Spend or save?

Parsimonia
Parsimonia Posts: 255 Forumite
edited 19 February 2014 at 8:13AM in Over 50s MoneySaving
You've all given me valuable advice with my MIL problem, so I hope you have some good advice re my close friends' situation.

'Steve', the husband of my best friend 'Trudy' (not their real names!!!), was diagnosed with severe vasculitis a little over 5 years ago and had to permanently give up work a little over a year ago. The disease has damaged all his major organs, doing most damage to his heart and lungs. He currently gets ESA and is in the support group.

They have 3 grown children and 2 grandchildren.

He was a milkman, and hadn't paid into a pension scheme. He's 57 years old. Trudy is 51 and an senior manager in the NHS. She works crazy long hours. She earns £67,800 a year, and has been in the NHS pension scheme for 19 years. She also has two small frozen pensions from when she worked in the private sector.

Trudy's official retirement age is 66 (I think), but she wants to retire at 55 instead (in 4 years' time) in order to spend some quality time with her husband. Retiring so early means that her actuarially reduced pension will be about £18k gross and her lump sum will be about £60k.

They have about £50k in ISAs at the moment.

The crux of the problem centres on whether Trudy can afford to retire at 55.

She's worked out that if she cuts their expenditure to the bone, she should be able to save about £20k a year for the next 4 years, to build their savings up to £130k. When added to her retirement lump sum, they should have almost £200k in total.

Their house is owned outright, and they have no major debt apart from a car loan that finishes in 8 months' time.

Unfortunately, Trudy's early retirement plan is causing lots of arguments.

Steve doesn't want to be frugal and thrifty, as he knows he has a reduced life-expectancy and so he wants to enjoy himself now, whilst he still can. Trudy knows he has a reduced life expectancy, which is the main reason that she wants to retire early. But she thinks that she needs to save heavily now, to make early retirement possible.

She asked my advice, but I don't know what to tell her! I know exactly what she's going through as my hubby has a reduced life expectancy too, but given our different financial situations, I won't be able to retire early as we'll need every penny I can earn for as long as possible. We're having to be frugal and thrifty from current necessity, not because we're squirrelling money away for the future.

The problem is that Steve has an expensive hobby (he collects rare books and first editions) and he also loves wining and dining out several times a week. They both love their foreign holidays. He doesn't want to make any cutbacks or do without any of his pleasures - and I guess that's perfectly understandable!

He tells Trudy that she's focussing so much on saving for future rainy days that she's not enjoying the sunshine in the here-and-now. He wants her to carry on working full time until she's 66, when she'll earn her full pension, in order to reduce the amount they need to save now for a comfortable retirement.

I don't know how to advise her! I'd give up work in a heartbeat to spend more time with my hubby if I could, but it's a luxury we can't afford.

What would you do???
Save £12k in 2014 - No. 153 - £1900/£9000

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Comments

  • Savvy_Sue
    Savvy_Sue Posts: 45,811
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    Well, I hope that's not their real names ...

    I'm not going to comment on the viability: plenty of people live on a lot less than £18k pa (as you know ...)

    But do they know what his life expectancy is? Being realistic, is he going to make it through the next four years? Perhaps he knows something she doesn't.

    I think - and I could be wrong - that I'd want to reduce my hours as soon as I could, and get some quality time in now, before I was forced to do so because of the amount of care which might be needed.

    But then I'm watching MIL become increasingly unable to leave FIL because of his dementia, and I'm glad they have a number of 'good' years to look back on.
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  • What a difficult situation to be in for both you and you friend savy_sue.

    It is difficult to comment but 'Steve' might well know something that 'Trudy' doesn't. We realised after my fil passed away that he kept the knowledge of his actual life expectancy to himself in order not to upset my mil. In some ways Trudy & Steve know what's ahead of them but they need to agree how to handle it. Many others don't get the chance to make plans......

