Your browser isn't supported
It looks like you're using an old web browser. To get the most out of the site and to ensure guides display correctly, we suggest upgrading your browser now. Download the latest:

Welcome to the MSE Forums

We're home to a fantastic community of MoneySavers but anyone can post. Please exercise caution & report spam, illegal, offensive or libellous posts/messages: click "report" or email forumteam@.

Search
  • FIRST POST
    • Cruixer
    • By Cruixer 9th Nov 18, 11:01 PM
    • 24Posts
    • 6Thanks
    Cruixer
    What now?!?
    • #1
    • 9th Nov 18, 11:01 PM
    What now?!? 9th Nov 18 at 11:01 PM
    I'll admit to feeling a little guilt about discussing something as though its a problem when so many people are struggling just to get by, or to get on the property ladder etc, but here goes.

    Its not as though I was born into wealth and my first job was an unskilled factory worker, but a combination of continually upgrading my education, reasonably frugal living, the ability to do almost all home maintenance myself, and a period of renting out instead of selling houses when I moved area because it was a bad time to sell have led me, or more accurately us, to where I am now. In the last couple of years we sold our respective previous homes which were rented out, so that we could pay off the mortgage on our current home.

    I am 46, we are both earning around 50k, have around 60k in the bank left over from our recent sales, still have one of my previous homes rented out overseas with the rent covering the mortgage which I think will be paid off in around 10 years. We are in the house that we expect to stay in until we are of an age that we need something smaller. My wife has a company car, I got rid of my car a few years back and don't really want another, with a 4 year old we don't go out much so our expenses are minimal.

    Its all come together financially in the last year and I am definitely not complaining, but I have found myself a little confused about what comes next. At what point do you consider yourself financially independent? Should I change my lifestyle and start spending more money, or should I give up my job, or go part time and have more free time? With the mortgage gone I am not really sure what my financial goals should be now!

    Interested in peoples thoughts.
Page 2
    • Alexland
    • By Alexland 10th Nov 18, 1:22 PM
    • 3,593 Posts
    • 2,912 Thanks
    Alexland
    I have always believed the first priority was to pay off the mortgage.
    Originally posted by Cruixer
    That's a common error - retirement saving and mortgages should take equal priority for most of your working life. Ok maybe some focus on mortgage overpayments in the early years when the LTV and repayments are high but otherwise its usually suboptimal to focus too much on the mortgage and more tax efficient and better return to make pension contributions.

    I'm not a big fan of insurances to be honest, not really convinced of the value of this
    Originally posted by Cruixer
    Hopefully you will never be in a situation where you really learn to value it. I agree small item insurance for losses you could easily bear is pretty pointless (as you will end up paying them more than they every pay you) but how would your family cope if one of you died or suffered a critical illness?

    Look at your child, do you want to have more children?
    Originally posted by crv1963
    I often look at our son and wonder why my wife is pregnant again....

    Alex
    Last edited by Alexland; 10-11-2018 at 1:29 PM.
    • Cruixer
    • By Cruixer 10th Nov 18, 6:32 PM
    • 24 Posts
    • 6 Thanks
    Cruixer
    As a higher rate taxpayer (based on the few facts available) your priority should have been mitigating any higher rate tax liability before overpaying any mortgage.
    Originally posted by BoGoF

    Maybe from a purely financial perspective, but my motivation for paying off my mortgage first is security. With no mortgage our home is not at risk unless we both lost our jobs, and couldn't get another before we used up all of our savings, and even then in the area we live we could sell and live in a house half the value and still live comfortably. In my mind this peace of mind is very valuable.



    The problem you seem to have is you have no end goal at present. Until you sit down and work that out then it is difficult to give advice.
    Originally posted by BoGoF
    Agreed.



    Do you get pension forecasts from work?
    Originally posted by BoGoF
    Yes. I need to understand these better, I have hardly glanced at them before now. It seems to say that I have currently accrued a pension of 4.4k and a lump sum of 13.4k.
    • Cruixer
    • By Cruixer 10th Nov 18, 6:36 PM
    • 24 Posts
    • 6 Thanks
    Cruixer
    Meant to add, having that money in Marcus is devaluing that money due to inflation.
    Originally posted by BoGoF

    I'm aware of that, but it was better to get it in there and earn some interest in the short term while I figured out what to do with it.


    What would you suggest, using up the ISA allowance for the year and starting a stocks and shares ISA?
    • Cruixer
    • By Cruixer 10th Nov 18, 7:00 PM
    • 24 Posts
    • 6 Thanks
    Cruixer
    I note the comments about what it I or my wife died. I have thought about this, but if one of us died the other would receive work life insurance and pension, and to be honest either of us would be fine with just our own salary, even without the death benefits. If both of us died, my concern for my daughter would not be financial, she would inherit a 700k house and any benefits from the work life insurance. There are enough family members that would look after her and enough cash to help them support her.



