Retiring early with a small "pot": can it be done?

Buttercup15

hugheskevi said:

Buttercup15 said:

Marcon said:

Buttercup15 said:

Simon11 said:

 Helpful if you could share your age & your condition, to allow suitable advice.

But assuming you are 52 now, you have 15 years till the age of 67.

Thus 15 years x £11k would cost £165k, leaving you £30k in savings upon the age of 67.

It is certainly doable on a shoe string budget for the rest of your life, but would leave you adrift if you had any unexpected expenditure such as a new kitchen, roof ect and unlikely to be anything for adult children (apart from your home?).

If you could find a flexible part-time on zero hour contract that you can dip into & out as your health/ personal circumstances allow, that may give you that extra cushion?

You should also consider risks to the markets- with S&S ISA worth £120k. What happens to your plan if the fall by 20% in the next several years? What would you do?

Thanks for the reply. 51 now. I won't share health details to keep it totally anonymous.  

Unless you have a birthday before 6 April this year, or you can access your pension on the basis you are too ill to work again, you can't access your DC pension until you are 57 - the minimum age changes from 55 to 57 on 6 April 2028. 

I called the pension provider and they said my policy had a protected age of 55 and that the new rule wouldn't apply. I was surprised and checked their website as well which confirmed that (you have to have been enrolled prior to 2006 or 2010, can't remember). 

If you joined before 2006, that date suggests you could have a protected age that is under 55. It might be worth double checking what the minimum pension age is unless you are certain it is 55.

Pretty certain it is 55, as confirmed by them on the phone and documents available on their website, but can always triple check as I need to call them again at some point to add money. 

Buttercup15

barnstar2077 said:

Buttercup15 said:

I'm hoping to read the experience from others who have retired early on a small retirement pot, or a small monthly "income" after retirement. I am desperate to stop working and although I think my numbers work on paper, I need reassurance it can be done. 

For context, I am in my early 50s, currently self-employed, working part-time. I have a long term health condition which is making it harder and harder to work. I have already reduced my hours to suit this but still have many days I feel I cannot do another day of it. Due to the nature of the work, I cannot reduce hours further, and anyway, I feel I need to be "mentally free" from work, if that makes sense. 

I have been tracking my expenses for years and anticipate I need £15k per year. This includes a couple of holidays in UK / Europe and a small amount for eating out, a couple of hobbies, so could be reduced by a few hundreds if desperate. No mortgage or car. I don't spend much on clothes/tech/subscriptions. £4k a year would come from PIP (for health condition mentioned). So I need to find £11k a year. 

I have a DC pension I can access at 55, currently worth £25k so anticipating will be about £30k+ in a few years. A S&S ISA worth £120k and savings of £45k (3 years of expenses + a bit more for contingency). 
My plan would be to use a cash ladder, where I use the savings at the rate of £11k a year (to add to the PIP) while I let the S&S ISA grow. At 55, start drawing down the DC pension so I can take less from savings. At some point, I would have to dig into the S&S ISA (a mix of taking dividends and selling some of the capital) to replenish the cash ladder savings.
Do that over 12 years until I hit 67 and state pension kicks in. 

The aim is not to drain all of the savings/S&S ISA. Even though the health condition doesn't affect my life expectancy, I may need some form of help at home or care in my 70s. So I want to make sure some of that pot is still there when I hit 67. With sate pension kicking in then, the S&S ISA could be left to grow again, if depleted.
Having witnessed the quality of care when you depend on local authority funding, I need the option to pay for better care. I also have adult children and it would be nice to leave them something or help with buying property etc. Not the priority but a side bonus if markets are favourable. 
I think on paper the numbers add up but I would use a withdrawal rate of about 6.5% for a few years so I need to get over the mental barrier of seeing the pot of money go down and spending without a traditional income. 

So, is anyone managing on very small numbers? I am worried about taking a big leap of faith. Anything that I have missed?

In your situation I would start living off of the money from my ISA today and put as much of my salary as I could into my pension.  I would do that until I was either able to access the pension or I just couldn't take it any more.  You may find that having a set date of retirement (your 55th birthday) will help greatly in getting through the day to day grind.

Then at 55 make sure that you drawdown at least your full personal allowance from the pension until it is all gone.

