Early-retirement wannabe

115K

Thanks Atush and Patanne. I will look into my own pension too. It didn't even cross my mind that I would be entitled to a state pension so I need to focus on that too.

Linton wrote: »

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.

Thanks Linton.:)

1. I think I thought of £20k as a rough conservative estimate but I hope it might be more than that with the extra pension contributions DH will be making. I can't see us really needing a lot more money in later life but obviously bills and food prices will go up.

2. Okay, thanks, it sounds like I have to understand investing a bit better, or at all!:D I think it is the risk that puts me off but I should really educate myself. Thanks again.

The people on this forum are so helpful!:A

KrytenIceCubeHead

!I started thinking about retirement after being made redundant back in 2009, during the (mercifully brief) period I was out of a job. My thoughts crystallised into Excel, where the most recent statements from the then five different legacy pension funds were carefully entered (that's a Final Salary scheme, AVC with that employer, tiny with-profits AVC, contracted-out policy, non-FS scheme with my latest employer). With the State pension added I could just get by at 66. Anytime before that was non-viable. I was 48 in 2009.

Making the spreadsheet was something of a lightbulb moment, in that it made me realise I had to pump money into retirement planning somehow.

The spreadsheet's been added to since then with another non-FS scheme with my current employer of 4 years, and the additional investments made since being made redundant. Almost all of the redundancy pay has gone into cash ISAs and NS&Is (no more NS&I for now, the rates are terrible). I'm now pumping cash ISAs every year, and siphoning money from every monthly salary payment off into a savings account. Next up will be a higher interest account with restricted access, or maybe a stocks ISA. I'm pretty risk averse though.

The upshot is that 4 years on, provided I can continue in a job for the next 9 years, I can retire at 62 without losing much in my standard of living (which is of course costed in another spreadsheet). It's nice to be able to see the light at the end of the tunnel, and know it's not an oncoming train.

Edit : I forgot to add the most important bit. Any advice? 62 is still 9 years off and any way to bring the day I can end the daily grind would be appreciated.

atush

You may be risk averse, but do read up on risk. Right now, it is hard to actually MEET inflation, much less beat it with cash. So you are actually losing money in cash in most cases.

So do look into S&S isas. you can choose something conservative such as a lifestlying fund by Blackrock or vanguard. Or a few diversified trackers.

What you should do is not have all your available eggs in one basket- cash.

lvader

There is nothing like being made redundant in your 40's to get you thinking about retirement, it worked for me anyway!

ermine

Retirement is about two things. How much you save, and how much you spend. Everyone focuses on how much you save.

It's all too easy to infer how much you will spend from how much you spend while working. And for anybody wanting to retire early, the win from reducing outgoings is proportionally larger. Drive down your costs. Ruthlessly. If you can wean yourself of consumerism you will retire earlier. And if you do it while still working, then a) you know you can do it and b) you save much more.

In the UK one of the biggest parasitic costs is housing, and an awful lot of people spend a lot on too much house for their needs. It ties up capital, it needs maintenance and heating in proportion to the internal volume, council tax is sort of proportional to size.

I'm pretty risk averse though.

You will retire later then. As atush said - Cash is a ghastly asset class to own at the moment, it is dying on its feet all the time. You need to inform yourself about risk and come to your own conclusions - not going all in with any one asset class is the way to mitigate this and balance the risks and rewards.

hugheskevi

I'm pretty risk averse though.

Any risk in particular? When preparing for retirement, there are many risks which should be taken into account, for example:

• Inflation risk
• Interest rate risk
• Pre-retirement longevity change
• Post-retirement longevity change
• Equity market risk
• Exchange rate risk
• Salary change risk (including ill-health and redundancy risk)
• Housing market value risk (if intending to change property)
• State Pension policy change risk
• Private Pension policy change risk
• Insurer/employer default risk
• Death (and what survivor benefits may be needed)

Not everyone faces all those risks (which can generally be grouped into investment risk, annuity rate risk and shortfall risk), but those with Defined Contribution pensions will probably face most at some point before or during retirement.

Sanchsoot49

Kryten

I would agree with other posters in regard to a retirement strategy based on cash holdings only on a 9 year time frame. IMO this is not a good way to grow your money at all and inflation will erode it.

If I was you I would think seriously about your options.

tootallulah

I am eight weeks away from retirement, my pension will be £34k, rental income £6k and I expect to do some consultancy work in the next three to five years. I am excited/frightened in about equal measure! I have agreed to do some voluntary work and need to make sure it isn't too much as I will still have a £50kish mortgage that I aim to pay off in five years so I do need to work. I chose to retire in the Spring so as to have the summer ahead, I do hope that will give me time to enjoy not being at work.

gfplux

Good luck tootallulah,
It is a frightening thing, jumping into the unknown however much planning you do.
To paraphrase (I think) Donald Rumsfeld
"You know what you know but you don't know what you don't know."
For me now +16 years after early retirement work is just a distant memory.

petepool

115K wrote: »

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?

?

You might also want to look at an offset mortgage as it likely your mortage rate will be higher than any savings rate you can get. I used a First Direct offset mortgage as the first step to early retirement, then ISAs and SIPPs.

Good luck