Early retirement - is when or how much more important?

ermine

pensionpawn wrote: »

Many comment on overpaying the mortgage / once I've paid the mortgage off etc however considering the amount of money that requires an alternative strategy is overpaying the pension. Times have changed from having a 25 year mortgage and paying it off before retiring.

I second this. At the very least don't pay down/overpay your mortgage until you are 55 (when you can get hold of DC pensions). You get a tax win going into a SIPP, so if you use the lump sum to discharge the capital you are effectively paying off your mortgage from gross income rather than net, what's not to like? Flexible/offset mortgages give you the opportunity to reduce the interest without committing yourself to paying it down.

Avoid setting yourself on a string of fixes as you get into the 50-55 zone, because nobody will give you a mortgage if you have no job income, so once you've left work and retired early, the end of the next mortgage fix will set you either on the standard variable rate or you have to pay it off.

Paying off my mortgage before I retired was the second greatest personal finance c0ck-up in my life. The first was buying a house in 1989. I was shorter of money in the first years after retiring, particularly pre-55. I will be better off when I draw my main pension in a couple of years, but the aim is to smooth one's retired income or if anything slightly frontload it to the early retiree's more healthy and active time. I didn't get that right because I discharged that mortgage because I was fearful and wanted to be debt-free. It was a misallocation of capital, I should have done it with the PCLS.

ermine

bugslett wrote: »

I've been dithering about making a house purchase ( it really is a unique house), but as it would coincide with the time that I retire in June, it confirms what had been niggling at the back of my mind that I need some time to adjust and really decide what to do with the rest of my life.

That is definitely the sort of decision that is worth going through decompression first. After all, one of the big questions about retirement is where you want to live, now you don't have the restriction of being close enough to work to commute there.


That's not to say you have to move, but it would seem a shame to rule the option out or make the alternative expensive and lock you into becoming an accidental BTL landlord from the get-go.

bugslett

ermine wrote: »

That is definitely the sort of decision that is worth going through decompression first. After all, one of the big questions about retirement is where you want to live, now you don't have the restriction of being close enough to work to commute there.


That's not to say you have to move, but it would seem a shame to rule the option out or make the alternative expensive and lock you into becoming an accidental BTL landlord from the get-go.

Its' a mile from where I live, which is nowhere near where I work - so looking to not commuting anymore. I'm not moving from an area where my friends are. I have no family, so friends are an important consideration.

It's more to do with the amount of time it would occupy as it would need gutting. On the other side, it's a bit like having your own kingdom. I must keep telling myself other places will come up.

mjm3346

I partially retired (dropped a day a week) at 50, originally to lock in the salary on my final salary pension which over 10 years later is still higher than the current salary levels. But I enjoyed not working and commuting so much that I fully retired less than 2 years later and have not regretted it once since.

smutput

We are scheduled to retire towards the end of next year. I've not got a fixed date as it will depend on the size of our pots. I've thought of 4 possible scenarios :-

1) If we make 2 more years contributions with no growth = my "just enough" pot
2) Contributions plus 2% growth = the pot all my spreadsheets are based on
3) A big drop in our pots = decision time. I'll have 3 years worth of cash for each of us to draw out of our pensions up to our tax limits +25% and also cash outside. It depends how brave, or how desperate, we are.
4) Contributions plus more than 2% growth = happy days

I'm the one who thinks we should go "whatever" as my time is getting way more precious to me than money. I've also allowed for a generous budget in my spreadsheets -which will be more than we spend now. The fact that can make significant savings by giving up the commute means that this will feel even more luxurious.

As I tell my other half, the absolute worst that can happen is we both do short contracts to bring in extra cash. 30 plus years of living to budgets and within our means tells me this is the very last resort

Doglegger

It's all about timing for me and going the day I turn 55 in 4 years time. I've never really had a "number" but there's enough pension provision there for a comfortable retirement for us.
I dislike my job so would walk away this minute but the wages are required for the here and now and things that will fall into place between now and then, like mortgage paid and oldest two through uni. Can't come quick enough TBH.

fred246

I took very early retirement. I remember talking to a work colleague before I left. "I feel a bit selfish. I should be giving to society. There's plenty of work left in me but I am going off doing my own thing". Ah "the bad citizen effect" he called it. I do feel a bit like that. The problem was that when I was working I never got any thanks or felt appreciated.

shinytop

I should be giving to society.

I feel I will have done - 40% tax, 12% NI, etc.

JoeEngland

fred246 wrote: »

I took very early retirement. I remember talking to a work colleague before I left. "I feel a bit selfish. I should be giving to society. There's plenty of work left in me but I am going off doing my own thing". Ah "the bad citizen effect" he called it. I do feel a bit like that. The problem was that when I was working I never got any thanks or felt appreciated.

Society won't care. It's more important to live your life how you want to.

Triumph13

ermine wrote: »

Paying off my mortgage before I retired was the second greatest personal finance c0ck-up in my life. The first was buying a house in 1989. I was shorter of money in the first years after retiring, particularly pre-55. I will be better off when I draw my main pension in a couple of years, but the aim is to smooth one's retired income or if anything slightly frontload it to the early retiree's more healthy and active time. I didn't get that right because I discharged that mortgage because I was fearful and wanted to be debt-free. It was a misallocation of capital, I should have done it with the PCLS.

Intellectually I agree with you completely. That's not always the whole picture. In my own case I aggressively paid down a mortgage from 2006 to 2012 and missed out on much of the initial run up after the 2008 crash. I clearly lost a lot of money compared to investing, but, as someone who's always suffered from Imposter Syndrome, it was much better for my mental health.
Similarly I sold a London house in 1996 to move to the country. I sold for £100k and 20 years later it was worth £1M. I don't regret the move in the slightest as my quality of life has been so much better.