My Early Retirement Plan - Your Thoughts

CityOwl

My husband and I both hit the big 5-0 in 2018 and with retirement not feeling as far away as it once did, we want to make sure that we can retire before the age of 67. Over the last few years we have been tidying up our finances and looking to maximise tax efficiency, but this has been done in isolation without a coherent plan.

I wasn’t really sure where to start, but having lurked for years and read my fair share of threads, I thought it best to summarise where we currently are financially.

Our finances as at January 2018

Me: Full-time PAYE £38K (Local Government)
Husband: Full-time PAYE £75K + £20K bonus & £6K car allowance (Private Sector)


PROPERTY

Home: Worth approx £800K – No Mortgage

Zoopla estimate was £917K but I am not sure how accurate this figure is and do not want to over-estimate, property was purchased over 14 years ago and we have not kept an eye on local property prices. We will move to a smaller place in the next 5-10 years, just depends on when the kids (19-23 years) can afford to leave home. Oldest is working but the younger two are currently at university, we are supplementing their student loans. We are not really expecting to free up any cash from the move, if we don’t spend it all on the new property, we will gift what is left to the children for house deposits.


DEBTS Credit cards balances cleared every month (and earning a bit of cashback too)


SAVINGS

Both: 2 x Cash ISA – £24K each, fixed at 2.51% to November 2020
£21K in various high interest current accounts and regular savers
Husband: S&S ISA current value £30K, paying in £500 a month


OTHER ASSETS

In addition to our everyday cars, my husband has a classic car which is insured for £40K. It is the love of his life and will probably be with us for another 15 years.

Jewellery (approximately £15K, can be sold in the future as I don’t wear it)


PENSIONS

Me: LGPS Career Average £2250 pa (accruing at £700+ pa - NRA 67)
SIPP £34500, paying in £1000 per month

Deferred Pensions
LGPS Final Salary £5100 pa (NRA 65)
PCSPS Final Salary £2000 pa (NRA 60)


Husband: Employer’s DC £213K, contributing £40K pa via salary sacrifice

Deferred Pensions
Employer’s Career Avg £8350 pa (NRA 65)
Employer’s Final Salary £2500 pa (NRA 60)
Old DB Scheme 1 £5000 pa (NRA 60)
Old DB Scheme 2 £3000 pa (NRA 60)


State Pension: I have obtained forecasts for us both and we will receive the full state pension each if we work for a further 5 and 6 years respectively. We will have 35 years of NI contributions in the next couple of years, but we may as well wipe out the COPE to maximise our state pension.


TO DO Make wills – I know we should have done this ages ago, but my fear is that it is going to be complicated so I keep putting it off. Worried we will start having to think about trusts etc. and I don’t like anything that I don’t understand.


We will be in really good shape financially from the age of 67. At present we cannot touch my husband’s DC pot without taking his employer’s DB pensions, which will be subject to an actuarial reduction if taken before 65. His employer is currently reviewing the rules of the scheme, but the decision could be more than a year off.

My SIPP and his S&S ISA are the beginnings of our provision from 57-67. Minimally we will need £2K a month. Should we just carry on as we are or am I missing something? As you may have guessed my husband is all for early retirement, but not interested enough to do anything about it. He is much happier leaving it all to me so he can tinker with his car.

Sorry for the long post, it will be really interesting to have your thoughts and suggestions.

AnotherJoe

Wills are easy you don’t need trusts get them done.
Also get LPAs done, again easy. DIY the latter.

It all looks good to me at a quick skim regards pensions, from age 60 you have good underpins of some pensions kicking in and depending how investments go can start burning down the ISAs and SIPPs to bridge the gap between when you retire (will that be together?) from some age after 55 until 60.

You might also not do a “hard” retirement but one retire a year or two before the other, one or both go part time for a year or three , etc.

You seem to me to be in good shape to make retirement decisions from ages 57 onwards.

enthusiasticsaver

You seem to be in good shape financially.

If you retire at 57 you will need 3 years to bridge until the old DB pensions kick in at 60. You will have the option of the cash isas/current accounts or s and s isa and sipp depending on market conditions. The s and s isa should be around £75-£80k depending on returns and the sipp should be around £100k. That should give you around £250k and you will need at least £75k to cover age 57 to 60

At age 60 the old DB pensions will give you £12500 which will probably be about half the income you will need but you should still have around £175k in the s and s isa and sipp. As you say from 67 you will have plenty.

We did the same as you and have just retired at 58. My husband overpaid into his DB pension though and due to excellent protections when the company moved to DC there was very little reduction if he took it early. He also received a smoothing pension to transition between 58 and 66 when his state pension kicks in. My DB pension is much less but I have more investments and a substantial SIPP and cash funds. We will be in the ridiculous position of having a higher income at age 66 than when we were working once all our pensions have kicked in including state pension.

You need wills but I am not a fan of trusts either. Our house is worth a lot less than yours though so if you do not downsize significantly you may want to consider it as your estate will be liable to inheritance tax. We gifted cash deposits to our daughters to help them on the property ladder.

CityOwl

AnotherJoe wrote: »

Also get LPAs done, again easy. DIY the latter.