    Also, regarding more children, my wife unfortunately can't have any more children so we know what we are planning for in that respect.



    Lots food for thought here and I appreciate all the comments. I've got the little one on my own this weekend so I have limited time to think about this, but I will make a better start once my wife is back.



    I obviously need to do a bit of study into our pensions. I am fairly sure that I can increase my contributions so maybe that is the first step. I need to learn and to understand investing with my surplus income. I haven't had a moment to think over the last few years as I have been doing a PhD, working full time, moving house, and determined to still keep plenty of time for my daughter. With the PhD complete and the mortgage paid off, both in the last few months, and the main issues with the house sorted, I should have time now to start to think in more detail about the future.


    Thanks all for your comments. I will get some more details about my pension etc and then return to this thread.
    • justme111
    • By justme111 10th Nov 18, 7:09 PM
    • 3,042 Posts
    • 2,946 Thanks
    justme111
    Money is not an aim , money is a mean to an aim. An aim of what? - of a happy fulfilling life. Options what to do now that pressure has decreased are endless - work part time to have time with your child - child years are time limiting opportunity; now it may seem that it takes forever for him to grow up bit what you could do at 2 and have not done can not be done at 4 anymore; every age has unique opportunities which are never , just think about it - NEVER - are going to be available again.
    Have more quality time with your wife.
    Spend time doing sports - benefits and enjoyment are second to none.
    Dedicate time to your other interests or hobbies.
    Do voluntary work in an area you are passionate about.
    Start some side work project.
    You see , the above listed can easily fill 2 full time lives without any work at all and all of the above enriches your life more than work which we do to earn money to support ourselves.
    Option 2 - investments of whatever type in order to achieve financial independence and /or retire early.
    Of course if there is something you dream of now is the time to buy it but spending money just because you have it because you sold your life time (that is what we essentially do when we work) is silly.
    • Alice Holt
    • By Alice Holt 10th Nov 18, 8:22 PM
    • 2,540 Posts
    • 2,937 Thanks
    Alice Holt
    Yes, that is a very significant risk for people planning to work to SP age. I used to have PHI, but stopped it once my early retirement plans had progressed to the point they made it unnecessary.
    Originally posted by Spreadsheetman
    Likewise.
    Reduced the premium, by having a deferred period so it paid out when my employee's company protection ended.
    Wouldn't care to rely on ESA (or UC) and PIP these days.

    In OP's shoes I'd look at pension provisions for both him and his wife.
    Alice Holt Forest situated some 4 miles south of Farnham forms the most northerly gateway to the South Downs National Park.
    • Audaxer
    • By Audaxer 10th Nov 18, 8:23 PM
    • 1,430 Posts
    • 869 Thanks
    Audaxer
    I am 46, we are both earning around 50k, have around 60k in the bank left over from our recent sales, still have one of my previous homes rented out overseas with the rent covering the mortgage which I think will be paid off in around 10 years. We are in the house that we expect to stay in until we are of an age that we need something smaller. My wife has a company car, I got rid of my car a few years back and don't really want another, with a 4 year old we don't go out much so our expenses are minimal.
    Originally posted by Cruixer
    You both have very good salaries. If you want to maintain anything near that level of income and lifestyle in retirement, I would recommend investing as much excess income as you have into a SIPP to benefit from tax relief and growth until you have enough pension to retire comfortably. Investing a significant amount every month should be possible as you say your expenses are minimal. That in my view would be a decent goal for you to aim for now that your mortgage is cleared.
    • Alexland
    • By Alexland 10th Nov 18, 8:57 PM
    • 3,593 Posts
    • 2,912 Thanks
    Alexland
    I note the comments about what it I or my wife died. I have thought about this, but if one of us died the other would receive work life insurance and pension
    Originally posted by Cruixer
    Yup that's the point of life insurance - does your employer also provide for you in the event of serious one-off or sustained illness?

    Alex
    • Cruixer
    • By Cruixer 11th Nov 18, 3:14 PM
    • 24 Posts
    • 6 Thanks
    Cruixer
    Wee one unfortunately is ill today and sleeping on the sofa, which has given me some time I wasn't expecting to look into the works pension.

    I am in the USS pension scheme at work

    Employer contribution is 18% of salary
    Employee contribution is 8%
    "Your benefits at retirement are based on a formula that takes account of your salary each year, and takes account of inflation"

    I've found out that there is what they call a 'match', where if I increase my contribution by 1% my employer matches this. I presume this is a no brainer so will add this on.

    Regarding additional contributions, are additional pension contributions typically the most effective investment over the other options available? My understanding is that pensions are taken from gross salary so reduce the amount of tax I pay, so with this in mind it sounds like it would be hard for another investment option to beat?

