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    • Cottage Economy
    • By Cottage Economy 10th May 18, 8:31 AM
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    Cottage Economy
    Mind the 'age' gap: retirement planning
    • #1
    • 10th May 18, 8:31 AM
    Mind the 'age' gap: retirement planning 10th May 18 at 8:31 AM
    Thought I'd start this thread to see if there is anyone else in the same boat and ask for help and ideas. I am currently retirement planning for DH and I based on a 12 year age gap. DH 57, me 45. Everything I read seems to be very US-based.

    So far, I have identified a few things I need to take into account.

    The plan has to be based on my predicted lifespan.

    For couples of approximately the same age, retirement planning starting from NRA usually spans 30-ish years. Our has to span 40-50. My life expectancy is 84, nearly 40 years away. With advances in medical science I estimate that I will need to plan to live until I am at least 95.

    I have to retire early

    Couples usually make plans to retire around the same time so they can enjoy some time together. I will still be working when DH retires and if I retire at the normal 60/65 he will have spent the greater part of his retirement alone. He may not even be in the best of health by then. I have to retire early, 55 ideally, so we have to save and invest a lot more money and get better returns to build a bigger pot.

    We have to take bigger risks

    To build up our retirement accounts, we have to take greater risks with the money to get better returns. For a man of DH's age, it is almost common 'lore' to hold no more than 40% in equities and 60% in bonds, but I am only in my 40s and therefore have a longer timespan to invest in. Some financial articles I have read suggest it is important to invest based on the age of the younger individual, not the older so asset allocation should be based on my age and attitude to risk to avoid fianancial 'drag'.

    We may have to delay taking the state pension

    In the UK, for every five weeks you delay taking the state pension you get a 1% increase, which equates to 10.4% increase if you delay for a full year. Depending on how we are building up our retirement accounts, this may have to form part of the planning.

    We have to consider long-term care costs

    With DH 12 years older than me, we may need to find the money for care costs, however, I will still need living expenses. Our plan has to ensure we don't exhaust our accounts making sure he is cared for, leaving nothing for me.

    I will inherit less of DH's pensions as I am a 'trophy wife'

    Being 12 years younger means that DH's occupational pension provider considers me a 'trophy wife' and instead of getting 50% of DH's FS/DB pension when he dies, I get a reduced sum, about 2.5% for every year between us over 10 years, so 5% less.

    We will have to use drawdown options

    Drawdown pots can be inherited, annuities cannot. To maximise my income in retirement, it will have to be drawdown for both DH's SIPP and my personal pension.

    We don't have children so are not bothered about leaving an inheritance to anyone.

    We can run our retirement accounts and assets right down if necessary, but of course not knowing when we will die is the perennial problem. I'm a little irritated at the thought of all the sacrifices we have and will continue to make and then not get all of the financial benefits.

    Other ideas being mulled over

    We have a single storey long Victorian brick barn on the smallholding. We could convert that and move in, splitting the holding down the middle and selling off the main house, rather than sell up to a small place when we can't cope with a bigger house any more. That could release some cash.

    Would front-loading my occupational pension contributions at the start of the financial year with an employer match help build a bigger pension pot?

    Should I take on the mortgage alone and extend the term when my sole income can cover it (approximately 3-4 years time)? This would reduce the monthly payment, and the difference used to build a bigger pension pot ready for my retirement. Taking the tax-free lump sum at the start of drawing DH's pension would bring it down and then I can do the same when I start drawing my pension.

    Phew. Anyone else struggling with retirement planning for an age gap?
    Last edited by Cottage Economy; 11-05-2018 at 8:41 AM.
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    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
Page 2
    • Cottage Economy
    • By Cottage Economy 11th May 18, 8:29 AM
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    Cottage Economy
    Well, I took another look at the funds in my personal pension, thinking maybe I could replace them with something better, but I'm still as happy with them as I was when I first bought them a couple of years ago so that is a no-go.

    I transferred 3,000 across to DH's SIPP and I'm just rearranging a few things so I can transfer another 4-5,000. This is part of the lump sum he was given by his mother when she sold her house and moved in with us (the rest is in S&S ISAs). It's been sitting at the bottom of our current account doing nothing. I realised I was clinging onto it out of a sense of security - I liked seeing the numbers in the bank account.

