Hi all , first time post and it’s a biggie so please bear with me…

eddyj

I just want to get some ideas to see if my retirement plans are on roughly the right track and also if there are any better choices I could be making and anything else relevant and advantageous I am missing out. Also there will be tax issues etc which I am not knowledgeable on at all.


Some background.

I have been working in mental health and social care for 29 years and am 46 ½ years old . it is very stressful and I am kind of burnt out to be honest.
I have a partner and one 4 month old child. Partner earns 17k in an admin job and wishes to keep working full time when she goes back after mat leave.
Due to being a late baby and my wonderful parents efforts I inherited a 3 bed semi with mortgage now paid off.
Due to inheritance and extreme carefulness with money since starting work I currently have approx £340,000 in a number of different savings products eg ISA / FRB/guaranteed capital bonds/NS&I/etc etc.
I have instant access to about 20k but rest is kind of tied up for 2 or 3 year periods to maximise interest. I could surrender these funds with some interest penalties however.


If I left work now my loc gov pension appears to be worth about 12k per year in todays money [ payable at 65 yrs ] and state pension payable at 66 years would be about 6k.


My 'Plans'


[All this depending of course that I and my family are spared and no major disasters befall…..! ]


For some time now I have been wanting to leave work and live off my savings until pension kick in.
I can live frugally and don’t have extravagant tastes with cars holidays etc , I just try get the stuff that’s good value for money.
Partner says she will help with running costs of the home and is also not a spendthrift high maintenance type person .

As a registered nurse I could in theory work via an agency maybe a couple of shifts or one night shift per week for some day to day money .

I feel that the 340k could be divided by 19 which is the amount of years I have to wait till Im 65 and in theory I could pay myself that as a yearly ‘wage’ until pension commences. Obviously I’d have to be careful due to effects of inflation , unexpected major purchases [ house repairs / cars etc.]
Partner [if she chooses to hang around! ] wants to help with some of the running costs and take some of the strain off me.
This all means I can be around when my daughter gets to school age and take her back and forth and be there during the day for her etc. however , I am acutely aware that she will generate her own costs throughout!


So ,
Any advice or thoughts from experienced posters on this plan / tweaking of same and/or whether it is feasible or ludicrous would be gratefully received


Many thanks
rob

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Marine_life

How much are you earning at the moment (net) and (more importantly) how much of that are you spending?

Are you sure about the pension?

What will you do if you 'retire'?

eddyj

hi ,
on 35k at present PA
fairly sure re the pension as this was a recent annual mailshot valuation from the pension provider
if im not working there is plenty i can do
looking after the little one
loads of hobbies interests pastimes etc
as i said i could do some nursing shifts
ed

kidmugsy

Since your plans are distinctly long term, I suggest that you find out whether the LGPS would let you draw pension early e.g. at age 55, and what the penalty for doing so would be.

bristol_pilot

I don't think you can do it to be honest, the main reason is that your accrued pension from 65 is too low and also since retirement is so far away for you £12k in today's money will be subject to considerable inflation risk over that period and then until whatever age you die (could be another 30 years). I would not want to arrive at 65 with a house but no savings and a very small pension. If the savings of £340k were intact at that point, then maybe it would be more feasible.

Could you consider carrying on to, say, 55 then maybe going part-time, freelance or semi-retired?

bendix

Sure he could do it, bristol, but it would be a stretch and it would be a long retirement of constantly looking over one's shoulders financially.

I would recommend another approach. It's obvious he's burnt out. After working so long for one employer, why not take a year off, go travelling, relax, go for long walks. You might find it rejuvenates yourself, and then you could be itching to go back to work for - say - another 4-5 years at which point your nest egg will be bigger, your pension pot bigger too, and the number of years needed to fill before your retirement money commences will be less.

I'm a huge fan of occasional 'life sabbaticals'.

My_life

Is what you are proposing is for you to become the primary carer for your daughter, as your profession will allow you to supplement your joint (you and partners) income by flexible part-time/occasional working. You have a safety net of significant savings to fall back on, have no debts or mortgage and you will have a deferred LGPS pension increasing with CPI yearly until you collect it at either 65 or earlier - but reduced.


Options:

1. If you are really unsure about this - request a 6-12 month unpaid break - to test if you can actually deal with not working and the challenges to raising a baby
2. check if you are allowed to buy additional years service/ increased pensions before you leave (I am currently in LGPS and buying £5000 per year extra pension from my salary to make up for the shortfall I will have as I plan to take early retirement)
3. find out if staffing cuts are on the cards in your service - therefore voluntary redundancy is possible - you may be helping colleagues and be given the opportunity to boost your pension
4. be clear about how much you three actually need to live on - what will your contribution need to be? how much of your savings will you have use each year to meet that share - after assuming you do say 2 or 3 shifts a month?

