FIRE Girls Pension Diary - Aim High & Dream Big

Firegirl

QueenJess said:

Following with interest as I am on a similar journey to you. I am mixing up paying down the mortgage, saving to ISAs and putting money into my pension with the aim to retire early or at least have options to do so if I want.

Having the option is the key isn’t it. Doesn’t matter what we do but to have the choice would be amazing!

Bostonerimus1

QueenJess said:

Following with interest as I am on a similar journey to you. I am mixing up paying down the mortgage, saving to ISAs and putting money into my pension with the aim to retire early or at least have options to do so if I want.

"options" is the key word. The "FI" in "FIRE" stands for "Financial Independence" and that is synonymous with having options. I retired at age 52 without a mortgage, considerable investments in general accounts, a DB pension that I took at 55, state pensions from US and UK that I'll take in a few years and DC pensions that I probably won't touch. I might be returning to the UK in 2025 and my finances make that "option" relatively easy.

FIRE is possible, but it takes planning, perseverance and a realistic time scale. I started saving for retirement in my mid 20s, but wasn't serious about it until my mid 30s, so it took me around 20 years.

Pat38493

Firegirl said:

SouthCoastBoy said:

I always think it is good not to have all your eggs in one basket. Hence I have a 50:50 split between pensions and ISAs, means I will have plenty of non taxable income available to me. Governments always seem to be tinkering with pension rules, so you never know what is around the corner, so personally I think it is nice to have some flexibility.

Very good point about the govt tinkering with rules. My IFA said that too but I forgot about that.

Everyone will have different views here but my approach is to plan my finances based on current legislation rather than assumptions about what might change in the future.  

Even if I did do that, I suspect the most likely tinkering outside of IHT related changes would be to reduce the input tax relief available to higher rate taxpayers, so I would still put more into pension while I have the opportunity.

Of course as stated above, if you wish to have the option to retire before you can access the pension or want to have ISAs for any unexpected emergencies this remains a valid reason in my view.

enthusiasticsaver

Bostonerimus1 said:

QueenJess said:

Following with interest as I am on a similar journey to you. I am mixing up paying down the mortgage, saving to ISAs and putting money into my pension with the aim to retire early or at least have options to do so if I want.

"options" is the key word. The "FI" in "FIRE" stands for "Financial Independence" and that is synonymous with having options. I retired at age 52 without a mortgage, considerable investments in general accounts, a DB pension that I took at 55, state pensions from US and UK that I'll take in a few years and DC pensions that I probably won't touch. I might be returning to the UK in 2025 and my finances make that "option" relatively easy.

FIRE is possible, but it takes planning, perseverance and a realistic time scale. I started saving for retirement in my mid 20s, but wasn't serious about it until my mid 30s, so it took me around 20 years.

We had ideas that we wanted to retire early in our 20s and luckily started addressing that with choosing a booster pension scheme for my DH when he moved jobs. Altogether about 15% of his salary was going into pensions and we never got used to the extra money so didn't miss it.  We didn't address my pension arrangements and boosting that though until our children were in secondary school and by then I was 40.  We consequently did not retire until we were 58 but that was still 8 years earlier than SP. Madness though that when our state pensions kick in we will be bringing in more income than when we were working with a mix of drawdown, DB pensions, ISA withdrawals and SPs. 

michaels

I fell planning early retirement/fire entirely randomly when they brought in the child benefit removal at 50k and I was earning about 60 with 3 kids so £2.4k 'extra tax' to pay. 

I then started to realise there were other options in relation to pension contributions and tax credits, using my DWs 3.6k pa etc that I would probably never have looked for otherwise. 

Add in the removal of serps/s2p which impacted me particularly badly (basically my NI paid after the change has earned me no additional state pension) and looking to retire asap has become a more attractive option.  Economics 101, if you make working less lucrative relative to having more leisure time then that is what people will choose.

enthusiasticsaver

michaels said:

I fell planning early retirement/fire entirely randomly when they brought in the child benefit removal at 50k and I was earning about 60 with 3 kids so £2.4k 'extra tax' to pay. 

I then started to realise there were other options in relation to pension contributions and tax credits, using my DWs 3.6k pa etc that I would probably never have looked for otherwise. 

Add in the removal of serps/s2p which impacted me particularly badly (basically my NI paid after the change has earned me no additional state pension) and looking to retire asap has become a more attractive option.  Economics 101, if you make working less lucrative relative to having more leisure time then that is what people will choose.

My son in law has just moved into this area after a recent payrise means they may lose child benefit and I suggested he look at overpaying his pension. Does that work? I did a bit of research but the information is sketchy about the rules on CB and assuming the £50k is gross salary cutoff that seems to point out anyone earning over that no longer qualifies? So if he is earning £55k and pays over £5k into his pension over the year does that mean my DD still gets the benefit? 

michaels

enthusiasticsaver said:

michaels said:

I fell planning early retirement/fire entirely randomly when they brought in the child benefit removal at 50k and I was earning about 60 with 3 kids so £2.4k 'extra tax' to pay. 

