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    • scarter
    • By scarter 2nd Oct 17, 5:58 PM
    • 347Posts
    • 392Thanks
    Do we have enough to retire now?
    • #1
    • 2nd Oct 17, 5:58 PM
    Do we have enough to retire now? 2nd Oct 17 at 5:58 PM
    We're thinking of retiring early - when I turn 55 next year and my husband is 51.

    Here's the situation. If you think the numbers don't add up please say!

    We're currently self employed with a software business and book sales that will keep money trickling in for years to come without us doing any work. Additionally, my husband loves photography and makes money out of that. So we would still have income but we don't want to factor that into our calculations. We want to think of it as a bonus.
    • We have savings of 155k.
    • A combined pension pot of 155k.
    • A house worth 200k - a large and fairly expensive house for our area. We could downsize when very old and release half of that.
    • I have a civil service pension that will bring in 2500 year from age 60 - index linked.
    • We both have paid enough NI for a full state pension when we eventually reach official retirement age of 67.

    We don't have expensive tastes. We currently live comfortably on around 15k per year, although things like new cars or unexpected home expenses come out of our savings.

    Our thinking is that we aren't too fussed about how we live when we're old and infirm - we may not live to see it and we have no kids to inherit our estate. We want to balance things slightly in favor of enjoying life now but not being destitute if we live to be very old.

    I've worked out that if we just draw down on our savings, taking our pension as cash (in such a way that we stay under the tax threshold and don't pay any tax on it) then we can keep our income at 21k a year until I'm about 85 years old. After which we'd have to rely soley on state pension and equity from our home. If one of us dies the other is left with just 15k a year to live on.

    Of course, this assumes that pension/savings keep abreast with inflation.

    All thoughts / advice / opinions welcome. I'm just starting to look into this and I admit to being a bit baffled by it all.
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    • GDB2222
    • By GDB2222 3rd Oct 17, 12:07 PM
    • 14,439 Posts
    • 78,058 Thanks
    State pension age is quite likely to go up by the time you reach age 67.

    It's very hard to find work once you reach age 60+. So, if you need a bit more money set aside to retire, now is the time to earn it.
    No reliance should be placed on the above! Absolutely none, do you hear?
    • atush
    • By atush 3rd Oct 17, 12:46 PM
    • 16,819 Posts
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    No. You should keep working for another 10 years....
    Originally posted by NineDeuce
    Slightly alarmist, maybe they can afford to in 5 years?
    • Thrugelmir
    • By Thrugelmir 3rd Oct 17, 12:58 PM
    • 58,946 Posts
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    Well it would likely have gone up by more than you have withdrawn as we have just had some excellent years for uk investors.
    Originally posted by Alexland
    Devaluing the currency only provides a one-off boost. Strip out currency exchange and the picture looks far less rosy. If one isn't reinvesting the income generated.
    Financial disasters happen when the last person who can remember what went wrong last time has left the building.
    • Stubod
    • By Stubod 3rd Oct 17, 1:23 PM
    • 486 Posts
    • 338 Thanks
    ..looks very tight to does "living" off 15k....(may be just surviving). I would be inclined to go another 5 yrs min to help bridge the gap between now and SP age....but thats just me....
    • Triumph13
    • By Triumph13 3rd Oct 17, 1:32 PM
    • 1,187 Posts
    • 1,473 Thanks
    I see the bears are out in force!
    If you are genuinely happy on 15k pa then your only real risks are a) high inflation over the bridging period meaning that the bulk of your funds don't keep pace with inflation, b) political risk of significant reductions / delays in state pension and c) insufficient income for the survivor after the first death. With your other income streams as backup and downsizing or equity release later on c) is the only one that I see as seriously worrying.
    With your spending levels the 2 SPs will already more than cover your spending so you really don't have to worry about whether we really are in a worse position for investors than ever before - and therefore need to draw at 3% or lower - as that's a small part of your overall income and you can afford to cut back in a particularly bad period - or at least not give yourself inflationary rises.
    • Linton
    • By Linton 3rd Oct 17, 1:32 PM
    • 9,395 Posts
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    I have done some spreadsheet calculations taking into account assumed inflation and a zero investment (cash) return.....

    A steady inflation adjusted 21K isnt possible even if it assumed to include all one-off large expenditures. Inflation is the problem in the early years, after you both get your state pensions almost all your income is inflation linked. If you restrict your average expenditure to something like the total of your SP and DB pension, say 19K/year inflation linked, things look a lot better.

    - if you want 21K/year covering everything you really need your savings to increase more than inflation. This can only be done with investing. Are you happy with managing 300K of investments?
    - 85 is around the average life expectancy for a man. There is a resonable chance you could both live beyond that age and a good chance that one of you will.
    - When one of you dies the survivor's income will about halve. Their expenses wont. You need to look at some what-if calculations.
    - Dont rely on downsizing when you are 85 - would you really be able to cope with a house move at that age?
    • AnotherJoe
    • By AnotherJoe 3rd Oct 17, 2:07 PM
    • 9,607 Posts
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    I wouldn't be as optimistic as you about downsizing when older. A house or flat thats purpose built or fitted out for elderly people can be disproportionately expensive - if its a bungalow it takes up more land, if its a flat there are maintenance fees to pay, if its partly sheltered accommodation then higher fees.

    Going back to your general question, I'd say not quite yet, would look at working a few years more unless you really hate your job. Even then, is there another job you could get?
    • kidmugsy
    • By kidmugsy 3rd Oct 17, 7:52 PM
    • 10,881 Posts
    • 7,436 Thanks
    a software business and book sales that will keep money trickling in for years to come without us doing any work. Additionally, my husband loves photography and makes money out of that. So we would still have income but we don't want to factor that into our calculations. We want to think of it as a bonus.
    Originally posted by scarter
    Right or wrong, the consensus here could be interpreted as saying that those income streams would need to be included in the calculation because otherwise you'd be taking too big a risk with inflation in the gap until both your state pensions are in payment.

