Is there an optimum month to retire?

worksurvivor

Thanks for the clarification --- "alles ist claar!" as Herr Lipp might've said --- you're right about NRA (Normal Retirement Age): for me, it would be 66, but I've done long enough and don't fancy doing four more years to serve the full sentence up to NRA.

I've just looked again at the annual pension payment which, as you say, is more depleted the earlier it is taken. 

62: £20,230

63: £21,100

64: £22,020

65: £23,000

66:  £24,670

By my calculation, if I go before 63, I'm "giving up" £870. 

Assuming I'll take 20 or 25 years of pension  as a 62 year-old, that £870 could add up to something between £17,400 and £21,750, or about a year's pension in total.

I've performed the same calculation for each year and if I held on long enough to take the 66 year old's rate, that comes out at somewhere between £33,400 and £41,750, or about eighteen months to two years' payment at the 62 year old's rate (there's a peculiar extra wide gap between the payout at 65 and 66, perhaps to encourage people to hang on for the last gasp).

Albermarle

Normally reductions for DB schemes for taking them early are 4 to 5% for each year, so yours is in that ballpark .
Based on average life expectancy it should work out approx equal to taking it at NRA. Better at 4% than 5% though obviously .

jimi_man

worksurvivor said:

Thanks for the clarification --- "alles ist claar!" as Herr Lipp might've said --- you're right about NRA (Normal Retirement Age): for me, it would be 66, but I've done long enough and don't fancy doing four more years to serve the full sentence up to NRA.

I've just looked again at the annual pension payment which, as you say, is more depleted the earlier it is taken. 

62: £20,230

63: £21,100

64: £22,020

65: £23,000

66:  £24,670

By my calculation, if I go before 63, I'm "giving up" £870. 

Assuming I'll take 20 or 25 years of pension  as a 62 year-old, that £870 could add up to something between £17,400 and £21,750, or about a year's pension in total.

I've performed the same calculation for each year and if I held on long enough to take the 66 year old's rate, that comes out at somewhere between £33,400 and £41,750, or about eighteen months to two years' payment at the 62 year old's rate (there's a peculiar extra wide gap between the payout at 65 and 66, perhaps to encourage people to hang on for the last gasp).

Not sure I understand your workings? Maybe I've got it wrong.

Assuming a life expectancy of 86.

At 62 you'd get 24 years of £20230 which is £485,520
At 63 you'd get 23 years of £21100 which is £485,300
At 64 you'd get 22 years of £22020 which is £484,440
At 65 you'd get 21 years of £23000 which is £483,000
At 66 you'd get 20 years of £24670 which is £493,400

To me the differences are so minor as to be not worth worrying about. Around £8000 difference over the life of the pension to take it at 62. Personally I'd take that action.

worksurvivor

jimi_man said:

62: £20,230

63: £21,100

64: £22,020

65: £23,000

66:  £24,670

By my calculation, if I go before 63, I'm "giving up" £870. 

Assuming I'll take 20 or 25 years of pension  as a 62 year-old, that £870 could add up to something between £17,400 and £21,750, or about a year's pension in total.

[snip]

Not sure I understand your workings? Maybe I've got it wrong.

Assuming a life expectancy of 86.

At 62 you'd get 24 years of £20230 which is £485,520
At 63 you'd get 23 years of £21100 which is £485,300
At 64 you'd get 22 years of £22020 which is £484,440
At 65 you'd get 21 years of £23000 which is £483,000
At 66 you'd get 20 years of £24670 which is £493,400

To me the differences are so minor as to be not worth worrying about. Around £8000 difference over the life of the pension to take it at 62. Personally I'd take that action.

It's helpful to see someone with some mathematical acumen do the calculations! 

My workings-out were based on the difference between one year's pension value and the next, which is higher, and multiplying the difference by 25, which is the number of years I might take that amount, based on life expectancy.

Your method, however, makes much more sense! 