    We've been too conservative with the lump sum she gave is, thinking if she became ill and used all of her money the council may demand we repay it, but realistically that may never happen so we've decided to put the money to work for us and cross that bridge when we come to it. She has a lot of her own money that will be used up first so if she became ill tomorrow and needed nursing care it could be 2-3 years before we have that conversation with the council.

    Anyway, that's across now. I have also switched the existing Vanguard Lifestrategy fund from 60% to 80%. I have yet to decide whether the new money going in will also go into the 80%, or whether I will buy a different one to give me 70% equities.

    Tried to get to grips with RetireEasy last night. Everything is in there, but apparently without tweaking any of the figures we can both retire at 62 and 55 respectively and never run out of money and have an ever-increasing asset base. That's without touching the house or any of our assets, just using the pensions. Yeh right!

    Also, I don't really want an ever-increasing asset base. I want to run it down in our lifetime and have a very exotic and expensive funeral at the end

    It's just not giving me enough information on the income side of things to see how this is done, even on the spreadsheets. I want to see how the income breaks down. It also doesn't allow you to select a month when things will happen, just the year. Maybe the premium account will give me this? Anyway, I'm currently searching for other UK-orientated spreadsheets.
    Last edited by Cottage Economy; 11-05-2018 at 8:44 AM.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • Cottage Economy
    • By Cottage Economy 14th May 18, 8:24 AM
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    Cottage Economy
    Ok, I had another play with the software over the weekend and discovered a bit more that would be helpful. The issues I was finding with it were all down to me not understanding a couple of key points. A bad workman always blames their tools

    Saying that, I still can't get a monthly breakdown. There are peaks and troughs that could be smoothed out by timing when during a year income is taken, but can't find out how to do this yet so have emailed the company to ask.

    Basically, at the moment there is a big drop in income that pensions/investments won't cover if I retire at 55.

    I'm now working out how much extra we need to put in for the next 10 years to plug the gap, and what we have to do to obtain that.
    Last edited by Cottage Economy; 14-05-2018 at 8:43 AM.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • MK62
    • By MK62 14th May 18, 9:46 AM
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    MK62
    Planning for the unknown and unforseeable is never easy......and retirement planning can certainly fall into that category.
    As you have no children then being the richest people in the graveyard is little comfort, so planning to spend most of it within your unknown lifetimes is a difficult task, at least without using a lot of guesswork and assumptions.

    It may be prudent to seek the assistance of an IFA in your DH's case, to consider a transfer out to a scheme which doesn't have such a "trophy wife" condition.
    While it's not pleasant to be planning for the death of your partner, it's something you do have to consider when planning both your future finances - it's surprising how many people don't.
    It's impossible to tell whether such a transfer would be good or bad without a lot more information though!

    You probably need to work a few "what if" type scenarios to get a handle on your future income needs/desires and whether your current arrangements are suitable to meet them.

    Also, I'm not sure I understand

    without tweaking any of the figures we can both retire at 62 and 55 respectively and never run out of money
    and

    at the moment there is a big drop in income that pensions/investments won't cover if I retire at 55
    • Cottage Economy
    • By Cottage Economy 14th May 18, 10:19 AM
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    Cottage Economy
    MK62 - when I originally did the calculations at the end of last week it gave me great results. I was very skeptical of that so spent more time over the weekend checking the figures. I had missed a couple of important points and the real result was that we would, in fact, have a shortfall.

    One of the perils of using software - the output is only as good as the input!

    In terms of the 'trophy wife' I understood that a lot of the FS/DB pension providers have these and it is quite a standard clause...?
    Last edited by Cottage Economy; 14-05-2018 at 10:22 AM.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • Cottage Economy
    • By Cottage Economy 14th May 18, 10:38 AM
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    Cottage Economy
    And I've just realised that having an FS/DB pension may mean DH doesn't get a full state pension as he would be contracted out.

    I was assuming he would get a full state pension in my calculations. I'll have to go and get a forecast.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • Noobie2011
    • By Noobie2011 14th May 18, 10:41 AM
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    Noobie2011
    Ok, I had another play with the software over the weekend and discovered a bit more that would be helpful. The issues I was finding with it were all down to me not understanding a couple of key points. A bad workman always blames their tools

    Saying that, I still can't get a monthly breakdown. There are peaks and troughs that could be smoothed out by timing when during a year income is taken, but can't find out how to do this yet so have emailed the company to ask.

