Must I stay or can I go

SnowMan

Hi bigchipper

Couldn't agree more with Totton and SliAbhaile that getting out of the rat race if you look like you may be able to afford to do so has to be the best option.

I did the same at an early age and have never regretted it and my quality of life has just rocketed even though my expenditure has decreased massively.

You need to work out every element of your current expenditure, using one of the budgeting sheets that are widely available or by creating your own spreadsheet.

There might be a possibility of doing some sort of equity release or downsizing in your current property in later life which would help with any shortfall if the finances don't go as well as expected. Doesn't mean you will need to do that but it is nice to have a fall back option.

I am working on an assumption by the way of earning RPI + 2% on my savings and investments with a fall back plan if I don't achieve that. I am heavily invested in shares through tracker funds but there is no guarantee that investments will outperform savings over our remaining lifetimes or that any return on any asset class much above RPI will take place even over long periods. If going the investment route it is essential to keep costs down (for example by using low cost trackers).

Starship9

I have to agree 100% with the previous poster.

I was in a similar situation to yourself (Classic pension member, 33 years service, 51 years old). We had paid our mortgage off though.

I got an early retirement package last year where my Dept topped up my tax free lump sum to pay off the actuarial reduction and I ended up with a £17K PA pension plus £50Kish tax free lump sum.

We house and feed our kids (19 + 21) for now but they have part time jobs / apprenticeships and it's amazing how the grants payable improve once your income drops !

Overall I've a lot less disposible income now but we can still have a few holidays and treats each year and plenty of days out of course !.

The point about life not being a rehersal was bought home forcibly to me 20 years back when my dad died suddenly, still in work, at 57. I vowed back then that I'd go at the earliest opportunity and did so - retired at 51 and a bit !

No regrets whatsoever so far and we have just found that my wifes pension can be drawn in 5 years time (instead of the 10 I'd planned on) so thats going to to give us a nice lift in capital and income so we can start to save again, if needed, from then.

We have both managed to pick up some part time earnings here and there too so thats provided some "fun" money.

My advice is be realistic in your projections and be prepared to live off a lot less but if you can do it, do it

SliAbhaile

Starship9 wrote: »

The point about life not being a rehersal was bought home forcibly to me 20 years back when my dad died suddenly, still in work, at 57.

Yup, mine died at 52 having worked every day of his life since he was fourteen. His early death sure helped form my outlook on life.

sabretoothtigger

http://www.youtube.com/watch?v=UcL91CKyivE

kidmugsy

Just two points.

(i) If you've made your thirty years of NI contributions, you will get a full State Pension without making any more.

(ii) Take all advice that the secret of equity investment is to hold it for a long time with a pinch of salt. The secret of equity investment is to buy equities when they are good value. If you buy when they are bad value you could be lumbered for decades. For judging whether "the market" is good value the best procedure known to me is to follow the writings of Andrew Smithers.

N1AK

kidmugsy wrote: »

J
(ii) Take all advice that the secret of equity investment is to hold it for a long time with a pinch of salt. The secret of equity investment is to buy equities when they are good value. If you buy when they are bad value you could be lumbered for decades. For judging whether "the market" is good value the best procedure known to me is to follow the writings of Andrew Smithers.

Your points are both valid. My only contrary observation is that knowing when the market is 'good value' could be at best described as 'difficult' and could be described as 'impossible'. If you are building up a portfolio over the long term then investing as you go protects you from the risks inherent in trying to predict markets.

gadgetmind

N1AK wrote: »

My only contrary observation is that knowing when the market is 'good value' could be at best described as 'difficult' and could be described as 'impossible'.

When p/e ratios are sky high, and every newspaper is screaming that equities are the place to be because it's a "new paradigm", and everyone at dinner parties is bragging about how well their investments are doing, then that's a good time to start rolling into cash and bonds.

When the papers are asking "Is this the death of equities?", everyone is grubbing around for teeny returns from cash and gilts as the "markets are too dangerous at the moment", then that's a great time to invest.

You'll never get out at the peaks or in at the bottom, and perhaps shouldn't try, but some common sense should let you avoid doing the exact opposite.

Radiantsoul

bigchipper wrote: »

You are correct the first £30k is tax free) but to get the £72k I would either need to accept an actuarially reduced pension (down from £14kpa and £42k lump sum to £10k pa and £30k pa), or to park the pension untouched until I am 60. Either way there is a funding shorfall that some other income source would need to fill. If investing available cash cant bridge that gap do into retirement and i need to keep working its maybe best to just see it out where I am as its highly unlikely I would get anything remotely near what I earn now somewhere else.

I guess my point is that you will earn £42k+company pension contributions less tax(c£10k) for six years. If you go you will get £72k. To my mind that makes taking the money now appealing as it will be around 35% of what you can expect to earn, without having to work again.

My dad retired at 58, and was dead by 68. I am sure he never enjoyed work either and so it was good for him to have 10 years of leisure.

Rollinghome

gadgetmind wrote: »

And this is why you need a long term view.

The point that seems to have been missed is that the OP is asking "Can I go?". He isn't talking long term, he's talking now.

Projections are fine for the long term. They're essential. Someone in his middle years needs to make some assumptions to make plans for his eventual retirement. It's quite likely that over time those assumptions have to be changed and plans altered but there isn't a better alternative.

What we shouldn't do is to confuse projections with predictions. Someone not planning to retire in 30 years but to leave his job now, and depend on savings for an income, wants a realistic estimate of what income he might reliably expect.

One course that would provide certainty would be to buy an annuity but one that was index linked wouldn't return anything approaching 5% or anything like it.

Many people do buy annuities at the point of retirement. Why on earth would any sensible person do that if they could expect to reliably get 5% from a mixed basket of investments? And that's where the OP is, potentially at the point of retirement.

And over other time periods, the equities would have trounced this.

Of course they have. Which is why I asked why you or anyone who was totally sure that an immediate reliable income of 5% after inflation could be had elsewhere would settle for just 0.5%.

When people ask these questions of how much they can expect as a return on a given sum then the sensible honest answer is that we don't really know for sure. We can estimate, we can guess, we can hope, but that's about all.

It's an old cliche but no less true for that: " There are two types of people. Those who don't know, and those who don't know they don't know.".

Guess what figure I have in my retirement projections for my annual income from my cash reserves?

Sorry without knowing what rates of interest you've secured or future inflation rates, I have no idea what your projections or guesses might be.

gadgetmind

Rollinghome wrote: »

Many people do buy annuities at the point of retirement.

Yup, and if you need a cast iron guarantee of getting a set sum every month then that's the way to go.

Why on earth would any sensible person do that if they could expect to reliably get 5% from a mixed basket of investments?

Even 4% drawdown only has a just over 90% success rate and 5% closer to 60%, but we've mainly got the great depression followed by the 2nd world war in the data set to thank for that. However, you tend to find that if you add state pension coming in later on, that even 5% hits a 100% success rate.

Have a play with firecalc.

We can estimate, we can guess, we can hope, but that's about all.

This is why I said "rule of thumb" in my posting where I mentioned the 4-5%, and I also said "risk does rise towards the top end of the withdrawal range. However, I guess what you're really after is a bridge until state pension kicks in".

Sorry without knowing what rates of interest you've secured or future inflation rates, I have no idea what your projections or guesses might be.

Yes you do because I gave you the answer!

Our cash buffer is exactly that and this is all that cash ever really can be over a period of decades.