Early Retirement - (nearly) one year on

bugslet

Thorsson wrote: »

I know it feels nice to be paying off the mortgage earlier, but the fact is that there is no better place to put extra money in than to your pension. Every pound you put in is only costing you 51p - you are immediately doubling your money!

It's easy enough to calculate how much interest you will save on paying a mortgage off early. At 2.7% it would be around £7.5k (the lower the rate the less you save). However if you'd put the difference, grossed up (i.e. just about double), in mortgage payments in to a pension pot instead that would have gained you £32.8k from tax/NI, plus any gains on the gross amount over the 10 years. Of course you also have to factor in that for the following 5 years you can save all of your mortgage payments - but you will have missed 10 year's growth and you may be capped on pension contributions; normal savings don't give you that initial tax/NI boost.

I did both, paid a bit extra off the mortgage and paid into a pension. My father went bankrupt when I was in my early 20s ( I bought their house so we had somewhere to live in) and that worry about losing your house stuck, so it was important to me to have a house I owned (or could own) outright. I have 20k left, but I could pay it tomorrow if I had to.

On the learning to work early subject. I never had paid jobs as a kid, but I started 'working' age 3, when I used to go out with my Dad in his truck and I was in charge of map reading:D. It wasn't long after that that I started shifting bags of potatoes around at ungodly hours. H&S has put paid to a lot of the experiences I had in my formative years; it's a shame, it was great exposure to all sorts.

MallyGirl

DT2001 wrote: »

With longer life expectancy will more inheritances pass a generation and therefore help our children when they need it more?

I think this may well be true. My parents were young when they had me, I was 34 when I had DD. Parents are still going strong - along with their second spouses. Hopefully we will all be in retirement for a few years together. DH's parents are slightly older / less well but still very active. DD is their only grandchild.

Thorsson

bugslet wrote: »

I did both, paid a bit extra off the mortgage and paid into a pension. My father went bankrupt when I was in my early 20s ( I bought their house so we had somewhere to live in) and that worry about losing your house stuck, so it was important to me to have a house I owned (or could own) outright. I have 20k left, but I could pay it tomorrow if I had to.

On the learning to work early subject. I never had paid jobs as a kid, but I started 'working' age 3, when I used to go out with my Dad in his truck and I was in charge of map reading:D. It wasn't long after that that I started shifting bags of potatoes around at ungodly hours. H&S has put paid to a lot of the experiences I had in my formative years; it's a shame, it was great exposure to all sorts.

Certainly no reason not to pay off your mortgage if you have money sitting around doing nothing, and I also understand the desire to pay it off. I'm just saying that financially, until you've maxed out your pension contributions, that is usually the best course, and certainly so if you're a higher rate taxpayer with salary sacrifice.

My first "job" was ploughing the fields at age 7. These days, not even adults are allowed to drive that sort of tractor. It was great; I can still recall the noise of the engine, the wind blowing into my face and the flocks of seagulls going mad for the worms left in my wake. And it's so easy, even a 7 year old can do it.

rosiest

Thorsson wrote: »

I know it feels nice to be paying off the mortgage earlier, but the fact is that there is no better place to put extra money in than to your pension. Every pound you put in is only costing you 51p - you are immediately doubling your money!

It's easy enough to calculate how much interest you will save on paying a mortgage off early. At 2.7% it would be around £7.5k (the lower the rate the less you save). However if you'd put the difference, grossed up (i.e. just about double), in mortgage payments in to a pension pot instead that would have gained you £32.8k from tax/NI, plus any gains on the gross amount over the 10 years. Of course you also have to factor in that for the following 5 years you can save all of your mortgage payments - but you will have missed 10 year's growth and you may be capped on pension contributions; normal savings don't give you that initial tax/NI boost.

Thanks that's a really valid point . I also hope to not have to down size as I absolutely love my home so having lots of equity sitting there wont make a difference to my day to day life in early retirement . I get a bonus and have every year taken it as cash but after losing 40% of it last year I think I'm going to put it to my pension which I get the offer to do. it's usually about 6k before tax and ni so a decent amount to add to the pot and will go with the plan of upping my contribution this year

Teacher2

I had to retire early due to burnout and stress after 33 years of full time teaching. I went at 55 and lost 25 per cent of my pension for taking it then. The plan was that my DH would continue until our SP age of 66 and we would continue to save.

It did not work out that way as he was made redundant at 60 with a small payoff which we have been eking out by adding it to my teachers’ pension. We are living off a fifth of what we used to earn together so things are very tight and there is not a lot of slack in the system for big and unexpected bills. We had a leaking roof and heating cistern bills last year which caused a bit of a problem.

Nevertheless, we have always run a very tight financial ship and track every penny we gain and spend through a spending account ledger we have kept for forty years. Also, we never lived up to our income and, when it was possible, always saved for the rainy day which has now arrived.

We actually have a very contented if dull life. We do many things which cost nothing or next to nothing. We walk, read, keep busy looking after the house and garden, the DH volunteers on a steam railway and I love to bake and cook. We are great bargain hunters and live like kings on a beggar’s income in many ways. We buy few clothes or possessions any more and the DH has saved us hundreds a year by switching utilities and insurance contracts to get the lowest prices. We do not have any expensive subscriptions for gyms, media packages or phones and our children have generously added us to their Netflix and Amazon Prime accounts.

I would have to say that life is very good and we value every day we have. We live in a horribly expensive part of the country and, while it means that council tax is top whack, we have lovely places to visit and walk nearby and the supermarket knockdowns are often very high end products as are things in the local charity shops.

