Early-retirement wannabe

melanzana

kidmugsy wrote: »

I suggest you check the level of inflation protection on your £35k p.a. If it's weak, I further suggest you invest that lump sum so as to protect yourself from inflation. Otherwise, best of luck.

Thanks for your advice. Yes, I will be investing the entire lump sum. I am currently getting independent advice from a consultant affiliated to my Union. I m risk averse, so the poor lady is having a tough time selling her tied products to me! But we will get there.

bigadaj

melanzana wrote: »

Thanks for your advice. Yes, I will be investing the entire lump sum. I am currently getting independent advice from a consultant affiliated to my Union. I m risk averse, so the poor lady is having a tough time selling her tied products to me! But we will get there.

Why get advice from a tied agent, an ifa would be a better option, money spent upfront but more comeback if things go wrong and cheaper in the long run.

gadgetmind

Do you have the option of not taking the lump sum and getting more pension? Bearing in mind that extra pension will be taxed at 20%, you'd need about 5% of whatever the lump sum is PA for it to be worth it.

When investing the lump sum, you may want to concentrate on dividend income from anything held "unwrapped" so equities, perhaps in the form of investment trusts. There is no further tax to pay on these unless you stray into higher rate tax, which may happen depending on magnitude of lump sum. This is likely to be the case for me, so we'll simply invest it all in my wife's name.

You can then move £15k pa into a NISA (double that if married) and in there hold bonds and REITs.

I don't want loads, just enough.

That pension would cost you about £1.2M to buy using your own money. Enjoy your wealth!

tell_it_how_it_is

Enjoy your retirement, melanzana!

I'm hoping I can bail out in 11 years time at 55, although I have nowhere near the amount of money most are mentioning on here lol

gallygirl

tell_it_how_it_is wrote: »

I'm hoping I can bail out in 11 years time at 55, although I have nowhere near the amount of money most are mentioning on here lol

Don't worry tihii - me too :rotfl:. Though hopefully next year here :T,

Enjoy your retirement melanzana - I'd be very happy with those figures. Seeing if you could increase your pension instead of a large lump sum is worth exploring.

melanzana

bigadaj wrote: »

Why get advice from a tied agent, an ifa would be a better option, money spent upfront but more comeback if things go wrong and cheaper in the long run.

It was a tongue in cheek comment really!

I had to go see the person... part of the package, but I'm not stoopid either!

melanzana

gallygirl wrote: »

Don't worry tihii - me too :rotfl:. Though hopefully next year here :T,

Enjoy your retirement melanzana - I'd be very happy with those figures. Seeing if you could increase your pension instead of a large lump sum is worth exploring.

Not an option to increase pension instead of lump sum, in this package.

Thanks so much for your good wishes.

Im so happy that I had a great career, but things have changed so much. It's for the youngsters now with loads of energy. And best of luck to them!

I'm off!

gadgetmind

melanzana wrote: »

It's for the youngsters now with loads of energy. And best of luck to them!

There's an air of that in my company now.

The "old guard" such as myself, who were involved in founding and building the company, are now mostly in their 50s. This is the age where steering major projects and running large multi-national teams are part of the job, but the stress and very long hours are beginning to chafe a little.

As a result, people are slowly starting to drift away, perhaps to seek "glide path" second careers to take them to retirement, or just knocking it straight on the head and popping on the slippers.

As for me, I'm still enjoying the work, but I'm also ensuring there is structure in place below me that will make me less essential with each passing year.

melanzana

gadgetmind wrote: »

There's an air of that in my company now.

The "old guard" such as myself, who were involved in founding and building the company, are now mostly in their 50s. This is the age where steering major projects and running large multi-national teams are part of the job, but the stress and very long hours are beginning to chafe a little.

As a result, people are slowly starting to drift away, perhaps to seek "glide path" second careers to take them to retirement, or just knocking it straight on the head and popping on the slippers.

As for me, I'm still enjoying the work, but I'm also ensuring there is structure in place below me that will make me less essential with each passing year.

That's a lovely way to express things!

I have a voluntary "job" on the go as we speak, which might lead to other openings on a part time basis. If it does, it does, I'm not that concerned really.

From a high tech job, I am now a voluntary city ambassador. Helping tourists in the historic parts of town. I love it! I am going to do the certified tour guide course (with the young kids, ha ha!) which sounds great from the prospectus. So off we go in
September! I love medieval history, and there's plenty of that where I am.