Thank you, I had completely forgotten about LPAs, even though I looked into them for my mum a couple of years ago when she had a mini stoke. She backed out at the last minute and we didn't want to pressurise her if she felt uncomfortable about it. There is a history of debilitating strokes in her family, so she keeps asking us to promise we will "switch off the machine" if she ever has a massive stroke. Mum probably thinks we won't do it if she gives us LPA and that the doctors will ignore her wishes. Not sure where to go with that one.

Just added LPAs to my To Do List

CityOwl

AnotherJoe wrote: »

You might also not do a “hard” retirement but one retire a year or two before the other, one or both go part time for a year or three , etc.

We will probably retire within a year of each other as we both work long hours and are feeling a bit burnt out, hence the Early Retirement Plan. His rewards are greater, so I think he will just hang in there until he is ready to go.

I occasionally look at other jobs and decide that I am going to do something less stressful, but the LGPS is so good that it keeps me hanging on for a little bit longer. There is no way I will be doing this job is my sixties and I am not even sure I will make the next five years as there is no work/life balance. I will just keep plodding on, accruing the additional pension until I can't take it anymore.

It will then be a part-time job (preferably at John Lewis for the staff discount) until I have enough NI contributions.

CityOwl

enthusiasticsaver wrote: »

You need wills but I am not a fan of trusts either. Our house is worth a lot less than yours though so if you do not downsize significantly you may want to consider it as your estate will be liable to inheritance tax. We gifted cash deposits to our daughters to help them on the property ladder.

I must admit I have been following your journey on these boards and I always read your posts with interest as they resonate with me.

The wills will be done this year and LPAs have been added too.

Its interesting that no one (as yet) has advised us not to gift our children house deposits, which will impact on our early retirement. The Bank of Mum and Dad is flourishing, even if the other banks are closing down branches.

crv1963

CityOwl wrote: »

I must admit I have been following your journey on these boards and I always read your posts with interest as they resonate with me.

The wills will be done this year and LPAs have been added too.

Its interesting that no one (as yet) has advised us not to gift our children house deposits, which will impact on our early retirement. The Bank of Mum and Dad is flourishing, even if the other banks are closing down branches.

I too follow others journeys picking up ideas and tips. You seem to be sound and I empathise with the stress element and we're also on a similar journey.


I think if it's possible then gifting house deposits is a good idea, we think we'll probably end up doing so too, if we're able. I think it's intrinsic to human nature to want to assist the next generation. The bank of Dad certainly seems open here!

maysmummy

On the LPAs : they should certainly be done by you , as well as an advance directive which is a document saying what you would or would not like in terms of care and treatment in the last part of your life. Without one, doctors will usually treat as a younger person i.e. everything they can . If your mum doesn't fancy a LPA for health and welfare, she might agree to one for finance. It would save a lot of hassle if she has a stroke and can't pay her bills etc.
The paperwork for an advance directive can be obtained from age uk.
HTH

CityOwl

maysmummy wrote: »

On the LPAs : they should certainly be done by you , as well as an advance directive which is a document saying what you would or would not like in terms of care and treatment in the last part of your life. Without one, doctors will usually treat as a younger person i.e. everything they can . If your mum doesn't fancy a LPA for health and welfare, she might agree to one for finance. It would save a lot of hassle if she has a stroke and can't pay her bills etc.
The paperwork for an advance directive can be obtained from age uk.
HTH

Advance Directive added to my list. Just not sure how to bring it up with mum...

CityOwl

I was a bit nervous about posting as it does feel like airing your dirty linen in public. However, as nobody has come back with “what on earth are you doing? It’s all wrong”, I am feeling much more confident about our plan for early retirement. From the responses I have received (thank you), it appears that carrying on as we are is the best way forward.

My To Do List for this year includes making the following for us both;

Wills
Lasting Power of Attorneys for both finance & health and care
Advance decisions (living wills)

I will let my mum know that we plan to do and hopefully it will give her some food for thought and maybe encourage her to look at LPAs again and make a living will too.

It feels like a good idea to revisit this plan and our finances in a year’s time. Being able to drawdown from my husband’s DC pension pot without having to take the DB pensions would really be a game changer.

His empoyer’s review of their pension scheme should be completed by then and will give us the next steps. It would be interesting to know if other pension schemes are allowing access to DC pension pots without making their members take their DB pension.

AnotherJoe

maysmummy wrote: »

On the LPAs : they should certainly be done by you , as well as an advance directive which is a document saying what you would or would not like in terms of care and treatment in the last part of your life. Without one, doctors will usually treat as a younger person i.e. everything they can . If your mum doesn't fancy a LPA for health and welfare, she might agree to one for finance. It would save a lot of hassle if she has a stroke and can't pay her bills etc.
The paperwork for an advance directive can be obtained from age uk.
HTH

My experience from a couple of elderly relatives is completely the opposite, they attempt to switch off elderly people as soon as they can. If mother/ mother in law is concerned that “the doctors will switch her off” that’s far more likely with no LPA than with one. Ina medical LPA she can specify what should happen should she go on life support, under what conditions the “plug should be pulled” and so on.