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    • SB1961
    • By SB1961 17th Jun 19, 2:49 PM
    • 6Posts
    • 6Thanks
    Considering Early Retirement - What am I missing ?
    • #1
    • 17th Jun 19, 2:49 PM
    Considering Early Retirement - What am I missing ? 17th Jun 19 at 2:49 PM
    I am approaching 58 and have been working in the finance sector for 40 years next month. I am working far longer hours that I should be and am finding my job stressful with the likes of the hours I work, the workload, anti money laundering, regulation, compliance, procedures, bureaucracy, politics, the lack of communication from management, etc.

    The company I work for has recently been taken over after a far too long a period of negotiations and I see the bureaucracy and politics becoming even greater from what I have seen so far.

    To add to this further, my new employer has reduced my salary by 30%+ and my pension contributions by 50%, so this does little to incentivise me.

    I am seriously considering taking early retirement but the age old questions keep popping up in my mind giving me cause for concern, i.e. how long will I live and will I have enough savings/pension in my retirement.

    I have been saving for many years and have also been fortunate in inheriting some money in the last couple of years. Whilst I still have a large mortgage, which I can afford to carry on paying, I have been rearranging my savings and pension over the last six to twelve months, from a growth perspective to a predominantly income perspective. My savings/pension pot is now equivalent to savings of approximately 40 years salary based upon my reduced salary. The income from my pot by coincidence also produces income roughly the same as my reduced salary. So effectively I will be earning the same from my investments as I would working, without having to draw down from my "pot" and without the stress.

    So early retirement seems to be a no brainer but I still find myself asking questions and am wondering what I am missing; "Is there any reason I shouldn't take early retirement, if my investment income is the same as my salary and I don't need to touch my pot, as on paper it appears that I can afford to ?"

    I haven't been to see an IFA, as that would only be one opinion, whereas hopefully I will receive a few opinions from this forum from people that have retired or are about to retire, giving me a wider overview.

    Any thoughts would be most welcome please.

    Thank you
Page 1
    • Linton
    • By Linton 17th Jun 19, 3:19 PM
    • 10,877 Posts
    • 11,292 Thanks
    • #2
    • 17th Jun 19, 3:19 PM
    • #2
    • 17th Jun 19, 3:19 PM
    2.5% (pot size of 40X desired income) is significantly below the maximum % considered reasonable for sustainable drawdown. So you should be fine if you manage you wealth sensibly.

    So the question is how do you manage your wealth. The problem with a mainly income focussed portfolio could be inflation. Are you confident that the capital value will increase over time to generate a steadily increasing income - 2.5% inflation over 40 years gives a factor of about 2.7? I think you need a balance between income and growth investments, where you use the natural income of the portfolio as a whole supplemented by drawdown of the excess growth in capital. You dont need a strongly income focussed portfolio to generate 2.5% in natural income.

    Also, you need to be able to manage large falls in capital value during stock market crashes. It makes sense to hold a significant cash buffer of a few years income so you can avoid removing money from your portfolio if and when prices are low.

    If you have a spouse and/or dependents have you considered their income as part of your plan and their needs should you die early?

    On the plus side there is State Pension which will reduce your income needs once you reach 67. Have you checked that you have accrued the maximum?
    • Anonymous101
    • By Anonymous101 17th Jun 19, 3:31 PM
    • 1,345 Posts
    • 992 Thanks
    • #3
    • 17th Jun 19, 3:31 PM
    • #3
    • 17th Jun 19, 3:31 PM
    A lot has been written about safe withdrawal rates. Some people use the rule of thumb a 4% drawdown which would lead to a pot size requirement of x25. Personally I think that's a little bit too racey but certainly anything 3%+ would not be IMO.

    You're sitting well below those drawdown rate therefore my instinct would be that you have more than enough to retire right now. Especially when you consider your 40x is based on income not expenditure which is presumably lower.

