Retirement

[DaveH]

When you retire early, many look at the headline figures & are put off by how much less you get each year. The reality is that all youre doing is spreading the pot (i know there isnt an actual pot for DB) over a longer period so you get less annually, but same over expected average lifetime

Then because pension (and state pension) is taxable, if you wait until state pension age, youll pay more tax on your works pension as you wont have had the years were youre only earning your works pension

But the other side of that is that if you say get £5k less per year, you get £5k less per year. Would you want to sit at home worrying about the heating bill and wishing you could go away for a cheap holiday, knowing you will have got more out of the scheme by the time you are 88 by going early?

The approach I'm taking is deciding on how much I need to live on and that is an eye opener in itself. Going from my salary to my pension income is a large downward jump and sounds a bit frightening. But when I look at my take home pay after tax and pension, I lose quite a bit there. Then with mortgage overpayments, that is another chunk gone. If I take off what I put into savings each month and what I spend on travel to work, I'm starting to get into the realms of what my pension predictions are. I'll need something to top that up going early, but hopefully only have a couple of years of mortgage left which gives free money to save. And that is only filling the gap between early retirement and state pension.

And when I'm a pensioner, I shouldn't have two teenagers at home, one of which is at the stage where we can't fill him with food or stop him growing out of all his clothes every 6 months.

It is an exercise I'd recommend anyone doing. Basically take your take home pay and subtract all the stuff you will not be paying out for, saving or investing. For me that is coming out just over a third of my salary figure.

 

[42]

But the other side of that is that if you say get £5k less per year, you get £5k less per year. Would you want to sit at home worrying about the heating bill and wishing you could go away for a cheap holiday, knowing you will have got more out of the scheme by the time you are 88 by going early?

The approach I'm taking is deciding on how much I need to live on and that is an eye opener in itself. Going from my salary to my pension income is a large downward jump and sounds a bit frightening. But when I look at my take home pay after tax and pension, I lose quite a bit there. Then with mortgage overpayments, that is another chunk gone. If I take off what I put into savings each month and what I spend on travel to work, I'm starting to get into the realms of what my pension predictions are. I'll need something to top that up going early, but hopefully only have a couple of years of mortgage left which gives free money to save. And that is only filling the gap between early retirement and state pension.

And when I'm a pensioner, I shouldn't have two teenagers at home, one of which is at the stage where we can't fill him with food or stop him growing out of all his clothes every 6 months.

It is an exercise I'd recommend anyone doing. Basically take your take home pay and subtract all the stuff you will not be paying out for, saving or investing. For me that is coming out just over a third of my salary figure.

If you can't afford to retire early because of the reductions, then you can't afford to do it. But yes, it does massively help if you actually know where youre spending the money & how much.

But if you can live beneath your means, by putting a decent chunk into SIPPs & ISAs that you wont be doing once in drawdown, it does make that transition far easier as the loss of disposable income becomes minimal.

 

[Darlo1973]

But the other side of that is that if you say get £5k less per year, you get £5k less per year. Would you want to sit at home worrying about the heating bill and wishing you could go away for a cheap holiday, knowing you will have got more out of the scheme by the time you are 88 by going early?

The approach I'm taking is deciding on how much I need to live on and that is an eye opener in itself. Going from my salary to my pension income is a large downward jump and sounds a bit frightening. But when I look at my take home pay after tax and pension, I lose quite a bit there. Then with mortgage overpayments, that is another chunk gone. If I take off what I put into savings each month and what I spend on travel to work, I'm starting to get into the realms of what my pension predictions are. I'll need something to top that up going early, but hopefully only have a couple of years of mortgage left which gives free money to save. And that is only filling the gap between early retirement and state pension.

And when I'm a pensioner, I shouldn't have two teenagers at home, one of which is at the stage where we can't fill him with food or stop him growing out of all his clothes every 6 months.

It is an exercise I'd recommend anyone doing. Basically take your take home pay and subtract all the stuff you will not be paying out for, saving or investing. For me that is coming out just over a third of my salary figure.

Yes, it needs a totally different way of thinking about your finances. You don't need to match your salary for an equivalent (or better) lifestyle as your expenses are very different.

Take off taxes, (especially NI), mortgage, pension contributions, savings, commuting costs, children etc but add in maybe more money for holidays and hobbies for the next 15-20 years.

