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  • FIRST POST
    • Marine_life
    • By Marine_life 5th Nov 10, 9:46 AM
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    Marine_life
    Early-retirement wannabe
    • #1
    • 5th Nov 10, 9:46 AM
    Early-retirement wannabe 5th Nov 10 at 9:46 AM
    I would like to create a topic (don't see it at the moment - other than the NUMBER thread).

    Who is aiming for early retirement (or who has retired early already)?
    When did you begin planning and what drove the decision?
    What is the strategy for getting there?
    How much of a relative decline in income are you prepared to take / did you take?
    What are your main concerns?
    For those already in early retirement - how is it progressing? What have been the good and bad surprises (financial and otherwise)?

    I will post my strategy but wanted to get some thoughts
Page 3
    • getmore4less
    • By getmore4less 18th Nov 10, 10:58 AM
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    getmore4less
    As has been said the key is the spending.

    Rather than spreadsheets I would recomend investing in an old copy of MSmoney and track everything in detail, go back a couple of years if you can to give you some history to start looking for cutbacks.

    There are loads of builtin tools for analysis and projections.

    The devil is in the detail, understanding where every penny goes is the key to understanding where your future spends will be and what the trade offs are for the money you have.

    Once you have the minimum spend foot print you can add in the discretionary spends.

    There are 2 approaches to funding the future spends from savings/investments.

    Fully funded : ( best for the min spend footprint like housing and food you don't now how long you need these).

    That means whatever means you use the income will always exist, this could be by indexed pension income or investment income that does not involve reuctions in capital.

    Draw down : usefull for spend that will reduce or dissapear over time.

    If you asume that the pot of money will at least grow with inflation you can use fixed amount at the start to fund the spend.

    To see the comparisons in the strating size needed take cars as the example and 5% as the return after inflation

    Starting at 50 and getting 10k cars that last 10 years.
    so one at 60,70,80,90.......

    That needs a pot of 18208, that will grow by 10k every 10 years.
    But you can asume you don't need an endless supply of cars the pot to buy each car is
    1st car 6070
    2nd car 3684
    3rd car 2236
    4th car 1358
    So cars till 100 needs less than 13400k much less than the 18k for a neverending pot.
    • Marine_life
    • By Marine_life 5th Dec 10, 9:01 PM
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    Marine_life
    Its been a while but I have a quick update.

    First of all, Cyprus has come up on the agenda as a potential early retirement destination. Why? Well, if I understand the tax rules correctly, provided you are not earning any money locally you can decide to be taxed at a special rate for retirees which is 5% of total income.

    This is potentially very interesting as one of my retirement funds is a deferred compensation scheme which pays out after the age of 60 at (broadly speaking) a lump sum. If I could get that sum taxed at 5% rather than 40-50% it could make a big difference (in fact enough to pay for a property in Cyprus!).

    Of course those rules could change between now and receiving the fund but worthwhile thinking about.

    Still don't have that full list of spendings / outgoings and am tempted to leave until after Christmas
    • Loughton Monkey
    • By Loughton Monkey 5th Dec 10, 10:02 PM
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    Loughton Monkey
    First of all, Cyprus has come up on the agenda as a potential early retirement destination. Why? Well, if I understand the tax rules correctly, provided you are not earning any money locally you can decide to be taxed at a special rate for retirees which is 5% of total income.
    Originally posted by Marine_life
    Sounds good!

    And I believe the UK State pension remains index linked (such as it is) there rather than frozen like a lot of countries.

    Currently [without holding my breath!] taxation is not quite crippling for us early retirees. By stashing money in ISA'a over the years (and more 'ordinary' accounts), I calculate our joint tax bill (wife and I) of little more than about 12% - possibly less. This will rise a bit once we take more pensions, but it is not a 'killer' reason to go abroad.

