I Think I Can Retire at 57

barnstar2077

Nick9967 said:

fred246 said:

Great idea. Retire early and die early.

sense of humour missed that point fred246 , there was a reason I added "haha!"  at the end of the smoking point, having smoked for 40 years and now given up for 2+ years I class myself as having the right to joke about it! and yes i still miss it!
I'm full of joy , covid 19 now has an end in sight, retirement on the horizon! more hobbies than I can fit in even if retired! 
  

I am sure a lot of people just think that they have smoked for so long that they may as well continue, so I am interested to know if you have noticed an improvement in your breathing / general health since you stopped?  

trevjl

I gave up 15 years ago in my mid 40's because I became fed up with waking up wheezing and having a mouth like a Turkish Wrestlers jockstrap every Sunday morning after a Saturday night out.

Best thing I ever did, breath wise a definite improvement in my health after. Not had one or  even wanted one since

33scott

jamesd said:

Overpaying on the mortgage seems like throwing money away, even if you hold only cash in a pension with overpayment money.

For each 1k gross at basic rate that you sacrifice your net cost is no higher than 800 - 120 = 680. You end up with 1k in the pension. 25% out tax free at 55 without affecting pension contribution  limits then the remainder gradually drawn at basic rate gets you 250 + 600 = 850 out. That's a 25% gain, free of investment risk. Equivalent to 4.6% compounded annually. You may well also take investment risk but cash without any employer NI added is unambiguously profitable compared to mortgage overpayments.

You can get 52% relief on much of the money. NI is calculated for each pay period, tax annually. Sacrifice down to minimum wage in a month and some of the money will be saving you 2% NI but much will be in the 12% employee NI range so you save 52% instead of 42% on your higher rate income. Concentrate into as few months as possible to maximise your gain, in the rest do no more than it takes to get employer matching.

Whether you actually should repay the mortgage at 55 even when you can is an interesting question and I think the answer is no, at least not fully. Consider your cash flows:

Age 68: 9k state pension plus 14.5k DB + safe drawdown rate on DC.
Age 60: 14.5k DB  + safe drawdown rate on DC possibly plus DC top-up to replace state pension.
Age 55: safe drawdown rate on DC possibly plus DC top-up to replace state pension and DC top-up to replace DB.

For drawdown the earlier years are when you're most vulnerable to investment drops. That's also when you're likely to be drawing on the DC at your highest rate even without mortgage repaying. So perhaps consider:

1. A retirement interest only mortgage with a plan to switch from interest only to added regular overpayments from age 68-73, perhaps after some state pension deferring. RIO is a relatively new product.
2. A repayment mortgage ending at age 85, say.

What these approaches do is shift the mortgage repayment cost to a time with less risk. That's particularly true for RIO, which commonly has death as the ultimate end date. They also allow for more investment growth and greatly reduce the risk associated with committing to a very large lump sum payment at a fixed time when equities might be down.

Thanks James, that's a really interesting take on things, I guess my natural instinct was always to overpay the mortgage, remembering back to when my very first mortgage was 12%! This has given me something to think about.

Brenster

33scott said:

jamesd said:

Overpaying on the mortgage seems like throwing money away, even if you hold only cash in a pension with overpayment money.

For each 1k gross at basic rate that you sacrifice your net cost is no higher than 800 - 120 = 680. You end up with 1k in the pension. 25% out tax free at 55 without affecting pension contribution  limits then the remainder gradually drawn at basic rate gets you 250 + 600 = 850 out. That's a 25% gain, free of investment risk. Equivalent to 4.6% compounded annually. You may well also take investment risk but cash without any employer NI added is unambiguously profitable compared to mortgage overpayments.

You can get 52% relief on much of the money. NI is calculated for each pay period, tax annually. Sacrifice down to minimum wage in a month and some of the money will be saving you 2% NI but much will be in the 12% employee NI range so you save 52% instead of 42% on your higher rate income. Concentrate into as few months as possible to maximise your gain, in the rest do no more than it takes to get employer matching.

Whether you actually should repay the mortgage at 55 even when you can is an interesting question and I think the answer is no, at least not fully. Consider your cash flows:

Age 68: 9k state pension plus 14.5k DB + safe drawdown rate on DC.
Age 60: 14.5k DB  + safe drawdown rate on DC possibly plus DC top-up to replace state pension.
Age 55: safe drawdown rate on DC possibly plus DC top-up to replace state pension and DC top-up to replace DB.

For drawdown the earlier years are when you're most vulnerable to investment drops. That's also when you're likely to be drawing on the DC at your highest rate even without mortgage repaying. So perhaps consider:

1. A retirement interest only mortgage with a plan to switch from interest only to added regular overpayments from age 68-73, perhaps after some state pension deferring. RIO is a relatively new product.
2. A repayment mortgage ending at age 85, say.

What these approaches do is shift the mortgage repayment cost to a time with less risk. That's particularly true for RIO, which commonly has death as the ultimate end date. They also allow for more investment growth and greatly reduce the risk associated with committing to a very large lump sum payment at a fixed time when equities might be down.

Thanks James, that's a really interesting take on things, I guess my natural instinct was always to overpay the mortgage, remembering back to when my very first mortgage was 12%! This has given me something to think about.

