Bold leap into retirement

pterri

 Interesting article in the FT (sorry, paywalled)

I suspect his may be me, I’ve seen others mention this. 

Retirees can struggle to shift the ‘saver mindset’
https://on.ft.com/4goshKI

Judytoo

Oh, gosh, that article resonates with me.

like a few others on here I am finishing this year, for me in December. Mr J2 has already retired and has done a huge chunk of  the repairs and decorating that was over due, and we will be 62. Both fit and well and healthy. 

We have a mix of DB and DC pensions and by the time we get state pension we will be better off than we have ever been.  We are mortgage free and own decent cars and have future proofed as much as we can with new electrics and heating and a new roof

But oh, how I am struggling to pay for a slightly nicer hotel, or coffee mid morning and lunch out on a day out. National Trust members so cost is for the petrol to get there only

And we do want to travel, but like hiking  and dislike the heat, so Scotland and Canada on a long distance footpath rather than the Maldives 

I have set a budget for ‘frivolous’ spending and aim to spend it all by the end of each month, but the temptation to roll it over to next month is very high

Nebulous2

It's a common theme here, that shift from accumulation to spending. I've had the most spendy year I have ever had, 3 years into retirement, but I am still clinging onto my part-time job, at least in part because I don't want to deplete my capital. 

That was it's purpose - to see me through to state pension age, but it has since become a safety blanket.  From SPA we will have more than we need, at least until care kicks in. 

It's one of the issues that economists have with the changing demographics, that older people won't spend to keep the economy going, and it may be a subtext to the IHT changes. If older people pass money on to avoid IHT their children may be more willing to spend it. 

katejo

Judytoo said:

Oh, gosh, that article resonates with me.

like a few others on here I am finishing this year, for me in December. Mr J2 has already retired and has done a huge chunk of  the repairs and decorating that was over due, and we will be 62. Both fit and well and healthy. 

We have a mix of DB and DC pensions and by the time we get state pension we will be better off than we have ever been.  We are mortgage free and own decent cars and have future proofed as much as we can with new electrics and heating and a new roof

But oh, how I am struggling to pay for a slightly nicer hotel, or coffee mid morning and lunch out on a day out. National Trust members so cost is for the petrol to get there only

And we do want to travel, but like hiking  and dislike the heat, so Scotland and Canada on a long distance footpath rather than the Maldives 

I have set a budget for ‘frivolous’ spending and aim to spend it all by the end of each month, but the temptation to roll it over to next month is very high

I have no problem with a coffee out or a lunch on an excursion but I feel I am being overindulgent on things like holidays. I put my savings in interest earning accounts and also have an investment/ISA. Once I have moved the money from my current account, I am reluctant to touch it and almost feel that I have 'failed' if I do need it. Meanwhile I try to pay for my holidays out of just my salary income and feel good if I succeed.

cloud_dog

One or two of the people in my household have a similar resistance to spending, specifically they don't like the big number to go littler 😀

Now I'm not saying this will fix your challenges but, there are savings to be saved and then there are savings to be spent.  How we resolved this was to create a savings pot (account) and name it 'To be spent'.  Unbelievably (or not), this really helped the psychological wall.

Smudgeismydog

The recent comments about the psychological shift from saving to spending really resonates with me too.

Similar to cloud_dog, I am finding it easier to spend money from our joint account than my personal account. Each month my partner and I sit with a cuppa and chat about the remaining projects on the house, any trips or activities we’d like to do and which pots will fund them.

We both pay ourselves a personal allowance into our current accounts that we can do what we like with, but with the aim that the money is to be spent each month, then pay into the joint account to fund all household bills and joint spending. I track our pot values, and this approach continues to give me confidence about our ongoing ability to fund our retirement, particularly this phase prior to being able to access our pensions.

GenX0212

I started thinking seriously about retirement maybe 18months ago as I was coming towards the 55 marker. Did some maths and worked out that I could probably retire on or about the same amount of money as my current take home pay. In August last year I successfully applied for a small reduction in working hours from 37 to 34 per week and a reduction from 5 days to 4. That meant that as well as having more free time the dial on matching my current take home pay actually became slightly closer.

'Planning' on retiring next year at 57 but although I'm convinced it's what I want do, no longer really enjoying work, it still feels more of a conceptual than a physical aim and the time seems to be flying by so soon it will become a very real decision 

My current take home pay after significant payments into my pension pot is £3.8k per month. I will have a (reduced) DB income of £15k with currently £630k accumulated in DC pots which I am hoping will be closer to £700k by retirement (expecting to add ~£50k from salary, AVC and bonus sacrifice in the next 12 months).
My better half takes home about £1400 per month but for the last year or two a hefty chunk of which has been going straight into savings and being paid into a SIPP DC pension pot. She will have a (reduced) DB pension of £4K plus a DC pot of about £40k.

