Early Retirement Pitfalls, Requirements etc Your opinions

[Chillidoggy]

30 minutes ago, Kimbers said:

He was going to but he had an offer he couldn't refuse. And now you can see him doing the Full Monty every night at the Palladium!

[Sparky]

I'm retired.  Except maybe today.

[Chillidoggy]

38 minutes ago, Sparky said:

I'm retired.  Except maybe today.

 

That image never really seems to change much. It's probably on Google Earth.

[Sparky]

Ah, if you look at Street View, you'll see me relaxing during my retirement.

[Chillidoggy]

1 minute ago, Sparky said:

Ah, if you look at Street View, you'll see me relaxing during my retirement.

 

Ha, ha!

The sun must have come out.

 

[exeterjeep]

3 minutes ago, Sparky said:

Ah, if you look at Street View, you'll see me relaxing during my retirement.

seen that, on a virtual tour of Cassiobury park

[C8RKH]

2 hours ago, Chillidoggy said:

You're in luck! I'm also feeling arsey today, and thus you are wrong.

You're either retired, or you're not. You cannot be retired and in employment. If you're still working part time, you might be deemed to be semi-retired, though.

As for Colonel Sanders, he never was a proper Colonel, so your analogy falls face down into a pile of fried chicken. He also died in 1980, so unless he's been reincarnated I can only imagine that whoever is opening all those restaurants is a doppelganger!😀

What utter pish. I can't be arsed wasting any more time on semantics. You believe what you want, I'm retiring from the conversation as bored.

[andyj007]

I never understood pensions and still dont tbh.. i took one out at 16 with the co op and spent the first year  paying his fees, stopped paying that one two years later,  , self employed for a number of years , then was employed for 10 years  which by the time i left was getting a reasonable decent pension paid in , but had enough of carrying other directors..  went back self employed..  after year 2 of not paying anything into that pension an IFA advised to star again  so i dropped in 5k 2008 i think   (rather than do it monthly .. 1 year later that was worth less than 5k  i remember being angry and gutted tbh  .  no way was i ever doing that again, against the IFA advice i never paid another penny into that fund.. instead i did my own thing with my money..  so I  saved 5k a year for 6 years , into  a bogo standard current account lol  . , and then invested 30k my own way ,  

i not sure what that 30k invested back then would be worth today  - would be fun to know, i suppose i could check what the pension did return over since then to  date    Im confident (hope)  im min 5x +  better off .. 

retiring to me means giving up the main job that has become taxing on my mental health  and doing something that just fun, for a few £ to allow buying parts for my cars   

I cant offer you advice, but i can send you good luck in what ever you decide ..  

 

 

 

 

[C8RKH]

12 minutes ago, andyj007 said:

retiring to me means giving up the main job that has become taxing on my mental health  and doing something that just fun, for a few £ to allow buying parts for my cars

Great approach 👍

[Redwing]

Re sitting down with an IFA.  The advice that you would receive today would be totally different to what you would have been given before that little sh1t Putin started his antics, and more than likely be different to what would be offered in a month's time.  My IFA always tells me that what the markets like is certainty and stability.  Two commodities that are seriously in short supply at the moment.   Now is not the time to be making life changing financial decisions.  HOLD!

[Mysterae]

On 19/03/2022 at 15:41, DJW said:

Found this guys videos very informative .  Worth having a  scan of his channel and watching a few that are relevant to you 

 

Thank you for posting the youtube link, this bloke does explain things quite well. I'm aiming to retire (in the sense of working for someone else) in about 11 years, when I'm 60.

I've always wondered what is better - a. paying your mortgage off early by putting a bit extra in to it each month or b. investing the same amount over the same time frame. The answer depends on you but mathematically it's answer b.

One thing I have learned is that you don't have to have paid your mortgage off to retire, as long as you can afford it. There's no point being house rich but money poor in your retirement.

[Beady]

Great thread - I have been thinking of this too, more so in the last year, as many others clearly have also been doing.