I'll be doing it for the love of it, rather than as a job...

Best of luck in your own journey..

hugheskevi

Inspired a bit by the posts above, an update on how my plans are going. Three key developments since April...

(1) The target.
I've never been a fan of counting all expenditure as it strikes me as far too bothersome - spend is closely monitored, but not to the level of being able to give a robust estimate of total spend. Fortunately, I realised that as my financial affairs are fairly straightforward and I keep decent records each financial year. I could quickly and accurately calculate total spend by the simple formula (doing it on household level):

Consumption=Gross salary - pension saving - ISA saving - income tax - National Insurance - Mortgage + Saving interest - change in other debts and saving (net)

I exclude pension and other saving and mortgage spending as these are not things I will have in retirement (or if I do, it will be from choice rather than necessity, so will not be burden and instead will be financially advantageous). There are a few bits and pieces that are not quite right (eg receipt of gifts, etc) but most of these 'errors' should also be present in retirement. The largest error factor would be spend on credit card balance transfer fees, which I don't expect to have in retirement. That serves to inflate consumption, but not by much. I also intend to live in rural Northern Ireland in the future rather than London and not to travel overseas, so I am confident that amount will be sufficient although there will also be separate savings for contingency.

That calculation resulted in consumption in 2013/14 of £26,581 (2 adult household in London, no kids). I'm fairly happy with that, as saving amounts are several times that number, and factoring in investment returns on top means net wealth is increasing nicely. It is however a little higher than the figure I was previously using. I intend to keep a record of consumption level each year over the next few years and that should give me a robust figure based on actual spend over about 5-10 years to aim toward as I approach retirement. Quite pleased to have that all sorted, as it removes a key uncertainty from the modelling.

I increase that target consumption number in line with average earnings (OBR assumptions for the next 5 years, and 4.75% in the long run which is about 30 years in this case) until age 70, then increase in line with RPI (assumed to be 3.2%) thereafter, until death at age 90 (that needs increasing a bit, but it won't materially affect any plans).

My rough aim is to generate the target with income not subject to investment returns (DB and State pensions) and use DC pension for the early part of retirement and tax efficiency in general to build up contingency funds.

(2)Positive shock
My personal preference is to use cautious assumptions throughout modelling. No reason other than I like any surprises to my modelling to be positive.

So when the wife got promoted at work (20% salary hike, and in a final salary pension scheme) that was a nice welcome addition to the plans that wasn't forecast. Most of the extra income will go into a SIPP, so it is a boost to income around the 55-60 age period. Sadly not all of it can go into a SIPP as she will now face Annual Allowance issues, but as I have worked my way through the mess that is the Annual Alllowance policy for myself in recent years that will all be easy to optimise.

Coincidentally, this positive shock pretty much entirely offset the increased consumption target above which was very welcome.

(3)Retirement plans
A constant problem I've been wrestling with is my plans for the period between leaving work and moving to my retirement house (and getting a lot of pets, which will prevent further travel of any significance). The plan is for a long period of travelling the world (roughly 2 years or so, but open-ended if more is desired but on previous experience I doubt it will be).

Although I've spent a number of years travelling, my wife hasn't. I doubt I could take 2 years of constant travel (13 months most I've ever done just wandering about constantly without any particular purpose), and the wife certainly wouldn't. It will therefore be necessary to intersperse some longer stays in amongst the time on the road if I want to get anywhere near 2 years away.

I was previously thinking in terms of staying in a city for a few months here and there, but then started thinking that it wouldn't be too much fun. Instead, I'm increasingly thinking that volunteering may well the way forward. That will most likely be doing work with animals, probably for several months at a time - it should be ideal, having something to do that is very enjoyable as well as taking a break from travelling and seeing the various different wildlife around the world in its own habitat.

More generally, this year is going to be the first in ages I make ISA contributions due to a combination of pensions and reducing mortgage to a lower LTV. This will continue in the future as the Annual Allowance bites. Will be nice having a lot more liquid assets, as whilst my strategy is very tax efficient it has led to nasty pinch points at certain points of the year to make big pension contributions, but that is now behind me and now more liquid assets will be focused on which should increase rapidly over the next 5 years or so.