    Basically, at the moment there is a big drop in income that pensions/investments won't cover if I retire at 55.

    I'm now working out how much extra we need to put in for the next 10 years to plug the gap, and what we have to do to obtain that.
    Originally posted by Cottage Economy
    Is the software really good as I have been plugging away at the weekend with my figures on a simple spreadsheet. Basically I have created columns for each of our state pensions, projected equity lumpsum from house sale, our workplace pensions and then a spare column for extra income we will have which is not tied to an investment yet so could go to our pension, extra mortgage overpayment, sharesave scheme or just standard ISA etc.

    I have then stuck our ages along the side and calculated each year how much of a wage we have and whether there is a shortfall as comparing this to our calculated ideal wage whwn retire. Then I can see any shortfall, where it arises as in year and what we woukd need to do to plug the gap.

    Some issues I have are:
    - my pension figures are not including any interest, pay increases etc so quite a bit lower than onlines figures and what my pension modeller is forecasting but surely this is a risk to include the forecasted gains??
    - house equity - plan now to have it paid off at worst when I hit 55 so 15 years but am working out our profit from sale on todays price. Again should I be forecasting and increase in value or stay safe and go with the current worth
    - biggest profits come from more money invested in my wifes pension but that will cause more tax implications and extra money is no good in my wifes pension if need it before then to allow her to retire earlier
    - planning to move abroad but god knows how you calculate the cost of living in 20 or so years time
    - if you go off the pension guides where it says you need around 3/4 of your wage yearly in retirement then ours would be 60k but that seems way excessive and our calculations on what we need a year are looking at half that figure so an I missing something
    • Cottage Economy
    • By Cottage Economy 14th May 18, 11:47 AM
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    Cottage Economy
    Noobie2011 - I started off doing something similar a couple of years ago but by the time I took into account everything I needed to it became a beheemoth and got away from me. I've been looking for something a bit simpler ever since.

    I want to include compound interest and growth estimates for all of our sources, even if they are conservative estimates, because they will form an important part of our retirement income.

    60k does seem excessive. I've been working on 25k joint AFTER mortgage payment, with other assets in the background earmarked to sell should we need it. That's currently in excess of what we spend but I'm putting in the extra to cover holidays and car resto's. DH has also mooted the possibility of doing the odd shift as a casual after retirement. He knows some of the more complicated rural deliveries that can take a long time for a new postman to learn so he may be able to make something of that to cover sickness and holidays.

    So I checked our state pension forecasts and he is fine - full entitlement in 4 years time. I am not. As I was in education/out of the country for 10 years of my record I have another 14 years until I make full pension - which doesn't tally with my plans to stop working in 10 years.

    Now wondering whether paying for an additional four years will be worthwhile to get the full state pension. So, that's a cost of 761 of Class 3 contributions for each additional year, or 3044 to get another 218 a year in state pension (assuming I complete the next 10 years break free). That will give me back 4,360 of extra state pension over 20 years or 6,540 over 30 years. The 20 year estimate takes me to 87 years old, which is probably more likely than the 97 years.

    Based on that, I'm wondering whether my money is better placed elsewhere and not in extra state pension years. Mind you, it is about 40% increase isn't it to 87, which is not to be sniffed at...unless I'm being far too simplistic in my maths?
    Last edited by Cottage Economy; 14-05-2018 at 12:21 PM.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • Cottage Economy
    • By Cottage Economy 14th May 18, 12:04 PM
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    Cottage Economy
    It may be prudent to seek the assistance of an IFA in your DH's case, to consider a transfer out to a scheme which doesn't have such a "trophy wife" condition.
    While it's not pleasant to be planning for the death of your partner, it's something you do have to consider when planning both your future finances - it's surprising how many people don't.
    It's impossible to tell whether such a transfer would be good or bad without a lot more information though!
    Originally posted by MK62
    Just had a few more thoughts about this and have found a clause in the pension that says any FS benefits built up before 1/4/2012 cannot be transferred out so it would only be what he has accrued in the DB scheme after that up to the April this year, when RM switched to the new defined cash balance scheme. So he'll build up 19.6% per annum of his pensionable pay between now and when he retires in 5 years and that gets paid as a lump sum.