    I would suggest at the very least doing a lot of reading up on Safe withdrawal rates and how market movements might affect you and also going to see an IFA.
    • MK62
    • By MK62 17th Jun 19, 3:57 PM
    • 464 Posts
    • 335 Thanks
    • #4
    • 17th Jun 19, 3:57 PM
    • #4
    • 17th Jun 19, 3:57 PM
    You are probably already on this, but don't forget to take income tax and NI into account - you didn't mention whether the income from your investments was equivalent to gross or net reduced salary, but you pay no NI on pension withdrawals and you can have 25% of each withdrawal tax free too.

    If your company has just been taken over, is there no chance to request (or engineer ) a redundancy package, or does your company's "early retirement" include a payoff?

    As the previous posters have said, on the face of it, it doesn't look to be a bad position to be in could even take a 25% hit on the capital value and still be no higher than 4% on withdrawals.....

    Also, don't forget to check your position re Lifetime Allowance.......I know you haven't mentioned any specific numbers, but a pot value of 40x salary could put you into the ballpark for having to consider that.
    • AnotherJoe
    • By AnotherJoe 17th Jun 19, 4:29 PM
    • 14,939 Posts
    • 17,972 Thanks
    • #5
    • 17th Jun 19, 4:29 PM
    • #5
    • 17th Jun 19, 4:29 PM
    I think you are missing that you are over cautious by a long way, possibly due to spending all that time in finance, and could pack it in tomorrow.
    Also you are missing that you potentially have an opportunity, given a new employer, to be made redundant and come away with a nice package.
    In your position I'd be shovelling as much into a pension as possible because you can access it any time, and being a pain at work to get yourself on a redundancy list.
    You can also wind down and stop caring about what happens at work which should reduce the stress. Don't tell them you are thinking of quitting you owe them nothing.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • JGB1955
    • By JGB1955 17th Jun 19, 4:43 PM
    • 199 Posts
    • 202 Thanks
    • #6
    • 17th Jun 19, 4:43 PM
    • #6
    • 17th Jun 19, 4:43 PM
    On a hugely lower salary than you, I decided to leave at 59 with enough money saved to carry me forward the one year until I could claim my LGPS and Civil Service Pensions. Still topping them up (very slightly) until I get my State Pension at 66 years old. Do I regret it?....NO! My life is so much better now. Having said that, we are mortgage free and have assets and cash that mean we need to spend to avoid our children paying IHT. Spending is harder than saving!
    • vulcanrtb
    • By vulcanrtb 17th Jun 19, 5:22 PM
    • 33 Posts
    • 96 Thanks
    • #7
    • 17th Jun 19, 5:22 PM
    • #7
    • 17th Jun 19, 5:22 PM
    With 40 years of service, how about chatting confidentially (protected conversation) with your manager to see if there are any redundancy opportunities?
    • BLB53
    • By BLB53 17th Jun 19, 6:12 PM
    • 1,537 Posts
    • 1,395 Thanks
    • #8
    • 17th Jun 19, 6:12 PM
    • #8
    • 17th Jun 19, 6:12 PM
    You are correct, it's a no brainer and also your health and well-being are more important than money so why delay.

    If it's any help, here's an article from the DIY Investor site relating to an assessment of the sums needed to provide x amount to live on

    Bear in mind there will be your works pension to draw at some point and also your state pension from age 66 yrs.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • Kentish Dave
    • By Kentish Dave 17th Jun 19, 7:41 PM
    • 431 Posts
    • 690 Thanks
    Kentish Dave
    • #9
    • 17th Jun 19, 7:41 PM
    • #9
    • 17th Jun 19, 7:41 PM
    It sounds like it’s the specific job not the industry that is bringing you down. After forty years you must have some valuable skills, is it maybe worth your while rolling the dice one more time, trying the next job, and seeing if it’s actually enjoyable?