    However, I might take a holiday there. Have a look. As long as I can get Gordon's Gin and Castella cigars, I might be able to survive!
    • Loughton Monkey
    • By Loughton Monkey 5th Dec 10, 10:19 PM
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    Loughton Monkey
    That needs a pot of 18208, that will grow by 10k every 10 years.
    But you can asume you don't need an endless supply of cars the pot to buy each car is
    1st car 6070
    2nd car 3684
    3rd car 2236
    4th car 1358
    So cars till 100 needs less than 13400k much less than the 18k for a neverending pot.
    Originally posted by getmore4less
    I have taken my own 'depreciation' approach to cars. I have to make assumptions on (a) inflation, and (b) interest rates.

    But after that, starting with the time I have just bought a new car (as I did in 2006), I follow the following 'recipe':

    1. Decide how long I am likely to keep a car (in my case, I have a good one - XJ6 - which I assume will last me 10 years).

    2. As at the time of purchase, find out the 'used' value for exactly the same car 10 years old - that day's prices.

    3. Hence, using inflation, it is easy to calculate the additional cost - over and above the cash for selling the old one - required for a new one 10 years later.

    4. I then do a calculation of saving X per month (inflated by the same assumed inflation figure each month), and let the fund roll up at assumed interest for 10 years. A "Goal Seek" calculation tells me exactly what X needs to be to be. It goes up each month.

    5. The 'final' action would normally be to 'spend' that amount by putting it into a specific bank account for that purpose - and you would not normally count the value of that fund as true 'savings' or 'net worth'.

    [In practice, however, I manage my money 'holistically', without any of it being dedicated for any purpose. But my accounts always have a 'debt' - represented by what the mythical car fund would be worth - which is always taken into account when I add up my net worth.]

    It follows that if my 'net worth' were to be, say, 400K, I could go out, buy a brand new car for 60K, and the day after, my net worth would still be 400K, and my outgoings the following months would be virtually the same.

    * Of course since I do this for Mrs Loughton Monkey's car as well, then renewing mine in 8 years, and hers after 15 years might produce the same financial result! I wonder which might be the 'optimum' solution?
    • Marine_life
    • By Marine_life 26th Dec 10, 9:30 PM
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    Marine_life
    Time for a small update
    Have been reflecting on the early retirement plans over the holiday period and now have in place a provisional spreadsheet setting out my pension income possibilities. I know this is something we should have done a long time ago but - to be honest - I guess we just get caught up in living!

    Anyway, I have now nailed it down to three scenario's:

    1. We could retire within the next 12 months and enjoy a moderately comfortable retirement.
    2. We could wait three years and have a more relaxed standard of living.
    3. We could wait 7-8 years and continue to enjoy the standard of living we enjoy today.

    The main difference between scenarios 1 and 3 are the type of property we want to live in and the things we want e.g. cars we will drive etc.

    At the end of the day I have come to the conclusion that it is an even balance between and emotional decision (i.e. how much I want to continue to work) and a financial decision.

    This year we are putting a significant sum into our pension funds and if we can manage that over the next three years we will be in very good shape.
    • getmore4less
    • By getmore4less 26th Dec 10, 9:50 PM
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    getmore4less
    1. We could retire within the next 12 months and enjoy a moderately comfortable retirement.
    2. We could wait three years and have a more relaxed standard of living.
    3. We could wait 7-8 years and continue to enjoy the standard of living we enjoy today.
    That indicates that some carefuly selected reductions now could get to a point where a partial retirement could get more than 2 and close to 3 but much sooner and build back up to 3 depending on how much you filled the gap.
    • Gatser
    • By Gatser 27th Dec 10, 9:57 AM
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    Gatser
    Anyway, I have now nailed it down to three scenario's:

    1. We could retire within the next 12 months and enjoy a moderately comfortable retirement.
    2. We could wait three years and have a more relaxed standard of living.
    3. We could wait 7-8 years and continue to enjoy the standard of living we enjoy today.
    Originally posted by Marine_life
    Pleased I am not the only one "playing" with my retirement spreadsheets over Xmas!
    It always seems like a good time to reflect on "Christmas past & future though!"

    We are going for "Option 2", which will be 2013 for us.
    It's always tempting to keep striving for lifes comforts/luxuries but I must keep reminding myself that health,
    fitness and free time are the true luxuries in life and for that we are prepared to sacrifice the monetary one's.

