Early-retirement wannabe

Marine_life

Loughton_Monkey wrote: »

At the end of the day, only you can answer this. You seem to have the right 'approach' - which I always strongly recommend should start with "what do I want to spend?". The job, then, is to refine your spreadsheets and calculations to model all your assets, and discover for how long they can support that spending.

I would just throw in a couple of observations from my own experience.....

1. Never underestimate the 'cost' of each year you retire early. Turning this round the other way, if you delay early retirement for just 1 year, you get (a) a full year's spending. Paid for from the extra year's income, and (b) more savings to bung into your assets as represented by the amount by which income exceeds spending, and (c) One year less for which your current assets need to support you. In other words, an ill-informed rash early retirement could leave you 2 or 3 years (of spending) 'short', whereas simply slogging it out for another year might have balanced the books perfectly.

2. In your calculations, make absolutely sure you have the tax implications worked out. I have read many past posts containing loose assumptions of spending savings for a while until pensions click in. Fine, but why throw away the bulk of £10K tax free allowance that you'll never get back? It's usually best to leave savings in ISA wrappers. If, say, you and your wife were to spend every spare penny from your current income, and bung as much into extra pensions as you can, you're not only getting 20% relief at source, you can then draw it virtually all out over 2,3 or 4 years as 'taxable' income - with >£20K relief between you and not pay any income tax.

3. At risk of preaching to the converted, I would assert that good budgeting is essential - especially in retirement. Many people I know probably do roughly 'the right thing' by common sense. i.e. they draw their salaries, pay for their food, utilities, luxuries, and 'stuff', and then hopefully have more than a couple of quid left over to bung into the ISA. Fine. When drawing an income, if you over-spend, making it up seems so much easier. Possibly overtime, or a promotion could come along.... But in retirement, there are few, if any, ways to make up shortfalls, other than your own investment or financial skills. So once you've worked it all out, be passionate about monitoring both top line and spending, and ensure that you control what you do to match the budget. E.g. you mentioned £31K spending. Fine. Break it down by month and by type (gas, electric, car, fuel, groceries, insurance, dining......). Then monitor actuals. Every day, week, month, you should be looking for variations (up or down) and changing future months/headings so that the annual result will never exceed the original £31K.

My own assumptions were 'cautious'. I would never have retired early on an "only just" projection. So much can happen - like the current lack of any interest on cash savings. Like the 2008 'crash'. Like (hopefully not) inflation in a couple of years getting up to 7/8% when my FS pensions will only escalate 5% max....

But the good points (for me anyway) have been the law of 'swings and roundabouts'. Then there's the natural tendency (when retired) to avoid buying new 'stuff'. We just don't need, or appreciate, a new wardrobe, or another cut glass vase, or an Apple watch! Finally, retirement gives you the time to get more 'savvy' and shop around continuously for best deals on insurance, utilities, travel etc. Or earn a few shillings from cashback, regular savings accounts, bonus current accounts etc. or perhaps discovering 'safer' investments that pay good returns with minimal risk...

Good luck anyway.

Those are all very sensible thoughts and I've read A LOT on the internet these past few years about Safe Withdrawal Rates and budgeting etc. but unless you like doing that stuff (and as an accountant I'm comfortable with numbers) then its going to be a real bind to monitor spending to that level of granularity.

For me though the world of finance over the last few years has demonstrated a number of uncertainties from savers money being confiscated (Cyprus) to the collapse of companies and subsequent reduction in values of supposedly iron clad final salary pensions. In my own company we've seen a significant pull back in the generosity of benefits available and I expect that process could easily continue (at the moment pensioners are immune and its only new joiners who are being badly impacted but who knows what could happen if there's another major financial shock).

So the question then is, do you want to be in the game (and able to influence results) or watching from the sidelines? I will freely admit that we've made some financial mistakes in our life but have always been able to buy ourselves out of those problems. and I think the modern retiree needs an added "buffer" to insulate them from increasing uncertainty.

gfplux

Having been retired 18 years (now 70 years old) I am so grateful to have had so many years of "leisure"
It is not ALL about money. I now recognise that as the years go by your body does begin to slow you down. That the fitness you have in your 50's is different to that of your 60's and more surprising the mind also changes, not ages but you see things differently than before.
Yes I can hear some say that will not happen to me, well frankly it will. Even the fact that retirement can, and did for me, give you time to keep fitter, it will effect everyone.
You are NOT the same person at 62 that you were at 52.
I am not saying that at 70 life is over, far from it. I have put away my Alpine Skis and retired from the high intensive Airobic class but feel there are many years left to enjoy Aquagym, swimming, cycling and walking and of course the less energetic things like cinema, theatre, opera, chess, reading, holidays and of course Talking!

TheTracker

Loughton_Monkey wrote: »

My own assumptions were 'cautious'. I would never have retired early on an "only just" projection. So much can happen - like the current lack of any interest on cash savings.

A bit OT and maybe you were being loose with words, but a single person can stuff away about £50k at about 3.5%pa and 100k at about 2.5%pa on an instant access basis with high street banks, while each of a couple can achieve even more with joint accounts. This is about as good, if not better, than the historical short notice cash savings rate above inflation. Not many retirees (should) have more than 100k in cash.

itm2

gfplux wrote: »

That the fitness you have in your 50's is different to that of your 60's and more surprising the mind also changes, not ages but you see things differently than before.

Interesting....in what ways did your thinking change when you were in your 60s - was it primarily the time vs money thing?

gfplux

Hello itm2,
As an example and to clarify something in my post.

Alpine Skiing.
I came to this late in life, in my 30's but worked hard to become reasonably strong and competent. However my attitude to personal safety began to change in my mid 60's and this has taken the pleasure away. So my equipment gathers dust in the basement and it is very unlikely they will be used by me ever again.
Aerobics.
I have taken a weekly class for many years. Most of those taking part are ladies around the age of 30-40. Very few men take part. The level was aimed at this age group and I have finally had to admit that I can't keep up.

I hope the above explains some things.

Broadsword

Gfplux makes a very strong point which I endorse. I did not retire early , but three months after 65th. I am now nearing 68. Even when I was in my late 50s I would be working outside in my over large garden all day long. I accumulated all manner of chores for retirement thinking that with the extra time, they would be sorted in no time. Something happens between your full energy 50's and the 60s even with full health and vigour.i can still do everything I ever did but not so often or repetitively. Right now is a good example, I have about 300 yds of hedging that is a once a year cut. A few years ago my wife and I would tackle it as a full on three days. It is now most fine days, a couple of hours at a time. The 60s are often the era when health issues intervene ( I have very few ) but muscular aches and pains come more easily and muscle pains can take weeks, even months to heal. I used to fiddle about with cars a lot but even taking a wheel off is a hard task. Perhaps they got heavier?

The moral of the tale is that if you retire late you risk losing the days of vigour and endurance. So, if the financial planning allows it retiring even 10 years earlier could make a big difference to what you can do.
Of course I leave myself open to folk in their 70s and 80s telling me how they climb Everest each week. But I draw on gpflux's commonsense observations for the average man because it reflects my experience.

cathybird

I'm very interested to read what gfplux and broadsword are saying as I've noticed a slowdown myself now that I have got past 50. It's the main reason I want to retire sooner rather than later.

atush

I've just noticed it now in my mid 50's.

In my 40's I was unstoppable (if I wanted to be lol)

gadgetmind

By the time I reach my mid 50s, I hope to have slowed down so much that I barely move!

ManofLeisure_2

''Old Age'' doesn't come alone - that's for sure.