Help with early retirement plans??

Eyes_wide_open

I'm 42 and for the first time in my adult life I am debt free so have started thinking about my long term finances.

I am a civil servant and currently have 25 service in and have no plans to leave.

I live in rented property following the break up of my marriage so no savings / equity available there.

My long term plans are to either retire early or at the minimum be in a position to significantly cut my hours.

I have around £800 per month that I can put away every month but have no idea what the best options are ?

Any advice would be greatly received.

McKneff

Are you in the civil service pension.

Eyes_wide_open

Yes I am , have been in the classic scheme since I started there. I know I am in a privileged situation but also know that with the changes coming in I would be wise supplementing my retirement income by other methods xx

bigadaj

I'd be saving for a house or flat deposit and then overpay a. Mortgage on a cheap property, this obviously depends on where you are located.

Eyes_wide_open

Something to consider. I just didn't fancy paying a load of interest on a mortgage and thought I was too old to get a mortgage?

[Deleted User]

Mortgages can be quite short (10, 15, 20 years are all valid options from some lenders), so although the typical mortgage length is 25 years it certainly isn't the only option, and you have 25 years left until your state pension age anyway so you may well be able to get a 25 year mortgage depending on when you were to apply. Mortgages certainly aren't beyond your reach, you'll just need to be careful to balance saving for a deposit against putting money into a pension.

bigadaj

My personal view is that the uk is massively over focused on property, house owning and the like, however owning your own property does give you security. As you are a single bloke then security of tenure is something that is difficult to achieve whilst renting. That is something I would prioritise over early retirement or a reduction in hours, but were all different a Nd have different priorities.

Loughton_Monkey

I have not done calculations for your particular age, but it's not difficult to 'model' the concept of buying now, with a mortgage up to a chosen age (67 say?). Then model the cost of renting for evermore - right up to age 90, which is about 'average' should you survive to retirement. The two columns of results side by side would almost certainly still prove that buying is far better than renting. It is by a mile for younger people, irrespective of house price inflation (or the reverse).

It is unlikely, though, that the equity thus tied up in you house could be used for retirement income [although things like a lifetime mortgage may be a very good way to do that]. But if the calculations above prove 'profitable' then it's best to buy.

On top of that, once you have made that significant rent/buy decision, you need to work out your spending and income patterns going forward and see what comes out. It is far better to concentrate on spending (and not saving) since what you don't spend you save. But spending is what you "DO" and it is spending money that you "WANT" when you retire.

To me, this sort of calculation is 80% of the job. Simply don't worry at all [for the moment] where to put and spare savings money, because that is subsidiary to the spending issue. Just assume that you'll be able to get something like 7% for any reasonable pension or ISA investment.

This sort of model will tell you what you are spending while working, and what you can spend after retirement at several different dates. See if it "adds up". Only then do you do the other 20% which is basically about (a) rigorously sticking to your spending budgets, and (b) optimising your pensions and investment/savings portfolio. and (c) formulating a strategy on when you can retire, fine tuning what you want to do in retirement, and managing/controlling the model and updating it with variances from original assumptions.

atush

I would agree that saving for a property to live in is key for an early retirement (or indeed any retirement).

Early retirement while renting privately can be tricky as you are not in a secure situation, and income would have to be higher to pay for renting.

So, save for a property, then overpay and save outside pension as well.

Eyes_wide_open

Thank you for all your advice. There is lots to think about.

I'm currently in social housing so it's secure and reasonable rent. Having that security will allow me time to consider all my options.

Thanks again xx

Road_Hog

Eyes_wide_open wrote: »

Thank you for all your advice. There is lots to think about.

I'm currently in social housing so it's secure and reasonable rent. Having that security will allow me time to consider all my options.

Thanks again xx

Another vote for property here. Even if you don't move into it, but become a BTL LL.

When you retire (unless you become very ill early on and the State wants to sell your property to pay for care), having your home paid for and not having to find the rent each month will be such a bonus.

There are no guarantees in life and your social housing may become insecure or the rent may rocket. Having a property gives you options.