Retire at 58?

2nd_time_buyer

I was just thinking it might be interesting to someone to update this almost 3 years later. 

So generally things have progressed pretty much as expected. The DC pension schemes are looking healthier mainly through contributions rather than investment growth. 

Increase in house prices and rents have made the buy to lets more profitable on paper and in terms of cash flow in the short term. However, interest rate rises when we come to remortgage in the next 2-3 years will meant they will be much less profitable. And even with salary sacrificing a large amount into pension contributions we might get pushed into the higher rate tax band. Thrugelmir's prediction on the effect of interest rate rises as proven to be relevant and I think we will sell one or both BTLs over the next few years to reduce exposure.

The effect of inflation has also adjusted how much we think we will require for retirement. So we are now thinking £40-50k rather than £30-40k. 

I did a spreadsheet as suggested by AlanP_2 and others which I have been keeping regularly updated. Even with pessimistic assumptions, if we keep contributing to pension at current rates adjusted for inflation,  we should be in a position to retire at 55. In practice I might like to use the insulation of savings/pension to move into a more rewarding, lower paid work from 50ish.

Here are the updated figures:

Me, 46 years old, 55k/year salary

DB Pension £13k/year from 65, plus £39k (3x lump sum). Currently contributing 1/85th per year (but will be back to 1/75th at some point next year)

DC scheme: £59.8k balance. Invested in 20% in ethical equites, 20% in emerging markets equities, 60% global equities.  Currently contributing £1.4k/month through salary sacrifice all into global equities.

9 years to full state pension

Wife, 47 years old, £47k/year salary

£77k in workplace DC scheme. Currently paying in around £1100 per month (now salary sacrifice). 8% employer, 12% employee

Previous DB pension. £4.8k/year from 60.

6 years to full state pension

 

Joint

Two BTLs: Combined profit £15k per year (before tax but after all expenses). Combined interest only mortgage £165k, combined value £400k.

Our house: Value £450k, mortgage £254k

 £15k cash

Bostonerimus1

You are far from financial independence and early retirement because your mortgage and BTL's with interest only mortgages (worst mortgage product ever) make you hostage to the whims of the BoE and monetary policy.

Marcon

2nd_time_buyer said:

I did a spreadsheet as suggested by AlanP_2 and others which I have been keeping regularly updated. Even with pessimistic assumptions, if we keep contributing to pension at current rates adjusted for inflation,  we should be in a position to retire at 55. In practice I might like to use the insulation of savings/pension to move into a more rewarding, lower paid work from 50ish.

 

You have clocked that you won't be able to access your pensions until age 57 at the earliest? Minimum age is changing in 2028 from 55 to 57.

2nd_time_buyer

Marcon said:

2nd_time_buyer said:

I did a spreadsheet as suggested by AlanP_2 and others which I have been keeping regularly updated. Even with pessimistic assumptions, if we keep contributing to pension at current rates adjusted for inflation,  we should be in a position to retire at 55. In practice I might like to use the insulation of savings/pension to move into a more rewarding, lower paid work from 50ish.

 

You have clocked that you won't be able to access your pensions until age 57 at the earliest? Minimum age is changing in 2028 from 55 to 57.

Thank you. Yes, good point. I think we need to start increasing our cash/isa and taper down pension contributors in the next few years.

LeafGreen

You are 46 but say 9 years to full state pension.  And your wife 47 with 6 years to full state pension.

Sorry if I'm missing something obvious (which is quite possible )...  but surely you won't get full state pension until you are 67 or 68?

Bostonerimus1

grahamgoo said:

You are 46 but say 9 years to full state pension.  And your wife 47 with 6 years to full state pension.

Sorry if I'm missing something obvious (which is quite possible )...  but surely you won't get full state pension until you are 67 or 68?

I took "6 years to full SP" to mean six years until further NI contributions won't increase the SP amount.

2nd_time_buyer

grahamgoo said:

You are 46 but say 9 years to full state pension.  And your wife 47 with 6 years to full state pension.

Sorry if I'm missing something obvious (which is quite possible )...  but surely you won't get full state pension until you are 67 or 68?

I think it is generally 35 years of contributions now. There was also a quirk whilst I was at 6th form that you could build up NI contributions when studying full time. Then when I was at university work during the holidays was enough to build up contributions. On the flip side my employer opted out for a little while, hence I have to work a little longer than my wife. Although to be honest I checked it with the government website and am not entirely certain of the details.

Edit. Just reread your message. Yes, it it's how many more years of contributions remaining.

33scott

What's your expenditure?
Its worth keeping track of every penny you spend over the next few years, you might find that without the mortgage you can live off less than £40k.

LeafGreen

2nd_time_buyer said:

grahamgoo said:

You are 46 but say 9 years to full state pension.  And your wife 47 with 6 years to full state pension.

Sorry if I'm missing something obvious (which is quite possible )...  but surely you won't get full state pension until you are 67 or 68?

I think it is generally 35 years of contributions now. There was also a quirk whilst I was at 6th form that you could build up NI contributions when studying full time. Then when I was at university work during the holidays was enough to build up contributions. On the flip side my employer opted out for a little while, hence I have to work a little longer than my wife. Although to be honest I checked it with the government website and am not entirely certain of the details.

Edit. Just reread your message. Yes, it it's how many more years of contributions remaining.

Ah yes thanks, I should have realised that but had a mental block!

I know the rules on contributions are complicated… I’m 49 and apparently already have enough.

QrizB

2nd_time_buyer said:

The effect of inflation has also adjusted how much we think we will require for retirement. So we are now thinking £40-50k rather than £30-40k. 

Me, 46 years old, 55k/year salary

DB Pension £13k/year from 65, plus £39k (3x lump sum).

Wife, 47 years old, £47k/year salary

Previous DB pension. £4.8k/year from 60.

So, once you both reach SPA you'll have £38k per year from SP and two DBs. That's pretty close to your £40k minimum.

If you want to retire at 58, 10 years before SPA, you'll need £400k to bridge the gap.

If you then want another £10k pa on top, you'll need maybe £300k to draw down.

2nd_time_buyer said:

DC scheme: £59.8k balance. Invested in 20% in ethical equites, 20% in emerging markets equities, 60% global equities.  Currently contributing £1.4k/month through salary sacrifice all into global equities.

£77k in workplace DC scheme. Currently paying in around £1100 per month (now salary sacrifice). 8% employer, 12% employee

Two BTLs: Combined profit £15k per year (before tax but after all expenses). Combined interest only mortgage £165k, combined value £400k.

Our house: Value £450k, mortgage £254k

 £15k cash

The equity in your BTLs roughly balances out your domestic mortgage.

Between you, you've got £140k in DC pensions and are adding £30k per year. In ~11 years when you want to retire you'll have £470k.
I think you're looking OK for retiring at 58 on £40k pa, but £50k will need more work.