Can I afford retire next year at 55 ?

lisyloo

To me it seems tight but that might be my personal bias (I was £31k just for me without savings).
i feel you don’t have room for any unexpected items if you are living off your savings.
for example one-off house, car repairs or what if you want to pay for some health or dental privately (dental implant for example are expensive).

Im monitoring my spending, but I’m also doing a budget as the actual may be lower than average. For example nothing has gone wrong with my house, car, bike, health, teeth so far this year.

Albermarle

Savings are currently  equally in cash isas/ savings accounts, premium bonds and S&S isas

Due to current low saving rates plus high inflation, and some negative movements in financial markets. Then  your £200K at the start of 2022 will be only worth about £180 K by the end of the year. ( Physically the number will be larger than that but mainly due to high inflation, it's real value in terms of what in can buy will have been  reduced) Alternatively you could take the actual figure but increase your proposed spend from £30k/£35K to £33/£38K due to inflation( also  new cars have gone up in price a lot)

It is quite possible that something similar will happen next year, hopefully less dramatic, but you never know

So due to the current situation, that may well persist for some time, I would advise some caution.

SarahB16

Dazed_and_C0nfused said:

DairyQueen said:

SarahB16 said:

Re crunching the numbers to see if you'd be better off living off the savings for a few years before claiming the pension so as to get a smaller reduction. I think you raise a really good suggestion p00hsticks as something to consider.   

Can I ask the pension experts on here.  If a person delays taking e.g. their DB pension by a few years in order to get a higher annual pension and instead lives off their savings for a few years instead they will not be using their tax allowance in those years. 

Can they carry forward that unused tax allowance to be used against future pension income which is greater than that year's tax allowance?  I'm thinking is this possible for say up to six years?      

'Fraid not. Use it each tax year or lose it.

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  

I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

QrizB

SarahB16 said:

Dazed_and_C0nfused said:

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  
I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

Anyone under the age of 75 can pay into a pension scheme. The limit on contributions is usually your earned income (capped at £40k pa) but there's a £3600 pa collar, so you can contribute this much even if you have no earned income. £3600 is £2880 plus £720 tax relief at source.

If you're over 55 (due to become 57 in a few years) and aren't bothered by the MPAA you can pay in £2880, wait for the tax relief to be credited then take the £3600 out again. 25% (£900) is tax-free and £2700 is taxed at your marginal rate. If you're a non-taxpayer you can get the full £3600 out without paying tax and you're now £720 better off. If you have to pay 20% tax on the £2700 you'll still be £180 better off.

And you can do this every year from 55 to 75.

There's a 120-page thread on this if you've nothing better to do with your Sunday afternoon:

https://forums.moneysavingexpert.com/discussion/5580163/paying-2880-into-pension-when-retired

lisyloo

SarahB16 said:

Dazed_and_C0nfused said:

DairyQueen said:

SarahB16 said:

Re crunching the numbers to see if you'd be better off living off the savings for a few years before claiming the pension so as to get a smaller reduction. I think you raise a really good suggestion p00hsticks as something to consider.   

Can I ask the pension experts on here.  If a person delays taking e.g. their DB pension by a few years in order to get a higher annual pension and instead lives off their savings for a few years instead they will not be using their tax allowance in those years. 

Can they carry forward that unused tax allowance to be used against future pension income which is greater than that year's tax allowance?  I'm thinking is this possible for say up to six years?      

'Fraid not. Use it each tax year or lose it.

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  

I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

It depends what you want to use your savings for (especially if there might be 40 years to go).
living off them seems a bad idea to me in general, but if you have the sort of scheme that would give you a better deal and you then you could replenish from a lump sum then it sounds like a good idea.

if you want you savings to cover exceptional one-offs like car, house, dental implants, possible tests or private operation, house improvements over the next 40 years, the. You need to be cautious IMO

so as always the devil is in the detail

amounts like £200k sounds like a lot but for 2 people for 40 years, it’s not actually that much

buyhighselllow

lisyloo said:

SarahB16 said:

Dazed_and_C0nfused said:

DairyQueen said:

SarahB16 said:

Re crunching the numbers to see if you'd be better off living off the savings for a few years before claiming the pension so as to get a smaller reduction. I think you raise a really good suggestion p00hsticks as something to consider.   

Can I ask the pension experts on here.  If a person delays taking e.g. their DB pension by a few years in order to get a higher annual pension and instead lives off their savings for a few years instead they will not be using their tax allowance in those years. 