If you have read the Paupers thread, mentioned previously, then you will know that I am not a proponent of waiting until you can live on 3.5% of your assets until you decide to retire, but I have increased my retirement pot goal a couple of times since my plans first inception.  Mainly because of the affects of covid and the invasion of Ukraine on food prices, utilities, and public transport costs etc, and because when I dropped down in days at my current job I realised that I am now spending more money.  I hadn't factored in that with more spare time on my hands I was more likely to spend money keeping myself entertained.  My hobbies are pretty cheap really, mainly walking and hot drinks in cafes with friends and family, but but every bus fare, lunch etc adds up.

Thanks Barnstar. Yes, I had set myself a goal of 55 but I honestly don't know if I can do another 3-ish years so for now, I am looking at my next birthday as the next goalpost. Easier to think about it as, it's just a few more months. 
Yes, good point about putting more into the pension. I was considering keeping 3 years of expenses only and moving the difference to my pension to get the free 20% top-up. Yes, am hoping energy prices are going to stop going up every 6 months! 

Time2count

The other thing to consider is what happens if you lose your PIP/ it reduces in value/ doesn't increase in line with inflation etc.
Even if you regain it later, could you cope financially without it for a year-18 months if it's removed and you have to go to tribunal to have it reinstated? What if that happens more than once?

On the plus side, if you have a partner who is (I presume) paying half the bills/ outgoings, then I do wonder if £15k a year is possibly more than you need? I pay £12k a year in rent, the total outgoings without scrimping are approx £25k, that's with myself and another adult in the home. If you're not paying rent/ mortgage then you could live more cheaply than you imagine.

dont_use_vistaprint

Buttercup15 said:

I'm hoping to read the experience from others who have retired early on a small retirement pot, or a small monthly "income" after retirement. I am desperate to stop working and although I think my numbers work on paper, I need reassurance it can be done. 

For context, I am in my early 50s, currently self-employed, working part-time. I have a long term health condition which is making it harder and harder to work. I have already reduced my hours to suit this but still have many days I feel I cannot do another day of it. Due to the nature of the work, I cannot reduce hours further, and anyway, I feel I need to be "mentally free" from work, if that makes sense. 

I have been tracking my expenses for years and anticipate I need £15k per year. This includes a couple of holidays in UK / Europe and a small amount for eating out, a couple of hobbies, so could be reduced by a few hundreds if desperate. No mortgage or car. I don't spend much on clothes/tech/subscriptions. £4k a year would come from PIP (for health condition mentioned). So I need to find £11k a year. 

I have a DC pension I can access at 55, currently worth £25k so anticipating will be about £30k+ in a few years. A S&S ISA worth £120k and savings of £45k (3 years of expenses + a bit more for contingency). 
My plan would be to use a cash ladder, where I use the savings at the rate of £11k a year (to add to the PIP) while I let the S&S ISA grow. At 55, start drawing down the DC pension so I can take less from savings. At some point, I would have to dig into the S&S ISA (a mix of taking dividends and selling some of the capital) to replenish the cash ladder savings.
Do that over 12 years until I hit 67 and state pension kicks in. 

The aim is not to drain all of the savings/S&S ISA. Even though the health condition doesn't affect my life expectancy, I may need some form of help at home or care in my 70s. So I want to make sure some of that pot is still there when I hit 67. With sate pension kicking in then, the S&S ISA could be left to grow again, if depleted.
Having witnessed the quality of care when you depend on local authority funding, I need the option to pay for better care. I also have adult children and it would be nice to leave them something or help with buying property etc. Not the priority but a side bonus if markets are favourable. 
I think on paper the numbers add up but I would use a withdrawal rate of about 6.5% for a few years so I need to get over the mental barrier of seeing the pot of money go down and spending without a traditional income. 

So, is anyone managing on very small numbers? I am worried about taking a big leap of faith. Anything that I have missed?

People can live on surprisingly very small amounts of money and still live a very rich and fulfilling lifestyle. I would say just go for it if it’s on your heart to do it, if it doesn’t work out, you can always get a job in a few years time. 

What you’ll find  find is once you have no income coming in other than maybe some interest and capital growth, you’re spending habits and lifestyle radically change and you will find all kinds of ways to have adventures and save money.  

