Early-retirement wannabe

kidmugsy

I know it's trite, but remember that one of the best gifts you can give your grown children is the knowledge that Pa and Ma are financially secure in their retirement.

115K

I read this whole thread yesterday and I think I understand a little more!:eek: I was dreaming about pensions last night.:p

This is our strategy for ER if I understand things correctly.:o:)

My DH (43 years old) has about £360k in his work pension and he is going to increase his contributions after April this year to be in the 20% tax bracket as he is a higher tax earner.

I have worked out that he should have about £600k in his pension in 2026 and he is hoping to retire early at that time at 55.

I was overpaying the mortgage but I have switched to saving in a cash ISA but I was thinking of either opening the First Direct savings account, a cash ISA or a S&S ISA or all three and just start saving as much as we can?

I have worked out that we are roughly living on 40% of his income whilst we are saving (£1,100 a month) with bills, groceries and extras. The 60% rest goes to mortgage payments and savings. We don't have any kids or cars so we are fairly frugal.

I would think we could live on about £20k a year income after retirement.

If we start saving I have calculated we should have about £150K in savings at age 55 so then we should live on our savings until he is aged 60 or take some money out of the pension and invest it?

Does this sound about right?

115K

Anyone, please?:A

Does it sound as though I have anything glaringly wrong?

atush

Saving in cash is great for upcomong expenses like a holiday etc or an emergency pot.

But equity exposure for the longer term is preferable so consider a S&S isa too.

AS for you what about your pension? You have a PA in retirement, and if your savings are all in ISAs and his in pensions, your PA could go to waste. So you should have enough pension to pay 3-10K per annum in a pension in your name if you want to retire alongside him? That way your income could be tax free until SP age, and you still get tax relief while building it up?

115K

Yes, I'm definitely thinking of getting a S&S ISA after reading the thread. I need to find out about them.

atush wrote: »

AS for you what about your pension? You have a PA in retirement, and if your savings are all in ISAs and his in pensions, your PA could go to waste. So you should have enough pension to pay 3-10K per annum in a pension in your name if you want to retire alongside him? That way your income could be tax free until SP age, and you still get tax relief while building it up?

I don't have a job so I don't have a pension, can I have a pension without a job? Probably really stupid question.:o

patanne

I am definitely not an expert & I am sure one will be along soon to give you figures but YES you certain can have a pension & the taxman will even give you a limited amount into it too. Have you checked how your state pension is doing? You may benefit from buying years to top it up!

115K

patanne wrote: »

I am definitely not an expert & I am sure one will be along soon to give you figures but YES you certain can have a pension & the taxman will even give you a limited amount into it too. Have you checked how your state pension is doing? You may benefit from buying years to top it up!

Yikes, Thanks for that, I just called up to order the statement from the DWP just now.

atush

115K wrote: »

Yes, I'm definitely thinking of getting a S&S ISA after reading the thread. I need to find out about them.



I don't have a job so I don't have a pension, can I have a pension without a job? Probably really stupid question.:o

Yes, you can pay in up to 2880 per year, which the govt lifts up to 3600 with tax relief. So get onto it pronto!

In your situation, you could get tax relief on the way in, and get it tax free using your PA later. Win win?

atush

As for the pension statement, it won't be correct as the pension is changing in 2016. Make sure it lists the Number of years, not the amt (as the amt will change) and the number of years needed right now is 30, but will be going up to 35 in 2016.

Linton

115K wrote: »

.......
My DH (43 years old) has about £360k in his work pension and he is going to increase his contributions after April this year to be in the 20% tax bracket as he is a higher tax earner.

I have worked out that he should have about £600k in his pension in 2026 and he is hoping to retire early at that time at 55.

I was overpaying the mortgage but I have switched to saving in a cash ISA but I was thinking of either opening the First Direct savings account, a cash ISA or a S&S ISA or all three and just start saving as much as we can?

I have worked out that we are roughly living on 40% of his income whilst we are saving (£1,100 a month) with bills, groceries and extras. The 60% rest goes to mortgage payments and savings. We don't have any kids or cars so we are fairly frugal.

I would think we could live on about £20k a year income after retirement.

If we start saving I have calculated we should have about £150K in savings at age 55 so then we should live on our savings until he is aged 60 or take some money out of the pension and invest it?

Does this sound about right?

It sounds very good, much better than most people posting here asking for help. You are living well within your means and putting sufficient money away to be able to carry on much the same standard of living after early retirement.

Your plan to live on savings until 60 (at least) seems very sensible to me as it gives another 5 years for the large pension pot to increase in value tax free. With the State Pensions coming in at 68(?) you should be fine.

Two comments:

1) Is your estimate of £20K/year something you could live on if you had to or is it sufficient to live to the standard you would be happy to for the rest of your life, perhaps a further 40 years after retirement for planning purposes? From the figures you give it seems to me you should be able to afford more than £20K/year.

2) I agree with the other comments that you shouldnt be looking to have £150K in "savings" but rather hold investments in an S&S ISA. Perhaps £80K in cash savings by the time you retire would be sensible to last up to 4 years should the stock market suffer one of its periodic major falls.