IMO the issue for folk now (with most not having DB Pensions) is the 'gap' between their retirement and when the State Pension kicks in, and this applies whether they've decent private pensions or not. And for those who own their house, downsizing/equity-release is always a good back-stop (later in life).
it can be an issue, but with a DC pension its fairly easy to take more out in the years before you're 67 then take less out once the state pension has kicked in. Tax free lump sum can help with that too.
For example, you could downsize to a 2 bedroom apartment and travel extensively with the additional capital.
and not worry about the property whilst travelling. No garden for those who don't DO gardening but do DO travel is a nice idea. We'll downsize and probably not have paid off all the mortgage. But will be retiring to a (much) cheaper area as has a colleague recently.
Another option is to downsize even more and pay for the kid(s) to stay at a local Airbnb when they visit. All depends on how often they come to stay. For example, you could downsize to a 2 bedroom apartment and travel extensively with the additional capital.
Yeah we could, but we would also like to have something for the kids to inherit* – they are going to need all the help they can get. We should still have enough to enjoy our retirement with capital from a house sale along with our modest pensions.
*We know this may not happen if one or both of us ends up in a care homes for a long time, but we can't plan around that scenario.
I took a tax free lump sum out of one of my pensions last June when I retired, and set up a monthly payment from the same policy to last for the 5 years until the state pension kicks in. By keeping good records on our spend over the last few years we know what is likely to be needed. (Obviously we assumed a rate of inflation, that may or may not be reasonable.)
Yeah we could, but we would also like to have something for the kids to inherit*
Not sure on the amount of years gap between you and your kids but a lot of people are going to inherit money well too late to be of any real benefit for say buying a house. I am 57 for example and have not yet inherited anything and I will be retiring in a few years with a paid off house so while inheriting something would be nice it is far too late to give anyone "all the help they can get"
I am 57 for example and have not yet inherited anything and I will be retiring in a few years with a paid off house so while inheriting something would be nice it is far too late to give anyone "all the help they can get"
Conversely, I, too, am 57 and I received an inheritance 14 years ago as my dad died at 69, my mum at 70. This is why we have a four-bed detached with a big garden rather than the tiny two-bed end terrace with a postage-stamp garden which provided great help as our kids have grown up with their own bedrooms and a garden big enough for trampoline, climbing frame, vegetable garden, marquee birthday parties etc. Thanks mum and dad – I'd rather have you here, but it was a great help.
Same here. Small amount from my mum's flat many years ago paid the deposit for the nice house we're in now. A bit from my dad's estate a few years ago has been invested and has given me a buffer to go self employed will let me retire a good few years early. I think they'd both be happy that they've really helped me out, but as above, would rather have them around. Conversely wife is about a generation behind. Her parents have recently inherited and really don't need it.
I'm intrigued that nobody, with the partial exception of johndoh, has mentioned passing on any money to their kids to get a foothold as they reach adulthood and try to by a house in a stupidly inflated property market.
Is that because you are planning to, but just haven't mentioned it?
Because you have no kids?
Because you hate your kids?
Or can't afford it ( and yet can still afford to retire early)?
Or are under the delusion that, because you made it work for yourself, your kids just need to buck up their ideas and stand on their own two feet?
I've got about enough to comfortably retire just now, but not be able to help the kids buy houses etc. given that I brought them into this world I feel I have an obligation to support them ..... including doing what I can to offset the insanity of their position vis the housing market.
Nobody else?
To add to what thegeneralist has said, something that gets said on YouTube money videos quite often is 'its better to give with a warm hand than a cold one' that struck me so I acted on it.
I decided to take something from my savings this tax year and give to my daughter (you can gift £3k per year) I'll try to do the same for the next few years. She was over the moon and very grateful, she's 28 and living in London and hoping to head to Australia to work for a couple of years. If she spends it or saves it I don't mind but at least I can see her have it and possibly use it to benefit her now.
At 53 I've been thinking about packing in at 60, so this is all part of my planning for that date. I've got a mix of 13 yrs DB and what will be 15yrs DC.
I'm intrigued that nobody, with the partial exception of johndoh, has mentioned passing on any money to their kids to get a foothold as they reach adulthood and try to by a house in a stupidly inflated property market.
Is that because you are planning to, but just haven't mentioned it?
Because you have no kids?
Because you hate your kids?
Or can't afford it ( and yet can still afford to retire early)?
Or are under the delusion that, because you made it work for yourself, your kids just need to buck up their ideas and stand on their own two feet?
I've got about enough to comfortably retire just now, but not be able to help the kids buy houses etc. given that I brought them into this world I feel I have an obligation to support them ..... including doing what I can to offset the insanity of their position vis the housing market.