    Actually, I can't work out what pensions DH is due because the pension arrangements are so up in the air. I can only make very broad estimates as RM hasn't sent out his new illustration and we usually see that in September.
    Last edited by Cottage Economy; 14-05-2018 at 12:31 PM.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • MK62
    • By MK62 14th May 18, 3:59 PM
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    MK62
    In terms of the 'trophy wife' I understood that a lot of the FS/DB pension providers have these and it is quite a standard clause...?
    Originally posted by Cottage Economy
    What I meant was him looking at transferring from this scheme to an alternative pension arrangement which doesn't have such a restriction - a SIPP for instance!
    You can understand why they have such restrictions, but that doesn't help in your case if the worst happens and you find yourself on your own, with only 45% of your husband's pension to live on (unless that's enough of course)

    That said, transferring out could be a bad idea for a number of reasons, and to do it you'd need to engage the services of an IFA anyway....(though it could be a good idea too - it all depends....)
    • MK62
    • By MK62 14th May 18, 4:10 PM
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    MK62
    I want to include compound interest and growth estimates for all of our sources, even if they are conservative estimates, because they will form an important part of our retirement income.
    Originally posted by Cottage Economy
    Don't forget to plan for the effect of inflation too though!
    • MK62
    • By MK62 14th May 18, 4:27 PM
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    • 113 Thanks
    MK62
    Now wondering whether paying for an additional four years will be worthwhile to get the full state pension. So, that's a cost of 761 of Class 3 contributions for each additional year, or 3044 to get another 218 a year in state pension (assuming I complete the next 10 years break free). That will give me back 4,360 of extra state pension over 20 years or 6,540 over 30 years. The 20 year estimate takes me to 87 years old, which is probably more likely than the 97 years.
    Are your sure about those figures?

    I think your gap years could be cheaper than your estimate, and four extra NI years should give you more state pension pa than that....
    • MK62
    • By MK62 14th May 18, 4:41 PM
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    MK62
    Oh, I think I see what you mean now - do you mean paying 4 years Class 3 NI contributions from age 55-58?
    • kidmugsy
    • By kidmugsy 14th May 18, 4:43 PM
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    kidmugsy
    ... have found a clause in the pension that says any FS benefits built up before 1/4/2012 cannot be transferred out so it would only be what he has accrued in the DB scheme after that up to the April this year, when RM switched to the new defined cash balance scheme. So he'll build up 19.6% per annum of his pensionable pay between now and when he retires in 5 years and that gets paid as a lump sum
    Originally posted by Cottage Economy
    It's worth keeping an eye on this. Does it mean that he'll have three different tranches of pension: (i) non-transferable DB, (ii) transferable DB built up from 1/4/2012 to approx 1/4/2018, and (iii) new "defined cash balance scheme"? I ask because it may mean that in the end that he could accept a DB pension from (i) and transfer (ii) & (iii). That might be a very decent compromise.

    I found this useful because I had no idea what a "defined cash balance scheme" was.
    https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/workplace-pension-schemes/cash-balance-plans

    It left me doubting the generality of your statement "So he'll build up 19.6% per annum of his pensionable pay between now and when he retires in 5 years and that gets paid as a lump sum."
    Last edited by kidmugsy; 14-05-2018 at 4:55 PM.
    Free the dunston one next time too.
    • gallygirl
    • By gallygirl 14th May 18, 5:02 PM
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    gallygirl
    MK62 - when I originally did the calculations at the end of last week it gave me great results. I was very skeptical of that so spent more time over the weekend checking the figures. I had missed a couple of important points and the real result was that we would, in fact, have a shortfall.

    One of the perils of using software - the output is only as good as the input!
    Originally posted by Cottage Economy
    I really struggled with any spreadsheets I used - and it's easy to make mistakes when you don't really understand something. In the end I built my own.

    Is the software really good as I have been plugging away at the weekend with my figures on a simple spreadsheet. Basically I have created columns for each of our state pensions, projected equity lumpsum from house sale, our workplace pensions and then a spare column for extra income we will have which is not tied to an investment yet so could go to our pension, extra mortgage overpayment, sharesave scheme or just standard ISA etc.

