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Early retirement - is when or how much more important?
Comments
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Yes ermine, I bought my first house in 1989 inflated out of all proportion my Lawson's reckless (although I thought he was an excellent Chancellor until then) decision to flag in the March budget the end of dual tax relief in the following August. The stampede to buy a house rocketed house inflation whilst I was 'trapped' in my last year of university. I went from being able to buy a four bed detached on graduating to a two bed semi. Sold in negative equity seven years later.0
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The point being that he was going to 'work' for fun rather than necessity. Hence retired.0
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Intellectually I agree with you completely. That's not always the whole picture. In my own case I aggressively paid down a mortgage from 2006 to 2012 and missed out on much of the initial run up after the 2008 crash.
There's absolutely nothing wrong with living intentionally - life is as much about the quality of the ride as the destination. However, the pay down the mortgage before retiring is a massive psychological attractor, so it's worth at least thinking about the counterfactual.
Coming to the conclusion - yes, paying off my mortgage will mean I am shorter of money in the earlier part of my early retirement, particularly pre-55, but I am prepared to pay that price for peace of mind is a perfectly reasonable decision.
Where I failed is being dreamily unaware that that peace of mind meant I would be more skint for the first few years, and correspondingly better off fairly soon. In personal finance, though an awful lot is luck, knowledge is also power. It's not about which path you take, it's about knowing there is a choice of paths to take and the territory they run through.
Particularly for early retirees between 50 and 55, this is a place when you can hold the amount to pay off the mortgage as cash in a SIPP, you can avoid investment risk then, if that is a fear. Inflation risk probably won't kill you over five years, and the bung from the taxman helps offset inflation risk as it is, and people are likely to be at the peak of their earning capacity at the time if they are able to entertain the idea of retiring early. Not paying off the morgtage deserves serious thought, even if the answer is 'sod that' in the end.0 -
The funny thing is that using the money that could pay off the mortgage to invest in a DC pension is basically what an endowment mortgage was. We applaud the former and pour scorn on the latter - I guess the difference is tax relief....I think....0
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My plans are on the home stretch but with uncertainties:
1. [Specific] What are they going to do with the private pension access age? If it's a cliff-edge on 6 April 2028 I can get mine at 55. If it's transitioned in, or if it is accelerated further due to State pension changes, it could be 56, 57, 58... Before waving goodbye to my earnings power, I could really do with knowing how long my savings have to last me.
2. [General] Will I keep my job until I'm good and ready, or will there need to be a last-minute change of plan due to circumstances beyond my control?
In a sense, item 2 is what all this has always really been about, psychologically, for me. Getting myself to the point where if I lost my job tomorrow it would not be the end of the world, would be a weight off my mind.
It's only in the last couple of years that my income has really taken off and yeah I expect it will be tempting to do just one more year when each one would mean a significant increase in cash to cover the "gap" between ER and private pension access. Sit in the park for two years, or work for one year and travel the world for one year?
I feel like I've seen both sides of the time vs money thing. My dad was about my age when he died, and the comments upthread about how health issues can blindside you at any time from your late forties are worryingly undeniable. I'm sure that anyone who's had their plans wrecked by permanent medical conditions would have done a lot of things differently if they'd known. And, exactly as mentioned upthread, my own personal time is indeed running out at the rate of 168 hours a week.
But... on my dad's death my mum, also at about the age I am now, decided that her widow's pension was just about enough that she didn't need to work any more. She went for time over money. As a result of that choice she has spent the last 30 years living a restricted life with small horizons and is now too old to do any differently. On top of that, once you get to retirement age it doesn't matter what you were doing ten years ago. All of her cohort are now long retired - and I bet she'd rather have their pension than hers.
On balance I think that "not having to go to work" is not, in itself, a victory. You also need enough money to be comfortable, and to give yourself options - both in the present and when you get to pension age.
You need more spending money now than you will when you're older, and the nature of the calculation (in conjunction with the fixed pension access date) means that the younger your planned retirement age, the harder it is to bring the date forward. Which circles back to item 1 above. Once I have that clarity, it's going to be a numbers game. I am hoping "one more year", if it represents an outcome I'd be daft to refuse, won't have quite the same feel at 50 as it would at 63 (say).