Thanks for taking the time and trouble to show a sensible way of working out the numbers! 

jimi_man

worksurvivor said:

jimi_man said:

62: £20,230

63: £21,100

64: £22,020

65: £23,000

66:  £24,670

By my calculation, if I go before 63, I'm "giving up" £870. 

Assuming I'll take 20 or 25 years of pension  as a 62 year-old, that £870 could add up to something between £17,400 and £21,750, or about a year's pension in total.

[snip]

Not sure I understand your workings? Maybe I've got it wrong.

Assuming a life expectancy of 86.

At 62 you'd get 24 years of £20230 which is £485,520
At 63 you'd get 23 years of £21100 which is £485,300
At 64 you'd get 22 years of £22020 which is £484,440
At 65 you'd get 21 years of £23000 which is £483,000
At 66 you'd get 20 years of £24670 which is £493,400

To me the differences are so minor as to be not worth worrying about. Around £8000 difference over the life of the pension to take it at 62. Personally I'd take that action.

It's helpful to see someone with some mathematical acumen do the calculations! 

My workings-out were based on the difference between one year's pension value and the next, which is higher, and multiplying the difference by 25, which is the number of years I might take that amount, based on life expectancy.

Your method, however, makes much more sense! 

Thanks for taking the time and trouble to show a sensible way of working out the numbers! 

Yes, people often forget that whilst you get less if you take it early, you do get more years of it. It should be broadly actuarily neutral, though that obviously depends how long you live. Looks to be around 4% reduction per year.

cfw1994

See https://forums.moneysavingexpert.com/discussion/6065262/best-time-of-year-to-retire-uk#latest for another discussion I triggered on this.
For me, it was spring/summer (went end of April)

Thrugelmir

jimi_man said:

worksurvivor said:

Thanks for the clarification --- "alles ist claar!" as Herr Lipp might've said --- you're right about NRA (Normal Retirement Age): for me, it would be 66, but I've done long enough and don't fancy doing four more years to serve the full sentence up to NRA.

I've just looked again at the annual pension payment which, as you say, is more depleted the earlier it is taken. 

62: £20,230

63: £21,100

64: £22,020

65: £23,000

66:  £24,670

By my calculation, if I go before 63, I'm "giving up" £870. 

Assuming I'll take 20 or 25 years of pension  as a 62 year-old, that £870 could add up to something between £17,400 and £21,750, or about a year's pension in total.

I've performed the same calculation for each year and if I held on long enough to take the 66 year old's rate, that comes out at somewhere between £33,400 and £41,750, or about eighteen months to two years' payment at the 62 year old's rate (there's a peculiar extra wide gap between the payout at 65 and 66, perhaps to encourage people to hang on for the last gasp).

Not sure I understand your workings? Maybe I've got it wrong.

Assuming a life expectancy of 86.

At 62 you'd get 24 years of £20230 which is £485,520
At 63 you'd get 23 years of £21100 which is £485,300
At 64 you'd get 22 years of £22020 which is £484,440
At 65 you'd get 21 years of £23000 which is £483,000
At 66 you'd get 20 years of £24670 which is £493,400

To me the differences are so minor as to be not worth worrying about. Around £8000 difference over the life of the pension to take it at 62. Personally I'd take that action.

Future years starting amounts will be uprated by the relevant inflation measure. Likewise the differential will rise over the period of the payment. Compounding makes a sizable difference. 

Nebulous2

If your pension is like the LGPS those illustrative figures for each age wont be stepped, they will be calculated per day. ie you wont jump from £20,230 to £21,100 on your 63rd birthday, it will go up more like £2-3 a day in between. 

I left at the end of March at 59. I had the cash to defer to my 60th birthday, or indeed several birthdays later, but didn't like the idea of being without an income and depleting my cash reserves, so I took the pension and took the reduction. 

These decisions are not all financial, for me it was a psychological one as well. After 40 years of a monthly income, giving it up was the biggest downside of leaving work. 

jimi_man

Thrugelmir said:

jimi_man said:

worksurvivor said:

Thanks for the clarification --- "alles ist claar!" as Herr Lipp might've said --- you're right about NRA (Normal Retirement Age): for me, it would be 66, but I've done long enough and don't fancy doing four more years to serve the full sentence up to NRA.