    I have then stuck our ages along the side and calculated each year how much of a wage we have and whether there is a shortfall as comparing this to our calculated ideal wage whwn retire. Then I can see any shortfall, where it arises as in year and what we woukd need to do to plug the gap.
    Originally posted by Noobie2011
    Mine sounds very similar to yours. The biggest issue I had was not deciding what growth figures to use but how to model different scenarios such as a sudden, 1-3 year downturn, prolonged recession etc. In the end I found a website (sorry, can't remember which one!) which gave annual growth for the last 80 years and I used those figures to do about 20 different models, starting a few years apart, to see if I ran out of money. I didn't - well, only once or twice . CFireSIM does a similar job for you but I needed to understand the workings so I could trust the figures.
    Also we do not and will not have children so that is less of a worry in terms of inheritance so we have factored our house equity in(mortgage free by my retirment) and plan to split the equity between money for retirement and moving abroad.
    Originally posted by Noobie2011
    I would strongly advise against coming out of the UK property market. I live in Spain and know a fair few people who sold up in the UK and now would like to move back but are priced out. No matter how definite you are about moving permanently you don't know what the future may hold. Can you retain your house and let it - that would reduce the income needed but obviously mean you had less spare capital. That's what we've done - I can't envisage me ever returning to live in our old house but at least we could sell it and buy something comparable but different elsewhere.

    I love this thread - very empowering .
    A positive attitude may not solve all your problems, but it will annoy enough people to make it worth the effort
    Mortgage Balance = 0
    "Do what others won't early in life so you can do what others can't later in life"
    • Cottage Economy
    • By Cottage Economy 14th May 18, 5:44 PM
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    Cottage Economy
    Don't forget to plan for the effect of inflation too though!
    Originally posted by MK62
    Yep! I'm assuming the software has that base covered...?? (runs off to check)

    What I meant was him looking at transferring from this scheme to an alternative pension arrangement which doesn't have such a restriction - a SIPP for instance!
    You can understand why they have such restrictions, but that doesn't help in your case if the worst happens and you find yourself on your own, with only 45% of your husband's pension to live on (unless that's enough of course)

    That said, transferring out could be a bad idea for a number of reasons, and to do it you'd need to engage the services of an IFA anyway....(though it could be a good idea too - it all depends....)
    Originally posted by MK62
    He can transfer only what he has built up after April 2012. Prior to that, the government stepped in and took over responsibility for it all and that is non-transferable.

    Oh, I think I see what you mean now - do you mean paying 4 years Class 3 NI contributions from age 55-58?
    Originally posted by MK62
    I was assuming I could just buy the extra years, kind of like an NI supermarket. I am now thinking that I can't. Does it fall into the 6 year rule so I can only buy unused years?

    It's worth keeping an eye on this. Does it mean that he'll have three different tranches of pension: (i) non-transferable DB, (ii) transferable DB built up from 1/4/2012 to approx 1/4/2018, and (iii) new "defined cash balance scheme"? I ask because it may mean that in the end that he could accept a DB pension from (i) and transfer (ii) & (iii). That might be a very decent compromise.

    I found this useful because I had no idea what a "defined cash balance scheme" was.
    https://www.pensionsadvisoryservice.org.uk/about-pensions/pensions-basics/workplace-pension-schemes/cash-balance-plans
    Originally posted by kidmugsy
    It left me doubting the generality of your statement "So he'll build up 19.6% per annum of his pensionable pay between now and when he retires in 5 years and that gets paid as a lump sum."
    Originally posted by kidmugsy
    Thanks Kidmugsy. I haven't explained myself well at all. Yes, he will have three tranches of money. I had it in mind that he would probably transfer out the lump sum when the time comes if feasible. It's designed to be used as the 25% tax free lump sum instead of using part of his FS/DB benefits; they remain untouched.

    All the literature I've read so far from RM on the cash balance scheme says that he will contribute 6% and RM 13.6% of his pensionable pay (so 19.6%) to it every year while working, which will will be used to fund part/all of the 25% tax-free lump sum when he retires. What he can do with it if he doesn't want to take the lump sum, I don't know. I am assuming if he retires at 62-ish and doesn't take the pension straight away, as a deferred member he probably transfer out. I know pension rules can sometimes be different if you actually retire and claim the pension benefits straight away - not sure if this is the case with RM.

