Sensible income for retirement

Advice4sue

Hi all
Background- I’m 57 and hubby 60. I work part time since my elderly parents illness’s in last few years and sadly they have both now died. Within a few days of dads funeral, husband had a serious life threatening health problem which scared me to say the least.
Although he’s now hopefully ok, it’s really made me think I would like us to look at early retirement.
But husband thinks we would have insufficient income and I’m curious to hear other views. I realise this is subjective but it would still help.

We have no mortgage and have about 60k in savings. Husband already in receipt of a military pension of £16k
We have a small car loan that could be paid off. The other car is coming into its last year on PCP and could be handed back. We have small amounts on interest free credit cards but again they can be paid off.

.Basically if we finished in April 20, husband would get an additional pension from current employer of either 5k or 4k plus lump sum of 26k.
I continue to get my small civil service pension of £1600 , and would get another small local government pension of £2k plus lump some of 10k.
So basically joint income of £23,600.
He also is due to get an additional lump sum of 30k at 65 .
Of course our state pension don’t come in until we are 66 and 67.

I think my husband is concerned at the big drop in income from working as our current income is about 75k before tax.
I must admit looking at the figures it’s a big drop. But I feel we could manage. He spends a a lot just getting to work. His military pension is taxed at 40%. And also I’m thinking of his health, because his illness was most likely instigated by sitting at a desk all day without sufficient breaks.
Wondered what anyone’s view is?

JGB1955

I would start by working out how much you NEED and if that can be covered by your potential joint monthly net income.

Catswhiska

We are of the same age. We manage on a small pension of £8000 plus additional income of £4000. We do have savings but don’t owe anybody anything. We enjoy the simple way of life but still eat out twice a week and don’t regret anything. We have no children to leave money to so no worries there.

MEM62

You have worked our your projected income if you retire now. Continue working but try living on that income for six months and see how you go.

Spreadsheetman

MEM62 wrote: »

You have worked our your projected income if you retire now. Continue working but try living on that income for six months and see how you go.

Good advice. The question isn't what you earn, it's what you spend when it comes to working out if a pension is sufficient.

Look into what capital expenses you may incur in the next few years (house repairs/upgrades, car etc.) to work out if your cash reserves are sufficient between now and SP age. Looks like you have around £100k with £30k more to come at 65 and then you will be running a surplus with 2 x SP added to the £23.6k.

An important question to ask is - what of one of you die? - how much income will the survivor have?

billy2shots

With a joint income of £75k and a predicted joint pension of £23.6k I think some time needs to be spent deciding how best to improve that situation.

Cars on PCP suggests that lifestyle could be tweaked better to slant things more in your favour come retirement.

Obviously the health scare has brought your retirement plans forward so you are not in as stronger position as you intended but.......

......58 and 61 (next year) is not exactly early retirement. Earlier than state pension age granted but not super early. Perhaps plans could have started earlier but that’s neither here nor there now.

An earlier poster has the right idea about continuing to live within your means whilst still work. I would go one step further than the 6 months suggested. Delay retirement for 1 year whilst living on your projected income and bank the difference to swell your retirement pot.
Use that year year to become more frugal. Car loans, PCP, credit card balances are a drag on saving/retirement. Being harsh one could question the need for those loans being on £75k a year.

[Deleted User]

His military pension is taxed at 40% because of his current income. Its not taxed any differently to any other income. So if he retires early and his total income including his military pension is less than £40k he will be taxed at 20% on his income minus his taxable allowance (normally £12.5k but he can up this by another £1250 if you transfer your allowance to him, which you should do because you aren't paying any tax on your income)
You also won't be paying NI anymore because you are on pension income.
Crunch the numbers the NET amount you get might be a interesting surprise compared to your current net. ie not as big a percentage jump than you currently think
If you can't crunch them - then if you want post you and your husbands current gross and net income and if your tax codes are normal! one of us can crunch them for you

shinytop

MEM62 wrote: »

You have worked our your projected income if you retire now. Continue working but try living on that income for six months and see how you go.

At the same time husband could/should contribute more to his pension to stop paying that 40% tax, even better if he can salary sacrifice. That's what I did in my last couple of years. Also, work immediately becomes less stressful when you have an end date in sight.

AnotherJoe

shinytop wrote: »

At the same time husband could/should contribute more to his pension to stop paying that 40% tax, even better if he can salary sacrifice. That's what I did in my last couple of years. Also, work immediately becomes less stressful when you have an end date in sight.

^^^^^^ this

MEM62

shinytop wrote: »

At the same time husband could/should contribute more to his pension to stop paying that 40% tax, even better if he can salary sacrifice. That's what I did in my last couple of years. Also, work immediately becomes less stressful when you have an end date in sight.

Absolutely. That's what I am currently doing - using salary sacrifice to sit just under the 40% threshold. Currently 32% of my salary is going into my pension.

ffacoffipawb

shinytop wrote: »

At the same time husband could/should contribute more to his pension to stop paying that 40% tax, even better if he can salary sacrifice. That's what I did in my last couple of years. Also, work immediately becomes less stressful when you have an end date in sight.

Can't say I noticed. :rotfl::rotfl:

Glad to be out of it at 55.