Early-retirement wannabe

k6chris

Retirement used to be a line in the sand, you worked for a long period of time, probably with an increasing final salary, then you stopped working and retired. Many had an expectation of a 2/3 final salary income. This is no longer the case for most people. Having a usable pension pot to provide income is not the same discussion as retiring! Most people of my age (early 50s) have seen their peak earning days pass by them, so are on a natural path of spending less. Part time work is a natural part of that phasing down, in terms of stress, % work time and indeed income. There will be many people who never 'retire' in the old fashioned sense, but who will have a more flexible and more enjoyable time, afforded by their pesnion savings. Saving for that time is vital, pensions are an important part of that, retirement is down to the user....

darkidoe

RickyBoyRoy wrote: »

Awesome thread! I've just been blogging about my retirement plans and happened to find this whilst Googling. I should have known there'd be something about this on MSE but didn't think to look.

I started reading from page 1, but when I got to the bottom I realised there were 153 pages! At my reading speed it would take me until retirement to read all those posts! I've read as much as I can and will go back to pages I've missed as I get a chance.

Anyway, I'm 34 (almost 35) and, until recently (approx 12 months ago), didn't have any kind of pension or retirement plan. I've always been pretty good with money - always managing to save a good chunk of my salary each month but then also spending a good chunk on nights out, festivals etc. for the majority of my 20s. I've always said that I didn't want to work until my late 60s though!

I bought my own house when I was approx 23, a 3 bed end terrace for the sum of £54k. A complete renovation project which I sold in 2008 for £100k leaving me with a pot of approx £40k after fees and expenses.

I put my self through uni using that money but I also worked part time so my £40k remained intact plus a bit more.

Anyway, many years later, I'm in my third house, with a wife and our first child due in February! Scary stuff!

Not having any pension, I opened a SIPP last year and I've ploughed most of my savings into it - currently stands at around £37k - not a lot, so I'm not retiring any time soon! We've gotta start somewhere though!

Our current 25 year mortgage is going to take us close to 60 (58 for me, 56 for my wife) so that wouldn't be a bad retirement age, although I don't know how much savings we'll have if we've only just paid the mortgage off. Maybe we'll be pushing on into our 60s after all but I guess it depends what happens in the next 25 years.

One of the comments I read said something about having 400k saved and they will hopefully add another 300k in the next 3-4 years. JEEZ!! I won't even earn 300k gross! I'm currently earning £40k per year with my wife on approx £28k.

Well, that's an intro to me and where I'm at. Not really got a plan, but I've started a pension and ploughing as much as I can into it before the baby comes a long. I know I need to spend a lot more time on planning things out so I hope you guys can offer some advice about how you started to plan and any mistakes you've made. Is there a good Excel template I can use?

There seem to be a good mix of people who are approximately the same age as me, and I'm looking forward to discussing retirement plans with you guys over the next 25ish years. Those that are nearing retirement now, I hope I can follow your lead and pick up some tips a long the way.

Thanks for reading,
RickyBoyRoy

3 Bed Terrace for a sum of 54K?? Now whereabouts is this in ol' blighty?

I would suggest calculating your income and then outgoings and then factor to see how much you are able to save per month, year. Then when you get an estimate of how much you can put away per year, and consider where you are going to put in away (SIPPS, ISAs, Savings) according to life plans. Always keep 6-1 years worth of expenses in cash!

Congrats on the upcoming new kid!! Exciting times ahead I am sure!

Reckless_Saving

RickyBoyRoy wrote: »

One of the comments I read said something about having 400k saved and they will hopefully add another 300k in the next 3-4 years. JEEZ!! I won't even earn 300k gross! I'm currently earning £40k per year with my wife on approx £28k.

Depends was the 300k relates to, if it's main employment income then yes :eek: not your average job and certain the american bloggers seem to be in this category. If it's referring to increase in net-worth then it could be feasible to those lower on the income scale.

Average investment income 5%@20k plus income savings of 20k gives you 160k over 4 years, could the investments net-worth increase by 9% through to bridge the gap to 300k, tall order but possible for some.

@RickyBoyRoy what's you blog url

Marine_life

AlanP wrote: »

An interesting take on Phased Retirement, particularly the bit about the "comfortable middle" being happy not to work as they get older compared to those who need the money at one end and those who want to "do something and make a contribution" at the other end.

