Early-retirement wannabe

gadgetmind

RetireEarlyBlog wrote: »

It's just for anyone my age (27), I can't say I know of a single person who has a similar arrangement who isn't a government worker.

Public sector and eduction (even private sector) seem to be the last hold-outs for defined benefit pensions.

It was my brother retiring at age 50 on his civil service pension that kicked me into taking control of my pension planning rather than relying on an IFA. Best thing I ever did!

lvader

I think final salary pensions look much better than DC pensions because markets have performed pretty badly since around 2000. Eventually we will see a decade in with stocks perform much better and DC schemes will perform well. I'm happy to see stocks underperform because while I'm still saving towards my pension I'm getting more for my money.

cyclonebri1

RetireEarlyBlog wrote: »

It's interesting to see just how many of you 40 and 50-something's are on final salary pensions. Not a criticism of any beneficary of final salary pensions, you guys have worked hard to deserve them. It's just for anyone my age (27), I can't say I know of a single person who has a similar arrangement who isn't a government worker.

Two points, you will live 10 years longer on average than the 50 somethings you quote, fact:o, price that please.

2ndly, please don't get that 1 going again, this is the reason the private sector is up in arms against the public sectors resistance to modernisation, ie, peeps live longer so less private support and more contributions, we have to pay our own way.:A

Moby

Very interesting read dlorde. Its all about choices and balances and knowing the difference between need and want. I'm working towards the same plan but am a few years behind you! I also have to figure in the cost of the expensive holidays I can't resist taking which require physical fitness....so will need to do these trips now! Just another 10 weeks b4 I'm back in India!:j

RetireEarlyBlog - Im one of those on a final salary scheme and I had a look at your blog. I like your focus on goal setting and counting every penny. However remember you also need to remember that deferred gratification also has its limits. There may be things in life that you want/need to do while you are still young and will therefore need to shell out for them now!...eg in my case...expensive trips looking for wildlife. Its a question of balance really...both enjoying the life you have now but also thinking about the future and how you can increase your freedom. I struggle to see how you can consistently enjoy the life you have now if you are saving/investing 75% of your income?

Re. your point on pensions.... its sad that there is a race to the bottom now and the Govmt gives out so many mixed messages about the importance of saving for retirement and then simultaneously changing from RPI to CPI. Some very interesting research by Tom McPhail of Hargeaves Lansdowne and the Institute of Fiscal Studies on this Govmt's current pension policy indicates that they are going to save no money by the changes anyway......because amongst other things of the increase in benefit payments that will result and the way in which we are forcing a watering down of the changes by increasing the accrual rates ......so at least the less well paid will be better off:).

gadgetmind

Moby wrote: »

its sad that there is a race to the bottom now.

It's more about a race to affordability and towards each generation paying for their own pensions rather than expecting the next generation to pick up a massive tab.

Marine_life

ok, I have not done this in a while but I just checked and there are now only 955 days until my 50th birthday and potential retirement date.

I am starting to get more prepared and have been reading a lot of early retirement blogs - most I have to say have been quite dour at it seems that a lot decide the route to early retirement has been to really cut back on expenses.

I recently stumbled across these guys:

http://www.wherewebe.com/

...and whilst I don't think their approach is for me, I do think they have an incredibly interesting approach (and some fabulous piccies on their website).

So what have I been doing the last year to prepare for early retirement?

Well, we have ramped up our mortgage payment to the maximum allowed (to try and maximise our interest saving) and have put the money aside to pay off the mortgage in full at the end of next year.

Secondly, as we have lived in a number of countries in the world we have been checking our pension entitlement (that needs a post in itself as its not easy).

Overall our retirement will be in three phases:

1. What I will call the bridging phase between ages 50 and 60 before any of our pensions kick in.

2. Ages 60-66 when our private pensons kick in;

3. Ages 66+ when we have all our pension income streams.

Of course phase 1 is the one that is troubling to most early retirees and that is the phase I am now starting to think about i.e. we will need to generate sufficient return on our savings to bridge that time period or be prepared to accept a combination of income and capital drawdown. I don't mind drawing some of the capital but don't want to spend it all.

