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13 years since the discussion started....
Early_Retire_Free
Posts: 76 Forumite
Back in 2010 I started the "early retirement wannabe" thread but it took me a further 8 years to actually retire (in 2018 at age 53) and a further 3 years before I really took my work shoes off. I've now been fully retired for 2 years and the retirements questions now are quite different.
I spend some time now thinking about the following:
A. Whether to go back to work?
B. How to spend enough money?
C. How to protect what's left from the taxman?
On the work front, I have some criteria which are quite restrictive namely, 1. It has to be something I really want to do, 2. It would preferably be paid, 3. It has to be flexible (rather than part-time) meaning I don't want to work every day. I suspect I've come across the same problem that a number of early retirees find (and this is the problem the government faces), that those sort of jobs just don't exist. I can fill my time and never really get bored but sometimes I do feel that without work, there is an element of purpose missing from the day to day. I'm now 59 so probably at the tipping point where if I don't so something this year, I never will. Of course there is the tax element as well i.e. my retirement income means that any job will be taxed at the higher rate!
As regards money, we're quite fortunate. My (inflation linked) DB pension kicks in next year (at age 60) which will pay more than enough to cover day to day living expenses. That will be supplemented by some (quite a lot of) deferred income from when I was working that comes in over the next 7 years. After that, state pensions start which means that from age 67, in todays money we will have £70-80k in income at todays prices before spending any of our savings pot.
Our savings pot (low seven figures) is split roughly equally between high interest savings accounts and equities with a further chunk of cash in DC pension schemes (invested in a mixture of equities and bonds. We are Shielding the maximum we can in ISA's but as we started quite late that's still a relatively small portion of the total.
From the perspective of spending, we have already given the children a fair chink of money but after years of saving and investing, its quite hard to turn the taps on and start spending money more liberally. We do like to travel and I've recently started booking premium economy for longhaul but I cannot see that business class ever represents anything other than a complete waste of money! I peruse the pages of auto-trader looking at expensive sports cars.....but I can't really get THAT excited.
The DC pension pot is protected from inheritance tax and we have some chartiable giving in mind (but I do worry about the big charities gobbling up money on admin) but, if you were in my position, how would you spend it and how would you protect it?
I spend some time now thinking about the following:
A. Whether to go back to work?
B. How to spend enough money?
C. How to protect what's left from the taxman?
On the work front, I have some criteria which are quite restrictive namely, 1. It has to be something I really want to do, 2. It would preferably be paid, 3. It has to be flexible (rather than part-time) meaning I don't want to work every day. I suspect I've come across the same problem that a number of early retirees find (and this is the problem the government faces), that those sort of jobs just don't exist. I can fill my time and never really get bored but sometimes I do feel that without work, there is an element of purpose missing from the day to day. I'm now 59 so probably at the tipping point where if I don't so something this year, I never will. Of course there is the tax element as well i.e. my retirement income means that any job will be taxed at the higher rate!
As regards money, we're quite fortunate. My (inflation linked) DB pension kicks in next year (at age 60) which will pay more than enough to cover day to day living expenses. That will be supplemented by some (quite a lot of) deferred income from when I was working that comes in over the next 7 years. After that, state pensions start which means that from age 67, in todays money we will have £70-80k in income at todays prices before spending any of our savings pot.
Our savings pot (low seven figures) is split roughly equally between high interest savings accounts and equities with a further chunk of cash in DC pension schemes (invested in a mixture of equities and bonds. We are Shielding the maximum we can in ISA's but as we started quite late that's still a relatively small portion of the total.
From the perspective of spending, we have already given the children a fair chink of money but after years of saving and investing, its quite hard to turn the taps on and start spending money more liberally. We do like to travel and I've recently started booking premium economy for longhaul but I cannot see that business class ever represents anything other than a complete waste of money! I peruse the pages of auto-trader looking at expensive sports cars.....but I can't really get THAT excited.
The DC pension pot is protected from inheritance tax and we have some chartiable giving in mind (but I do worry about the big charities gobbling up money on admin) but, if you were in my position, how would you spend it and how would you protect it?
I used to be Marine_life .....but I can't connect to my old account
5
Comments
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A. Whether to go back to work?
.