Nobody else?
Thats a very good point and must admit maybe we are being selfish?!
All other comments here have had me going into full on jfdi mode.
I expect there is an element of I had to buy my own house without help so why shouldn’t my kids….but I admit that’s ignoring the ridiculous state of the housing market now.
But on the other hand, I have 3 kids and not sure I could afford to help them all if I kept working anyhow - other than I suppose down sizing my own house and giving them the profit from that.
But also other factors, eg will they all want property? Do I give it to daughter who is currently with a partner who doesn’t seem that keen on getting a job that would sustain a mortgage etc?
From a more philosophical perspective, is it selfish to want to spend the last years of our lives when we are truly healthy and fit doing what we want to do rather than continuing to work in jobs that don’t make us happy? I’ve spent over 30 years working in a career that has admittedly been successful and paid well but not one I have enjoyed.
'its better to give with a warm hand than a cold one'
Absolutely – if we are able, we'd help our daughters before we die, but obviously we'd want to still enjoy our retirements too. My wife's mum and dad have started doing what white101 is doing - gifting their annual allowances, however, they are gifting it to their five/six grandkids, not their three children so one of my daughters will have a very nice nest egg so she will be able to realise her dream to travel the world after A-Levels or uni. The other is spending hers on horses as quick as she gets it 🤣
To answer thegeneralist. We have no kids so we can splaff our cash on whatever we fancy. Our nieces and nephew will all be looked after by their parents so no real necessity to help them either.
You can actually give a whole lot more than 3k per annum if you want.
You can make a regular gift of any amount you want completely free of tax so long as you can afford it out of your regular income. The gov website has the specific example of paying your child's rent for them. If your income exceeds your normal expenditure by a significant margin, you can give away this excess with no tax implications.
You can also make large occasional or one-off gifts of any value at all, far in excess of the 3000 pound annual exemption. You just have to (legally speaking) keep a note and if you die within 7 years the gift will form part of the estate for inheritance tax purposes. However if you live 7 years this gift is free of all tax. It can be as big as you want. Like a house. If you gave away so much that the estate didn't have enough left in it to pay the IHT, it's theoretically possible that HMRC could come after the recipient for this, but this isn't likely to happen unless you really set out to do this (ie by giving away everything on your death-bed). Otherwise, the extra tax just comes out of the estate, there is no liability on the recipient.
Of course the 3000 each year is a decent wedge and it's a reasonable starting point. But it's not a limit.
I'm intrigued that nobody, with the partial exception of johndoh, has mentioned passing on any money to their kids to get a foothold as they reach adulthood and try to by a house in a stupidly inflated property market.
I'm 65. My dad is still alive at 92 and my mum died 2 years ago and I got an inheritance from her. If I live as long as she did my kids will be in their 50s before they inherit from me, if I live as long as my dad they'll be in their 60s. They were lucky enough to get some money from my mother's will, which they have used to reduce their mortgages in two cases/go towards a deposit in the other. We also gave them some cash to help with the house buying process. We've just acquired a grandchild, and we will be amending our wills to give most of the money to grandchildren as they are likely to be of an age when it actually will be useful for homebuying.
@onewheelgood I gave both of my kids a non trivial lump of cash to add to their deposits to allow them to buy their first houses. It took a chunk of our cash and (I am 60) in a few years time when we downsize (roughly 3-5 yrs from now) we will look for ways to pass what we can afford to them in a tax efficient way, at the time when they need it most, not in 25yrs time (?) when they are likely set up and probably need it less. When we snuff it I want them to have had most of their inheritance in the years when they are struggling to make ends meet. Hopefully they will get a sum at the end as well but my mum (and likely my mil and fil as well) will lose everything to care costs and their home will be sold to pay them.
Nobody else?
60 y/o and my Mum is still alive, living in a barn we converted for her - 2 of our kids have houses (and families of their own) and the 3rd could afford to buy if he wanted to.
We've said to the kids that when we go there'll be no cash etc, but they will have our house to divide up between them - but I'm hopefully by this point they'll be near retirement too.
And giving gifts, just pay for things; Grandkids school-fees is an easy one, as you can have the contract with the school rather than you kids, or other costs they have, pay them directly.
I dont have children
Re this paying for missing years NI thing. If you retire part way through a tax year, what are the criteria for HMRC to decide if you have paid in sufficient NI for that to be a qualifying year for your state pension?
I seem to have read very conflicting things on the web. One version is that as long as your NI contributions = £X it doesn't matter even if you only worked the first month in that tax year (May) you will be credited with a full year. The other version is that you have to have a full years worth of NI contributions regardless of the total sum and that you need to pay for every week you have not contributed.