I think I could afford to do it now but that would mean downsizing house (earlier than planned) and giving up a few things that I am not quite ready to do yet.

we still have kids at home so our outgoings are still quite high and we like holidays , so my plan now is to retire as soon as they leave home, possibly a couple of years beforehand.

that puts me retiring at circa 57 (in 4-5 yrs)

Assuming mortgage paid off by then, my financial man maths is as follows-

Age 57-67 - need circa £40k/yr =£400k

age 67-77 need less - say £30k/yr but govt pension is £10k so need 20k =£200k

This takes me to average life expectancy anyway but as a contingency - let’s say 77-87 needs £20k/pa less govt pension =£100k

so that’s a total need of £700k 

this assumes that I have no debts /mortgage etc and gives enough for holidays and a decent but not extravagant lifestyle

Current pension is just over £200k and with what I will pay in plus increase in next 4-5 yrs should be close to £300k by then.

other savings / investments etc - say £200k

-we would sell the house and downsize releasing a minimum £200k and still owning a large house to pass on to the kids to argue over.

So the income side matches the expenditure and the house equity release could be a lot more if needed .

The expenditure is based on 2 of us but the income excludes anything Mrs B might get in pensions or savings.

It also excludes any parental inheritance that we may get but I have this mentally reserved to pay for the kids at university.

 

In summary I think I can afford it now and it’s very tempting but for other reasons I have decided to wait a little while, but not too long.

 

kimbers - if you are mentally ready to do it and the maths work, then do it. 

 

 

 

 

 

[Bibs]

This popped up rather appropriately today! 

[DJW]

13 hours ago, Redwing said:

Re sitting down with an IFA.  The advice that you would receive today would be totally different to what you would have been given before that little sh1t Putin started his antics, and more than likely be different to what would be offered in a month's time.  My IFA always tells me that what the markets like is certainty and stability.  Two commodities that are seriously in short supply at the moment.   Now is not the time to be making life changing financial decisions.  HOLD!

I’ve seen 35% wiped off my main stocks in pension this year.  If I was looking to purchase an annuity then I would be worried , as I would have to take that hit “now”.  However as I’m looking to use a flexible drawdown of pension pot over next 25 years, there is plenty of time for market to recover and make some.  
 

This explains the risk angle well. 
 

 

[Kimbers]

I see womens Tennis Champ Ash Barty has retired today at age 25. The radio is full of people not understanding how she could retire when she is a champion and No 1 in the world.

Lets look at it from a normal persons point of view.

When shes not in a tournament she gets up very early and exercises all morning. Has lunch and plays tennis in the afternoon for most of the day. She is told what to eat, when to exercise, when to sleep and she's not allowed to drink alcohol or generally "have fun". 

She's made £17.3 million in prize money in 5 years. Why the F**K would you continue working?

If I made £1 million I would retire instantly! I'. surprised shes lasted this long!

[SFO]

4 hours ago, Beady said:

Assuming mortgage paid off by then, my financial man maths is as follows-

Age 57-67 - need circa £40k/yr =£400k

age 67-77 need less - say £30k/yr but govt pension is £10k so need 20k =£200k

This takes me to average life expectancy anyway but as a contingency - let’s say 77-87 needs £20k/pa less govt pension =£100k

so that’s a total need of £700k 

this assumes that I have no debts /mortgage etc and gives enough for holidays and a decent but not extravagant lifestyle

Current pension is just over £200k and with what I will pay in plus increase in next 4-5 yrs should be close to £300k by then.

other savings / investments etc - say £200k

-we would sell the house and downsize releasing a minimum £200k and still owning a large house to pass on to the kids to argue over.

So the income side matches the expenditure and the house equity release could be a lot more if needed .

 

Remember that investment income and pension income or drawdowns (excluding the 25% tax free lump sum) are subject to income tax at the prevailing rates 

[Chillidoggy]

21 minutes ago, SFO said:

Remember that investment income and pension income or drawdowns (excluding the 25% tax free lump sum) are subject to income tax at the prevailing rates 

Well said.