We used to be cash rich, time poor but we are coping quite well with cash poor, time rich.

We do not have anything like a £1000 a month fun fund and I notice that our expenses are considerably higher than the OP’s. We pay over £400 council tax a month, £200 on utilities and £100 on house insurance. The thing I fear the most is Corbyn’s Marxist government being elected and his aim of tripling the council tax being enacted. I do not know how we could cope with that as we are hanging on by our fingertips as it is.

Still, that is the future. Today is fine.

michaels

Teacher2 wrote: »

I had to retire early due to burnout and stress after 33 years of full time teaching. I went at 55 and lost 25 per cent of my pension for taking it then. The plan was that my DH would continue until our SP age of 66 and we would continue to save.

It did not work out that way as he was made redundant at 60 with a small payoff which we have been eking out by adding it to my teachers’ pension. We are living off a fifth of what we used to earn together so things are very tight and there is not a lot of slack in the system for big and unexpected bills. We had a leaking roof and heating cistern bills last year which caused a bit of a problem.

Nevertheless, we have always run a very tight financial ship and track every penny we gain and spend through a spending account ledger we have kept for forty years. Also, we never lived up to our income and, when it was possible, always saved for the rainy day which has now arrived.

We actually have a very contented if dull life. We do many things which cost nothing or next to nothing. We walk, read, keep busy looking after the house and garden, the DH volunteers on a steam railway and I love to bake and cook. We are great bargain hunters and live like kings on a beggar’s income in many ways. We buy few clothes or possessions any more and the DH has saved us hundreds a year by switching utilities and insurance contracts to get the lowest prices. We do not have any expensive subscriptions for gyms, media packages or phones and our children have generously added us to their Netflix and Amazon Prime accounts.

I would have to say that life is very good and we value every day we have. We live in a horribly expensive part of the country and, while it means that council tax is top whack, we have lovely places to visit and walk nearby and the supermarket knockdowns are often very high end products as are things in the local charity shops.

We used to be cash rich, time poor but we are coping quite well with cash poor, time rich.

We do not have anything like a £1000 a month fun fund and I notice that our expenses are considerably higher than the OP’s. We pay over £400 council tax a month, £200 on utilities and £100 on house insurance. The thing I fear the most is Corbyn’s Marxist government being elected and his aim of tripling the council tax being enacted. I do not know how we could cope with that as we are hanging on by our fingertips as it is.

Still, that is the future. Today is fine.

I too much prefer time to money. One question is the home insurance sounds surprisingly high, your CT is double ours, your utilities about the same but our buildings and contents insurance is only about £200pa?

Marpau

We moved house to village life when OH was 59 he retired and we lived on my salary only when he was 62 I took early retirement to help with grandchildren childcare. As I was 55 my DB was reduced by 25% we used lump sum from my pension and his private pension to purchase rental property which supplements my pension as I receive SO at 66. We have a drawdown on his pension which keeps us both below tax threshold and manage 3 holidays a year. The extra time allows me to manage finances more and look for unearned income streams. Last month I managed to achieve £350 extra in unearned income.

OldMusicGuy

Thanks for sharing, good to hear more experiences.

Teacher2 wrote: »

We do not have anything like a £1000 a month fun fund and I notice that our expenses are considerably higher than the OP’s. We pay over £400 council tax a month, £200 on utilities and £100 on house insurance.

Ow! I thought our council tax was on the high side. I'm assuming you must live in quite a nice area or have a large property. Does that mean that downsizing/moving to a cheaper area may be on the cards for you?

wormleygooner

Hi
I too retired early at 61 last Jan,i live on my own in 3 bed semi mortgage paid off & my partner has her own property
My annual expence is around the £15000 mark including my golf membership and spending money for night out
Any one thinking of early retirement I would recommend if your firm dose it, is to pay in extra pension contributions they may give you salary exchange i.e return what they would have paid in NI also if your like I was with company car I paid around 45%of my salary into pension pot bringing my tax down to 20% instead of 40%
So I will live of this until i'm 65 when I draw a DB pension and state at 66
Also get a water meter
Its a lot easier then you think

uk1

Several posters have indicated that they feel that current younger people have the advantage of a better life expectancy than us. Those that feel that way might be interested to think more about how longevity is actually forecast. Longevity is normally a prediction of how long someone born "today" might live for based on current and earlier death rate trends. It isn't obviously based on younger people's actual lifespan because they are currently still alive. It is based on current and previous generations lifespan and is simply speculated from those.

Many people alternatively speculate that because younger generations have a poorer diet and exercise habits that they might in fact have reversed the longevity trend. It seems to me that current older generations know how to cook better than later generations and possibly even in general exercised more and have less sedentary lifestyles.

I think the presumption that younger generations might enjoy a longer lifespan may turn out not to be "very" true - if true at all. Better medical treatment "helps" but we might have actually plateaued. It seems to me that people were thinner when my generation were kids and they seem fatter today and there is a much greater percentage of youngsters that are obese,

One thing we do possibly know however is that retirement ages have plateaud and are now being delayed at a faster rate than longevity projections and younger generation will probably retire later than earlier generations - if at all. This probably means that with respect to this forum that even if longevity was slowly extended there are probably likely to be fewer years of pensionable retirement for younger generations now than for earlier generations and perhaps those years might even be less healthier than earlier generations unless they start to learn how to cook vegetables.

No one "!knows" and these are simply personal observations - but that is my theory .......