I agree, it is an interesting thought, why pay off a debt that is costing 2% over putting into a mortgage which can provide a 25% tax boost and should pay on average between 5%-10%

Nick9967

barnstar2077 said:

Nick9967 said:

fred246 said:

Great idea. Retire early and die early.

sense of humour missed that point fred246 , there was a reason I added "haha!"  at the end of the smoking point, having smoked for 40 years and now given up for 2+ years I class myself as having the right to joke about it! and yes i still miss it!
I'm full of joy , covid 19 now has an end in sight, retirement on the horizon! more hobbies than I can fit in even if retired! 
  

I am sure a lot of people just think that they have smoked for so long that they may as well continue, so I am interested to know if you have noticed an improvement in your breathing / general health since you stopped?  

The fact is that having let smoking drive my life since the age of 12 at 50 I changed my life, 20 years commuting to London daily chasing the money ( I had a good income) with 100k +, I changed that , took a job locally , take the kids to school , eat with them every night round a table, earn 35% of what I did, at best, and watch my pension ever day!
what's changed?
No smoking- I couldn't afford it any longer - in reality I do not feel healthier at all , I put 2 stone on and its staying on, I do not walk nearly as much as i did between trains, stations , underground, office etc (with a fag and a coffee in hand!) BUT I'm far more relaxed and enjoy life - it's not the smoking it's the pressure and the working hours that changes you!
The problem with smoking for me was, and still is, I enjoy it, a pint with a fag, smoke with a coffee etc etc. 
I'll always miss it and believe it or not if someone gave me a fixed lifespan tomorrow due to some horrible disease i would start smoking again in a heartbeat! but not in front of my kids cos they think I'm fab for giving up!

barnstar2077

Nick9967 said:

barnstar2077 said:

Nick9967 said:

fred246 said:

Great idea. Retire early and die early.

sense of humour missed that point fred246 , there was a reason I added "haha!"  at the end of the smoking point, having smoked for 40 years and now given up for 2+ years I class myself as having the right to joke about it! and yes i still miss it!
I'm full of joy , covid 19 now has an end in sight, retirement on the horizon! more hobbies than I can fit in even if retired! 
  

I am sure a lot of people just think that they have smoked for so long that they may as well continue, so I am interested to know if you have noticed an improvement in your breathing / general health since you stopped?  

The fact is that having let smoking drive my life since the age of 12 at 50 I changed my life, 20 years commuting to London daily chasing the money ( I had a good income) with 100k +, I changed that , took a job locally , take the kids to school , eat with them every night round a table, earn 35% of what I did, at best, and watch my pension ever day!
what's changed?
No smoking- I couldn't afford it any longer - in reality I do not feel healthier at all , I put 2 stone on and its staying on, I do not walk nearly as much as i did between trains, stations , underground, office etc (with a fag and a coffee in hand!) BUT I'm far more relaxed and enjoy life - it's not the smoking it's the pressure and the working hours that changes you!
The problem with smoking for me was, and still is, I enjoy it, a pint with a fag, smoke with a coffee etc etc. 
I'll always miss it and believe it or not if someone gave me a fixed lifespan tomorrow due to some horrible disease i would start smoking again in a heartbeat! but not in front of my kids cos they think I'm fab for giving up!

Could you incorporate a bit more exercise into your day another way?  Two stone is quite a lot relatively, how is your diet?  Sorry if that sounds funny, I am not taking the p*ss, I just think you have already made some massive quality of life improvements, which must have taken / take quite a lot of mental resolve.  Don't think about what food or drink you would be missing out on, think about the time you would be buying later in life with your family!

Again, kudos to you for making the changes you already have done.  Many people never will.

33scott

Thought I would post an update on how things are looking.
My planned retirement date is now 31/03/2025, just short of my 55th birthday. I plan to give myself an income of 29,600 which will increase by 2.5% per year, at age 75 I"ll take a reduction of 2,500.

My immediate goals are:
1) 2 more years to achieve full SP - On Track
2) DC pot currency at 165k, contributing 2,216 per month with a goal of achieving 320,000 - On Track
3) Mortgage currently 100k, to be paid off by my S&S ISA currently at 42k, contributing 550 per month - On Track

The big revelation to me has been through tracking my expenditure, my average yearly expenses (excluding mortgage repayment, pension contribution and ISA investment) are averaging 16,000 per year, which should give me a healthy 'fun pot' of over 10,000 per year to cover vehicle replacement, big one off expenses, holidays and just being able to enjoy not working.

I've shared my plans with my friends and a few people at work, their initial reactions was to call me crazy for wanting to stop work at 55, however most of those people have now admitted that they have recently increased their own pension contributions after hearing my plans!

jamesd

Hmm, why not use a higher pension tax free lump sum for the mortgage clearing? That gets you the additional tax relief and NI savings of salary sacrifice that you don't get through ISA. With a 320k pension pot target already that's 80k of tax free lump sum so it seems better not to use the ISA more unless you're hitting one of the pension limits.In fact, moving ISA money to pension until perhaps 20k left in ISA looks like a good move as you get closer to pension money access at age 55. Until then you need it for contingency income if forced to retire early for some reason.