I then started to realise there were other options in relation to pension contributions and tax credits, using my DWs 3.6k pa etc that I would probably never have looked for otherwise. 

Add in the removal of serps/s2p which impacted me particularly badly (basically my NI paid after the change has earned me no additional state pension) and looking to retire asap has become a more attractive option.  Economics 101, if you make working less lucrative relative to having more leisure time then that is what people will choose.

My son in law has just moved into this area after a recent payrise means they may lose child benefit and I suggested he look at overpaying his pension. Does that work? I did a bit of research but the information is sketchy about the rules on CB and assuming the £50k is gross salary cutoff that seems to point out anyone earning over that no longer qualifies? So if he is earning £55k and pays over £5k into his pension over the year does that mean my DD still gets the benefit? 

It is not a cliff edge at 50k but ramps between 50 an 60k (where you lose 100%).  Pension contributions are deducted from the income assessed for this so yes, keeping taxable pay at 50k means you get to keep all the child benefit.

Firegirl

So today’s news is that I’ve looked at my accounts and and moved all the SO to 1 account.  There is a few DDs left behind and I’ve decided I won’t bother moving them. They are interest free debts without much left on them. They finish this year.  

So my plan is when paid I’ll transfer a monthly amount to the account I will use. All spending will go through this account so it means in a few years I will have a really good idea of my spending without having to spend time doing a detailed budget.  I know the best idea is a detailed budget but I just can’t face doing it so this is a way round it. I spent many years watching every penny and I can’t face it. So this is a way can work out in the next few years what I’m spending.

As I type I thought I’d share a tip re the DD left behind.  If I have a big purchase like a sofa that i can get on interest free credit, then i take it. Put the money i saved for it in offset mortgage or ISA.  Then I pay off the interest free credit.

I did this for my car 5 years ago. Took out interest free Energy Saving Trust electric car loan at 0% interest, I put the money I’d saved for the car in my offset mortgage account and then continued paying the loan so I’ve saved mortgage interest on a substantial amount and I’ve saved the same amount again.  Does feel like I’ve paid for my car twice though  I sort of treat it as a way to save but I have the money there if I was to stop working.  

I’m starting to show you my crazy logic!  But really it’s similar to stoozing.  I don’t really like stoozing with credit cards.  I think it psychological and you have to keep track when your 0% ends.  This works for me because you set up payments for x months and just let it run til it stops.  Like stoozing you need to make sure it’s all paid up before the interest free period ends.

Great reading all the comments.  Thanks for reading !

hugheskevi

Firegirl said:

So my plan is when paid I’ll transfer a monthly amount to the account I will use. All spending will go through this account so it means in a few years I will have a really good idea of my spending without having to spend time doing a detailed budget.  I know the best idea is a detailed budget but I just can’t face doing it so this is a way round it. 

I can't be bothered tracking every individual spend either. Fortunately, there is a much simpler way that should give you the information you need if you keep moderately detailed financial records.

Once a year, in the first week of April, I save a copy of my financial spreadsheets. This is a record of exactly what I have at that time - all my assets and all of my liabilities.

I keep a careful record of my income, along with how much I contribute to pensions and ISAs over the following year and compare my spreadsheets the following April to the one I saved a year earlier. Then I know exactly how much I spent on general living costs by simply calculating:

Living costs=Gross salary + dividends + saving interest - pension saving - ISA saving - income tax - National Insurance - mortgage - change in net minor debts and saving

The dividends came from a very small company I set up and operated for a while. I keep a detailed log of my salary and deductions each month, so it is simple to sum them up at the end of the year. My mortgage payments were usually 12 payments of the same amount in most years. Interest was the hardest to track, but I need to do that anyway to avoid HMRC limits, so got into the habit of once a month logging interest from all our accounts. The categories I subtract from income are all the big things which are not to do with everyday living - either taxes, paying debt or saving in one form or another.

So this is a fairly simple inputs and outputs record, and as long as you are confident you can accurately record income and major savings, then whatever remains as the difference is what you spent on everything else, ie living. Other folk might have slightly different categories depending on their source(s) of income and major expenses, but that gives the general idea. 

I've found it a very good discipline, and like the charts it enables me to build over time - the chart below is the main one I keep up-to-date (unfortunately I couldn't update for 2022/23 and 2023/24 as I've been away traveling so there is a complete discontinuity in the series in every category, but 2024/25 will be back to normal).

Firegirl

Wow! Now this appeals to my geek side.  Love it.  I’ll def set this up and good news is I’ve got til April to get done.  Thanks for sharing