Early-retirement wannabe

blizeH

Thanks all for the replies... regarding the temperature it dropped off a lot again this morning (down to freezing again) so I was back to the car again unfortunately! As others have alluded to I should probably just get on with it, but for some reason I feel awful when I cycle when it's really cold.

Sounds like 4% could be enough for us then, especially with things like the deferred pension that you mention, but honestly it's such a long way off I don't even know I'll be able to get a state pension by the time I reach that age... certainly not something I'd like to take for granted anyway.

Hopefully once I give up work I'll still be able to do bits of design and programming so will still have some sort of income, and my girlfriend will hopefully have an income from her lingerie business too... but I'd still feel comfortable maybe aiming for 3% rather than 4% even if it does mean sticking with a job that I currently hate

Realistically our living costs have already been cut quite a bit... I've no doubt they could be cut further but it's not something I'd want to rely on to get by if that makes sense. We've already cut a lot to get to this position.

Thanks again for the replies

gallygirl

jamesd wrote: »

This article has a pretty good overview of assorted risks, I think.

That's one way of putting it. It **** the bejeezus out of me :eek:_pale_:rotfl:.

In an unrelated matter (which after reading that post is now related) I need to have a look and see if I can change my civil service and local govt pensions, due to start paying out in 2021. All the info I get every year is based on a small lump sum and pension (pensions around £1,200 each). Wondering if I can a) defer altogether and/or b) forego the lump sum for more pension. Does anyone know if it's possible?

Thanks.

Marine_life

I think the debate regarding the 4% rule is an interesting one.


I suspect its been formulated in more "normal" times when interest rates and returns on investment were higher. However does anyone really believe that in Europe we will ever return to the sort of inflation (and therefore interest rates) that we saw 5, 10 or 20 year ago? Probably not which means that investment returns will stay Paltry.


What important (when applying simple maths) is that even if the differential between investment returns and inflation remains constant, if returns stay low then a pension pot will erode under low inflation, low return assumptions (e.g. applying 7% investment return, 3% inflation under a "high" secenario, and 4% return, 1% inflation under a "low" scenario - the net retun is the same but the impact on funds is very different).


On the plus side, the 4% rule generally excludes social security payments and company pensions (especially important for early retirees).


My spereadsheets are ultra cautious and I assume zero net return but for the average user I would suggest model your own situation and don't rely on any benchmark.

atush

gallygirl wrote: »

That's one way of putting it. It **** the bejeezus out of me :eek:_pale_:rotfl:.

In an unrelated matter (which after reading that post is now related) I need to have a look and see if I can change my civil service and local govt pensions, due to start paying out in 2021. All the info I get every year is based on a small lump sum and pension (pensions around £1,200 each). Wondering if I can a) defer altogether and/or b) forego the lump sum for more pension. Does anyone know if it's possible?

Thanks.

I'd start a sep post about that so all the LGPS and CS people can tel you? Flor the LGPS, did you open an AVC that can pay the TFLS so you can get a higher pension?

gallygirl

Marine_life wrote: »

My spereadsheets are ultra cautious and I assume zero net return but for the average user I would suggest model your own situation and don't rely on any benchmark.

TBH although I have used quite a number of different retirement calculators I feel happier with my own fairly simple spreadsheet - it may be basic but at least I fully understand it.

greenglide

atush wrote: »

I'd start a sep post about that so all the LGPS and CS people can tel you? Flor the LGPS, did you open an AVC that can pay the TFLS so you can get a higher pension?

I didn't think the LGPS would let you use the AVCs to fund the 25% TFLS?

The original Civil Service scheme (like the LGPS of old) had the 25% automatically built in - it didn't reduce the pension.

My LGPS pension (started in 2011) would not let me defer and only part of the lump sum could be reverse commutated at a to very good rate. All of this was due to the length of service and the date of leaving - very complex rules.

atush

I thought LGPS AVCs from before Apr 2014 could be used to pay the TFLS.

jamesd

Marine_life wrote: »

I think the debate regarding the 4% rule is an interesting one. ... I suspect its been formulated in more "normal" times when interest rates and returns on investment were higher.

Hardly. You can read about the Trinity study to learn more about what was really done. It used the period from 1925 through 1995 and an updated version went to 2005. That's the Great Depression, two world wars and assorted high inflation times.

Triumph13

Marine_life wrote: »

However does anyone really believe that in Europe we will ever return to the sort of inflation (and therefore interest rates) that we saw 5, 10 or 20 year ago?

Over the course of a 30 year retirement I'd say there was a very good chance of seeing a period of fairly high inflation. With the level of government debt in many countries a 'stealth default' by deliberately engineering some higher inflation is going to look like a very attractive option to many countries.
Every time someone on here announces that they are going to use all of their pension pot to buy a flat annuity I wince inwardly at the risk they are taking of it being reduced to a pittance by inflation by the time they are in their eighties or nineties.

Marine_life

jamesd wrote: »

Hardly. You can read about the Trinity study to learn more about what was really done. It used the period from 1925 through 1995 and an updated version went to 2005. That's the Great Depression, two world wars and assorted high inflation times.

That's interesting...


...but I suspect I'm not alone in thinking that rates may not go up again materially in our lifetime.


http://www.marketwatch.com/story/why-british-interest-rates-will-never-go-up-again-2014-10-29


The underlying fundamentals just don't support it.