Item 2 - the ability to manage on what I've got - for me is a safety net, not an ambition. Although some days it's tempting!
Excuse the long post. I've got a lot out of some of the thoughts on this thread and maybe my take on things will interest somebody else.0 -
My plans are on the home stretch but with uncertainties:
1. [Specific] What are they going to do with the private pension access age? If it's a cliff-edge on 6 April 2028 I can get mine at 55. If it's transitioned in, or if it is accelerated further due to State pension changes, it could be 56, 57, 58... Before waving goodbye to my earnings power, I could really do with knowing how long my savings have to last me.
2. [General] Will I keep my job until I'm good and ready, or will there need to be a last-minute change of plan due to circumstances beyond my control?
In a sense, item 2 is what all this has always really been about, psychologically, for me. Getting myself to the point where if I lost my job tomorrow it would not be the end of the world, would be a weight off my mind.
It's only in the last couple of years that my income has really taken off and yeah I expect it will be tempting to do just one more year when each one would mean a significant increase in cash to cover the "gap" between ER and private pension access. Sit in the park for two years, or work for one year and travel the world for one year?
I feel like I've seen both sides of the time vs money thing. My dad was about my age when he died, and the comments upthread about how health issues can blindside you at any time from your late forties are worryingly undeniable. I'm sure that anyone who's had their plans wrecked by permanent medical conditions would have done a lot of things differently if they'd known. And, exactly as mentioned upthread, my own personal time is indeed running out at the rate of 168 hours a week.
But... on my dad's death my mum, also at about the age I am now, decided that her widow's pension was just about enough that she didn't need to work any more. She went for time over money. As a result of that choice she has spent the last 30 years living a restricted life with small horizons and is now too old to do any differently. On top of that, once you get to retirement age it doesn't matter what you were doing ten years ago. All of her cohort are now long retired - and I bet she'd rather have their pension than hers.
On balance I think that "not having to go to work" is not, in itself, a victory. You also need enough money to be comfortable, and to give yourself options - both in the present and when you get to pension age.
You need more spending money now than you will when you're older, and the nature of the calculation (in conjunction with the fixed pension access date) means that the younger your planned retirement age, the harder it is to bring the date forward. Which circles back to item 1 above. Once I have that clarity, it's going to be a numbers game. I am hoping "one more year", if it represents an outcome I'd be daft to refuse, won't have quite the same feel at 50 as it would at 63 (say).
Item 2 - the ability to manage on what I've got - for me is a safety net, not an ambition. Although some days it's tempting!
Excuse the long post. I've got a lot out of some of the thoughts on this thread and maybe my take on things will interest somebody else.
Another amazing post.... Thank you!"For every complicated problem, there is always a simple, wrong answer"0 -
You need more spending money now than you will when you're older, and the nature of the calculation (in conjunction with the fixed pension access date) means that the younger your planned retirement age, the harder it is to bring the date forward.
That s inherent in the nature of the beast. I sweated through three years of hating work but at the peak of my earning power because the spreadsheet said that there was no way of shortening that time - each year shorter would six years stacking shelves at Tesco, and I wanted a total out from work. I took a chance with physical and mental health, and was lucky enough to get away with it. I didn't have enough energy left to even think of part-time or doing some crap job, because I got to hate the whole power and authority structure of work.
As for retiring before SIPP age, that's what your ISA is for. You have to ride two horses - you need enough ISA savings to burn up before 55. But you need SIPP savings too - for many the obvious cross-point is save into a SIPP to bring you below the 40% tax bracket, save the rest onto ISAs. But it's tough - the wall you run into trying to bring retirement forward is a double whammy, not only do you have to save enough to carry you longer, but your total earnings fall because you are foregoing years of earnings - and often at the peak of your earning power.
I would dispute this. I am probably healthier and fitter than my working self. For two reasons - one is I don't have the pressure and jumped up pipsqueaks saying your crap to performance manage the paybill down, which ground me down. But the other is that I walk everywhere, I spend more time in Nature and less time in front of a screen. I would be a lot richer if I'd carried on working, but probably in poorer health. You can get away with hardly any exercise up until your late 40s, but probably not much after that.On top of that, once you get to retirement age it doesn't matter what you were doing ten years ago.