I’ve not worked for two years now, that’s two years with no income at all and I’ve hardly spent anything. have a little time before I can access my pensions at 55 , so each month I’m tracking how much of my savings has been spent, tracking it very carefully finding all kinds of deals, freebies, holidays become trips to friends places all around the world and then you repay back the favour they come and stay with you when it’s warm in the UK….. I’m absolutely spending three months out of the UK next winter and will be turning off the utilities & claiming council tax rebate

One of the best pieces of advice I would give you is that while you’re working to make some very smart purchases of things that will ideally last a lifetime, I love photography, guitars, wild camping and travel, so having the right gear and good quality clothes and shoes  for different countries it’s very important. I don’t want to be shelling  out £200 on a new pair of walking boots or £2000 on a lens while I’ve no income. I made all those purchases over the last few years, and on the hole I made purchases that increase in value rather than depreciate like  classic guitars and good quality lenses. 

The one area I’m still undecided on is a vehicle, public transport in the UK is really good and the costs of owning and running a vehicle all year round is expensive. I’ve been hiring things like a T-Cross, at best £20 a day, or £600 per month,  i’ve looked at buying something like an old Land Rover or an X5 for around £15,000 and learning to maintain it myself.  The dilemma is I only plan to be in the UK about seven or eight months of the year

jackieblack

Public transport in the UK is extremely variable, depending on where you live, good in some places but truly appalling in others. However, if you can manage without a vehicle that's got to be a moneysaver

QrizB

I haven't seen anyone mention yet that there's an advantage in moving as much of your SSISA as you can into a SIPP.

You'll get a 25% uplift from the tax relief when you make the contribution, can have the same investments as your SSISA, then (due to your low income target) get most or all of it back out without paying tax on it.

If you'd started a few years ago, your £120k SSISA could instead have been a £160k SIPP.

I don't think you've said what your current self-employed earnings are, annually? You've still got a month or two to contribute to a SIPP this tax year?

numpty_dumpty

Have you looked at other benefits you can claim? You may be eligible for New Style Employment Support Allowance if you have to give up work due to ill health.

Make sure you get all the disability discounts you can , ESA card for cinemas, companion tickets for theatre etc., which all help.

Also be careful allocating PIP solely to normal living expenses. You will have other additional costs related to your disability to cover, even if not now you may in the future. For example a wheelchair, car adaptions, home adaptions, carer costs etc. Being disabled is expensive!

Buttercup15

numpty_dumpty said:

Have you looked at other benefits you can claim? You may be eligible for New Style Employment Support Allowance if you have to give up work due to ill health.

Make sure you get all the disability discounts you can , ESA card for cinemas, companion tickets for theatre etc., which all help.

Also be careful allocating PIP solely to normal living expenses. You will have other additional costs related to your disability to cover, even if not now you may in the future. For example a wheelchair, car adaptions, home adaptions, carer costs etc. Being disabled is expensive!

Thanks for your reply. Yes, I did look into ESA a couple of years ago when I was going through a particular bad patch but the paperwork was absolutely ridiculous and I gave up, never sent the forms back. Also found it not helpful that the medical form should be filled and signed by the GP (who knows nothing about me and my challenges apart from basic medical info), rather than my hospital doctor who would have been able to support my case better. 
Agree on potential future costs and using PIP or savings for that. It's on my radar. 

Buttercup15

QrizB said:

I haven't seen anyone mention yet that there's an advantage in moving as much of your SSISA as you can into a SIPP.

You'll get a 25% uplift from the tax relief when you make the contribution, can have the same investments as your SSISA, then (due to your low income target) get most or all of it back out without paying tax on it.

If you'd started a few years ago, your £120k SSISA could instead have been a £160k SIPP.

I don't think you've said what your current self-employed earnings are, annually? You've still got a month or two to contribute to a SIPP this tax year?

I had considered moving some of the money to my DC pension but eventually decided against it. I got "scared" I might need some of that money before 55 and didn't want to lock it away. I will move a few thousands from what I keep as easy access though and will see if I can shift another couple of thousands in 2026/2027. Every little helps. My earnings are under £20k. 
Also, I believe my SSISA performs better than my DC pension. I could have transfered the DC pension to a Vanguard SIPP with the same funds as the SSISA, but then I would have lost my protected age of 55 so decided against that too. 