    According to the illustrator it says that if I continue as is I would be likely to get a lump sum of 60k and 20k p.a. pension. That appears not to account for inflation though.
    • Audaxer
    • By Audaxer 11th Nov 18, 7:01 PM
    • 1,430 Posts
    • 869 Thanks
    Audaxer
    According to the illustrator it says that if I continue as is I would be likely to get a lump sum of 60k and 20k p.a. pension. That appears not to account for inflation though.
    Originally posted by Cruixer
    Is there an option to take a higher pension and no lump sum? If so that might be a better option, depending on how much extra pension that you are getting by giving up the lump sum. If for example with no lump sum, you got only an extra 3k per year pension the 60k seems quite a good lump sum. However if you were to get at least an extra 5k per annum pension for no lump sum, then probably better to go for the higher pension and no lump sum.

    Edit: however that is just an option to be considered nearer the time you are about to take the pension. In the meantime best to increase contributions if you can.
    Last edited by Audaxer; 11-11-2018 at 7:05 PM.
    • BoGoF
    • By BoGoF 11th Nov 18, 7:14 PM
    • 3,608 Posts
    • 2,966 Thanks
    BoGoF
    Is there an option to take a higher pension and no lump sum? If so that might be a better option, depending on how much extra pension that you are getting by giving up the lump sum. If for example with no lump sum, you got only an extra 3k per year pension the 60k seems quite a good lump sum. However if you were to get at least an extra 5k per annum pension for no lump sum, then probably better to go for the higher pension and no lump sum.

    Edit: however that is just an option to be considered nearer the time you are about to take the pension. In the meantime best to increase contributions if you can.
    Originally posted by Audaxer
    Even if possible it may not be the most prudent move. The lump sum is tax free, an increased pension would not be.
    • Alexland
    • By Alexland 11th Nov 18, 7:53 PM
    • 3,593 Posts
    • 2,912 Thanks
    Alexland
    Even if possible it may not be the most prudent move. The lump sum is tax free, an increased pension would not be.
    Originally posted by BoGoF
    If the offer for guaranteed income is good enough it might be worth paying tax on.

    Alex
    • Cruixer
    • By Cruixer 12th Nov 18, 10:14 AM
    • 24 Posts
    • 6 Thanks
    Cruixer
    Money is not an aim , money is a mean to an aim. An aim of what? - of a happy fulfilling life. Options what to do now that pressure has decreased are endless - work part time to have time with your child - child years are time limiting opportunity; now it may seem that it takes forever for him to grow up bit what you could do at 2 and have not done can not be done at 4 anymore; every age has unique opportunities which are never , just think about it - NEVER - are going to be available again.
    Originally posted by justme111

    Yes, this resonates. The single most important thing for me is ensuring that I have time for my daughter. My job at the moment is flexible enough to allow me to do that. I don't work at weekends, and I can usually be away in time to pick her up from nursery before 5 and spend the rest of the evening with her, finishing off any work after she goes to bed. She'll be going to school next year so there is probably no point in giving up work in order to hang around the house while she is at school, but I would want to be in a financial position that I could change jobs or go part time if this one started to push on the demands of my time. I am probably mostly there now with the mortgage paid off and money in the bank, so for me while the job still suits its about continuing to put money away to increase that security.



    I don't have expensive hobbies, and I don't think that I will need a high income in retirement, but I do need to start to try and work out what level of income would make us comfortable in retirement and plan for that.


    So while it still needs fleshed out a bit, that's the guts of my goal. I'd rather have time than money, although I need to firm up on how much money is enough. At the moment the work-life balance is ok, but I want to have the flexibility to be able to react if this balance shifts, the security to be able to push back on my employer if they start to push on those boundaries, and to be able to change into a lower paying job to protect my priorities if need be.
    • MallyGirl
    • By MallyGirl 12th Nov 18, 10:39 AM
    • 3,035 Posts
    • 8,058 Thanks
    MallyGirl
    I don't work at weekends, and I can usually be away in time to pick her up from nursery before 5 and spend the rest of the evening with her, finishing off any work after she goes to bed. She'll be going to school next year so there is probably no point in giving up work in order to hang around the house while she is at school
    Originally posted by Cruixer
    Do not underestimate the amount of 'opportunities' there are for parents of primary school children to be at school - sports days, plays, concerts, themed lunches, etc,etc. They all fall within the school day for little ones. I worked 3 days a week till my DD was about 9 (then went to 4 and finally 5 by the time she was going to senior school). I could flex my hours to go to all sorts of events and also be part of the parents assoc etc.
    • Cruixer
    • By Cruixer 12th Nov 18, 2:58 PM
    • 24 Posts
    • 6 Thanks
    Cruixer
    Do not underestimate the amount of 'opportunities' there are for parents of primary school children to be at school - sports days, plays, concerts, themed lunches, etc,etc. They all fall within the school day for little ones. I worked 3 days a week till my DD was about 9 (then went to 4 and finally 5 by the time she was going to senior school). I could flex my hours to go to all sorts of events and also be part of the parents assoc etc.
    Originally posted by MallyGirl