    We all have different priorities... good luck with your plans
    THE NUMBER is how much you need to live comfortably: very IMPORTANT as part 1 of Retirement Planning. (Average response to my thread is 26k pa)
    My Other NUMBER: ZERO Working Days to SEMI-retirement: Achieved!
    • Marine_life
    • By Marine_life 27th Dec 10, 2:43 PM
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    Marine_life
    Some of the things we enjoy now could be cut back on but unfortunately the major expense items are not going to change significantly or at least they might change but in the wrong direction!

    The main expenses we have are the childrens school / university fees and the mortgage on the house. I assume the mortage will disappear when I retire as we will move to another area / smaller & cheaper house.

    I think the main thing that needs to change (to realise our plans earlier) would be more just to remove the general cavalier attitude to money that i am sure over a period of time costs us hundreds. Example in point - one of our TV's broke down on Christmas Eve (the one the children use for games) - so we just went out and bought a new one. No scouting for best deals (or even hesitating). The other "leakage" (as i have described earlier) is a bit of inherent laziness / lack of ability when it comes to things around the house (DIY and the like) which I (probably) with a bit of patience and time, could do myself.
    • Marine_life
    • By Marine_life 28th Dec 10, 9:40 PM
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    Marine_life
    Spreadsheets
    Spent some time today playing with spreadsheets!

    Between us we currently have a number of different pension / retirement schemes. I am still refining the calculations:

    1. Two schemes from when we contracted out of SERPS - both have a current (transfer) value of around 30,000 each and a combined pension of arounf 4,000 from age 60/65 respectively.
    2. My wife has a small private pension that currently estimates a pension of around 500 per annum from age 55.
    3. I have a non-contributory pension scheme with my employer which is currently worth around 15,000 per annum (starts paying at age 62)
    4. I have a frozen UK final salary scheme which is worth around 10,000 per annum in todays money (starts paying at age 62).
    5. I have a deferred compensation scheme which currently has a balance of around 350,000 (starts paying at age 60 with the balance paid over 5 years).
    6. I have just started a new private pension scheme which, with what I have paid in to date, will have a minimum pension of 2,000 per annum. (starts paying at age 60)

    So of those, numbers 1, 2 and 4 are fixed i.e. we will not pay in any more.

    Number 3 will increase simply by me staying with my current employer. If I stay another 4 years it will increase to around 18,000 per annum.

    I am continuing to paying into option 5 and expect that this will increase to arounf 600,000 over the next 4 years.

    I will continue to pay into option 6 with the hope that this will increase to at least 8,000 per annum.

    Overall then we feel happy that (from age 60) we will have enough money to live a comfortable life and the big variable is how much of our savings we need to draw on between the day we retire and age 60.

    As has been said earlier in the thread (and in THE NUMBER) thread, we really need to go back and look at expenditure. I am currently avoiding this task as a) I don't want to scare myself and b) its a hell of a task!
    • Gatser
    • By Gatser 28th Dec 10, 11:05 PM
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    Gatser
    As has been said earlier in the thread (and in THE NUMBER) thread, we really need to go back and look at expenditure. I am currently avoiding this task as a) I don't want to scare myself and b) its a hell of a task!
    Originally posted by Marine_life
    Well done... you seem to have accumulated a good basket of pension incomes there.

    As you say, your NUMBER will determine how much is surplus/safety buffer thereby allowing you to spend some savings before the pensions kick in.

    One good thing about phased/semi retirement is that its a great way to test the water and make sure we REALLY can survive without "a proper job"

    Good Luck with the spreadsheets!
    THE NUMBER is how much you need to live comfortably: very IMPORTANT as part 1 of Retirement Planning. (Average response to my thread is 26k pa)
    My Other NUMBER: ZERO Working Days to SEMI-retirement: Achieved!
    • peterg1965
    • By peterg1965 29th Dec 10, 9:01 AM
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    peterg1965
    Fascinating thread and a really useful insight into how other people make judgements and decisions on their retirement options.

    For my own situation, I am in the not-so-unusual position of juggling the here and now expenditure against looking forward 10-15 years to full retirement and making adequate and appropriate financial plans. Both my wife tend to live for today a little more than we should; bringing up three children (we all know they are EXPENSIVE!), with university looming large for my daughter, big mortgage, the liking for the nice things in life.