    Remember that every extra year you work has a double effect - you have larger pension pots, and you will be drawing pensions for a year fewer.
    • bostonerimus
    • By bostonerimus 4th Oct 17, 1:09 AM
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    • 1,281 Thanks
    Assuming 3% annual inflation on initial 21k spending, the state pension and your civil service pension, then if you can get at least 4% a year return on your investments they will last until your early 90s. You'll still have the house equity.

    If you start with your current spending of 15k/year with 3% inflation you could make things work with 0% return on investments, although the years just before and after your state pension starts look tight. If you can get 2% from savings accounts or short term bonds you'll be able to increase your initial budget to 19k a year.

    Of course I'm assuming a level return and throw in some early years of large negative returns and your would be in trouble. It all comes down to your budget now and your ability to manage risk.
    Misanthrope in search of similar for mutual loathing
    • Terron
    • By Terron 4th Oct 17, 1:06 PM
    • 235 Posts
    • 208 Thanks
    I have changed my mind from not quite to yes.

    The 4% figure was calculated looking at past performance of the US markets from 1900 to 1986, and is the rate at which you could safely withdraw throughout that time and have you fund last 30 years. For the UK the figure is lower and the current low interest rates make it even lower.

    You have the state pension and the DB as safety nets. So long as the funds last until you are both on the state pension you would be OK. That is unlikely to be more than 20 years. With some of them kicking in earlier and reducing what you need the risk is probably low enough to be acceptable.
    • scarter
    • By scarter 5th Oct 17, 5:43 PM
    • 347 Posts
    • 392 Thanks
    Thanks everyone. That does help a lot. We can kind of semi-retire. We can put a few hours a week into the business to increase the chances of bringing in 10k or so for a good few years to come. I can start taking money out of my pension next year to avoid paying tax on it later. I guess I'd transfer it into a stocks and shares ISA? Hubby can do similar with his in 4 years time when he hits 55.

    Re my State Pension contributions. I am utterly baffled and am at a loss to know how you can ever figure out for sure what you're likely to get.

    I sent off for a NI statement and it came back saying I had 35 years contributions. However, for 10 years of my working life I was in the Civil Service. I've read that this essentially meant I'm counted as opted out and wouldn't get the full amount. However, the other day I went online here and calculated what I am likely to get :

    It tells me that I qualify for the full amount.

    I worked in the Civil Service from about 1985 - 1995.

    Can anyone shed any light on this? I mean, if their estimate is completely wrong I have no comeback. Yet how can I plan if I won't find out for sure what I'm entitled to for another 13 years?
    • Dorian1958
    • By Dorian1958 5th Oct 17, 6:01 PM
    • 136 Posts
    • 98 Thanks
    Could you please post exactly what the forecast states? Something does not seem right given your age and employment history.
    • scarter
    • By scarter 5th Oct 17, 6:09 PM
    • 347 Posts
    • 392 Thanks
    Here's what it says.

    Forecast if you contribute another 1 years before 5 April 2030
    159.55 a week
    159.55 is the most you can get

    So once I've paid this year's NI then according to this I'll be eligible for the full amount. Yet I was in the Civil Service from 1986 - 1995.

    EDIT: Just to add, my husband's forecast has a section at the bottom telling him he was contracted out, and giving him a COPE estimate.

    Mine doesn't have this.
    Last edited by scarter; 05-10-2017 at 7:10 PM.
    • True Blue 64
    • By True Blue 64 5th Oct 17, 7:23 PM
    • 12 Posts
    • 5 Thanks
    True Blue 64
    Hi scarter

    I started a thread on the subject of SP forecasts a few weeks back as I was surprised that I had paid the maximum NI contributions to get the full SP of 159 and I'm 53 with about half my working life in contracted out pension schemes. I called the helpline and they confirmed that that is the case and I can't increase my SP anymore. Not sure I understand how it's calculated but I don't know why yours doesn't have a COPE estimate as mine did. I'm sure the helpful folks on here can help though.

    Good luck
    • scarter
    • By scarter 5th Oct 17, 7:47 PM
    • 347 Posts
    • 392 Thanks
    I just took a look at your thread.

    I would have had a full 30 years under the old system and presumably some SERPS, although not much as for many years I was self-employed. I've no idea how to figure out what SERPS I'd have built up but I'm guessing very little.

    The worry though is that they haven't stated that I was contracted out. For my husband they did. So that makes me concerned that they've made a mistake with mine. I guess I need to phone and ask.

    Thanks for the info!
    • Dorian1958
    • By Dorian1958 5th Oct 17, 9:58 PM
    • 136 Posts
    • 98 Thanks
    You are right to phone and check. The number of years you had under the old calculation is irrelevant as they were"revalued" at April 2016. For example, I have 43 years of full contributions, but because most of that was contracted out, my estimate indicates I need a further year, after this current one, to qualify for the full new SP. Good luck finding out, and fingers crossed that it is somehow correct!
    • kidmugsy
    • By kidmugsy 5th Oct 17, 11:03 PM
    • 10,881 Posts
    • 7,436 Thanks
    I can start taking money out of my pension next year to avoid paying tax on it later. I guess I'd transfer it into a stocks and shares ISA?
    Originally posted by scarter
    Consider running it through your own pension and your husband's. Store up more Tax-Free Lump Sums, and more opportunity to use your Personal Allowances.
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