I've just stopped paid employment and am surprised how many nice offers getting put my way to pass on experience, knowledge and helping out different organisations with very relaxing offers and generally well paid, more like a consultancy or project assistant role, currently thinking I may do a bit of anything nice I like, maybe just 3 to 5 months next fiscal year and plonk in a pension as another reserve tank and potentially the IHT current rules maybe helpful for others.B. How to spend enough money?
.
This is a question many others ask me as I have surplus assets and investments that aren't essential to me currently, possible cars and more holidays or the like, but would rather keep the cash tanks well filled rather than trying to get to the line with the fuel light on.C. How to protect what's left from the taxman?
.
There's plenty of ways of doing this to a greater or lesser extent if cash streams can be augmented in helpful ways making good use of not over paying tax for want of a little planning. To note over the last few years I reduced my focus on this matter and reluctantly kept feeding pensions and then I was more than happy when the government scrapped the LTA.
The LTA was my biggest bugbear for years, the various governments made it just impossible to achieve good planning IMHO, I can only guess we will see governments playing with LTA, MPAA, AA and IHT routes plus ISAs and similar products in the near future, maybe a couple or 3 years from now I'm guessing. I think they just see playing as adjusting revenue streams and feel obliged to keep tinkering with all the above so good prudent savers just can't complain too much at changes as we now see changes for change sake as the norm.1 -
No answers or insights from me. Just a couple of observations.The point of working hard over decades and diligently saving/investing was, presumably, to allow you to retire whilst you still had some time and health to hang on to and, crucially, to do so without having to worry about money.Yet you are worrying about money, even if it’s from the opposite end of the spectrum that most people think about when it comes to finance. Enjoy your freedom, which in your case means not worrying about having too much, as opposed to not enough money. You don’t have to spend it. Do what you want to do. If you spend, you spend, you can afford it. If you don’t, don’t sweat it. When you’re dead, you won’t care what you did or didn’t do with it nor how much the taxman helps himself to.16
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OP, I’m in a similar situation to you ie retired at 52 with a DB pension and substantial money in DC pensions and general investments and if it helps here is what I’ve done.
A) after 4 years of no paid work I was asked by an old colleague to help out at is small company. So I now work part time nearly always less than 20 hrs a week. It’s mostly practical mentoring young scientists in the lab, so lots of coffee and what I call “Catalog 101” ie showing them where to buy the components they need and set them up sensibly. The key is, if it ever becomes a chore I can stop immediately as I don’t need the money and have lots of other stuff to do.
I don’t worry about spending money. I’ve always been frugal and don’t see a need to change. So don't look for things to worry about and just enjoy what your money can provide to you and your heirs. I like being able to but large items like cars with cash. I bought a Honda 3 years ago rather than a BMW or some other more expensive brand and I expect to drive it for at least 10 more years. My holidays are usually bike touring and now I leave my tent behind and stay in hotels. I just rode from Lands End to John O’Groats and then back to London and stayed in hotels every night and ate in some good restaurants and it was nice not to have to worry about the cost.
C) Taxes are something that I think about quite a bit. As I’m working I put that money into a personal DC pension plan and that lowers current taxes. For estate/IHT I have a long term plan of gifting money to charities and my family. I expect the amounts to increase substantially when the young kids start going to university or needing help with house deposits..
And so we beat on, boats against the current, borne back ceaselessly into the past.4 -
The point of working hard over decades and diligently saving/investing was, presumably, to allow you to retire whilst you still had some time and health to hang on to and, crucially, to do so without having to worry about money.
I agree. One of my main motivations for working longer than strictly necessary was to make sure I had enough money that I did not have to worry about it, in relation to my expenditure.
I can only guess we will see governments playing with LTA, MPAA, AA and IHT routes plus ISAs and similar products in the near future, maybe a couple or 3 years from now I'm guessing.
The respected think tank the IFS, has published very strong views on what they see as the over generosity of taxation rules on pensions after death. The exemption from IHT being the main one. The removal of LTA will have increased the pressure, as now a lot more can be hidden in pensions from IHT than before without the LTA penalty, so making the rules even more beneficial for the well off handing down their wealth.
So I imagine this might be the main target in future. So in the end the LTA being dropped could be a double edged sword for many.
Death and taxes and pensions | Institute for Fiscal Studies (ifs.org.uk)
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OMG.... Low 7 figures?