    My overall aim is to have the option to retire at 55 (I am now 45). If I work beyond 55 I want it to be on my terms, ie. my own small business or to work in a consultancy capacity merely to provide more funds for discretionary expenditure. Here is my current position, and where I need to be: (I am actually thinking that my NUMBER is about 50-60K/year in retirement.)

    - Occupational final salary pension which will pay out as soon as I retire at 53 or 55 (compulsory). At todays figures I get 36000 at 53 with a 120K lump sum. It will be more if I am eventually promoted, but the scheme is also subject to change as part of a Govt review, but with accrued rights unaffected.

    - SIPP, this includes a PR element. The fund currently stands at 70K and I am contributing 15K (gross) a year, I will hopefully be in a position to increase this in future years. I want to crystalise this at 55. Aim to have a fund size of 400K-500K at 55. 120K ish lump sum and I would drawdown about 20K a year income.

    - My wife (3 years older than me) also has an occupational FS scheme which pays out at 60 (in 12 years time) which should give around 8000/pa with a lump sum of about 30-40K.

    - I am also tring desperately to save in S&S ISAs, I have 30K in funds and ISAs at the moment.

    - we will both have full NI contributions so could expect 10K in State pension when we are 66/67.

    So, the combination of pensions should give me my target pension and with the lump sums, the ability to pay off my IO mortgage at 55. My worries are that legislation changes again and/or I am unable to continue to pay into my SIPP. My (our) tendency to live for today also may threaten our plans. I do put a lot of thought into the future and believe that we are in a good position. Worst case is that I have to find another 'proper' job post 53/55, I don't want to do this but accept that I may have to.
    • WaxiesDargle
    • By WaxiesDargle 29th Dec 10, 9:40 AM
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    WaxiesDargle
    Peter...at first I thought you might have been in the same profession as me but the annual salary and lump sum don't equate to my profession.

    I retired at 50 with an occupational pension. Currently I receive just over 1500 into my bank from my pension every month...this will increase to around 1800 after my 55th birthday.

    My pension lump sum paid off most of my mortgage, which stands at about 9000, I have 10,000 in ISA savings.

    But after a couple of years of retirement I decided that with two of my kids still at home...one going to uni in a couple of years (at that time) and the other going to college...and all the expense that this brings...the pension income wasn't enough and now have another full time job (part time wasn't an option with this employer)

    However both my kids have found part time work around their studies and this will influence my thinking about giving up work again in about a year when my increase in pension kicks in

    to be honest I found retirement, after the initial euphoria, a tad boring and that was another factor in getting back to work, however the next time around will be different...I'm thinking of renting out my house once the youngest has gone to uni...and living off that income as well as my pension...and do a bit of travelling
    • Gatser
    • By Gatser 29th Dec 10, 10:02 AM
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    Gatser
    to be honest I found retirement, after the initial euphoria, a tad boring and that was another factor in getting back to work
    Originally posted by WaxiesDargle
    Very good point.

    We often dream of retirement, but in reality it's a lot of extra free time that will be coming our way.
    We hear of those retirement cases whereby the new retiree "expires" early
    because the will to live (work) has suddenly gone. Sad...

    I am under no illusion.
    I will need a range of activities to keep me physically & mentally fit
    in semi-retirement... My dream is more about doing what I want, when I want,
    rather than just putting my feet up.

    In many ways, organising myself in (semi) retirement will be as challenging as
    achieving my pension targets in the first place.
    THE NUMBER is how much you need to live comfortably: very IMPORTANT as part 1 of Retirement Planning. (Average response to my thread is 26k pa)
    My Other NUMBER: ZERO Working Days to SEMI-retirement: Achieved!
    • peterg1965
    • By peterg1965 29th Dec 10, 10:25 AM
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    peterg1965
    I am under no illusion that retirement will not become a life sat on the sofa! I have far too much planned, my passion is cars and travel so I will certainly keep myself busy. The reality is that if my health is still good, I may be inclined to continue working to provide the pocket money to persue my interests, knowing that if I wanted to, I could simply stop working . I do agree that keeping active in retirement is very important, particularly after a very active and busy 35 year career behind me.
    • gfplux
    • By gfplux 29th Dec 10, 4:23 PM
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    gfplux
    What a fascinating thread. The planners not yet retired and those who retired tell such interesting AND different story's.

