Planning early retirement

Skint_yet_Again

I am starting to think about early retirement. I am 52 and not due to get state pension until 68. I would like to retire in 3 - 5 years time. I will dig out my company pension forecast later and post any questions but at the moment would you kind people look over my budget and see if I have missed anything.

Mortgage will either be paid off by lump sum or I will already have sold my large 3 bed house and downsized. Son & girlfriend should have saved enough to move out with the dog by then ! (Sons dog). I should have a fair amount of equity left.

Retirement /No mortgage
Council tax £100 single
Annual bills £100 - based on current car/house insurance, car tax, haircuts, clothes, glasses, dentist, Breakdown cover / house maintenance painting & decorating, massage once a month.
Tv licence £12.37 freeview
Mobile phone £8
Water meter. £20
Gas/electric. £40
Food. £120
Petrol. £40
Car maintenance £50 - mot, service, tyres, repairs
Xmas birthday £50
Entertainment. £50
Prescriptions. £0 medically exempt
Eye tests. £0 medically exempt

Total £590.37

Ideally I would like to have a larger entertainment budget but I am used to going out for cheap meals / drinks with friends up to 5 times a month on £50 using wetherspoons under £10 deals for food & drink, 2 for 1 and vouchers/offers, occasional cinema.

I’m going to get an estate agent round to value the house and check online my current mortgage balance.
Is there anything else I should be doing or thinking about? I know almost nothing about pensions.

crv1963

Your budget seems very low- less than 7200 pa. Have you got money for one off expenses- car/ boiler/ roof?

Work occupies a large chunk of an adults life- you need to replace it with something- what will you do with your time and how much will that cost? So what are you retiring to? Will some costs rise- petrol, heating bills, electric bills- you wont want to sit in the cold and dark staring at the wall!

Dazed_and_confused

You should check your State Pension forecast on gov.uk.

You need to read past the likely headline forecast of £168.60 to see what you have actually accrued so far, usually to 05:04:2019.

Then you will know the impact, if any, stopping work in 3-5 years will have on your State Pension and can consider your options for increasing it. If that is necessary.

Is the (reduced?) company pension going to be your only source of income from mid fifties to 68?

House hold repairs/replacements and holidays are two things which spring to mind. Mid fifties and retired with no holidays seems an odd mix.

Skint_yet_Again

Thank you both for the quick replies.

crv1963 wrote: »

Your budget seems very low- less than 7200 pa. Have you got money for one off expenses- car/ boiler/ roof?

Work occupies a large chunk of an adults life- you need to replace it with something- what will you do with your time and how much will that cost? So what are you retiring to? Will some costs rise- petrol, heating bills, electric bills- you wont want to sit in the cold and dark staring at the wall!

Hi CRV, I based my budget on reduced heating & cooking by half as will go from 3 adults often cooking separate meals down to 1 adult. Heating is currently on from 1pm to 9pm I’m the winter, so maybe I should increase the amount for just me. I based water on having a meter fitted once I am home alone. Petrol I have left same as going to work 5 days a week. I currently have £1000 emergency fund and once house is sold I should have at least £30k equity.

I will continue to spend my day walking the dog, reading, maybe do some voluntary work, meeting friends. I would just hopefully not be so knackered ! I work 6.30am - 12.30 monday to Friday 30 hours so would hope to spend more of the morning in bed ! I may even look for a part time job.

Dazed_and_confused wrote: »

You should check your State Pension forecast on gov.uk.

You need to read past the likely headline forecast of £168.60 to see what you have actually accrued so far, usually to 05:04:2019.

Then you will know the impact, if any, stopping work in 3-5 years will have on your State Pension and can consider your options for increasing it. If that is necessary.

Is the (reduced?) company pension going to be your only source of income from mid fifties to 68?

House hold repairs/replacements and holidays are two things which spring to mind. Mid fifties and retired with no holidays seems an odd mix.

Thanks I will check on state pension, I hadn’t thought of that. Budget is based on current spending with reduced gas/electric & water & no mortgage. I don’t currently go on holiday other than going up north a couple of times a year to see family. I use 2 x council tax free months money to pay for petrol & stay with family.

Skint_yet_Again

Also now debt is paid off I have started long term savings £160 jan and £300 a month Feb 2020 onwards. This can help pay off mortgage or moving fees when sell house

lisyloo

Are you sure your pension age is 68? I think it’s 67.

I didn’t see anything in your budget for a dog. People tell me pets are expensive especially when they get older.
I think your budget is low. My budget for just existing was £8432.

I would suggest this year that you keep actuals for what you spend
It’s relatively easy.
Just have categories (as you have above) and tot up everything you spend in each category.
I did mine monthly for 2019 and it only took me about 15 mins a month to go through 1 credit card and 1 bank statement.

Are you planning to drawdown or get an annuity?
There are risks with drawdown notably inflation and investment risk as well as living longer than expected especially if you have a very tight budget.

Do you hate your job?
I’m planning on working a little longer to have a bigger pot than I need to cover the risks mentioned, but I quite enjoy my job and not everyone does.

Dazed_and_confused

I use 2 x council tax free months money to pay for petrol & stay with family.