    Last year a fellow forum member and employee of RM, Dasherman, told me the following:

    Cash Balance

    1. Use to fund the tax free lump sum at retirement and with anything left over he could transfer out to buy an annuity or drawdown.
    2. Transfer out independently of his main scheme benefits to buy an annuity or drawdown.
    3. His pot will be worth a minimum amount based on total contributions with the addition of investment growth of which CPI+2% is the aim. But currently no info on where money will be invested.
    4. Normal retirement age of 65, so possible reductions if taken early.
    5. The ability to transfer to the DC option if desired.


    That was back in October. Still no idea whether the Government will give approval for the CDC to go ahead either.
    Last edited by Cottage Economy; 14-05-2018 at 6:36 PM.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • Cottage Economy
    • By Cottage Economy 14th May 18, 6:47 PM
    • 969 Posts
    • 4,053 Thanks
    Cottage Economy
    I would strongly advise against coming out of the UK property market. I live in Spain and know a fair few people who sold up in the UK and now would like to move back but are priced out. No matter how definite you are about moving permanently you don't know what the future may hold. Can you retain your house and let it - that would reduce the income needed but obviously mean you had less spare capital. That's what we've done - I can't envisage me ever returning to live in our old house but at least we could sell it and buy something comparable but different elsewhere.

    I love this thread - very empowering .
    Originally posted by gallygirl
    A few years ago we considered buying a place in Italy with a view to retiring there one day but at that time some of the inheritance laws were draconian so I refused to do it in the end - forced heir-ship I think its called. For quite a while I had recurrent dreams about DH dying and some Italian lawyer finding fault with our will and handing 50% of our assets to a male 'wastrel' of a relative, who whooped with joy at his fortune as he had never bothered to pay into a pension knowing that something good would happen to save him.

    Woke up many a time with my heart pounding!
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • Noobie2011
    • By Noobie2011 14th May 18, 6:57 PM
    • 268 Posts
    • 46 Thanks
    Noobie2011
    I really struggled with any spreadsheets I used - and it's easy to make mistakes when you don't really understand something. In the end I built my own.



    Mine sounds very similar to yours. The biggest issue I had was not deciding what growth figures to use but how to model different scenarios such as a sudden, 1-3 year downturn, prolonged recession etc. In the end I found a website (sorry, can't remember which one!) which gave annual growth for the last 80 years and I used those figures to do about 20 different models, starting a few years apart, to see if I ran out of money. I didn't - well, only once or twice . CFireSIM does a similar job for you but I needed to understand the workings so I could trust the figures.

    I would strongly advise against coming out of the UK property market. I live in Spain and know a fair few people who sold up in the UK and now would like to move back but are priced out. No matter how definite you are about moving permanently you don't know what the future may hold. Can you retain your house and let it - that would reduce the income needed but obviously mean you had less spare capital. That's what we've done - I can't envisage me ever returning to live in our old house but at least we could sell it and buy something comparable but different elsewhere.

    I love this thread - very empowering .
    Originally posted by gallygirl
    Yeah I am just trying to get a starting point and then form there start applying growth figures but it makes me nervous in that I am applying extra income that is based on forecasted growth which yes unless very unlucky any pensions, property and savings we have should grow. To get around it I may just apply a modest growth and then can keep monitoring to get a better view as we go.

    It is a good point you raise and we may get to retirement age and not want to leave but we did talk about keeping a small base here in the UK and then buying abroad with the intention to live abroad but an option to visit here whenever and come back or good if needed. Plus the option of renting it out would supply an income actually which could come in handy even if increases any fall back money we may need. One of our options was to look to invest in a property abroad as soon as we could and rent it out while maybe using it as a holiday home and that would give us another form of income but also a change to decided if we wanted to live there.

    The idea of maybe having a base in the UK and abroad and earning income from one does get me excited so I must be getting old now haha
    • MK62
    • By MK62 14th May 18, 7:08 PM
    • 166 Posts
    • 113 Thanks
    MK62
    I was assuming I could just buy the extra years, kind of like an NI supermarket. I am now thinking that I can't. Does it fall into the 6 year rule so I can only buy unused years?