Analysing our current spending, we have no mortgage, 2 decent cars, and our only real financial commitment is to see out the very last year of our youngest's university costs (about £8.5k for rent and living expenses). Putting our 3 children through university has probably cost us somewhere in the region of £60-70k across the last 7 years. Our biggest remaining outlay is undoubtedly holidays having to suffer the ridiculous school holiday price hikes due to my wife working in a school 

So the plan is to retire early spending from the DC pots up until SP age. No more university costs, cheaper (but likely more frequent ) holidays. I firmly believe our spending will reduce as we get older. By state pension age our worst case is that the DC pots run out but we will have the £15k DB (me) £4k (wife) plus 2* full state pensions (already earned). So give or take £42k guaranteed income as a couple with hopefully money still available from the DC pot. In the event of a significant market crash then we would have to tighten belts but that's true whatever the plan.

My every instinct tells me this is absolutely doable and that we can carry on with no real impact to our current standard of living but as the 57 mark comes ever closer I do find myself second guessing our plans.


Sorry, long winded post I know! 

Cobbler_tone

I’d hazard a guess that far, far more people who have a plan to retire early (i.e. decent assets and income) generate further wealth as opposed to depleting it significantly. I’ve seen it first hand with both sets of parents and backed up by the conversation here. Probably human nature if you’ve been saving and working all your life.
It’s one of the reasons why IHT is such a hot topic and easy pickings for the government.
We need to shift our mindsets.
Some of the over cautious approaches I read are staggering, unless factoring in 10 years+ of five star long term care.

pterri

GenX0212 said:

I started thinking seriously about retirement maybe 18months ago as I was coming towards the 55 marker. Did some maths and worked out that I could probably retire on or about the same amount of money as my current take home pay. In August last year I successfully applied for a small reduction in working hours from 37 to 34 per week and a reduction from 5 days to 4. That meant that as well as having more free time the dial on matching my current take home pay actually became slightly closer.

'Planning' on retiring next year at 57 but although I'm convinced it's what I want do, no longer really enjoying work, it still feels more of a conceptual than a physical aim and the time seems to be flying by so soon it will become a very real decision 

My current take home pay after significant payments into my pension pot is £3.8k per month. I will have a (reduced) DB income of £15k with currently £630k accumulated in DC pots which I am hoping will be closer to £700k by retirement (expecting to add ~£50k from salary, AVC and bonus sacrifice in the next 12 months).
My better half takes home about £1400 per month but for the last year or two a hefty chunk of which has been going straight into savings and being paid into a SIPP DC pension pot. She will have a (reduced) DB pension of £4K plus a DC pot of about £40k.

Analysing our current spending, we have no mortgage, 2 decent cars, and our only real financial commitment is to see out the very last year of our youngest's university costs (about £8.5k for rent and living expenses). Putting our 3 children through university has probably cost us somewhere in the region of £60-70k across the last 7 years. Our biggest remaining outlay is undoubtedly holidays having to suffer the ridiculous school holiday price hikes due to my wife working in a school 

So the plan is to retire early spending from the DC pots up until SP age. No more university costs, cheaper (but likely more frequent ) holidays. I firmly believe our spending will reduce as we get older. By state pension age our worst case is that the DC pots run out but we will have the £15k DB (me) £4k (wife) plus 2* full state pensions (already earned). So give or take £42k guaranteed income as a couple with hopefully money still available from the DC pot. In the event of a significant market crash then we would have to tighten belts but that's true whatever the plan.

My every instinct tells me this is absolutely doable and that we can carry on with no real impact to our current standard of living but as the 57 mark comes ever closer I do find myself second guessing our plans.


Sorry, long winded post I know! 

Not exactly the same personal set up, mine is far simpler. If it were just numbers, it’s a no brainer for me. It’s the finality of it, but even that is nonsense. Plenty of people at my place retired and went back for various short term gigs. Funny old world but a good problem to have. 

pterri

Cobbler_tone said:

I’d hazard a guess that far, far more people who have a plan to retire early (i.e. decent assets and income) generate further wealth as opposed to depleting it significantly. I’ve seen it first hand with both sets of parents and backed up by the conversation here. Probably human nature if you’ve been saving and working all your life.
It’s one of the reasons why IHT is such a hot topic and easy pickings for the government.
We need to shift our mindsets.
Some of the over cautious approaches I read are staggering, unless factoring in 10 years+ of five star long term care.

Cobbler_tone said:

I’d hazard a guess that far, far more people who have a plan to retire early (i.e. decent assets and income) generate further wealth as opposed to depleting it significantly. I’ve seen it first hand with both sets of parents and backed up by the conversation here. Probably human nature if you’ve been saving and working all your life.
It’s one of the reasons why IHT is such a hot topic and easy pickings for the government.
We need to shift our mindsets.
Some of the over cautious approaches I read are staggering, unless factoring in 10 years+ of five star long term care.

There’s a think on the FT about the tax and economic windfall that may happen if people end up spending what they would have passed on.