[pete]

20 hours ago, SFO said:

Remember that investment income and pension income or drawdowns (excluding the 25% tax free lump sum) are subject to income tax at the prevailing rates 

Need to factor in inflation as well

[gregs24]

On 22/03/2022 at 19:59, andyj007 said:

I never understood pensions and still dont tbh.. i took one out at 16 with the co op and spent the first year  paying his fees, stopped paying that one two years later,  , self employed for a number of years , then was employed for 10 years  which by the time i left was getting a reasonable decent pension paid in , but had enough of carrying other directors..  went back self employed..  after year 2 of not paying anything into that pension an IFA advised to star again  so i dropped in 5k 2008 i think   (rather than do it monthly .. 1 year later that was worth less than 5k  i remember being angry and gutted tbh  .  no way was i ever doing that again, against the IFA advice i never paid another penny into that fund.. instead i did my own thing with my money..  so I  saved 5k a year for 6 years , into  a bogo standard current account lol  . , and then invested 30k my own way ,  

i not sure what that 30k invested back then would be worth today  - would be fun to know, i suppose i could check what the pension did return over since then to  date    Im confident (hope)  im min 5x +  better off .. 

retiring to me means giving up the main job that has become taxing on my mental health  and doing something that just fun, for a few £ to allow buying parts for my cars   

I cant offer you advice, but i can send you good luck in what ever you decide ..  

 

 

 

 

I can give you an idea. I put £25k into a pension in 2008 and it is now worth just over £80k. Yes it went down significantly from time to time, but pensions are a long term investment. 

On 23/03/2022 at 07:41, Beady said:

Great thread - I have been thinking of this too, more so in the last year, as many others clearly have also been doing.

I think I could afford to do it now but that would mean downsizing house (earlier than planned) and giving up a few things that I am not quite ready to do yet.

we still have kids at home so our outgoings are still quite high and we like holidays , so my plan now is to retire as soon as they leave home, possibly a couple of years beforehand.

that puts me retiring at circa 57 (in 4-5 yrs)

Assuming mortgage paid off by then, my financial man maths is as follows-

Age 57-67 - need circa £40k/yr =£400k

age 67-77 need less - say £30k/yr but govt pension is £10k so need 20k =£200k

This takes me to average life expectancy anyway but as a contingency - let’s say 77-87 needs £20k/pa less govt pension =£100k

so that’s a total need of £700k 

this assumes that I have no debts /mortgage etc and gives enough for holidays and a decent but not extravagant lifestyle

Current pension is just over £200k and with what I will pay in plus increase in next 4-5 yrs should be close to £300k by then.

other savings / investments etc - say £200k

-we would sell the house and downsize releasing a minimum £200k and still owning a large house to pass on to the kids to argue over.

So the income side matches the expenditure and the house equity release could be a lot more if needed .

The expenditure is based on 2 of us but the income excludes anything Mrs B might get in pensions or savings.

It also excludes any parental inheritance that we may get but I have this mentally reserved to pay for the kids at university.

 

In summary I think I can afford it now and it’s very tempting but for other reasons I have decided to wait a little while, but not too long.

 

kimbers - if you are mentally ready to do it and the maths work, then do it. 

 

 

 

 

 

You do need to be careful to take inflation into account. That £40k per year will be nearer £50k after 10 years of inflation (even shorter at current rates)

Ideally you don't want to use capital to live off as if you start hitting your capital too soon it will quickly vanish. That is the reason for the £1m figure to generate £40k per year. 4% return is achievable on longer term investments.

[C8RKH]

On 23/03/2022 at 11:59, SFO said:

Remember that investment income and pension income or drawdowns (excluding the 25% tax free lump sum) are subject to income tax at the prevailing rates 

Which is why you should not just bang your cash into a pension - the bigger the pot, the bigger the pension, the bigger the tax bill you will pay when you draw your pension.

Use up your £20k a year ISA allowance. Any future retirement income that you take from your ISA will be TAX free and NOT COUNT as taxable earnings - hugely important to keep your retirement tax bill as low as possible. Let's face it, you've worked long and hard enough, paying taxes, when you retire, the objective should be to minimise your tax personal tax contributions and burdens.

So by drawing down a blended retirement income (ISA and Pension) you can hit your monthly cash target in a way that means you don't pay tax, or only pay tax at the basic rate after your personal allowance has been used.

