Early-retirement wannabe

Acquinas

SIPPs eh? That's a whole new world for me. I think I need to do some reading. Amy recommendations as to where to start?

Triumph13

Acquinas wrote: »

But of course with state pension now at about £120 a week

You have plenty of time to get that up to £155 a week via either your new job or voluntary NI contributions.
£8k from SP plus £20k from your pension gives you the £2k per month net that you wanted. If you're happy with that, then there's a fairly simple option of take the pension now, stick most of your salary into a personal pension or SIPP until you have enough saved to plug the shortfall before state pension age and to pay any remaining voluntary NICs then off you go.

Triumph13

westv wrote: »

Saving money is the last thing I want to do once retired.

I'd love to know what the average 'savings rate' in retirement is for those who, like me, save like mad in order to retire early. I suspect that the habit of trying to come in 'under budget' is going to be a very hard one to break!

Marine_life

Triumph13 wrote: »

I suspect that the habit of trying to come in 'under budget' is going to be a very hard one to break!

That depends where you set your budget

The average spending level people seem to predict is somewhere around £2,000 per month (which is broadly equivalent to national expenditure averages for UK couple as a whole). Expenditure in continental Europe is higher for early retirees as we have to pay for medical insurance which where we live comes in at around £5,000 pa (for a couple - and the service is good so happy to pay for it).

I suspect the base spend (food, household bills etc.) is common for most retirees and where the difference exits is in the variables like holidays, cars etc which could quite easily double that.

I am actually tempted to pay ourselves a salary in retirement and then live on that so effectively we could (and probably would) end of saving as we would set the salary at a level which allows us to do so (if that makes sense? I think there is some sensible psychology there rather than just taking money from a big pot as and when needed)

tigerspill

westv wrote: »

Why do something when you can pay someone else to do it for you? Isn't retirement about relaxing? :D

Because you can likely do it much much better than those you pay.

jamesperrett

I've been wanting to post something on this thread for a while now but, as I use my real name on here, I didn't want everyone to know about it until I was really sure...

I've decided to take early retirement next summer at age 55 after nearly 37 years in a public service job. There are a few reasons but one big one was that I've been working away from home quite a bit over the last 18 months which attracts a pensionable allowance. As I'm still on a 'by analogy' scheme to the Civil Service Classic scheme, that allowance only counts if I retire within 3 years of earning it and it almost cancels out the actuarial reduction from taking the pension early.

I'm going to take the opportunity to expand a small business that I've been running in my spare time transferring old sound recordings to more modern formats - and possibly go into other aspects of the music and recording business. At the moment I'm getting more enquiries than I can handle so it would be good have more time to do something I enjoy that also brings in a little income.

atush

Did yu build u a DC pension, so you can leave your CS pension until it is no longer reduced?

jamesperrett

No DC pension I'm afraid - I started working for this organisation straight out of 6th form college. Only a small amount of other savings so not really worth trying to defer (unless I get a really attractive job offer over the next few months).

atush

Well you could always open one and save into it this year and next (while you still have earned income).

Andy1977

Hi,

I discovered this thread a few weeks ago and decided I’d post once I’d read the whole saga. I’ve found it really interesting although as has been mentioned, a lot of the figures mentioned are way beyond what I’ll achieve. So in response to the original questions…

Who is aiming for early retirement (or who has retired early already)?

I’m aiming for early retirement. I’m 39 and have started thinking seriously about this over the last few months, driven mainly by no longer enjoying my job. I’m in the common dilemma of wondering if I can stick it out with my relatively well paid job, or gamble on a career change that I might enjoy more (or not) but for less money. Anyhow, while I’m continuing down my current path I want to make sure that I am doing all I can to ensure I can retire as early as possible.

What is the strategy for getting there?

My situation is as follows:
39 years old with a partner and 2 young children
Mortgage of 90k on property worth 250k, base rate tracker @ 1.54%

Savings of 170k - about half in s+s isa, the rest in cash isas, regular savers, high interest current accounts and premium bonds. I’m currently in the process of shifting more of this into s+s isas which will accelerate when the isa limit increases in the next tax year. I’m also planning on investigating P2P lending when the more established companies are available within the innovative isas.

I had been heavily overpaying my mortgage for years but stopped a few months ago when it became obvious that my rate was so low I’d be better off using that money elsewhere.

Pensions – I have an index linked final salary pension (now closed) which is due to pay 5k a year, a couple of defined contribution schemes which I currently have around 25k in. My current employer pays 10% into my current scheme (the maximum available) and I have upped my contribution to 14%. I am on course for the full state pension with 14 years more contributions required.

I’m am also stoozing with a 0% credit card and using the money to fund the additional pension contributions and fund regular savings accounts paying 5-6%.

Interestingly I turn 40 one week into the next tax year which presumably gives me 1 week in which to open a lifetime isa. This should allow me to contribute 4k a year with a government top up of 1k a year for 10 years. I believe this pot then becomes available to me at 60.

I’ve set myself some fairly challenging savings targets which I am hoping will get me to the following situation at age 50:
S+S and P2P Savings pot of around 400k
Cash pot of around 60k
Defined contribution pot of around 120K

At 50 – retire or at least have the option to, or maybe go part time. Drip feed 4% (16k) income of s+s isa into cash pot which we’ll live off. Expenditure will exceed 16k (thinking around 22k) which will deplete cash pot until…

At 55 – access 25% tax free lump sum of pension to clear mortgage (this is due to be cleared at 58 anyway), re-invest rest into isas for tax shelter. Mortgage being cleared frees up around 5k a year

At 60 – lifetime isa pot becomes available to me but will leave to generate income if possible.

At 65 – final salary pension of 5K becomes available

At 68 – state pension of 8k becomes available

At 68 I’ll hopefully have around 18k of pension income to live off which I expect to be close to what we’ll need so I’ll be happy to have gradually run down my 400k savings pot to around 250k by this point, maybe less.

I’ve not factored in any thought of downsizing but that could free up around 50k at some point if needed.

How much of a relative decline in income are you prepared to take / did you take?

I earn around 45k now, and probably live off less than half that when you factor in what I save, contribute to pension etc. I’d like to have 22k available but once the mortgage is cleared could probably be quite happy on 16-18k.

What are your main concerns?

The pensions goalposts being moved to my disadvantage.
Not knowing just how much my children will end up costing me.
Being overly exposed to the stock market - not really in a position to invest in property which I think is becoming less attractive anyway. I’m expecting someone to point out the merits of VCTs at this point

I haven’t factored in any thought of inflation mainly because a). I can’t control it and b). it wouldn’t change what I’m doing anyway. I’ve also not mentioned anything relating to my partners finances. Her salary / pension situation is not as good as mine but the figures I’ve mentioned should be ok for the 2 of us and her finances will provide contingency.

All the figures are approximate and although I’ve given it plenty of thought, 10 years is a long time and I fully expect that the plan will become clearer as I approach 50.

My biggest problem now is trying to put this to the back of my mind and get on with living life. After reading this thread I’m in the mindset of imminent retirement!

Any thoughts, observations or suggestions very welcome,

Thanks.