Can they carry forward that unused tax allowance to be used against future pension income which is greater than that year's tax allowance?  I'm thinking is this possible for say up to six years?      

'Fraid not. Use it each tax year or lose it.

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  

I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

It depends what you want to use your savings for (especially if there might be 40 years to go).
living off them seems a bad idea to me in general, but if you have the sort of scheme that would give you a better deal and you then you could replenish from a lump sum then it sounds like a good idea.

if you want you savings to cover exceptional one-offs like car, house, dental implants, possible tests or private operation, house improvements over the next 40 years, the. You need to be cautious IMO

so as always the devil is in the detail

amounts like £200k sounds like a lot but for 2 people for 40 years, it’s not actually that much

 From my real life observations, increasingly of late,  life after 70 can be pretty unpredictable, and my observational experience is that quality of life diminishes greatly in a lot of cases. Being excessively thrifty or risk averse to hold onto money you increasingly have less use for as you start to decline seems like something I might live to regret ( assuming I live) .

lisyloo

buyhighselllow said:

lisyloo said:

SarahB16 said:

Dazed_and_C0nfused said:

DairyQueen said:

SarahB16 said:

Re crunching the numbers to see if you'd be better off living off the savings for a few years before claiming the pension so as to get a smaller reduction. I think you raise a really good suggestion p00hsticks as something to consider.   

Can I ask the pension experts on here.  If a person delays taking e.g. their DB pension by a few years in order to get a higher annual pension and instead lives off their savings for a few years instead they will not be using their tax allowance in those years. 

Can they carry forward that unused tax allowance to be used against future pension income which is greater than that year's tax allowance?  I'm thinking is this possible for say up to six years?      

'Fraid not. Use it each tax year or lose it.

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  

I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

It depends what you want to use your savings for (especially if there might be 40 years to go).
living off them seems a bad idea to me in general, but if you have the sort of scheme that would give you a better deal and you then you could replenish from a lump sum then it sounds like a good idea.

if you want you savings to cover exceptional one-offs like car, house, dental implants, possible tests or private operation, house improvements over the next 40 years, the. You need to be cautious IMO

so as always the devil is in the detail

amounts like £200k sounds like a lot but for 2 people for 40 years, it’s not actually that much

 From my real life observations, increasingly of late,  life after 70 can be pretty unpredictable, and my observational experience is that quality of life diminishes greatly in a lot of cases. Being excessively thrifty or risk averse to hold onto money you increasingly have less use for as you start to decline seems like something I might live to regret ( assuming I live) .

Absolutely.
This is the big dilemma we all face.
enjoying ourselves now vs running our later.

Im trying to navigate that very dilemma.

there is some space between 55 and 70 though.

buyhighselllow

QrizB said:

SarahB16 said:

Dazed_and_C0nfused said:

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  
I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

Anyone under the age of 75 can pay into a pension scheme. The limit on contributions is usually your earned income (capped at £40k pa) but there's a £3600 pa collar, so you can contribute this much even if you have no earned income. £3600 is £2880 plus £720 tax relief at source.

If you're over 55 (due to become 57 in a few years) and aren't bothered by the MPAA you can pay in £2880, wait for the tax relief to be credited then take the £3600 out again. 25% (£900) is tax-free and £2700 is taxed at your marginal rate. If you're a non-taxpayer you can get the full £3600 out without paying tax and you're now £720 better off. If you have to pay 20% tax on the £2700 you'll still be £180 better off.

And you can do this every year from 55 to 75.

There's a 120-page thread on this if you've nothing better to do with your Sunday afternoon:

https://forums.moneysavingexpert.com/discussion/5580163/paying-2880-into-pension-when-retired

So my wife is 55, still working PT and earns well under the threshold for income tax. As this is unlikely to change if she retires, this would seem like a no brainer for her to do if I am understanding it correctly ? How quickly after paying in £2880 can you draw off the £3600 ? 

buyhighselllow

lisyloo said:

buyhighselllow said:

lisyloo said:

SarahB16 said:

Dazed_and_C0nfused said:

DairyQueen said:

SarahB16 said:

Re crunching the numbers to see if you'd be better off living off the savings for a few years before claiming the pension so as to get a smaller reduction. I think you raise a really good suggestion p00hsticks as something to consider.   