    They both have to be very honest with each other and perhaps if they both made compromises they could meet in the middle. I'm sure Trudy could arrange for special leave of absence of up to 6 months at some point in the near future. ( I know people in the Scottish NHS do this. Perhaps if they saved like crazy for 6months they could then go travelling for 6 months while he is reasonably fit and well? Trudy could then return to her job( perhaps on reduced hrs) and save a smaller amount to enhance her pension pot.

    If they could agree to a smaller 'fun' budget in the meantime they could still go for nice meals out once or twice a fortnight. As for the expensive hobby, again a budget could be agreed. (These are potentially investments anyway, as the sad fact of the matter is they could be sold later on).

    Honesty and compromise might be the way forward.
    Busymumofthreeplusdog......
    ..............on a mission to curtail the spending and build up the savings
    2015 NSD total - 5
  • Parsimonia
    Parsimonia Posts: 255 Forumite
    edited 19 February 2014 at 8:14AM
    Savvy_Sue wrote: »
    Well, I hope that's not their real names ...

    No, just the first intials are correct!!! :D

    Savvy_Sue wrote: »
    But do they know what his life expectancy is? Being realistic, is he going to make it through the next four years? Perhaps he knows something she doesn't.

    His consultants have told him he that he could live for 20 more years, or have a flare up and be gone in a flash. Vasculitis is an auto-immune disorder, and can flare up very quickly. The main concern is the damage causes already to his lungs, heart and kidneys. His liver is the only major organ that isn't quite badly damaged. He's been told to expect to need dialysis within a year (his renal function is at 23%) and his lungs are severely compromised. His heart is weakened too, and I don't think there's much the cardiologists can do about that, apart from hope the vasculitis doesn't flare up again and cause more damage.
    Savvy_Sue wrote: »
    I think - and I could be wrong - that I'd want to reduce my hours as soon as I could, and get some quality time in now, before I was forced to do so because of the amount of care which might be needed.

    But then I'm watching MIL become increasingly unable to leave FIL because of his dementia, and I'm glad they have a number of 'good' years to look back on.

    It's a terrible quandry, isn't it? I'd want to spend the quality time with my hubby too, but then I wouldn't want to deny him any pleasures either, so it's such a difficult choice!

    If Trudy (not her real name!) was a nurse she could take her full pension at 55 but as she isn't she'll lose about a third of its value by leaving so early.
    Save £12k in 2014 - No. 153 - £1900/£9000

    January NSD Challenge - 19/21 under target :(
    February NSD Challenge - 22/20 - over target :D
    March NSD Challenge - 19/14 - over target :D
    April NSD Challenge - 0/16
    YTD NSDs = 60
  • Parsimonia
    Parsimonia Posts: 255 Forumite
    edited 19 February 2014 at 8:15AM
    What a difficult situation to be in for both you and you friend savy_sue.

    It is difficult to comment but 'Steve' might well know something that 'Trudy' doesn't. We realised after my fil passed away that he kept the knowledge of his actual life expectancy to himself in order not to upset my mil. In some ways Trudy & Steve know what's ahead of them but they need to agree how to handle it. Many others don't get the chance to make plans......

    They both have to be very honest with each other and perhaps if they both made compromises they could meet in the middle. I'm sure Trudy could arrange for special leave of absence of up to 6 months at some point in the near future. ( I know people in the Scottish NHS do this. Perhaps if they saved like crazy for 6months they could then go travelling for 6 months while he is reasonably fit and well? Trudy could then return to her job( perhaps on reduced hrs) and save a smaller amount to enhance her pension pot.

    If they could agree to a smaller 'fun' budget in the meantime they could still go for nice meals out once or twice a fortnight. As for the expensive hobby, again a budget could be agreed. (These are potentially investments anyway, as the sad fact of the matter is they could be sold later on).

    Honesty and compromise might be the way forward.

    Yes, all very good points. Thank you!

    'Trudy' is so panicked at the moment that I don't think she's considered a leave of absence. I'm pretty sure they'd allow it. We work in the same hospital and she is VERY highly regarded by the whole senior managament team.