Life must be soo hard.....lol2 -
Not sure how to use the "quote" function but hope that worksBostonerimus1 said:A) after 4 years of no paid work I was asked by an old colleague to help out at is small company. So I now work part time nearly always less than 20 hrs a week. It’s mostly practical mentoring young scientists in the lab, so lots of coffee and what I call “Catalog 101” ie showing them where to buy the components they need and set them up sensibly. The key is, if it ever becomes a chore I can stop immediately as I don’t need the money and have lots of other stuff to do.
I recently interviewed for an "admin" role at 15 hours a week - and although I was their preferred candiate, I ended up declining the job as I realised I wouldn't be able to keep my hands generally improving everything about the way they did business - I think they realised that as well. Never say never though - if something comes along I may look at it. I don’t worry about spending money. I’ve always been frugal and don’t see a need to change. So don't look for things to worry about and just enjoy what your money can provide to you and your heirs. I like being able to but large items like cars with cash. I bought a Honda 3 years ago rather than a BMW or some other more expensive brand and I expect to drive it for at least 10 more years. My holidays are usually bike touring and now I leave my tent behind and stay in hotels. I just rode from Lands End to John O’Groats and then back to London and stayed in hotels every night and ate in some good restaurants and it was nice not to have to worry about the cost.
Saving money to spend money is my approach. If I am going to buy something (even if its tea-bags), I want absolutely the best deal I can get. Having stayed in lots of luxury (chain) hotels in my working life - staying in expensive hotels generally doesn't appeal and I can have as much fun in an air b'n'b as I can a couple of weeks in the Maldives. Having said that, our holiday budget (in terms of bookings made) for next year will likely be £30-40k.
C) Taxes are something that I think about quite a bit. As I’m working I put that money into a personal DC pension plan and that lowers current taxes. For estate/IHT I have a long term plan of gifting money to charities and my family. I expect the amounts to increase substantially when the young kids start going to university or needing help with house deposits..
As most of my income is from overseas, it does not qualify for pensions relief in the UK which is annoying. I have dabbled with VCT's in the past and that may be something I look at again.I used to be Marine_life .....but I can't connect to my old account1 -
40k worth of holiday in a year, and you don't stay in expensive hotels? Are you going on holiday for the full 52 weeks?Early_Retire_Free said:
Not sure how to use the "quote" function but hope that worksBostonerimus1 said:A) after 4 years of no paid work I was asked by an old colleague to help out at is small company. So I now work part time nearly always less than 20 hrs a week. It’s mostly practical mentoring young scientists in the lab, so lots of coffee and what I call “Catalog 101” ie showing them where to buy the components they need and set them up sensibly. The key is, if it ever becomes a chore I can stop immediately as I don’t need the money and have lots of other stuff to do.
I recently interviewed for an "admin" role at 15 hours a week - and although I was their preferred candiate, I ended up declining the job as I realised I wouldn't be able to keep my hands generally improving everything about the way they did business - I think they realised that as well. Never say never though - if something comes along I may look at it. I don’t worry about spending money. I’ve always been frugal and don’t see a need to change. So don't look for things to worry about and just enjoy what your money can provide to you and your heirs. I like being able to but large items like cars with cash. I bought a Honda 3 years ago rather than a BMW or some other more expensive brand and I expect to drive it for at least 10 more years. My holidays are usually bike touring and now I leave my tent behind and stay in hotels. I just rode from Lands End to John O’Groats and then back to London and stayed in hotels every night and ate in some good restaurants and it was nice not to have to worry about the cost.
Saving money to spend money is my approach. If I am going to buy something (even if its tea-bags), I want absolutely the best deal I can get. Having stayed in lots of luxury (chain) hotels in my working life - staying in expensive hotels generally doesn't appeal and I can have as much fun in an air b'n'b as I can a couple of weeks in the Maldives. Having said that, our holiday budget (in terms of bookings made) for next year will likely be £30-40k.
C) Taxes are something that I think about quite a bit. As I’m working I put that money into a personal DC pension plan and that lowers current taxes. For estate/IHT I have a long term plan of gifting money to charities and my family. I expect the amounts to increase substantially when the young kids start going to university or needing help with house deposits..
As most of my income is from overseas, it does not qualify for pensions relief in the UK which is annoying. I have dabbled with VCT's in the past and that may be something I look at again.