    Thanks for the heads up. I don't really report in to anyone on a daily basis, and my wife is similar, so we can usually deal with these things by planning our own calendar, working from home and dropping around to the school for a bit, maybe picking up the slack later on at night. Saying that, this is our jobs as they currently stand. If they were to change something that meant that I had to be in the office every day, and this could easily develop with not much more than a few months warning, I have the reassurance of knowing that I could drop my hours or change job without too much financial pressure. In my current job I have the feeling that if I dropped to 3 days they would just expect the same from me and pay me 3/5 of my salary so I would probably be looking to change into a job that was intentionally part time.
    • Cruixer
    • By Cruixer 12th Nov 18, 3:56 PM
    • 24 Posts
    • 6 Thanks
    Cruixer
    Is there an option to take a higher pension and no lump sum?
    Originally posted by Audaxer

    It appears that additional contributions in the investment builder can be drawn down as a lump sum tax free option, or taxed as additional pension, but so far I haven't found the detail on what the deal is in terms of how much additional pension. As you say though, this is probably more something for nearer the time.
    • Cruixer
    • By Cruixer 13th Nov 18, 10:34 AM
    • 24 Posts
    • 6 Thanks
    Cruixer
    Starting to get my head around pensions and tax etc and have started to put together a short term plan while I think a bit more about the longer term. Whatever I decide to do longer term, the discussion on this thread has made it clear that I do need to build a better pension pot. This thread has been really helpful to me in general and has reinvigorated me into thinking about new goals now that the mortgage is paid off.



    It strikes me that as I have a capital gain from the sale of my flat in April, I will have a hefty tax bill this year and this might be a good time to reduce my liability by pushing as much as possible to pension, while at the same time starting to build my pension pot.


    If I push 100% of my salary to pension for the remainder of this tax year, which I can afford to do due to the capital gain, then I would bring my income down below the higher rate for much of the capital gain.



    I am new to this and hoping that someone with more experience could validate whether my logic is sound here?


    It is likely that I will still have cash left in the Marcus bank account which is depreciating, but it doesn't seem like there is any benefit to a cash ISA over the Marcus account while I am under the tax free interest threshold, but is it worth moving some of this into a stocks and shares ISA, or something else?
    • justme111
    • By justme111 13th Nov 18, 1:20 PM
    • 3,042 Posts
    • 2,946 Thanks
    justme111
    More knowledgeable people will hopefully comment on it , I do not know an answer to this question - are you sure that capital gains tax has anything to do with income tax and is going to be affected by your pension contributions?
    Re cash versus investments - you would need some emergency funds in cash and beyond that it is your preference - either losing money to inflation or taking risk with investments .
    • Cruixer
    • By Cruixer 13th Nov 18, 4:40 PM
    • 24 Posts
    • 6 Thanks
    Cruixer
    are you sure that capital gains tax has anything to do with income tax and is going to be affected by your pension contributions?
    Originally posted by justme111

    According to the revenue site there are two bands for capital gains on residential property, basic rate and higher rate, 18% and 28% respectively. This year I will also still have income from overseas property which will push me up. My understanding is that the lower my taxable earnings, by using salary sacrifice for my pension, the lower my tax liability for both of these income streams when I complete self assessment.


    I did hear back from my employer and they have told me that the only limit on salary sacrifice, is that I can't earn any less than the minimum wage, and this is calculated on a monthly, not annual basis.
    • LHW99
    • By LHW99 13th Nov 18, 5:09 PM
    • 1,522 Posts
    • 1,412 Thanks
    LHW99
    either of us would be fine with just our own salary
    Just a thought, if one of you should sadly pass away while your child is still young, you have more than just lifestyle to consider. You may need to be able to cover higher child care costs, because there would be no partner to cover when the survivor has to be working. Also, no help when the little one is ill and needs to be at home - most childcare is extremely reluctant to look after a sick child. You may have grandparents able and willing and close, but they may be less happy to be permanent rather than emergency helpers.
Welcome to our new Forum!

Our aim is to save you money quickly and easily. We hope you like it!

Forum Team Contact us

Live Stats

173Posts Today

1,448Users online

Martin's Twitter
  • I've just heard about the 8 month pregnant woman shot through the stomach by a crossbow. Its both evil and medie? https://t.co/hQTOxWiXhj

  • Major new guide... Brexit, what it means for you and your finances: M mortgages, savings, flights, consumer rights? https://t.co/SXCMG2qXwX

  • Have you haggled on the high street in the last year? If so who with and did you succeed? Please vote in this week? https://t.co/fdzmmFfA4u

  • Follow Martin