I like the little (not so little these days mind) bonus you get twice a year from budgeting on the basis that council tax has to be paid every month.

State Pension will no doubt be an important income stream for you post 68 so best understand exactly what you will or won't be getting and then, if necessary, you have time to do something about it.

And as a 52 year old won't your State Pension age be 67 not 68??

Skint_yet_Again

Lisyloo the dog is my sons and he pays for everything. I just walk her !

I will check out state pension. I need to create a gov gateway account but don’t have a passport (not renewed) and still have my paper driving licence so I think I will need to find P60 or print off payslip at work tomorrow.

My budget is currently low



Statement of Affairs and Personal Balance Sheet
Household Information
Number of adults in household........... 1
Number of children in household.........
Number of cars owned.................... 1


Monthly Income Details
Monthly income after tax................ 1138.34
Partners monthly income after tax....... 0
Benefits................................ 0
Other income............................ 190 bills from DS & gf
Total monthly income.................... 1328.34


Monthly Expense Details
Mortgage................................ 227.5
Electricity & Gas ....................... 80
Water rates............................. 47.8
Mobile phone............................ 8
TV Licence.............................. 12.37
Internet Services....................... 50.5 & TV/landline
Groceries etc. ......................... 120
Petrol/diesel........................... 40
Car maintenance (including MOT)......... 50
Presents (birthday, christmas etc)...... 50
Entertainment........................... 50
Holiday................................. 148
physio massage.......................... 20
dog food................................ 15
union fees.............................. 8.54
annual bills ........................... 100
Total monthly expenses.................. 1027.71


Monthly Budget Summary[/b]
Total monthly income.................... 1,328.34
Expenses (including HP & secured debts). 1,027.71
Amount left after debt repayments....... 300.63[/b]




Created using the SOA calculator at www.LemonFool.co.uk.
Reproduced on Moneysavingexpert with permission, using other browser.


Compared to retirement budget ....

Retirement /No mortgage
Council tax £100 single
Annual bills £100 - based on current car/house insurance, car tax, haircuts, clothes, glasses, dentist, Breakdown cover / house maintenance painting & decorating, massage once a month.
Tv licence £12.37 freeview
Mobile phone £8
Water meter. £20
Gas/electric. £40
Food. £120
Petrol. £40
Car maintenance £50 - mot, service, tyres, repairs
Xmas birthday £50
Entertainment. £50
Prescriptions. £0 medically exempt
Eye tests. £0 medically exempt
Total £590.37

crv1963

Skint_yet_Again wrote: »

Thank you both for the quick replies.



Hi CRV, I based my budget on reduced heating & cooking by half as will go from 3 adults often cooking separate meals down to 1 adult. Heating is currently on from 1pm to 9pm I’m the winter, so maybe I should increase the amount for just me. I based water on having a meter fitted once I am home alone. Petrol I have left same as going to work 5 days a week. I currently have £1000 emergency fund and once house is sold I should have at least £30k equity.

I will continue to spend my day walking the dog, reading, maybe do some voluntary work, meeting friends. I would just hopefully not be so knackered ! I work 6.30am - 12.30 monday to Friday 30 hours so would hope to spend more of the morning in bed ! I may even look for a part time job.



Thanks I will check on state pension, I hadn’t thought of that. Budget is based on current spending with reduced gas/electric & water & no mortgage. I don’t currently go on holiday other than going up north a couple of times a year to see family. I use 2 x council tax free months money to pay for petrol & stay with family.

I'd suggest a realistic budget for utilities is to keep them the same as now or maybe even increase them. If you are tired all the time now then have a look at lifestyle- do you sleep/ eat/ or rest enough?

Don't look at what others think you should do but look at what you would like to do. So if you don't like holidaying great for you, visits north may be all you need, if you retire will those you visit want to come to you more frequently adding to your costs?

My main point is that stopping work or retiring is a lifestyle choice- what will you do, have a clear idea of what you want for you. Work may or may not be enjoyable but necessary at the moment but while working liked or not it provides a focus or point to most peoples life. Once you stop working you need a focus or you may slip into a couch potato lifestyle or worse.

Build a picture of what retirement is for you, look at exercise- it doesn't have to be a gym! Entertainment, will meals out increase in number? Look at what your role will be- dog walker, childminder, gardener for your son? I have several friends retired age 50 one does all the housework, cooking etc, goes out with friends and down his allotment, his wife can think of nothing worse so wont retire, but it works for them. Another has just taken a delivery driver job because he couldn't fill his day with enough interaction with others, not because he needed the wage.

Albermarle

I know almost nothing about pensions.

Then maybe a good time to start learning .
https://www.pensionsadvisoryservice.org.uk/
https://www.moneysavingexpert.com/savings/discount-pensions/

lisyloo

Bear in mind bills could rise. I don’t mean consumption (although that’s a poossibility) but simply that some things may get more expensive.

Are you planning on getting a replacement vehicle at any point?
I am factoring in £3k per annum which is more than I need for a banger but won’t get me a jag either. A car might be a lifeline if you’re able to drive but not cycle or walk very far.