Prosperous soul in the making

savingholmes

Awww all the gang turned up! Thanks guys. Hope all my readers are enjoying the festivities and are getting some time to chill. Happy New Year all. We had a good Christmas seeing family. Just chilling now. We've been so exhausted. Normally I would have been getting bored by now but this year feel like I'm just recovering so no boredom in sight.

I've gone through our £ - £75 is due to go out probably tomorrow. That will mean we finish 2019 on £25.1K owed to CCs which would have seemed impossible at the start of the year. I've gone through our budget to Nov 20. If we cut back on our holiday in the summer we should hopefully still be able to get to debt freedom by Nov 20 which is a relief. If I get around to claiming my tax refund that could boost that. DS also needs to get a job. He still hasn't had his tax refund from Oz but we are docking the £1K he owes us out of the maintenance £ we send him at uni. Really hoping DS gets a job too after his return from Oz. Doubt the original company will take him back as he left at their busy period. He's having a lovely time over there - friend's parents have taken him in over the xmas periods and he is having a whale of a time pretty much for free - they even gave him gifts.

Being more in control of our money is giving me more hope for the future. I keep running various calculators to see when we could get to financially independent. If we want to stay in a house like our current one it is likely to take until age 60 (10.5 years). If we are willing to downsize may be able to do sooner. If we went after the smallholding idea and increased our mortgage debt by say £100K - we would either need to continue to have an interest only mortgage or would need to work a lot longer - or downsize at a later point which would be another option. I don't want to take on a house with high maintenance costs though so need to be wise and keep asking is this taking me closer to FI or further away.

In working out my financially independent (FI) number - I've taken into account that I could access one of my pensions at 60 and get a lump sum of £35K plus an on-going pension of £6K per year. If we are fortunate enough to live healthily to age 67 and beyond - we are already due to get combined pensions of around £35K+ per year (including that state pension element). Assuming we continue working for at least the next 5.5-10 years that will continue to rise so I feel like we have already taken care of our post age 67 future and just need to focus on the 17.5 years between then and now. To retire at 60 - we would therefore need a SIPP with about £290K in it to create a big enough lump sum to also help repay our mortgage (if we decided to at that point).

At age 60 - we could clear our mortgage if we chose to:
£35K lump sum from previous pension
£72.4K from sipp lump sum
£13K from £102.51 over-payments per month
£24.5K EF

If we only needed the remaining £217K to last 7 years - we could have an income equivalent from the SIPP of £31K p.a. plus the £6Kp.a. from the previous pension so we would be sorted even after allowing for tax. That would require us to stick to an expenses budget of around £2.9K per month and put £2K a month into a SIPP (assumed we get tax relief of 20% and get a return of around 5%). So that's the goal currently - repay debt and then get to that point. I would want to write and have side hustles but it would be fab if we could have that kind of safety net so we didn't have to if we didn't want to or if we couldn't.

doingitanyway

Your future plans sound very exciting and doable. Great debt repayment for the year too

savingholmes

Thanks DIA - I am someone who needs to keep focused on the bigger picture to stay with the programme.

I think I will start tracking my FI number on here - probably in my signature - in preference to my MFW date. As a reminder:

Need to track an old pension of DH's which I believe had £1.2K in. Won't count this until confirmed.

In addition we have in defined contribution pensions:

• R1 £5988 (DH)
• R2 £26115 (DH)
• A £2000 (Me)

So of our FI through SIPP/pension target we are approx 34K/291K (eg to retire at 60) = 11.68%

In defined benefit pensions I have

• £6K p.a. I can access from 60 (not included in FI number above)
• £7.3K p.a. I can access at 67

DH has a £4Kp.a. projection from age 67 from his defined contribution. (not included above)

Providing we both work until 55 we will both have full state pensions each on current rules (from age 67).

ohdearhowdidthathappen

Those plans sound fab, although I'm not convinced I understand them completely. I find pension stuff REALLY confusing, I must admit I'm not sure where OH and I stand with it all. Retiring always seems so far away, it's easy to ignore, but I need to get a grip on my understanding of it as it'll creep up!
Glad you've had a lovely Christmas :-)

jwil

That's really interesting. How do you calculate what is enough to live on? Do you do it on the basis of what everything costs today? That's where I get confused. Say for example we'd need £20k if we were to retire this year, but how does that translate to 20 years time when we don't know how much things will cost?

enthusiasticsaver

I will weigh in here with what we did when we knew we were aiming for early retirement. We tracked our pensions and long term savings annually and updated a spreadsheet and at the same time tracked expenditure. Remember most people have paid off their mortgages by retirement although many advise concentrating on saving and pensions instead as mortgage rates are low. It helped us though to get rid of the mortgage as it was our biggest outgoing. You work on today's expenditure rates as presumably as prices increase so does pension income either through investment growth or index linking if the pension is DB (defined benefit).

You have a good plan but it may be good to look at the tax implications. We were in the position of having very good defined benefit pensions and full state pensions meaning we would be paying significant tax by the time we got to SRA which is 66 for us. We opted to take our DB pensions early and although they were reduced it meant we could retire at 58. They were staggered so we are living off my DHs pension (the biggest) and his lump sum and one of my smaller pensions to use my tax allowance. Another one of mine pays out in February 2020 and we will use my lump sum to top up our savings. Best to have more than one income stream, stagger it and subsidise with savings/investments.

Msmoneyspider

I have really enjoyed reading your diary and think you have done fantastically well clearing £20k of debt. My heart goes out to you as you support your daughter navigating her teenage years, whilst contending with ASD.

Our son was diagnosed with CAPD at 4 and his teenage years were very traumatic for my husband son and I, not sure how any of us made it through …… but we did and he is now doing very well and seems happy in his own skin, feel sure the same will be true of your DD.

Love your crafting. Art has been my saviour and creative outlet.

Keep up the great work.

jwil

enthusiasticsaver wrote: »

I will weigh in here with what we did when we knew we were aiming for early retirement. We tracked our pensions and long term savings annually and updated a spreadsheet and at the same time tracked expenditure. Remember most people have paid off their mortgages by retirement although many advise concentrating on saving and pensions instead as mortgage rates are low. It helped us though to get rid of the mortgage as it was our biggest outgoing. You work on today's expenditure rates as presumably as prices increase so does pension income either through investment growth or index linking if the pension is DB (defined benefit).

You have a good plan but it may be good to look at the tax implications. We were in the position of having very good defined benefit pensions and full state pensions meaning we would be paying significant tax by the time we got to SRA which is 66 for us. We opted to take our DB pensions early and although they were reduced it meant we could retire at 58. They were staggered so we are living off my DHs pension (the biggest) and his lump sum and one of my smaller pensions to use my tax allowance. Another one of mine pays out in February 2020 and we will use my lump sum to top up our savings. Best to have more than one income stream, stagger it and subsidise with savings/investments.

Thank you, that's really useful

I get the arguments about the mortgage vs pensions, but for me I think it's about security. Whatever happens we'd have a roof over our heads. I can't get away from that angle. That's really helpful to think about tax too, I wouldn't even have considered that.

I'm mostly focussing on debts at the moment, but do try and keep in mind pensions etc. I haven't spent much time on it. I've got a DB one, but DH's provision needs to be thought through and considered more. It's one thing I keep meaning to do.

jwil

Happy New Year SH

Busy_Mee1

Great plans SH and amazing what a bit of focus can do. You will probably iterate your plans as you move closer to retirement. We did. We started saving to offset against the mortgage, and now Mr Mee has retired and we are nearly mortgage neutral we have switched our efforts to paying down the mortgage.

Hope you have a very Happy and Healthy 2020