Buttercup15

dont_use_vistaprint said:

Buttercup15 said:

I'm hoping to read the experience from others who have retired early on a small retirement pot, or a small monthly "income" after retirement. I am desperate to stop working and although I think my numbers work on paper, I need reassurance it can be done. 

For context, I am in my early 50s, currently self-employed, working part-time. I have a long term health condition which is making it harder and harder to work. I have already reduced my hours to suit this but still have many days I feel I cannot do another day of it. Due to the nature of the work, I cannot reduce hours further, and anyway, I feel I need to be "mentally free" from work, if that makes sense. 

I have been tracking my expenses for years and anticipate I need £15k per year. This includes a couple of holidays in UK / Europe and a small amount for eating out, a couple of hobbies, so could be reduced by a few hundreds if desperate. No mortgage or car. I don't spend much on clothes/tech/subscriptions. £4k a year would come from PIP (for health condition mentioned). So I need to find £11k a year. 

I have a DC pension I can access at 55, currently worth £25k so anticipating will be about £30k+ in a few years. A S&S ISA worth £120k and savings of £45k (3 years of expenses + a bit more for contingency). 
My plan would be to use a cash ladder, where I use the savings at the rate of £11k a year (to add to the PIP) while I let the S&S ISA grow. At 55, start drawing down the DC pension so I can take less from savings. At some point, I would have to dig into the S&S ISA (a mix of taking dividends and selling some of the capital) to replenish the cash ladder savings.
Do that over 12 years until I hit 67 and state pension kicks in. 

The aim is not to drain all of the savings/S&S ISA. Even though the health condition doesn't affect my life expectancy, I may need some form of help at home or care in my 70s. So I want to make sure some of that pot is still there when I hit 67. With sate pension kicking in then, the S&S ISA could be left to grow again, if depleted.
Having witnessed the quality of care when you depend on local authority funding, I need the option to pay for better care. I also have adult children and it would be nice to leave them something or help with buying property etc. Not the priority but a side bonus if markets are favourable. 
I think on paper the numbers add up but I would use a withdrawal rate of about 6.5% for a few years so I need to get over the mental barrier of seeing the pot of money go down and spending without a traditional income. 

So, is anyone managing on very small numbers? I am worried about taking a big leap of faith. Anything that I have missed?

People can live on surprisingly very small amounts of money and still live a very rich and fulfilling lifestyle. I would say just go for it if it’s on your heart to do it, if it doesn’t work out, you can always get a job in a few years time. 

What you’ll find  find is once you have no income coming in other than maybe some interest and capital growth, you’re spending habits and lifestyle radically change and you will find all kinds of ways to have adventures and save money.  

I’ve not worked for two years now, that’s two years with no income at all and I’ve hardly spent anything. have a little time before I can access my pensions at 55 , so each month I’m tracking how much of my savings has been spent, tracking it very carefully finding all kinds of deals, freebies, holidays become trips to friends places all around the world and then you repay back the favour they come and stay with you when it’s warm in the UK….. I’m absolutely spending three months out of the UK next winter and will be turning off the utilities & claiming council tax rebate

One of the best pieces of advice I would give you is that while you’re working to make some very smart purchases of things that will ideally last a lifetime, I love photography, guitars, wild camping and travel, so having the right gear and good quality clothes and shoes  for different countries it’s very important. I don’t want to be shelling  out £200 on a new pair of walking boots or £2000 on a lens while I’ve no income. I made all those purchases over the last few years, and on the hole I made purchases that increase in value rather than depreciate like  classic guitars and good quality lenses. 

The one area I’m still undecided on is a vehicle, public transport in the UK is really good and the costs of owning and running a vehicle all year round is expensive. I’ve been hiring things like a T-Cross, at best £20 a day, or £600 per month,  i’ve looked at buying something like an old Land Rover or an X5 for around £15,000 and learning to maintain it myself.  The dilemma is I only plan to be in the UK about seven or eight months of the year

Sounds like you are doing very well! Great hobbies, I am into music too, reading and doing free online courses just for fun, so these are pretty cheap hobbies. 
Good point on expensive purchases. When I am ready to take the plunge, I'll review what I may need to change or upgrade. 
We have one car, partner needs it to go to work and covers those expenses. I work remotely and have a free bus pass so minimum transport costs. I agree with Jackie, if you live in an area with good public transport links you can save the expense of a car and it'll keep you fit