Age 38, very little retirement savings, but want to retire early

Lois_and_CK

I'm just off out to get a haircut, but I'll reply to others later when I get home. Really appreciate your comments.

L & CK

Lois_and_CK

Linton wrote: »

Try the HL pension calculator

When I put your numbers in, treating the pair of you as 1 person it seemed to show that with your £1300/month and your employers' contribution increasing with inflation you are in the right ballpark for retiring in your late 50's.

However, suggest you check things yourself.

Thanks Linton - that calculator is useful. My employer's contribution automatically goes up whenever I get a pay rise so the inflation increase is a good point.

Lois_and_CK

hugheskevi wrote: »

So you have a total £15,157 p/a from combined State Pension. You want to get that up to £21,000 p/a so another £5,843 of pension from age 67 needed.

Then you require £21,000 of income each year between target retirement date, let's say 58, and age 67.

And you also need £107,000 extra for housing (£157,000 mortgage less £50,000 released somewhere down the line, net £107,000.)

Using the calculator, with the current £430 monthly contributions and combined £12,000 pot you would get an income from age 58 of £4,600 and a lump sum of £41,000.

So for the period 58-67, further capital of £107,000 (9 years *£21,000 less £4,600 pension income less lump sum of £41,000) is required.

The combined capital to fund early retirement and pay off mortgage is £214,000 saved over a 20 year period, and your saving capacity is £26,400 per year. There is another £1,200 p/a of post 67 income to get too, but that won't cost much, about £50-£75pm or so into a pension maybe.

Looks realistic - the above is rather simplistic as it ignores interest on mortgage and returns on saving, and any income escalation post retirement, but it all seems comfortable enough at first glance.

This is great, thank you. The way you've worked it out with a total amount needed for housing + retirement really simplfies the calculations for me and makes it seem a bit more achievable put that way.

hugheskevi wrote: »

The maths seem to stack up, but my main concern would be what you say about debt. Do you have the discipline to formulate a savings plan and actually stick to it - you don't seem to have saved much previously outside of house equity?

Fair enough. Being in debt was the low-point and most stressful time of our lives. If I can help it, we will never be in that position again. The discipline of snowballing, switching to 0% cards, and sticking to strict budgets has carried over now that we're out of debt, and the same principle has given us our 6-month salary emergency fund. The feeling of being debt-free and having savings is very powerful, so I'm fairly confident we can remain disciplined.

hugheskevi wrote: »

Have you robustly calculated your target of £21,000 - that is pivotal to everything?

Yes, even down to the cost of dog food for the dog we won't own until we retire

hugheskevi wrote: »

Definitely contribute enough to pensions to maximise employer contributions. And probably extra to provide an income to get income up to £21,000 form age 67 as pensions are best for income provision.

Use S+S ISAs to provide capital for the period 58-67.

In terms of priority order, I'd say (and others will have different ideas here - there is no right answer):

• Pension contributions to maximise employer contributions
• Additional pension contributions up to amount needed to get £21,000 income from age 67 including State Pension if have access to salary sacrifice, or are higher rate taxpayer
• S+S ISA contributions
• Mortgage overpayments
• Pension contributions up to amount needed to get £21,000 income from age 67 including State Pension if not got salary sacrifice or higher rate tax-payer

Thanks so much, I really appreciate the time you've taken to reply.

Lois_and_CK

property.advert "But, £21,000 a year is not necessarily the goal to aim for. Investing as much as possible, taking as much advantage of employer contributions and salary sacrifice will either make £21k a year come sooner or provide more than £21k by the minimum retirement age."

Good point - if it can come sooner than age 58 then all the better. Thanks for your reply.

Lois_and_CK

hugheskevi wrote: »

The pension estimates look to be in today's money - £122 and £169 p/w respectively, taking into account Basic State Pension and Additional Pension that looks reasonable.

Yes that's right - state pension forecasts are definitely in today's money.

fairleads

If you want to retire early then don't contribute any more money into your pension funds. Invest the 300 per month into UTs ITs etc. This way you will receive the tax benefits where you need it - in retirement ( tax free income) - and avoid future changes to pension fund legislation.

Paul_Herring

property.advert wrote: »

But surely the most stable and predictable element is the state pension ?

Hardly. My retirement age has crept up in stages in the past few years from 65 to 67 for example with no guarantee that it won't change again - as a result I'm not even sure when I'll get my state pension, presuming there will actually be one...

Lois_and_CK

fairleads wrote: »

If you want to retire early then don't contribute any more money into your pension funds. Invest the 300 per month into UTs ITs etc. This way you will receive the tax benefits where you need it - in retirement ( tax free income) - and avoid future changes to pension fund legislation.

Thanks for your reply, fairleads. UTs I'm guessing is unit trusts? What's ITs please? Do you mean via S&S ISAs?

Lokolo

fairleads wrote: »

If you want to retire early then don't contribute any more money into your pension funds. Invest the 300 per month into UTs ITs etc. This way you will receive the tax benefits where you need it - in retirement ( tax free income) - and avoid future changes to pension fund legislation.

That's stupid. Just because the OP wants to retire early, not putting money in somewhere where it is doubled is stupid!

The OP can still put money in UTs etc. outside pension wrapper but not to take advantage of matched contributions is plain stupid.

gadgetmind

Paul_Herring wrote: »

My retirement age has crept up in stages in the past few years from 65 to 67 for example with no guarantee that it won't change again

Perhaps you mean that your state pension age has crept up?

Your retirement age is different, and is far more under your control.