    When my uncle was dying of throat cancer a few years ago his wife took a leave of absence from her NHS job and they did a few 'dream holidays' back to back. He was really poorly, but was so glad they'd done it.

    I don't think she's considered cutting her hours either - she's in that trap of thinking of hers as an all-or-nothing job, not one that would lend itself to part time working. Perhaps she could consider job-sharing....

    Yes, the books are an investment...he's always joking about that! The compromised fun budget is a good idea too...

    Thank you so much. I'm so close to 'Trudy' that I find it difficult to give disinterested advice....I don't know 'Steve' so well, but theirs is a difficult relationship sometimes, and this is testing them quite a lot. :(
    Save £12k in 2014 - No. 153 - £1900/£9000

    January NSD Challenge - 19/21 under target :(
    February NSD Challenge - 22/20 - over target :D
    March NSD Challenge - 19/14 - over target :D
    April NSD Challenge - 0/16
    YTD NSDs = 60
  • I forgot to mention that 'Steve' also has a substantial life insurance policy, so when he does die my friend will have no money worries - not that that is any consolation to her.

    I think a sabbatical might be a good solution for her - so that she can have say 12 months of really good quality time with him before he's tied down with dialysis etc...and then she could return to work part time afterwards, still contributing towards her pension, and have the best of both worlds. I know from bitter personal experience how much dialysis ties you down and knocks the stuffing out of a person.

    They are in a better place financially than us, but we share essentially similar concerns - I do really feel for her!
    Save £12k in 2014 - No. 153 - £1900/£9000

    January NSD Challenge - 19/21 under target :(
    February NSD Challenge - 22/20 - over target :D
    March NSD Challenge - 19/14 - over target :D
    April NSD Challenge - 0/16
    YTD NSDs = 60
  • getmore4less
    getmore4less Posts: 46,882
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    Tough one.

    Needs a bit of thought to way up the options.
    I have a gut feel she has just gone with this as the only.

    As you have qualified the after there is life cover, investigate the options of cashing that in now many have impaired life options.

    Quality time, (if he wants to keep his hobbies going he won't need her full time unless he gets very ill.

    Downsize the job and plan to carry on past 55, could probably go 1/2 time and they still have a good income.

    She won't need so much savings later on as the pension would be bigger.

    Sabbatical is another possibility followed by part time(or full time if it happens). keep the pension going and don't take the reduction.

    There is a potential claw back issue if you take the pension then go back into the health service.

    Have a plan for his collections if these are of no interest long term, perhaps upgrade the collecting to trading now he has the time.

    Property/mortgage any options there?
  • Tough one.

    Needs a bit of thought to way up the options.
    I have a gut feel she has just gone with this as the only.

    As you have qualified the after there is life cover, investigate the options of cashing that in now many have impaired life options.
    Property/mortgage any options there?

    I don't think they've explored cashing in his life insurance policy - the policy predates his illness by about a decade, so I don't think there would be an issue with it paying out...and I think it's a substantial sum insured - I think I remember her saying it was £450k....
    Quality time, (if he wants to keep his hobbies going he won't need her full time unless he gets very ill.

    Downsize the job and plan to carry on past 55, could probably go 1/2 time and they still have a good income.

    She won't need so much savings later on as the pension would be bigger.
    I don't think the thought of part time work had even crossed her mind. Temperamentally she's an all-or-nothing type of woman, so this may be an interesting option for her to consider that she wouldn't have thought of by herself.

    There is a potential claw back issue if you take the pension then go back into the health service.
    Yes, we discussed that. A lot of our colleagues have done that though....
    Have a plan for his collections if these are of no interest long term, perhaps upgrade the collecting to trading now he has the time.

    I'm not sure what his collection is worth, but I know it's insured for £200k. I'm not sure he could bear to trade any now - I think it'll something she'll have to deal with when the time comes.
    Property/mortgage any options there?