Personally I would do this and it is a decision that mothers have to make every day. I did - I walked away from a high paid professional job and took 6 years off to raise my child. My colleagues thought I was mad and it would ruin my career, but it didn’t. My partner was concerned as I was the highest paid of us at that time - but we survived and now we realise that for us it was the right choice.

You have the chance to make a difference in your life and that of your child - pensions are important, but you appear to be in a very safe place financially. You know from your job how much being healthy in the mind is more important that being healthy in the bank - but unhappy with your life.

Good luck

My life

eddyj

thanks everyone for your helpful replies.
it would probably make more sense for me to continue working till my daughter is school age as that would be another few years savings and pension input.
it is a bit of a gamble all in and yes i could be leaving myself short for the future if i am spared.
i have seen so many friends and acquantances either dying or being diagnosed with major illness recently that i am starting to think that quality of life is more important than constant working and nose to the grindstone....

can anyone advise what the tax position on my savings would be if i did give up work at some point in the not too distant future?
thanks
ed

bendix

eddyj wrote: »

thanks everyone for your helpful replies.
it would probably make more sense for me to continue working till my daughter is school age as that would be another few years savings and pension input.
it is a bit of a gamble all in and yes i could be leaving myself short for the future if i am spared.
i have seen so many friends and acquantances either dying or being diagnosed with major illness recently that i am starting to think that quality of life is more important than constant working and nose to the grindstone....

can anyone advise what the tax position on my savings would be if i did give up work at some point in the not too distant future?
thanks
ed

Which just reinforces my suggestion for a sabbatical. Take a year out. Spend time with your daughter. Enjoy life. Spend a little - even, say, £15000 of the savings you've done well to accumulate.

You work in a profession in which being in your late 40s is not a negative and it's also a profession in which you would be able to return after a year of relaxing.

Take advantage of it. You're in a great position - your net worth is so much higher than 99% of the populations. Don't throw it away by being rash simply because you're tired now. Don't condemn yourself to future poverty and financial stress, because you need a break.

You are in a situation where you can have your cake, and eat it too.

property.advert

Lets look at education. Even assuming there are good local schools (which may well not be the case in this day and age) which are free, then post 18 education will need to be financed. With home fees today at £9k against some foreign fees at up to £30k then a prudent person might think this gap will close or indeed disappear in the next 18 years. Working on that principle and the fact that moderate living expenses are about £300 per week for London, you come up to £45k per year. Some courses are 3 years but other are longer. I'd work on £50k per year for 5 years as a happy medium and if there is an excess, then good.

So you need £250k in 18 years time. With a single investment now, that equals 250,000/(1+5%)^18 = £103,880. So you could say £100k invested now will cover it. By the looks of it, whatever income there is in 18 years won't be able to pay for education out of income so some provision has to be made now. Investments should of course be monitored to see that that they on track etc.

That leaves £240k to invest. I'd knock off £40k now to cover a possible move to a house which is in the right catchment area for schools, either now for primary education or later for secondary schools.

So £200k to invest isn't going to give much in the way of return compared to the current salary whilst keeping up with inflation.

Simply, you need to work but some of the large expenses are already covered. Feeding this £200k in through annual ISAs could be the best way to maximise returns, cash certainly isn't going to work. You need some advice but first you need to prioritise your goals. At the moment you appear to be thinking only of replacing your income, which is hardly the full picture. Think carefully and then get some professional advice but beware those who are looking to feather their own nests from your nest egg !

Loughton_Monkey

Up to you, OP, but I would recommend a slightly different approach. I did something very similar, but actually retired at 56.

In my own case, I 'lived' for work, and worked very hard. The more senior I got, the more money I earned (and saved) but 'phew' the stress and politics really takes hold.

Having always felt I wanted to retire early, it was not until about late 40's that I really got into it seriously. One advantage I had was a very detailed knowledge of my exact worth and spending patterns. So I set myself the task of analysing at what stage I could give up work and continue to maintain my (reasonably lavish) lifestyle.

I guess you could liken it to swimming the channel [which I could never do]. You have started, and you have got 15 miles across. What you are considering is basically giving up, and 'dining out' on a very good effort of doing 15 miles. The alternative is to swallow hard. Do the other 5 miles. Then you have cracked it.

My calculations showed me just that. New contract in year 2000 (I calculated) would do me fine if I stuck it for the full 5 years. Did 6 years in the end (circumstances).

So work out some figures as to when you can safely retire, with no regrets. The 'joy' of being able to earn more money and be able to 'swallow' all the cr4p for another few years knowing you are going is only exceeded by the joy of actually achieving it. I hung up my suits over 5 years ago, and haven't regretted a minute of it!