I suppose it's similar to when I went from being a permanently skint student to my first proper salaried job and it took me a long time to get used to actually getting paid every month and eventually not having to worry about paying the electric bill.

 

[Swindon On Tour]

Yes, it needs a totally different way of thinking about your finances. You don't need to match your salary for an equivalent (or better) lifestyle as your expenses are very different.

Take off taxes, (especially NI), mortgage, pension contributions, savings, commuting costs, children etc but add in maybe more money for holidays and hobbies for the next 15-20 years.

I suppose it's similar to when I went from being a permanently skint student to my first proper salaried job and it took me a long time to get used to actually getting paid every month and eventually not having to worry about paying the electric bill.

Notwithstanding a part time job can support your income.
Even better if it’s a hobby type or no stress.
Once you remove mortgage payments and investment into savings it’s a substantial chunk that no longer needs to be budgeted for.

 

[Iamme]

Notwithstanding a part time job can support your income.
Even better if it’s a hobby type or no stress.
Once you remove mortgage payments and investment into savings it’s a substantial chunk that no longer needs to be budgeted for.

Retired at 53. Currently pay myself 600 a month and have about 150 left over. Live on 450 a month technically. Savings pays for unexpected bills i.e leaky shower etc.

Why do you need 20 grand a year to live on when retired???

How do you or can you spend that in year?

I have 2 holidays a year. Paid out the 600 a month.

 

[Darlo1973]

Retired at 53. Currently pay myself 600 a month and have about 150 left over. Live on 450 a month technically. Savings pays for unexpected bills i.e leaky shower etc.

Why do you need 20 grand a year to live on when retired???

How do you or can you spend that in year?

I have 2 holidays a year. Paid out the 600 a month.

Not sure it would be possible to live on £450 a month. Surely fixed costs (gas/electric/council tax) take up most of that plus there are groceries, running a car, going the pub, out for a meal, going to the football...

Doesn't sound like much fun - and you could have another 40+ years of living like this.

 

[DaveH]

Not sure it would be possible to live on £450 a month. Surely fixed costs (gas/electric/council tax) take up most of that plus there are groceries, running a car, going the pub, out for a meal, going to the football...

Doesn't sound like much fun - and you could have another 40+ years of living like this.

I was thinking similar. It costs me £100 to fill the car up. I can drive up to the north east and back on just over a tank, but tend to do a lot of driving about when up there.

One possible dream for retirement is to just fancy a few days walking and either have a camper van and take it to the lakes or find reasonable B&Bs up there. My wife probably will not come so just me and hopefully a dog spending a few days on the hills. Petrol or train costs, plus accommodation and tea in a pub each night, that is easily over half of £450 gone just from a few days hiking.

I want to retire, but I want to retire with enough cash to enjoy myself and indulge in more expensive hobbies. Taking my astrophotography further is a big one. Beautiful clear night last night, first one in a while and I had to do the sensible thing and go to bed because I knew it would be busy after a bank holiday weekend. If I were retired, I could have been up imaging to 2-3 in the morning, slept in until 9 to compensate. With that, taking the images is only the first step, there is a lot of combining and processing (which is learning and time).

All of a sudden from seeing a clear sky I can have filled a couple of days of my time just getting a single picture of a nebula. And then back to cost, it is the sort of hobby where you think it would be better if you had a ..... And then you are looking at your bank balance.

All about different life styles, but I can see my life being busy with stuff and a lot of that stuff needing money.

I suppose it's similar to when I went from being a permanently skint student to my first proper salaried job and it took me a long time to get used to actually getting paid every month and eventually not having to worry about paying the electric bill.

That was an amazing change. But life seemed so much cheaper then (end of the 90s). I had to loan £200 of my parents to pay my first month of rent. I paid them back out of my first wage packet which was about £600. That was not a full month of pay, but it was pretty much half the final year student loan. I paid back my parents, paid the next month of rent and had £200 left. But then what was only a few weeks later, I got the same again plus more.

 

[stapler]

Retired at 53. Currently pay myself 600 a month and have about 150 left over. Live on 450 a month technically. Savings pays for unexpected bills i.e leaky shower etc.

Why do you need 20 grand a year to live on when retired???

How do you or can you spend that in year?