    Their house is a lovely semi-detached 4 storey Victorian property with a tiny front garden and a large back garden in one of the most expensive parts of the city. I don't know exactly what it's worth, but definitely upwards of £300k, and it's owned outright without a mortgage. It's their absolute pride and joy, though, so I think 'Trudy' would be loath to sell. Only their youngest daughter is still at home (she's 21) so it will be far too big once 'Steve' has gone, but they bought it when they first married from the proceeds of a legacy from Steve's parents, so lots of memories are bound up in it...
    Save £12k in 2014 - No. 153 - £1900/£9000

    January NSD Challenge - 19/21 under target :(
    February NSD Challenge - 22/20 - over target :D
    March NSD Challenge - 19/14 - over target :D
    April NSD Challenge - 0/16
    YTD NSDs = 60
  • System
    System Posts: 178,071
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    I am sorry but I really cannot understand why a person is anguishing so much about whether to 'spend or save' in such a difficult situation as this.
    The couple concerned own their house outright(£300000)with other assets including the book collection of about £250000. How much does somebody want for goodness sake? Surely the priority is spend quality time together. No price can be put on that. Having lost a sister at 42 through illness who left 4 childen behind, the priorities of my entire family have become much more life than money focused.
    Time cannot be bought, only used wisely.
    A life insurance policy of £450000 also seems excessive. The premiums must be huge!!
    Surely the wife needs to consider taking some time out, sabbatical seems a good idea. Her financial future seems secure whatever happens.
    Spending time together, enjoying the simple things in life cost very little as does piece of mind.
    Sorry to sound brusque but to me this is a non issue. Spend precious time together. That is what really matters. There are no pockets in a shroud.

    Be happy and content.

    V.
  • missile
    missile Posts: 11,679
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    I am with Steve, enjoy what little time they have together.

    Rather than retiring would it not be better for Trudy to cut back her hours and possibly work part time?
    "A nation's greatness is measured by how it treats its weakest members." ~ Mahatma Gandhi
    Ride hard or stay home :iloveyou:
  • excelpaul wrote: »
    I am sorry but I really cannot understand why a person is anguishing so much about whether to 'spend or save' in such a difficult situation as this.
    The couple concerned own their house outright(£300000)with other assets including the book collection of about £250000. How much does somebody want for goodness sake? Surely the priority is spend quality time together. No price can be put on that. Having lost a sister at 42 through illness who left 4 childen behind, the priorities of my entire family have become much more life than money focused.
    Time cannot be bought, only used wisely.
    A life insurance policy of £450000 also seems excessive. The premiums must be huge!!
    Surely the wife needs to consider taking some time out, sabbatical seems a good idea. Her financial future seems secure whatever happens.
    Spending time together, enjoying the simple things in life cost very little as does piece of mind.
    Sorry to sound brusque but to me this is a non issue. Spend precious time together. That is what really matters. There are no pockets in a shroud.

    Be happy and content.

    V.

    To be honest, I don't think it's Trudy's own future financial security that she's worrying about! The crux of her worry is what's the best thing to do financially if he manages to go into remission and his health doesn't deteriorate, and he therefore lives another 20 or 30 years?

    To make it clear, this is what she absolutely WANTS to happen - she wants him to live as long as possible.

    But, she's worried that if he does live a longer life than anticipated, she'll need to provide sufficient pension for two people to live comfortably on (one of whom has very expensive hobbies and tastes).

    I think if she knew for certain that he only had a few years to live she'd quit her job in an instant, before she's even entitled to draw down any pension at all, and regardless of the financial impact.

    It's Steve that wants her to carry on working - he wants the high income now so that he can enjoy himself whilst he still can.

    She's devoted to him, and wants to look after him but also not have to deny him anything (materially) that he wants.

    I agree that £450k (or thereabouts) is a lot of life insurance - not quite sure why they took out that much (I think Trudy's life is insured for the same amount)...I think they wanted to provide security for their children and grandchildren....
    Save £12k in 2014 - No. 153 - £1900/£9000

    January NSD Challenge - 19/21 under target :(
    February NSD Challenge - 22/20 - over target :D
    March NSD Challenge - 19/14 - over target :D
    April NSD Challenge - 0/16
    YTD NSDs = 60
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