Save for retirement

skegvegas473

Hi Everyone

I recently came into an inheritance and have managed to pay off my mortgage 11 years early and now I am thinking about my retirement.

I am currently 52 years young and would like to be able to retire well before the current 67 years old and I was wondering what would be best to earn enough money to retire early.

I'm not on a high wage (less than £30k per year) and still have 2 teenager's at home but would love to be able to retire and still have a good standard of life so would like about £20K to live off per year.

I will be saving £450 per month not paying a mortgage anymore and I'm currently paying into my NHS pension which I could claim from 60 but the amount I receive wouldn't last me until 67 if I retired that early.

I could buy extra years in my NHS works pension but the charges I would pay wouldn't be worth it, same with my private pension so my issue is what can I do now to save enough for retirement

I know I will need a new car next year so cant save the full £450 each month as I will need to save for a car

I could start a small business on the side but dont have any good ideas and mr tax man would probably take most of the money

Anyone any ideas what the best course of action would be?

Thanks

dunstonh

I could buy extra years in my NHS works pension but the charges I would pay wouldn't be worth it, same with my private pension so my issue is what can I do now to save enough for retirement

That is not logical.
£ for £, the NHS additional pension gives you the most money.

Your reference to private pension doesn't really help as the term private pension means different things to different people. For some, its anything but state pension.  For others it is anything other than state or occupational. For others it is anything but State and DB schemes (so not DC schemes).

However, charges would not wipe out the benefit and in most cases, the charges you pay on modern pensions are lower than the charges you pay on bank savings accounts.  The only difference is you see one explicitly whilst the other is applied implicitly. 

Anyone any ideas what the best course of action would be?

Pension.  Which one will depend on your objectives.

eskbanker

Best place to start would be to model how much you'd need to accumulate and by when in order to fund your desired £20K annual post-retirement income target, which should of course be adjusted by inflation in your modelling.  If your existing pension arrangements would take care of, say, 90% of that requirement then it's just some tinkering needed, but if you only have enough for 10% that would be a different story....

Mark_d

I would try to put as much money in to pension as possible.  Once that is maxxed I'd look at S&S ISAs.  There are risks with investing in pension funds and with shares/funds in an ISA but you could choose a lower risk fund to reflect your anticipated retirement date.

Albermarle

I could buy extra years in my NHS works pension but the charges I would pay wouldn't be worth it, same with my private pension so my issue is what can I do now to save enough for retirement

The cost of generating regular income after you stop working is generally underestimated.
Probably the best action is to add to your NHS pension, which is a really fantastic pension scheme. From whenever you retire it will payout a guaranteed income linked to inflation until you die.

Otherwise if you want to fund the first few years of retirement separately , then open a new DC type pension as well.

There is no easy fix. You may have to reconsider how early you can retire.

DRS1

I will be saving £450 per month not paying a mortgage anymore and I'm currently paying into my NHS pension which I could claim from 60 but the amount I receive wouldn't last me until 67 if I retired that early.

What does that mean?  Surely the NHS pension would last you until you die?

Yes it will be less than if you did not start to receive it until 67.  How far off the desired £20K would it be?

tacpot12

What entitlement have you built up to a State Pension? 

You should try to estimate what your final NHS Pension will be using the information available about your scheme.  

If you were to draw your NHS pension early, it will be reduced in line with the figures in this document from the NHSBSA: NHS Pensions factsheet template V1

Let's say that you have a full entitlement to the State Pension: £11,500 per year. This leaves you needing about £10,500 a year to have an after-tax income of £20K.

Using the early retirement factors in the document and your estimate of what your NHS Pension would be in each other years before your normal retirement age (each year you work you will get more pension), you can look to see when you would be able to retire on an income of £10,500 per year. 

Let's say that if you retire at 64, your reduced NHS pension will be £10,500. 
and if you retire at 63, your reduced pension will be £9,500.

If you can save £4000 between now and age 63, you can retire a year early, because you can pay yourself £1000 per year between the age of 63 and 67. 

You can repeat this calculation until you get to a figure you think you might be able to save before retirement. Don't forget that for every year you retire early, your NHS pension will be less, and you will need to replace the missing money for more years AND you will have less time to save up the money you need. 

If you are good with spreadsheets, it's quite easy to model this, and you can update your model each year when the TRS is updated.