I have 2 holidays a year. Paid out the 600 a month.

I commend your frugality, but I'm not sure it is realistic for general application. I doubt we could survive on £450 a week between us. £450 a month doesn't cover our energy, water and council tax. I'm sure we could make some savings in the first 2 categories. But not enough to feed and clothe ourselves, pay for transport, entertainment and other fun.

 

[42]

Not sure it would be possible to live on £450 a month. Surely fixed costs (gas/electric/council tax) take up most of that plus there are groceries, running a car, going the pub, out for a meal, going to the football...

Doesn't sound like much fun - and you could have another 40+ years of living like this.

Once state pension kicks in, youd have another grand a month. If living very frugally, it can be done but youd not have much life unless you do genuinely enjoy living like a monk

 

[SurreyMackem]

Retired at 53. Currently pay myself 600 a month and have about 150 left over. Live on 450 a month technically. Savings pays for unexpected bills i.e leaky shower etc.

Why do you need 20 grand a year to live on when retired???

How do you or can you spend that in year?

I have 2 holidays a year. Paid out the 600 a month.

My Council tax and Utilities comes to just over £450.

 

[Darlo1973]

My Council tax and Utilities comes to just over £450.

Must be retired and living at home with parents.

 

[Town End Farmer Giles]

Must be retired and living at home with parents.

Or an absolute weirdo who continually posts complete shite?

 

[42]

My Council tax and Utilities comes to just over £450.

My c tax, gas, electric & water are £320. If living on my own, they'd drop to about £250. If i dropped down to a small band A property, id probably looking at a saving another £30 pcm

 

[NYMackem]

But the other side of that is that if you say get £5k less per year, you get £5k less per year. Would you want to sit at home worrying about the heating bill and wishing you could go away for a cheap holiday, knowing you will have got more out of the scheme by the time you are 88 by going early?

The approach I'm taking is deciding on how much I need to live on and that is an eye opener in itself. Going from my salary to my pension income is a large downward jump and sounds a bit frightening. But when I look at my take home pay after tax and pension, I lose quite a bit there. Then with mortgage overpayments, that is another chunk gone. If I take off what I put into savings each month and what I spend on travel to work, I'm starting to get into the realms of what my pension predictions are. I'll need something to top that up going early, but hopefully only have a couple of years of mortgage left which gives free money to save. And that is only filling the gap between early retirement and state pension.

And when I'm a pensioner, I shouldn't have two teenagers at home, one of which is at the stage where we can't fill him with food or stop him growing out of all his clothes every 6 months.

It is an exercise I'd recommend anyone doing. Basically take your take home pay and subtract all the stuff you will not be paying out for, saving or investing. For me that is coming out just over a third of my salary figure.

All good points, but it's actually the other way round. If you take your DB pension as early as you can, the longer you live, the more that decision will cost you. For every year early you take it, there is an age where if you die before it you've made money going early and die after it you have cost yourself money.

It's a very personal decision though. If you have a big mortgage and dependents you might not be able to afford to go early because of the drop from salary to pension.

For others the freedom of giving up work while you're still fit and healthy enough to enjoy it is worth losing a bit of cash overall. There will come a point where the extra money you get from holding off won't really affect your quality of life.

 

[DaveH]

My c tax, gas, electric & water are £320. If living on my own, they'd drop to about £250. If i dropped down to a small band A property, id probably looking at a saving another £30 pcm

£600 is living off £7,200 per year, but if it is really like £450 then that is £5,400.

I wonder where these two holidays per year are to, because even two deals out of season into Europe, is going to blow at least 20% of that.

There are a lot of guides for how much you need in retirement and none said less than £10k. Think of the hell on about pensioners only on the basic £12k a year losing the £300 WFA. I suspect some misreporting or miscalculation here.

All good points, but it's actually the other way round. If you take your DB pension as early as you can, the longer you live, the more that decision will cost you. For every year early you take it, there is an age where if you die before it you've made money going early and die after it you have cost yourself money.

I worked it out once and I think with my pension, it was around 88 that was the break even point (depending on how early you go). You get more per year if you go later, but it takes years for that extra to equate to the tens of thousands you have already had out the scheme.