    If it’s not there’s nothing lost, but if it is you can have another two or three years adding to the pot before giving it up.
    • cfw1994
    • By cfw1994 17th Jun 19, 11:27 PM
    • 328 Posts
    • 270 Thanks
    Your new employer has reduced your salary by 30%+ and your pension contributions by 50%....& you have 40x salary savings/pension pot?

    Jeez, my notice would be in faster than you could say “please don’t leave, we want to take advantage of all your knowledge some more”!!

    Seriously: stuff that, leave, relax, take at least 3 months (summer!) off to decompress, look into tax-efficient ways to live off your pots and find what you want to do moving ahead.
    If you do then decide you want to “roll the dice” and continue a bit longer, find a company who values your experience, not treats you like something the dog brought in! Their behaviour is shocking!

    Good luck!!
    • marlot
    • By marlot 18th Jun 19, 3:44 AM
    • 3,950 Posts
    • 3,089 Thanks
    ...My savings/pension pot is now equivalent to savings of approximately 40 years salary based upon my reduced salary....
    Originally posted by SB1961
    I retired on a lot less, and find myself doing fine.

    I was in a similar position in that I was made redundant, and the next job paid rather less. THat was fine, until there was a change in management and it wasn't fun any more.

    I worked through my financial concerns by doing a cash flow based on my actual spending for the last 4-5 years. I then added in new hobbies and subtracted commuting. I modelled different rates of inflation and investment returns.

    My concern wouldn't be the financial aspects, but more whether you're emotionally ready to retire. What do you plan to do? hobbies? volunteering? We get what you're running from, but what are you running to?

    If you're on three months notice, you'd be leaving in October, just as many activities start to wind down, the wet weather is here and the nights drawing in. A friend strongly advised me to delay my retirement to Feb/March. He'd met too many men who got stuck in a negative loop from their first few months of retirement.

    Are there other things you could do to ease the transition to retirement? Change to part-time?
    Last edited by marlot; 18-06-2019 at 3:47 AM.
    • ffacoffipawb
    • By ffacoffipawb 18th Jun 19, 4:20 AM
    • 2,776 Posts
    • 1,917 Thanks
    I think you are missing that you are over cautious by a long way, possibly due to spending all that time in finance, and could pack it in tomorrow.
    Originally posted by AnotherJoe
    Hmmm, this sounds a bit like me as well

    I think I have a Stockholm Syndrome relationship with w*rk.
    Financial Independence achieved with SIPP PCLS in June 2019.
    Now part retired (working a 2 day week).
    • uk03878
    • By uk03878 18th Jun 19, 6:12 AM
    • 61 Posts
    • 33 Thanks
    We work for managers and not firms
    Sounds like the new toxic managers are the cause of the problems - and seriously they cut your salary by how much!
    I would ask for redundancy and leave whether they offer it or not
    • SB1961
    • By SB1961 18th Jun 19, 6:57 AM
    • 6 Posts
    • 6 Thanks
    Very many thanks for the various replies.

    Commenting on some of the points mentioned:

    - Unfortunately redundancy is not an option for a number of reasons

    - If I resign I have 12 months notice and working this long a notice period I would not look forward to

    - I am unable to work elsewhere in the same type of job as I have a two year non compete contract

    - What would I do in retirement; DIY, gardening, tidying up my Man Cave, walking the dog, cycling, loose weight and get fit, probably some more charity work which I have done for 25 years, more motoring trips which I enjoy, travelling and possibly in a year or so look for a part time job just to ensure I keep myself occupied but not in the finance sector !

    Since my post I have asked my new employer if I can reduce my working week from 5 to 4 days. I am waiting a response, however I am thinking that even if they say yes, that trying to do 5 days work in 4 days, which is probably what will happen, will be more stressful and won't have the desired plan of being less days work = less stressful !