    I'm no expert on this subject, but as I understand it the 6 year "rule" has been temporarily extended for the introduction of the new state pension.
    Now it seems you might be able to buy as far back as the 06/07 tax year.

    AIUI, you can't just buy extra years - so for instance you can't just phone up and say you'd like to buy 4.
    I think your options are either to pay class 3 NICs for any gap years between 06/07 and now (assuming any of these are gap years), or wait until you are 55 and retired, and continue to pay class3 NICs for a further 4 years then (at whatever rate is set at the time, and assuming it's still an option then).
    However you may need to be careful about pre2016 years....in some cases you could end up shelling out for nothing.....and from a few stories I've read, people are not being informed at the time that they could be paying for nothing (that could have changed by now though)

    I think your state pension would increase by more than 218pa from buying those extra 4 years though.....I reckon it could increase by up to 18.80 a week (c978pa) in today's figures.
    • Cottage Economy
    • By Cottage Economy 14th May 18, 8:46 PM
    • 969 Posts
    • 4,053 Thanks
    Cottage Economy
    AIUI, you can't just buy extra years - so for instance you can't just phone up and say you'd like to buy 4.
    I think your options are either to pay class 3 NICs for any gap years between 06/07 and now (assuming any of these are gap years), or wait until you are 55 and retired, and continue to pay class3 NICs for a further 4 years then (at whatever rate is set at the time, and assuming it's still an option then).
    However you may need to be careful about pre2016 years....in some cases you could end up shelling out for nothing.....and from a few stories I've read, people are not being informed at the time that they could be paying for nothing (that could have changed by now though)
    Originally posted by MK62
    I am fully funded back to 2001/02 so if I want to buy extra years I will have to look into it after I finish work.

    I think your state pension would increase by more than 218pa from buying those extra 4 years though.....I reckon it could increase by up to 18.80 a week (c978pa) in today's figures.
    Originally posted by MK62
    I'm probably looking at old data again!

    Thanks MK62.
    'Save 12k in 2018' 3500/6,000 (58%)


    "...success in personal finance isn't about mastering the technicalities. It is about mastering yourself."
    • Noobie2011
    • By Noobie2011 15th May 18, 8:17 AM
    • 268 Posts
    • 46 Thanks
    Noobie2011
    Noobie2011 - I started off doing something similar a couple of years ago but by the time I took into account everything I needed to it became a beheemoth and got away from me. I've been looking for something a bit simpler ever since.

    I want to include compound interest and growth estimates for all of our sources, even if they are conservative estimates, because they will form an important part of our retirement income.

    60k does seem excessive. I've been working on 25k joint AFTER mortgage payment, with other assets in the background earmarked to sell should we need it. That's currently in excess of what we spend but I'm putting in the extra to cover holidays and car resto's. DH has also mooted the possibility of doing the odd shift as a casual after retirement. He knows some of the more complicated rural deliveries that can take a long time for a new postman to learn so he may be able to make something of that to cover sickness and holidays.

    So I checked our state pension forecasts and he is fine - full entitlement in 4 years time. I am not. As I was in education/out of the country for 10 years of my record I have another 14 years until I make full pension - which doesn't tally with my plans to stop working in 10 years.

    Now wondering whether paying for an additional four years will be worthwhile to get the full state pension. So, that's a cost of 761 of Class 3 contributions for each additional year, or 3044 to get another 218 a year in state pension (assuming I complete the next 10 years break free). That will give me back 4,360 of extra state pension over 20 years or 6,540 over 30 years. The 20 year estimate takes me to 87 years old, which is probably more likely than the 97 years.

    Based on that, I'm wondering whether my money is better placed elsewhere and not in extra state pension years. Mind you, it is about 40% increase isn't it to 87, which is not to be sniffed at...unless I'm being far too simplistic in my maths?
    Originally posted by Cottage Economy
    So I am not sure how conservative you should be with compound interest but it seems everyone goes off 5%. However when I apply that to our pension pots they increase quite a bit and give us quite a few more options. Is 5% realistic to calculate off or is the rule to apply a less risky %
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