At the moment our plan is to try and get 4-5% return with relatively low risk. What do people think about this?

Ok, that's all for now

gadgetmind

Marine_life wrote: »

ok, I have not done this in a while but I just checked and there are now only 955 days until my 50th birthday and potential retirement date.

As HMG unilaterally changed private pensions to age 55 without so much as a by-your-leave, I'm over 2000 days off, but who's counting?

Of course phase 1 is the one that is troubling to most early retirees and that is the phase I am now starting to think about

Yes, that is the problem stage. I'm seriously thinking that I might have to use flexible drawdown to make this stage work for me. HMG will only let you take out a trickle of money pa even if your investments are doing just dandy.

At the moment our plan is to try and get 4-5% return with relatively low risk. What do people think about this?

The "low" risk part of my portfolio is spread between corporate bonds, property companies with low gearing (I chose UKCM and LSP), and infrastructure companies such as HICL, JLIF, and BBGI.

(None of these are recommendations, just an indication of my approach)

I also hold Investment Trusts such as RIT and Personal Assets to get even more asset classes and to add more non-UK exposure.

I do not directly hold any gilts as I can see no chance of decent income or further upside. If I'm wrong, then I'm wrong!

I also hold high yield equities and bank preference shares, but not in my SIPP.

I spread my risk with equities but also with less risk and income oriented investments, and but I don't go silly looking for obscure new asset classes.

Are you wanting 4-5% *real* return, so *after* inflation? That's a pretty big ask.

Marine_life

Gadget - when I talk about 4-5% I am meaning pre-inflation.

What I am working towards is having a big cash lump sum that will last me through those barren years when there is no pension income coming in. I don't want to erode that much of the capital but to be honest (as I mentioned on page 1 of this thread) I still really haven't sat down and worked out how much we spend or how much we will need in retirement (and no it is against all the "accepted advice").

Anyway - that's the biggest headache at the moment.

I am interested in investing in prperty companies so any tips are welcome!

Some more good news on the pension front is that I have confirmation that the full benefits on my non-contributory company pension accrue at age 50 whereas I had previously thought they would be scaled back. Its a massive bonus and means that we will have around an extra €10,000 per year than I had been planning.

gadgetmind

Marine_life wrote: »

Gadget - when I talk about 4-5% I am meaning pre-inflation.

OK, that's achievable. You can even manage this *after* inflation if you're prepared to accept some volatility. There are tables in Smarter Investing showing the risk with various levels of drawdown from various portfolios.

What I am working towards is having a big cash lump sum that will last me through those barren years when there is no pension income coming in. I don't want to erode that much of the capital but to be honest

Between Smarter Investing and firecalc, you should be able to work out the right equity/bond blend to let you do what you need.

I still really haven't sat down and worked out how much we spend or how much we will need in retirement (and no it is against all the "accepted advice").

Yup!

I am interested in investing in prperty companies so any tips are welcome!

My only tip is to take care with gearing and research the income/dividend split for REITs if holding unwrapped.

Some more good news on the pension front is that I have confirmation that the full benefits on my non-contributory company pension accrue at age 50

All of my retirement income will (sadly) come entirely from money I have saved. Even my state pension won't cover my annual tax bill.

Marine_life

gadgetmind wrote: »

All of my retirement income will (sadly) come entirely from money I have saved. Even my state pension won't cover my annual tax bill.

Well if your state pension won't cover your tax bill I would say you are in pretty good shape financially.

I realise with the pensions income that I have guaranteed I am incredibly lucky (one is an old defined salary scheme and one is a defined salary scheme with my current employer).

I have only just discovered the firecalc simulator so have been having a bit of a play with those.

In reality I could, financially at least, retire now and the three things holding me back are:

1. School fees payable for another two years.
2. Mortgaged on a fixed rate until December 2013.
3. Aforementioned pension which hits its full benefit in October 2014.