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Having just spent the last 14 months on holiday overseas with my wife and coincidentally having spent £43,000 on an annualized basis, I'm afraid that budget only permits accommodation of about £30-£35 per night. That goes a long way in many countries, but couldn't be described as luxury 😀 We are really splashing out next week, and spending £39 per night on an apartment in Ushuaia - Argentina is a great place to visit at the moment due to exchange rate.eastcorkram said:
40k worth of holiday in a year, and you don't stay in expensive hotels? Are you going on holiday for the full 52 weeks?Early_Retire_Free said:
Not sure how to use the "quote" function but hope that worksBostonerimus1 said:A) after 4 years of no paid work I was asked by an old colleague to help out at is small company. So I now work part time nearly always less than 20 hrs a week. It’s mostly practical mentoring young scientists in the lab, so lots of coffee and what I call “Catalog 101” ie showing them where to buy the components they need and set them up sensibly. The key is, if it ever becomes a chore I can stop immediately as I don’t need the money and have lots of other stuff to do.
I recently interviewed for an "admin" role at 15 hours a week - and although I was their preferred candiate, I ended up declining the job as I realised I wouldn't be able to keep my hands generally improving everything about the way they did business - I think they realised that as well. Never say never though - if something comes along I may look at it. I don’t worry about spending money. I’ve always been frugal and don’t see a need to change. So don't look for things to worry about and just enjoy what your money can provide to you and your heirs. I like being able to but large items like cars with cash. I bought a Honda 3 years ago rather than a BMW or some other more expensive brand and I expect to drive it for at least 10 more years. My holidays are usually bike touring and now I leave my tent behind and stay in hotels. I just rode from Lands End to John O’Groats and then back to London and stayed in hotels every night and ate in some good restaurants and it was nice not to have to worry about the cost.
Saving money to spend money is my approach. If I am going to buy something (even if its tea-bags), I want absolutely the best deal I can get. Having stayed in lots of luxury (chain) hotels in my working life - staying in expensive hotels generally doesn't appeal and I can have as much fun in an air b'n'b as I can a couple of weeks in the Maldives. Having said that, our holiday budget (in terms of bookings made) for next year will likely be £30-40k.
C) Taxes are something that I think about quite a bit. As I’m working I put that money into a personal DC pension plan and that lowers current taxes. For estate/IHT I have a long term plan of gifting money to charities and my family. I expect the amounts to increase substantially when the young kids start going to university or needing help with house deposits..
As most of my income is from overseas, it does not qualify for pensions relief in the UK which is annoying. I have dabbled with VCT's in the past and that may be something I look at again.4 -
Crikey, sounds like a first world problem we would love to have!
A. Whether to go back to work? Why worry about that?Find something you enjoy that you can volunteer with - it sounds to me like the money is irrelevant for you, so enjoy sharing your valuable time with people or a cause you want to encourage, your sense of worth will multiply 🤷♂️
B. How to spend enough money? Most here are more worried about how to not run out of money 🤣
If we were in your shoes (& age-wise it sounds like we are, but perhaps not with the available resources you sound like you have), I would raise the quality of the holiday accommodation and travel, or even just try some fancy restaurants more frequently.Go Interrailing First Class, stay in 4 & 5* hotels only for a month, take a cruise on a small boat (we had one on a luxury ‘Windstar’ as a work jolly once for abut 5 days - amazing experience!). Take an all expenses included trip to some special places - go luxury in Iceland….
Maybe look at improvements you could make to your daily lifestyle and ‘splash the cash’: new bathroom, landscaping, new car (EVs are pricey up front but brilliant for ongoing costs, plus they ‘feel’ like driving the future!). A home battery & solar would use up a chunk but lower your costs if you don’t plan moving for 5-10+ years…..
C. How to protect what's left from the taxman? Trickier…..give more away sooner to offspring (assuming they are your ‘final’ beneficiaries). Keep plugging £2,880 into each pension for future tax-free bequests…Plan for tomorrow, enjoy today!5 -
C. How to protect what's left from the taxman?
Any gifts to charity ( however large ) are exempt from the usual gift rules, so will be excluded from any IHT calculations. Plus if you give 10% or more of your estate to charity in your will, then any IHT still due will be charged at 36% instead of 40%.
So for example if you left £2Million, with £1Million liable for IHT. So tax of £400 K leaving £1.6 M
If you gave away £200K, then tax of £288K ( £0.8M X 0.36) leaving £1.512K
So a gift of £200K will only cost you £88K.
Probably a better ticket to heaven than a lot of 5* hotel bills !
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