The difference is tangible. Near where I live there's a landmark hill that's about 500 ft high. We aren't talking mountain climbing. There's a quiet place about halfway up it where I like to sit on a bench and listen to the birds and look out at the view. I try and do that regularly.
My forty-year old younger self once failed to climb that hill, giving up halfway, because it was too much like hard work and I got out of breath and my heart was pounding, the view wasn't worth the climb. Although it's not particularly high it's reasonably steep.
I can do that easily now. Nearly two decades have passed. I have never been inside a gym or played sports since leaving school. I would say retirement has been good for my health, and hopefully that will be of help even after I reach retirement age, it's still a long way till I get to SP age. I would say in some areas it does matter what you were doing 10 years before normal retirement age, and hillwalking beats sitting in an office, not just for the experience at the time but overall physical health.
Sure, your mother probably got the balance wrong. But your retired self needs less money that your working self. They aren't paying into a pension, or commuting to work, has probably discharged the mortgage. They can travel outside the peaks and the school holidays, they can spend more time at the destination or travel slower. They can adapt their plans to take advantage of deals or opportunities.0 -
On balance I think that "not having to go to work" is not, in itself, a victory. You also need enough money to be comfortable, and to give yourself options - both in the present and when you get to pension age.
I find having reached the point that I could if I wish take my DB and pay my share of the bills quite liberating psychologically, I am in fact working 3 additional years (2.5 to go) to absolutely max out the DB pension. Also we're trying to put as much into Mrs CRV pension pot so she too can retire at the same time, she is younger by a few years, so I'll be 58/59 and she 55.
I am someone who does genuinely like my job, I am also very conscious that we are swapping time for money, especially as I now work away from home most of the time. This month and next I have picked up a lot of overtime shifts- the extra income earmarked for specific items, but the toll both on body and on mind (time away from Mrs CRV especially) is high.
Although the money is good I could not see myself sustaining it for more then a couple of months. I think that as long as you are aware of what you are exchanging and are happy with that then go for it.CRV1963- Light bulb moment Sept 15- Planning the great escape- aka retirement!0 -
I think one of the biggest pieces of harmful, misinformation in this area is the "two-thirds of your final salary" requirement for retirememnt income. Whilst many of the wise people on this forum will understand the nonsense of this 'rule', it has the effect of making many people (in my experience certainly) assuming that they 'cannot afford to retire yet'. Retirement will be a step change in the way you live from when you worked. You may decide that you want to travel the world in a private jet and so need a whole stack of money, or you may decide to knit your own Yurt out of old socks and live off home made goat-dropping jam. Given that many of us have at times bought expensive things to try and off-set the misery of stressful work (we are worth it...) your past lifestyle and your retirement world may be (in fact are unlikley to be) a linear progression. The real problem, rather than getting to two-thirds, is perhaps trying to work out the nature of a satisfying retirement, somewhere between a private jet and goat-dropping jam, and working out the cost of that. This for me has taken many iterations and is still by it's nature a planning exercise.
At some point in the recent past, the lines on my 'lifestyle' and 'cost' graphs crossed and now the calling of that Yurt (albeit a nice one with a strawberry patch) is growing. As that calling grows, the ridiculousness of work seems to be being revealed to me. I am not sure if I am alone in this, but it feels as much a visceral calling as much as an intellectual one? I'm struggling to explain the feeling, but the penny has indeed dropped, I need to focus on my time rather than the M-thing. Not sure I can use the R-word yet, but that's just me still being 32 in my head. Anyone got a good jam recipe?"For every complicated problem, there is always a simple, wrong answer"0 -
The funny thing is that using the money that could pay off the mortgage to invest in a DC pension is basically what an endowment mortgage was. We applaud the former and pour scorn on the latter - I guess the difference is tax relief....
Ther is nothing wrong with endowments per se.
The issue was the unrealistic assumptions attached to them.
For example I was told verbally in 1990 that 20% could be expected and even the cautious paper work was 6,9,12%.0
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