Can I ask the pension experts on here.  If a person delays taking e.g. their DB pension by a few years in order to get a higher annual pension and instead lives off their savings for a few years instead they will not be using their tax allowance in those years. 

Can they carry forward that unused tax allowance to be used against future pension income which is greater than that year's tax allowance?  I'm thinking is this possible for say up to six years?      

'Fraid not. Use it each tax year or lose it.

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  

I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

It depends what you want to use your savings for (especially if there might be 40 years to go).
living off them seems a bad idea to me in general, but if you have the sort of scheme that would give you a better deal and you then you could replenish from a lump sum then it sounds like a good idea.

if you want you savings to cover exceptional one-offs like car, house, dental implants, possible tests or private operation, house improvements over the next 40 years, the. You need to be cautious IMO

so as always the devil is in the detail

amounts like £200k sounds like a lot but for 2 people for 40 years, it’s not actually that much

 From my real life observations, increasingly of late,  life after 70 can be pretty unpredictable, and my observational experience is that quality of life diminishes greatly in a lot of cases. Being excessively thrifty or risk averse to hold onto money you increasingly have less use for as you start to decline seems like something I might live to regret ( assuming I live) .

Absolutely.
This is the big dilemma we all face.
enjoying ourselves now vs running our later.

Im trying to navigate that very dilemma.

there is some space between 55 and 70 though.

Absolutely. But I'm increasingly reflecting how the last 30 odd years of my working life have flown by, its very sobering and made me more resolute to try and enjoy the next few years ( more so after the pandemic etc)

lisyloo

buyhighselllow said:

lisyloo said:

buyhighselllow said:

lisyloo said:

SarahB16 said:

Dazed_and_C0nfused said:

DairyQueen said:

SarahB16 said:

Re crunching the numbers to see if you'd be better off living off the savings for a few years before claiming the pension so as to get a smaller reduction. I think you raise a really good suggestion p00hsticks as something to consider.   

Can I ask the pension experts on here.  If a person delays taking e.g. their DB pension by a few years in order to get a higher annual pension and instead lives off their savings for a few years instead they will not be using their tax allowance in those years. 

Can they carry forward that unused tax allowance to be used against future pension income which is greater than that year's tax allowance?  I'm thinking is this possible for say up to six years?      

'Fraid not. Use it each tax year or lose it.

But you could do the old trick of turning £2,880 into £3,600 and then get it all back without paying tax if you have unused Personal Allowances whilst being a non earner.

Or even front load a personal pension  or SIPP whilst still working and then take larger amounts without needing to pay tax because you have a lot of unused Personal Allowance.

What is this old trick please?  

I'm sure I'm not the only person who might be thinking ahead and wondering if in the first few years of retirement they could live off their savings and delay taking their pension.  In these circumstances the personal allowance would not be used.  

It depends what you want to use your savings for (especially if there might be 40 years to go).
living off them seems a bad idea to me in general, but if you have the sort of scheme that would give you a better deal and you then you could replenish from a lump sum then it sounds like a good idea.

if you want you savings to cover exceptional one-offs like car, house, dental implants, possible tests or private operation, house improvements over the next 40 years, the. You need to be cautious IMO

so as always the devil is in the detail

amounts like £200k sounds like a lot but for 2 people for 40 years, it’s not actually that much

 From my real life observations, increasingly of late,  life after 70 can be pretty unpredictable, and my observational experience is that quality of life diminishes greatly in a lot of cases. Being excessively thrifty or risk averse to hold onto money you increasingly have less use for as you start to decline seems like something I might live to regret ( assuming I live) .

Absolutely.
This is the big dilemma we all face.
enjoying ourselves now vs running our later.

Im trying to navigate that very dilemma.

there is some space between 55 and 70 though.

Absolutely. But I'm increasingly reflecting how the last 30 odd years of my working life have flown by, its very sobering and made me more resolute to try and enjoy the next few years ( more so after the pandemic etc)

Totally get where you’re coming from.
DH has just retired (hated his job).
I’m a different situation as I love my job so may go on a few more years, but it’s very much a trade off and apparently healthy people our age can just drop dead.

regarding the part time working (playing devils advocate here)
it will commit you and stop you doing things spontanoualy e.g. picnic on a nice day, and stop you booking holidays etc. And the work culture might be a PITA.
is getting a nice stress free part time job a pipe dream?

an alternate view  is that your reality is how you perceive it and if you don’t it all that seriously then maybe it’s not so stressful