    It does seem to stack up financially and seems viable and certainly sensible from a health perspective to consider early retirement but not an easy decision.
    • NoMore
    • By NoMore 18th Jun 19, 7:09 AM
    • 370 Posts
    • 351 Thanks
    Its as easy or hard a decision that you choose to make it.

    Given the information you have given, for me it would be an easy decision to retire, for you your saying it's a hard one.
    • Anonymous101
    • By Anonymous101 18th Jun 19, 7:14 AM
    • 1,345 Posts
    • 992 Thanks
    If I were you I'd be much more bullish. You do not need to work. Financially you're very secure. x40 salary is more than you'll ever need. So if you were to walk out of work and never go back you'd be fine. I'd keep that in your mind whenever you talk to your employers. Companies are used to dealing with people that need to work and are afraid to lose their jobs, this doesn't apply to you so you can afford to set things out exactly as you want them to be. You don't need to be confrontational but employment is a two way street and should be treated as such.

    So NoMore says its as easy or as hard as you make it. I'd be asking for them to give me what I wanted and if they won't then I'd leave anyway. They can't make you work the 12 months... and you don't need to work for anyone else. So there's absolutely nothing to worry about.... yet you seem to be still?
    Last edited by Anonymous101; 18-06-2019 at 7:18 AM.
    • AnotherJoe
    • By AnotherJoe 18th Jun 19, 7:15 AM
    • 14,939 Posts
    • 17,972 Thanks
    I am sure that 1 years notice cannot be enforced that's akin to slavery. In any case they broke the agreement when they reduced your salary. Give them a months notice and if they demand a year, demand your salary is raised back to where it was and when they refuse walk out.
    P.s. Anonymous101 has it right and along those lines, I don't know if you have heard of the FIRE movement (Financial Independence Retire Early) but there's a concept in there when you have accumulated enough money to leave on your terms, it's called "FU Money" I'm sure you can understand what that stands for.
    Well you have that FU money and more and I suggest you take note of it and the strength it gives you when negotiating, as A101 points out, you aren't a "normal " employee dependent on their largesse to get by, you are in the position of strength. and need to ac accordingly.
    Last edited by AnotherJoe; 18-06-2019 at 7:23 AM.
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • justme111
    • By justme111 18th Jun 19, 7:21 AM
    • 3,298 Posts
    • 3,173 Thanks
    As someone mentioned in another thread you may try councelling.
    I can not believe how legally new owners can cut your salary by 30% - of course they are not going to offer redundancy, they may just cut the salary by 90%. You can not work ANYWHERE else in the same role for 2 years or just geographically within certain mileage ? Hard to believe again , sounds like slavery especially coupled with 1 year notice. Not that relevant for you as you don't need to work , just in principle. Not sure whether the terms of that contract would hold un employment tribunals.
    By the way you can go on long term sick leave - stress leading to IBS , depression etc. Although again , not sure why you would need it - what would happen if you given them 1 month notice and said bye and stopped cooking to work at the end of it?
    What would happen if you resigned with immediate effect ?
    The word "dilemma" comes from Greek where "di" means two and "lemma" means premise. Refers to difficult choice between two undesirable options.
    I came across so many occasions when people use the word without understanding what it means I decided to use the definition above as a signature.
    • uk03878
    • By uk03878 18th Jun 19, 7:35 AM
    • 61 Posts
    • 33 Thanks
    The one years notice in the financial services industry has been used before and confirmed by arbitration
    However, the contract has to be fair - they have to give you 12 months notice for them to fire you as well. It can't be loaded one way or the other.
    If you are on 12 months notice and they are allowed 1 months notice - then that is unfair and probably unenforceable
    • Anonymous101
    • By Anonymous101 18th Jun 19, 7:50 AM
    • 1,345 Posts
    • 992 Thanks
    Companies are not in the business of paying people that don't want to be there. Especially when they're actively trying to cut costs. Its mutually beneficial you don't work the full 12 months and given that you're retiring I'd think it extremely likely that you can come to some sort of an agreement.
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