On track to retire at 50? Pension diary

Triumph13

As long as you always contribute enough to get the max employer contribution, it may be worth alternating years of minimum pension contribution with years where you contribute enough to get the full child benefit, using carry forward allowance if necessary.

Alexland

artyboy said:

Ditto, even with a 2 year break from work, I was 'full' by my mid-40s. The whole entitlement thing is a real black art (albeit it will eventually be simplified to 35 years for everyone)

I'd say it was very unfair as we were due to get additional SP and they swapped it for progress to the basic SP which in most cases was probably not required as most people affected would probably still work long enough to get it anyway or could have bought the extra years inexpensively.

Simon11

With the new financial year coming up, everything is ready for the big switch over with change of strategy from throwing everything at the pension to get under £60k limit to taking as much as I can to be under £100k limit and still take all the employer pension contributions (plus stop child benefit payments).

Definitely feels odd going from putting in 45% into the pension to planned 14% for this new financial year.

Will however be nice to not have to dip into savings for holidays and be able to splash out a lot more/ feel more comfortable, now that we have a decent amount in investments for later in life. I will feel like a millionaire each month with the paycheck, lol!

Will have to see what happens to whether we continue this strategy beyond this year or not, as you never know what will happen around the corner and what happens with your career.

ex-pat_scot

https://forums.moneysavingexpert.com/discussion/comment/81930950#Comment_81930950

Indeed. There is a window at each threshold, where it is sensible to carefully manage around the marginal tax rates. This is particularly prevalent at the HR threshold, where you lose the ability to transfer personal allowance, and the dividend allowance halves to £500. Also in the child benefit clawback zone, and particularly at £100,000.

At some point, you run out of levers to pull, or cashflow, or both.

If you earn £110,000 then it's not too much of a challenge to sal sac to below the magic threshold. Pensions contributions should take the heavy lifting, but don't forget gift aid, cycle scheme, childcare vouchers. If you earn £150,000 then it becomes more of a challenge / cash flow problem. A very nice problem to have, but a problem nevertheless.

Bostonerimus1

OP, it's good to have a goal and a plan to get there. But it's never a straight path between A and B, and you've been on a windy path between A and C. Always include some slack in your plan so you can adapt to life.

Bostonerimus1

https://forums.moneysavingexpert.com/discussion/comment/81803702#Comment_81803702

When I checked my NI record I was surprised that back in the 1970s I had three contributions for time I spent at Sixth Form College. I missed 6 years while at university and then paid another 32 years of voluntary NI to reach 35 years. Under the old SP system I would only have ever qualified for the Basic State pension so the introduction of the New State Pension was another nice surprise.

artyboy

https://forums.moneysavingexpert.com/discussion/comment/81935976#Comment_81935976

IIRC, there was some sort of automatic credit for your 16/17 and 17/18 years.

Simon11

I have been using AI to recheck my strategy and at the moment, with my partner we have a combined amount of roughly £450,000 saved in our pensions with 20 years to go to 57 years old and get full access.

As per my post in March, I have reduced my future contributions to £2,250 per month (both employee & employer) to be under the £100k annual income band.

What I have realised, assuming annual growth of 4% on the pot, full state pension x2 with partner and with £2k monthly contributions until 50 years old is that with our target of having an income of £33k in retirement, we will smash that when 57 years old and likely to have +£60k comfortably per year.

Thus, what is holding us back from retiring at 50 comfortably, or even retiring in late 40s is actually non-pension assets which has changed my strategy focusing mostly on pensions.

I've already taken the move to increase annual income from £60k to £100k which is painful when looking at the tax impacts but it is worthwhile. However, assuming there are future pay rises and promotions, it doesn't make sense to take any further income particularly between £100-150k ranges and nor do I really need to put money away into the pension as per calculations above.

Thus apart from reducing my hours if I get a promotion, are there any other options on the table to consider?

In my workplace, I really enjoy the work and the stress levels are average. I had always considered it not worthwhile going to 4 days per week. Reason being is that at the moment, I kind of work 4.5 days a week through peak/ quiet periods and thus, if I were to reduce it, I wouldn't see a 20% reduction in work efforts!

There is however the concern that my wife doesn't have as much in her pension however if she changes her 20 hours per week min-wage job…. anything she would do would either mean starting low on the salary rung in a new career or returning to her previous job with crazy work/life balance.

This is of course is a nice problem to have and keen to make the most of it! Thanks for thoughts and ideas as always.

Bostonerimus1

My early retirement planning involved buying a rental apartment, paying off my mortgages and taking a job with a DB pension that I could start at age 55 as well as splitting my saving/investing between DC and after tax accounts. Without a mortgage my income needs were reduced so that rent and small saving withdrawals covered my needs from 52 to age 55. I took the DB pension at 55 and with the rental income that more than covers my spending without having to worry what the markets are doing. I was also fell into some part time contract work for an old colleague and that income goes into investments.

If you are planning to retire early it's important to think about the spending and expenses side of the equation as well as the income generation side.