Anyone able to clarify what happened with them as i'm sure not everyone waited until the end of April?
I had a part year and hmrc wanted a small amount to buy a full year, I am buying voluntarily and this was ages ago so things may have changed.
I am deliberately keeping 2 years short of max as if I got a job, I would be accruing more years. If I was maxed out now, any extra years would not earn me any more pension.
On the kids front we pay for stuff as needed from income. Junior finished his higher education with no debt because we paid everything up front. We paid a "year off" in Berlin which in fact enabled him to reach the stage where he gets an income from his music. I lend him my car whenever he needs one because I don't use it much - it's four months since I last saw it, I'll see it next when it's due for a service. We provide accomodation if when and where he needs it but can't afford it. They're all ways of transfering wealth without actually writing him a cheque.
Some of my mates do the same and some reckon we spoil him. Fact is that the "spoiled kids" are now more able to fend for themselves as they are better qualified and not hampered by debt.
As for the 4%. Yes you need to take into account inflation. You also need to take into account future trends in market caps, earnings, profitability and interest rates. If you'd offered me the returns on my current share investments in the early 90s I'd have said something impolite and stuck it in something yielding the overnight bank rate which was 9%. Market caps based on current P:E ratios and low interest rates are something of a rarity in economic history - you'd be unwise to base future trends on recent trends.
You only need 35 year's worth Blackflag, and even if you are short those missing weeks or even years don't cost much. Not worth worrying about IMO, Just make sure you pay for every extra year you can if you aren't at 35. Whatever extra you need to pay in you get back within 3 years of retirement.
"I'm intrigued that nobody, with the partial exception of johndoh, has mentioned passing on any money to their kids to get a foothold as they reach adulthood and try to by a house in a stupidly inflated property market."
Back in the 80s my parents gave me the deposit for my first flat. £3k on an £18k flat. It meant I had my first mortgage aged 21.
I have given my kids some cash in similar circumstances. If it can be afforded it makes more sense giving kids cash when they need it rather than after you are dead when they may not need it as much.
All my 3 kids have had a nice lump some from my parents which has enabled them to buy houses. I plan to do the same with my grand kids. I don’t expect or want any inheritance from my parents and would prefer they leave their money directly to their grandchildren.
I agreed that with my parents, db, 10% to each grandchild and the rest divided between myself and my sister. My sister has 3 kids so was pleased and like me has reached a stage where inheriting won't change much - if indeed we ever inherit as first we'll have to outlive the oldies and second it's quite likely to finance end of life care.
I am deliberately keeping 2 years short of max as if I got a job, I would be accruing more years. If I was maxed out now, any extra years would not earn me any more pension.
poolman - this doesn't make sense (to me), any chance you could explain your thinking in case I'm missing something?
FWIW - I've a reasonable understanding of NI having implemented payroll systems in the 80's & 90's plus worked with NIRS2 (National Insurance Recording System) as a Contractor.
It makes perfect sense to me intheborders. You can buy back years for up to the six previous years so If you're already at 33 years you can wait until just before you retire to buy the missing years (don't leave it too late the paperwork takes forever) - and if you work a couple of years before then you won't need to buy any extra years at all.
"I'm intrigued that nobody, with the partial exception of johndoh, has mentioned passing on any money to their kids to get a foothold as they reach adulthood and try to by a house in a stupidly inflated property market."
Then you haven’t been reading closely.
It makes perfect sense to me intheborders. You can buy back years for up to the six previous years so If you're already at 33 years you can wait until just before you retire to buy the missing years (don't leave it too late the paperwork takes forever)
I bought 2 years the other week... You can pay it online now from the same place you check your NI record.
It makes perfect sense to me intheborders. You can buy back years for up to the six previous years so If you're already at 33 years you can wait until just before you retire to buy the missing years (don't leave it too late the paperwork takes forever) - and if you work a couple of years before then you won't need to buy any extra years at all.
Ah, that's the bit I was missing - it was the way he said "deliberately keeping 2 years short", what he means is that he's not buying until he needs to.
Ta
"I'm intrigued that nobody, with the partial exception of johndoh, has mentioned passing on any money to their kids to get a foothold as they reach adulthood and try to by a house in a stupidly inflated property market."
Then you haven’t been reading closely.
I'm terribly sorry, please forgive me. Perhaps you could point me in the direction to aid elucidation.
I’m 52 my kids are 18 and nearly 22, I plan to be around when they buy their first home. Of course I will help them but I also still want to enjoy myself.