I've just looked again at the annual pension payment which, as you say, is more depleted the earlier it is taken. 

62: £20,230

63: £21,100

64: £22,020

65: £23,000

66:  £24,670

By my calculation, if I go before 63, I'm "giving up" £870. 

Assuming I'll take 20 or 25 years of pension  as a 62 year-old, that £870 could add up to something between £17,400 and £21,750, or about a year's pension in total.

I've performed the same calculation for each year and if I held on long enough to take the 66 year old's rate, that comes out at somewhere between £33,400 and £41,750, or about eighteen months to two years' payment at the 62 year old's rate (there's a peculiar extra wide gap between the payout at 65 and 66, perhaps to encourage people to hang on for the last gasp).

Not sure I understand your workings? Maybe I've got it wrong.

Assuming a life expectancy of 86.

At 62 you'd get 24 years of £20230 which is £485,520
At 63 you'd get 23 years of £21100 which is £485,300
At 64 you'd get 22 years of £22020 which is £484,440
At 65 you'd get 21 years of £23000 which is £483,000
At 66 you'd get 20 years of £24670 which is £493,400

To me the differences are so minor as to be not worth worrying about. Around £8000 difference over the life of the pension to take it at 62. Personally I'd take that action.

Future years starting amounts will be uprated by the relevant inflation measure. Likewise the differential will rise over the period of the payment. Compounding makes a sizable difference. 

Yes, that's also a very good point. I did them without inflation just as an illustration. But when you take (say 2.5%) inflation into account the figures do indeed read differently.

Just calculating the total amount by age 86

At 62 it is £654,421
At 63 it is £645,331
At 64 it is £635,560
At 65 it is £625,215
At 66 it is £630,187

Quite instructive.

Simes122

jimi_man said:

Thrugelmir said:

jimi_man said:

worksurvivor said:

Thanks for the clarification --- "alles ist claar!" as Herr Lipp might've said --- you're right about NRA (Normal Retirement Age): for me, it would be 66, but I've done long enough and don't fancy doing four more years to serve the full sentence up to NRA.

I've just looked again at the annual pension payment which, as you say, is more depleted the earlier it is taken. 

62: £20,230

63: £21,100

64: £22,020

65: £23,000

66:  £24,670

By my calculation, if I go before 63, I'm "giving up" £870. 

Assuming I'll take 20 or 25 years of pension  as a 62 year-old, that £870 could add up to something between £17,400 and £21,750, or about a year's pension in total.

I've performed the same calculation for each year and if I held on long enough to take the 66 year old's rate, that comes out at somewhere between £33,400 and £41,750, or about eighteen months to two years' payment at the 62 year old's rate (there's a peculiar extra wide gap between the payout at 65 and 66, perhaps to encourage people to hang on for the last gasp).

Not sure I understand your workings? Maybe I've got it wrong.

Assuming a life expectancy of 86.

At 62 you'd get 24 years of £20230 which is £485,520
At 63 you'd get 23 years of £21100 which is £485,300
At 64 you'd get 22 years of £22020 which is £484,440
At 65 you'd get 21 years of £23000 which is £483,000
At 66 you'd get 20 years of £24670 which is £493,400

To me the differences are so minor as to be not worth worrying about. Around £8000 difference over the life of the pension to take it at 62. Personally I'd take that action.

Future years starting amounts will be uprated by the relevant inflation measure. Likewise the differential will rise over the period of the payment. Compounding makes a sizable difference. 

Yes, that's also a very good point. I did them without inflation just as an illustration. But when you take (say 2.5%) inflation into account the figures do indeed read differently.

Just calculating the total amount by age 86

At 62 it is £654,421
At 63 it is £645,331
At 64 it is £635,560
At 65 it is £625,215
At 66 it is £630,187

Quite instructive.

So taking it early is beneficial - the amount total amount received taking at 62 is higher than the amount received taking it at 66, taking inflation into account?  Am I misreading the situation?