give us £1500 net pm index linked yearly - 40k saving - full sp at 65 - mortgage and dept free.

We think we will manage until the sp kicks in - wondered if anybody had similar experiences with a big cut in salary for the years until 65.

Pollycat

I assume you're going to grab this offer with both hands...?

£3000 per month net is a pretty good income and I'm sure lots of people would be over the moon at that amount to live on, especially with no debt or mortgage to pay.

However, you've probably both had really good jobs and see that amount as a serious reduction from what you've been used to living on.

Take into account that you'll not have travelling expenses but you will have some increases if you're both at home - in utility bills.

I guess it depends on what style of retirement you want.

I took early retirement at age 50 and my OH followed me 3 years later.
We have less joint pension at the moment but my OH's various pensions kick in over the next few years.
We do have quite a lot more savings/investments than you though.

jem16

Pollycat wrote: »

£3000 per month net is a pretty good income and I'm sure lots of people would be over the moon at that amount to live on, especially with no debt or mortgage to pay.

I read it as both pension giving a total of £1500pm not £1500pm each. Perhaps the OP can clarify?

Cautious_Investor_3

Hi

Good luck with your early retirement!

When I was an IFA we came across many people in your situation, who could perhaps afford to retire at age 65 (mainly due to the state pension bridging the gap between their desired level of income and what their private / occupational pensions would pay) but were not quite in a position to retire now.

We generally had a discussion along the following lines:

1. We would work out what net income per month they needed to provide their desired lifestyle. This takes careful planning, and should include items that require capital expenditure (holidays, new cars, home repairs etc)

2. Inflation should be applied to point 1

3. Once the desired level of income is confirmed we would then look at what income they would have after retiring, starting with pensions.

4. Having taken pensions into account if there was still a shortfall we would look at how to bridge this shortfall, here there are generally two options:

a. Invest any savings to provide an income sufficient to bridge the gap between pension income and desired income level

b. In many cases this was not possible and capital had to be spent to bridge the shortfall. We would therefore think about how best the capital could be invested / saved to produce a return until such time it is needed and spent instead of creating an income.

Many clients were happy to spend capital if they knew that when the State Pension kicked in they would have sufficient income (when added to their other pensions) to live out their years.

Spedning capital clearly has its drawbacks, but may be the price you have to pay to leave the rat race now.

Out of interest how much income do you need at the moment?

I hope this helps.

The Cautious Investor

LGH29

1. We would work out what net income per month they needed to provide their desired lifestyle. This takes careful planning, and should include items that require capital expenditure (holidays, new cars, home repairs etc)

Out of interest how much income do you need at the moment?

Thanks for all the replies .

I wish the pension was £3000 pm but no £1500 for both.

We have actually been living modestly for the last 5 years to bump the mortgage off and getting the house right up to date .
We think we can live off the pension and project to save enough a month for yearly expenses ( hols , car etc ).
But of course replacing the car etc will cut into the capital.

maggieann155

our travelling costs (fuel, wear and tear on car etc)will be going up considerably when we retire!
we plan to travel the length and breadth of the country, as much as we can, with our caravan.
it was an eye opener when we costed out the fuel needed!
and how all the incidentals add up!

have you had a look on THE NUMBER thread on here? sorry dont know how to link it.

have fun whatever you do!

LGH29

Thanks maggieann

Found the thread below - very helpful

Pensions Planning: The NUMBER

Velcro_Hotdog

Could you perhaps take the figure quoted above and suppliment the income with a part time job that you enjoy doing?

My grand parents did this and enjoyed semi retirement for ten years before knocking it all on the head when their state pansion kicked in. Maybe not the perfect answer for you but it worked for them.

bigbigmamamoo

Velcro_Hotdog wrote: »

Could you perhaps take the figure quoted above and suppliment the income with a part time job that you enjoy doing?

My grand parents did this and enjoyed semi retirement for ten years before knocking it all on the head when their state pansion kicked in. Maybe not the perfect answer for you but it worked for them.

or take in a lodger, or rent out your home during holidays?

I'm hoping to fund my hols that way

LGH29

If needed I would but to be honest I prefer to enjoy my time fully retired .

Loughton_Monkey

There is a lot of talk about costs/spending going down at retirement. This, in my experience, holds no water at all. I retired at 56, but did so only because I had enough capital/pensions combined to allow me to continue spending (inflation provision included) at the same rate for the rest of our lives (strong overall safety margin also included).

In the final analysis, a huge proportion of costs are 'fixed' - like Council Tax, Fuel Bills, Insurance, Car/Depreciation. Costs of travelling to work/suits etc. are easily transformed into extra costs on 8-week holidays, hobbies, lunches out etc.

Retirement does give you more time (a) to squeeze out the best deals and perhaps reduce yout costs a bit, and (b) to do all the hard work necessary these days to earn a decent crust from savings - and all the moving money around this entails.

But a lot depends upon your own lifestyle, aspirations, and what else you might want to do, so at the end of the day you have to make your own decision. It is not difficult to make reasonable assumptions as to cash flow in the future. If you think you can live on that, and within a reasonable safety margin, then go for it!