Downsize, gift the house to the kids at state pension age, pay them "market" rent from the state pension and live seven years. I think that's probably the most tax efficient means of doing things and avoiding IHT (depending on house price). Of course it assumes there will be other pension income, but if you are retiring early, then there will have to be.
Excellent Mattyfez. They've been putting more and more stuff online over the last couple of years, I'll check that out before making this year's payment. I'd like to bet I still get the bill in the post though. I'm always amazed that the UK government has such faith in the French Post Office, really important documents get sent to me by ordinary post.
Excellent Mattyfez. They've been putting more and more stuff online over the last couple of years, I'll check that out before making this year's payment. I'd like to bet I still get the bill in the post though. I'm always amazed that the UK government has such faith in the French Post Office, really important documents get sent to me by ordinary post.
I think you can only pay for missing years though... Not current year. I'm not sure.
I think that's probably the most tax efficient means of doing things and avoiding IHT (depending on house price)
If your estate is north of a million pounds, then merely giving them the house might well not be enough to bring it under.
If your estate is under a million pounds, it's not liable for IHT anyway (probably).
If you're wealthy enough for your estate to attract IHT, you should probably just pay it.
I've been sort of retired for coming up 3 years, this was facilitated by a very generous redundancy at 56 which worked very well for me and most of my colleagues.
Sadly like TJ I lost my wife 3 years earlier, I had paid the mortgage off and as I worked flat out through Covid with some good bonuses am in a good financial position. I would have loved children but unfortunately my late wife’s condition precluded that 🙁 though I have assisted my sisters 2 boys getting on the property ladder.
I tried dating again and had 2 relationships over the next 2 years but I think it's very hard to start again after a 37 year relationship where you grew up together, I'm still friends with the ladies but honestly I'm comfortable on my own.
I now have a part time job in an industry I've never worked in, working mostly with people that are 1/2 or even a 1/3rd my age I only work mornings 4 days a week and can do less if I want but I really enjoy it and sort of feel like "Dad" to most of them.
At the end of the day it's working for me and that's what any of you starting on the retirement path have to work out. As a few others have said it's surprising how much less money you really need when you have the spare time to plan your life properly.
My last day today. Out in the Peak in the van.
Excited and no apprehensions.
Eldest daughter has just announced she is getting married next year so along with all the planned bike rides we have a wedding to help with
I’m on day two of early retirement and it’s been another horrendous hangover, not sure I can keep this up.
I do believe that most folk now will have a graduated retirement ie going part time or moving to a lower stress job in the last few years of working. I think this will be the pattern in future
I do believe that most folk now will have a graduated retirement ie going part time or moving to a lower stress job in the last few years of working. I think this will be the pattern in future
I agree, and when I originally said early retirement that is probably what I meant. Plan will be to use part of pension and maybe equity from down sizing but supplement with some kind of part time or temporary work. BUT will be something stress free and that is just an interest and doesn’t stop us doing what we really want in life.
ps congratulations to @tracey and @kilo - very jealous! pretty sure when my time comes the first few days (weeks?!) will also be in my van and with a few hang overs!
Very good thread and pleased so many are also either retiring early or shifting to a new way of working.
I'm 53 shortly and have made it known I'd be open to taking voluntary redundancy in the current reorg. For me would equate to 2 years salary which would carry me to 55 when I could access my pensions if I wished or look for something low stress and/or casual.
I'm finding the mental gymnastics a little difficult to actively talk myself out of a job/career that I've been in for 32 years which rewards us very well. The issue is I have zero respect for the majority of my so called leadership so think it time to move on.
Psychologically I think I've already gone!
I do believe that most folk now will have a graduated retirement ie going part time or moving to a lower stress job in the last few years of working. I think this will be the pattern in future
I think it's going to have to become the norm for a lot of NHS staff. Due to changes in the NHS pension, you get massively penalised for retiring before pension age now. So I "can't" retire now until I'm 68 without losing huge proportion of pension. At the same time, it's incredibly unlikely I'll be physically able to do my job till that age, 12 hour days and a lot of fine, manual manipulation of stuff when I'm already knackered and my eyes are on their way out!! And I'm not a nurse on a busy ward. Christ knows what they're going to do.
Due to changes in the NHS pension, you get massively penalised for retiring before pension age now.
Isn't that the same for most pensions, take the benefit early and you can't expect the full amount. You could always have a private pension to cover the gap.
A different way to look at the reduced pension is if you are say penalised 5% per year under your normal retirement age but your pension is index linked to either rpi/cpi and that's running at say 3.5% the actual loss is only the differential of 1.5% and been in receipt for that time period.