For me, it is not about screwing as much as you can out the pension company, it is going as early as possible but making sure I have the finances for that decision to be a comfortable life. I don't want masses of money where I'm jetting first class all over the world, but sufficient that I don't think twice about a few days away or worry when the boiler needs replacing.

 

[42]

£600 is living off £7,200 per year, but if it is really like £450 then that is £5,400.

I wonder where these two holidays per year are to, because even two deals out of season into Europe, is going to blow at least 20% of that.

There are a lot of guides for how much you need in retirement and none said less than £10k. Think of the hell on about pensioners only on the basic £12k a year losing the £300 WFA. I suspect some misreporting or miscalculation here.

You can do a Haven caravan out of season for a little over £100 for 5 days.

Although I do wonder, if theres some other passive income from savings interest that pays for other stuff that isnt being disclosed.

 

[NYMackem]

£600 is living off £7,200 per year, but if it is really like £450 then that is £5,400.

I wonder where these two holidays per year are to, because even two deals out of season into Europe, is going to blow at least 20% of that.

There are a lot of guides for how much you need in retirement and none said less than £10k. Think of the hell on about pensioners only on the basic £12k a year losing the £300 WFA. I suspect some misreporting or miscalculation here.

I worked it out once and I think with my pension, it was around 88 that was the break even point (depending on how early you go). You get more per year if you go later, but it takes years for that extra to equate to the tens of thousands you have already had out the scheme.

For me, it is not about screwing as much as you can out the pension company, it is going as early as possible but making sure I have the finances for that decision to be a comfortable life. I don't want masses of money where I'm jetting first class all over the world, but sufficient that I don't think twice about a few days away or worry when the boiler needs replacing.

I don't have a DB pension, but my Mrs (no) is in the newest (and shittest) NHS scheme. Normal retirement image is 67 and for every year early you retire you take a cut in the annual pension payment of 3% - 6% on a sliding scale, where the earliest you can retire is 57 at 60% of your normal retirement pay.

I've worked it out that you are best going at 57 if you die before 77, 58 if you die when you're 78, 61 if you die between 79 and 82, and 67 if you live beyond 82.

That said, there's not much in it unless you live past 85, and even then I don't see what the point of having the 40% extra would be in your late 80s and beyond.

 

[Darlo1973]

You can do a Haven caravan out of season for a little over £100 for 5 days.

Although I do wonder, if theres some other passive income from savings interest that pays for other stuff that isnt being disclosed.

I'd rather have a holiday sleeping in my spare bedroom than a Haven caravan.

 

[42]

I don't have a DB pension, but my Mrs (no) is in the newest (and shittest) NHS scheme. Normal retirement image is 67 and for every year early you retire you take a cut in the annual pension payment of 3% - 6% on a sliding scale, where the earliest you can retire is 57 at 60% of your normal retirement pay.

I've worked it out that you are best going at 57 if you die before 77, 58 if you die when you're 78, 61 if you die between 79 and 82, and 67 if you live beyond 82.

That said, there's not much in it unless you live past 85, and even then I don't see what the point of having the 40% extra would be in your late 80s and beyond.

Have you factored tax into that also? Which then makes the earlier years more attractive. But goes back to what I said earlier, theres effectively a notional pot, and an average life expectancy age. The earlier you go, youre just spreading that pot over a longer period. And because you dont know when your health or time is up, its best to take the money as soon as you can afford to do it. No point in holding onto your late 60s then only having a couple of decent years to enjoy retirement

 

[Barista]

You may find January, February and March tough going , initially, as the weather will be shite. Thereafter however you will slide gently into retirement.
You may wish to consider some winter sun to break those 3 months up.

I retired at the end of December and I am passing on my personal experience. I know its not the same for everyone.

I was initially planning on leaving in the spring/summer as that is what everyone was saying was the best time to retire. However, due to reorganisations at work I couldn’t face all the upheaval when I knew I’d be leaving a few months later, so I bit the bullet and left at the beginning of January last year.
In reality, the winter weather made no difference to me, I was just so happy to be retired. I got on with jobs around the house so that by the time the nice weather arrived I had a sense of achievement from completing these and then could enjoy taking it easy over the summer. Also, I go to the gym most days and it didn’t make any difference weather it was cold and grey or sunny.
As you say though, it all depends on the individual, and starting retirement in the winter will not suit everyone.