    I retired 13 years ago at 53.

    My planning started in my early 40's when I started keeping a "Nett Worth" file. This list of my assets became the foundation of my plans.
    During the last 10 years of my working life our family spend was substantially below our income therefore creating opportunity's to save. We became mortgage free.
    Now that was a huge milestone and creates huge flexibility.

    Why did I retire. Well ask the B*&*^%ds who finally paid me to go away.(now I thank them) However that gave me time to think and I took the plunge and did the deed.
    Now 13 years on (as Loughton Monkey first said) "The absence of 'work/career stress' is an amazing relief and keeps me 100% happy"
    Never let anyone tell you that you may find time on your hands. If you do, you did not have a truly stressful job. (sorry if that sounds out of place)

    Any drawbacks to retirement.
    Yes a strange one (for me, or so I thought) You are defined by what you do. For a few months I found getting the word retired out of my mouth difficult when asked what I "did" Silly I know, but it happened and it surprised me at the time.
    There will be no Brexit dividend. "Brexit Blight of Uncertainty" sums it all up.
    • gfplux
    • By gfplux 29th Dec 10, 4:34 PM
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    gfplux
    I should have added. With some people living or planning to live outside the UK.
    Make a will and keep it up to-date.
    Inheritance law is very different in many country's. You would not want you or your partner thrown out of "your" home would you.
    Last edited by gfplux; 29-12-2010 at 4:37 PM.
    There will be no Brexit dividend. "Brexit Blight of Uncertainty" sums it all up.
    • Gatser
    • By Gatser 29th Dec 10, 6:37 PM
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    Gatser
    Any drawbacks to retirement.
    Yes a strange one (for me, or so I thought) You are defined by what you do. For a few months I found getting the word retired out of my mouth difficult when asked what I "did" Silly I know, but it happened and it surprised me at the time.
    Originally posted by gfplux
    I can understand this...

    Although I think I will (eventually) prefer to say the "R" word than the "C" word.........."Consultant" !!

    Any suggestions what we can say we "do" when asked after R-day?
    THE NUMBER is how much you need to live comfortably: very IMPORTANT as part 1 of Retirement Planning. (Average response to my thread is 26k pa)
    My Other NUMBER: ZERO Working Days to SEMI-retirement: Achieved!
    • Loughton Monkey
    • By Loughton Monkey 29th Dec 10, 9:49 PM
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    Loughton Monkey
    Any drawbacks to retirement.
    Yes a strange one (for me, or so I thought) You are defined by what you do. For a few months I found getting the word retired out of my mouth difficult when asked what I "did" Silly I know, but it happened and it surprised me at the time.
    Originally posted by gfplux
    I have no problems saying "Retired" at all, other than - possibly for psychological reasons - I tend to add the "Early" at the front! Don't know why, because if I didn't, people might think I was over 65 and look younger!

    Mrs Loughton Monkey is quite happy also. When living in Asia, she obviously socialised with her compatriates ("Ladies who lunch") and she used to hate the conversation that always started by "...and what does your husband do?"

    If it bothers you, you can always say "Retired Widget Maker..." (or whatever it is you did).

    My own standard answer, though, tends to be "as little as possible".
    • WaxiesDargle
    • By WaxiesDargle 30th Dec 10, 6:49 AM
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    WaxiesDargle
    Never let anyone tell you that you may find time on your hands. If you do, you did not have a truly stressful job. (sorry if that sounds out of place)
    Originally posted by gfplux
    This doesn't equate at all. I did and I did.
    • gfplux
    • By gfplux 30th Dec 10, 6:53 AM
    • 4,655 Posts
    • 4,062 Thanks
    gfplux
    Sorry to hear that waxiesdargle.
    There will be no Brexit dividend. "Brexit Blight of Uncertainty" sums it all up.
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