American based but still relevant.

http://knowledge.wharton.upenn.edu/article/the-case-for-phased-retirement/?utm_source=kw_newsletter&utm_medium=email&utm_campaign=2016-11-01

I partially fit into the "want to do something to make a contribution" category not in any charitable way (not that I don't think charitable contributions are not valuable) but in a way whereby a lot of the time its just interesting.

I am also finding that as money becomes less of a consideration I am enjoying loosening the purse strings a little. Not a lot as the (relatively) frugal ways are hard to give up but I now thing that paying extra to get something more is, in my mind at least, increasingly worth it.

When I look back at my spreadsheet from a few years ago (when I started this thread) I think I was a little deluded. Sure we could have retired at 50 but actually we would have run our cash reserves pretty dry by the time we got to the point where our pensions started rolling in (60).

RickyBoyRoy

darkidoe wrote: »

3 Bed Terrace for a sum of 54K?? Now whereabouts is this in ol' blighty?

I would suggest calculating your income and then outgoings and then factor to see how much you are able to save per month, year. Then when you get an estimate of how much you can put away per year, and consider where you are going to put in away (SIPPS, ISAs, Savings) according to life plans. Always keep 6-1 years worth of expenses in cash!

Congrats on the upcoming new kid!! Exciting times ahead I am sure!

Hi, lol yes £54k sounds pretty low, especially when I watch Location, Location , Location and people are paying £200k for studio flat near London, but I live near Bolton in the North West so it's not that exceptional, even today there are a few for that price on RightMove.

Thanks for the advice, I was keeping monthly expenses sheets up until we moved house but with all the moving and decorating I've let it slip, so I've lost track of what this new house is costing us but I'm going to get back on to it now. Good idea about the cash - what do you mean by 6-1 though?

Exciting and terrifying times ahead - definitely!!!

westv

I think they meant 6 months to a years worth of savings.

RickyBoyRoy

Reckless_Saving wrote: »

Depends was the 300k relates to, if it's main employment income then yes :eek: not your average job and certain the american bloggers seem to be in this category. If it's referring to increase in net-worth then it could be feasible to those lower on the income scale.

Average investment income 5%@20k plus income savings of 20k gives you 160k over 4 years, could the investments net-worth increase by 9% through to bridge the gap to 300k, tall order but possible for some.

@RickyBoyRoy what's you blog url

Hi Reckless, when I read it I just assumed this would just be cash savings but I see where you're coming from - I've just broke out the Excel spreadsheet to try to calculate your example of 160k over 4 years - I can't, so obviously I'm doing it wrong - please could you explain how you get to this figure?

I've literally only just started blogging and I did it to help me understand pensions as I didn't have a clue. I thought that writing about what I've learned would help me to get it straight in my head. I'm not allowed to link but the url is "making a millionaire dot co dot uk" - some of it might be wrong so feel free to correct me

Triumph13

RickyBoyRoy wrote: »

Hi Reckless, when I read it I just assumed this would just be cash savings but I see where you're coming from - I've just broke out the Excel spreadsheet to try to calculate your example of 160k over 4 years - I can't, so obviously I'm doing it wrong - please could you explain how you get to this figure?

I'm pretty sure he just meant investment growth @ 5% pa on the existing £400k would be £20k pa. Add in £20k pa of cash savings gives £40k pa. 4 years of that = £160k.

darkidoe

RickyBoyRoy wrote: »

Good idea about the vash - what do you mean by 6-1 though?

Yes I meant 6 months to 1 years worth of emergency cash savings

Triumph13 wrote: »

I'm pretty sure he just meant investment growth @ 5% pa on the existing £400k would be £20k pa. Add in £20k pa of cash savings gives £40k pa. 4 years of that = £160k.

I think that Triumph meant that Reckless meant to add another 300k over 3-4 years in net worth on top of 400k of investments is either:
1) Your employment income is that high
2) estimated 5% annual Dividend income from 400k investment = 20k reinvested + 20K own income added in = 40k X 4 years = 160K incease in networth +++ any capital growth in the investment itself to reach 300k.

RickyBoyRoy

Triumph13 wrote: »

I'm pretty sure he just meant investment growth @ 5% pa on the existing £400k would be £20k pa. Add in £20k pa of cash savings gives £40k pa. 4 years of that = £160k.

Ah, that makes sense - I forgot about the 5% on the £400k, no wonder my total was nowhere near £160k extra - yes I see how we get to that now. Thanks for the help.