Hope this makes sense.

[philcool]

40 minutes ago, C8RKH said:

Which is why you should not just bang your cash into a pension - the bigger the pot, the bigger the pension, the bigger the tax bill you will pay when you draw your pension.

Use up your £20k a year ISA allowance. Any future retirement income that you take from your ISA will be TAX free and NOT COUNT as taxable earnings - hugely important to keep your retirement tax bill as low as possible. Let's face it, you've worked long and hard enough, paying taxes, when you retire, the objective should be to minimise your tax personal tax contributions and burdens.

So by drawing down a blended retirement income (ISA and Pension) you can hit your monthly cash target in a way that means you don't pay tax, or only pay tax at the basic rate after your personal allowance has been used.

Hope this makes sense.

Wise words indeed but also remember that salary sacrifice into a works pension is also paid in tax free so if your like me rather than pay 40% tax stick it in the pension and I know I'll pay tax at 20% when I draw on it I'm still 20% better off.

Oh and would have also kept £6k child allowance as well if had started earlier 

[Kimbers]

4 hours ago, C8RKH said:

Which is why you should not just bang your cash into a pension - the bigger the pot, the bigger the pension, the bigger the tax bill you will pay when you draw your pension.

Use up your £20k a year ISA allowance. Any future retirement income that you take from your ISA will be TAX free and NOT COUNT as taxable earnings - hugely important to keep your retirement tax bill as low as possible. Let's face it, you've worked long and hard enough, paying taxes, when you retire, the objective should be to minimise your tax personal tax contributions and burdens.

So by drawing down a blended retirement income (ISA and Pension) you can hit your monthly cash target in a way that means you don't pay tax, or only pay tax at the basic rate after your personal allowance has been used.

Hope this makes sense.

I agree mate, however my company matches my contribution up to £150. I pay in £250 so I should be getting £400 in there a month. And its still only worth £240 a month when I retire at 67 and thats if I keep paying in £400 a month. Pitfall of having too many kids and not enough income and starting my pension when I was 40.

So here's another question. Drawdown my whole pension at Tax free amount every year (25% isn't it?) and blow the lot by the time I'm too old to care (circa 80 ish) or keep it for an income to go to the govt to pay for my care?

Don't forget if I concentrate hard to blow the lot including selling my house and renting and using that £500,000 as well, then I will get exactly the same level of care, a council place in a home or council house and even money towards heating etc. Whereas if I keep my house and money I won't get a thing and be forced to sell the house to pay for everything anyway!!

[Bazza 907]

41 minutes ago, Kimbers said:

Don't forget if I concentrate hard to blow the lot including selling my house and renting and using that £500,000 as well, then I will get exactly the same level of care, a council place in a home or council house and even money towards heating etc. Whereas if I keep my house and money I won't get a thing and be forced to sell the house to pay for everything anyway!!

From 2023 onwards you will only have to pay £86k towards your personal care costs.

That said, it doesn't include the cost of your accommodation at the care home if you're not in your own home

[ChrisJ]

My Mum was paying £1800/week for her care home - that's £93000 a year - and on one of my visits I was asked to buy some toiletries (soap & shampoo) as she had run out - the cheapskates. This was in the Bromley/Kent area.

[Dan E]

2 hours ago, ChrisJ said:

My Mum was paying £1800/week for her care home - that's £93000 a year - and on one of my visits I was asked to buy some toiletries (soap & shampoo) as she had run out - the cheapskates. This was in the Bromley/Kent area.

So, been looking after the MIL for at least 15 years worse in the last 5 years as she is house bound and 92 so we have to do everything and she has 3 care visits a day, oh and no life, now this brings me on to my solution (sorry @pete) 

Everyone gets to live to 85 and two days (to get over the hangover of your birthday), then we just take them somewhere nice and give them a very lethal injection with a pleasant Gin and Tonic. You know it is coming you can plan your birthday, live like you want because you know the date your aren't going to be here. This will solve pretty much all the pension schemes and NHS issues. 

vote for me 🤣