Could you retire on half your current income?

seven-day-weekend

Our income at the moment is £520 per calendar month from my husband's teachers' pension - about the sameas £115 per week which is classed as the minimum in the UK.

In the future we will have this plus 2 x full state pensions and my Local Authority Pension...but at the moment we live reasonably well on this amount.....in southern Spain where the cost of living is MUCH cheaper.

He also gets £200 pcm Incapacity Benefit,at the moment but we do not budget for this as it could be withdrawn at any time.

So, for us.....things can only get better! (Until we come back to the UK:eek: )

Then the sh*t will hit the fan!!!:rotfl:

copey_2

Hi I am just about to officially retire,although I have not been able to work for the past 15 years due to a spinal problem,enforced retirement at 50 was quite a shock,fortunatly I had taken a policy out a couple of years previous after alot of nagging by my good lady and my only saving grace was that a waiver of contributions clause had been written into my retirement plan policy,so regardless of my state of health, contributions were still being made,thank goodness. !!!
I am now at the point where figures for my pension have been issued and although its reasonably good,it needs to be used to make money.
I have been told to go and buy an ANNUITY,don`t really understand what that is all about,could anyone please enlighten me.
regards.. Alan

EdInvestor

jamesd wrote:

margaretclare could give prudent retirement planning and equity release a good name!

Speaking of equity release, the market is developing quite quickly now with more competition bringing better deals.See this article. The big banks are said to be poised to enter as well, which should improve matters even more.

Anyone with an existing plan should keep an eye on developments with a view to remortgaging to a better deal in future.And anyone thinking of doing E/R now should bear in mind that it might not be a "once in a lifetime" deal, but much more like an ordinary remortgage, with regular switches to get a better deal.

So consider things like redemption penalties, and drawing down income as and when it's needed, rather than in one big lump - a bit like taking income (but not capital) from a drawdown pension in a SIPP, you could say. If you take out a big lump sum, the interest can roll up quite rapidly, reducing your equity (and thus the amount you might want to borrow against in any future new deal).

savingforoz

I'm already living on about half my current income and actively planning for my financial future. I live well in the present, with holidays, etc, but I'm not a big spender and so have money available to invest for the future. I would never rely on benefits - I prefer to take responsibility for myself and do the best I can to ensure that I will have a comfortable retirement, which is still some way off. Learning about investments etc is proving an interesting experience.

So to answer the original question - yes, I could live on half my income - I already do.

margaretclare

jamesd wrote:

margaretclare could give prudent retirement planning and equity release a good name!

Oddly enough, it hasn't come about by prudent retirement planning. I wish I could say that it had!

I decided to pay the full NI contributions at a time when it was really not what married women were supposed to do. I belonged to the NHS pension scheme but could have made so much better use of it than I did.

In 1992 I was made redundant, widowed (husband 'hadn't believed in' life assurance when it mattered i.e. when he was a young family man before his heart disease kicked in), had a £45K mortgage and struggled for 5 years to keep a roof above my head. People were going into 'negative equity' all over the place and many lost their homes.

In 1997 I met the man who is now my second husband. As some of you know, he walked out on a disastrous second marriage and arrived on my doorstep like a refugee.

However, he worked for another 4 years to age 67. I worked too. When he became 65 he discovered that, because he'd never been 'contracted out', his SRP was matched by an equal amount of SERPS, giving him approx £160 a week. He kept his annuity from a previous career only by giving his ex all the equity in the matrimonial home, but that annuity is approx £250 a month after tax. I get approx £112 a week SRP plus SERPS, and I have various annuities, one is for £95 a month. It all adds up to approx the £23K a year that was mentioned. With the equity release we're no longer paying £260 a month on the mortgage.

However, because we get our income separately and are taxed separately we don't fall into that tax clawback which starts on retirement income at around £19K. In addition, like Jake'sGran, we live fairly simply but we live well and comfortably and like her, we can't help the savings rolling-up!

It certainly hasn't been down to long-term forward planning. If it had been, at the very least I would have insisted that my first husband take out life assurance at a time when he could have done cheaply, and keep it up. It could have paid off the mortgage for me at a time when I needed it most, when I was widowed and redundant at the same time.

Margaret

EdInvestor

However, because we get our income separately and are taxed separately we don't fall into that tax clawback which starts on retirement income at around £19K.

A very important point.So often you find one partner is overburdened with taxable (pension) income but no ISAs, and is thus getting the age allowance clawed back while the other has everything in ISAs, hardly any taxable income and is thus wasting the tax allowances.

The problem is that the focus is too much on tax relief when saving and not enough on tax planning at the retirement end.

novice-saver

Plasticman wrote:

£115 per week is £5980 per year
£115 per week x4 is £23920 per year

a high rate tax payer must earn £33,300 + £5,035 personal allowance = £38,335

how are you a high rate tax payer?

NI, PAYE, and DB Pension deductions exceeding £1K per month, leaving a bit over £2K per month in my hand to spend.

Perhaps I should have called in money in hand, rather than wage.

EdInvestor

copey wrote:

I have been told to go and buy an ANNUITY,don`t really understand what that is all about,could anyone please enlighten me.
regards.. Alan

Have a look at this report on whether annuities are value for money.

copey_2

Thanks for the link edinvestor unfortunatly I cant get into it,some prob with "plug ins",will have another attempt later

Plasticman

novice-saver wrote:

NI, PAYE, and DB Pension deductions exceeding £1K per month, leaving a bit over £2K per month in my hand to spend.

Perhaps I should have called in money in hand, rather than wage.

Thanks for clarifying that - my brain obviously wasn't in gear when I read your post!