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I'm loving reading your stories. I'm 42 so a few years off yet but I'm interested in what planning and prep you did, especially if you retired at 50-55.
I have ~15 years left on a mortgage but can overpay, 2 kids @10 and 12 and a few investments and pensions here and there. What are the big decisions you made? What went well for you and what would you have done differently?
thanks!
I had a meeting with the financial advisor a few months ago,she did the sums,my outgoings, as expected were less than £1100 a month plus holidays.
I guess it's really linked to how much you earned when working and whether you're on your own etc. For us, after a lifetime of each of us earning probably +3x average wages no way would we want to have to live on so little. TBH my OH probably spends somewhere near that on her horses...
Mid-50's and we've postponed retirement, waiting for Covid/Brexit to 'settle' - purely due to both working from home for the considerable future, uncertain short-term finances (for the UK) and the main reason is that while we're both earning very good money and can still do everything outside of work we want/need to - why not. Next step will be reduced days per month.
We are 'lucky' though, as we've always put into pensions and will have a good income, whenever we decide to take them (60 at the latest).
Ditto – I retired from my last job in July @ 55 (got fed up with fighting the short-sighted corporate ethos), but haven’t yet put my pension into payment. I’m doing a few odds & sods for my previous employer which is keeping the wolf from the door for now. It still feels like a holiday at the moment.
With respect, you've not 'retired', you've changed jobs.
Deary me.
What went well for you and what would you have done differently?
What went well
Transferred to a private fund - income is variable, and wife gets 100% of pension when I pop my clogs. When she goes, the money is still there for other people to fight over. Company pension gave fixed income (plus inflation) and 60% to the wife, and the fund died when we were both gone
What would I have done differently
Set the ball rolling earlier than I did for the pension transfer, it can take a couple of months
Put more money into the pension.
Colleagues that put in extra (can't remember how much, but it wasn't poverty inducing) had a decent amount of tax free lump sum available more than me, circa £20k more IIRC
Id say work out what you actually need in retirement, budget wise. Working extra years to boost a pot more than you need, you will never get back.
Biggest problem is figuring out how long you'll live. I could pop my clogs tomorrow, never touching a penny of my pension, but there's something like a 3% chance I'll live to 100, which is 50 years away....
Id say work out what you actually need in retirement, budget wise. Working extra years to boost a pot more than you need, you will never get back.
Lend us your crystal ball...
For ****’s sake. Please can someone divert this conversation away from talk about investment and the dire state of the NHS and working life in general.
I want people telling us about how they fill their later years with joy and fulfilment. How they wish they’d done it earlier. How little money they actually need.
Okay here you go then. We retired a few years ago at 52. We had missed out on lots of holidays etc when we were young in order to finance early retirement (a couple of nice redundancies helped too). Not doing the "live for today" thing when we were younger was a gamble, but a calculated one and it's paid off big time. The advantage now is we can afford to do the holidays we missed out on, and also do them for longer eg we spent a month in France and Germany in our van a couple of years ago, and planning a month in Canada next summer. We're quite happy in cheapish accommodation (it's a just a bed to crash on for the night) so longer holidays aren't much more than shorter ones.
It also reduces the number of flights we will take, which admittedly is something we've only started to think about in recent years. And in fact having more time means we've been doing more by train rather than plane. And as going by train is so much more enjoyable than flying it's a win win.
Covid has put things on hold obviously, but we're just home from a few weeks down on the south coast spending time visiting assorted friends and family down that way. Very laid back, relaxed trip. Great catching up with people in real life, plus plenty days in-between to just chill and wander around.
I can hand on heart genuinely say I'm happier now than at any time in my life. Retired five years and haven't been bored for a single second.
Oh and we bought bodyboards last summer so get to behave like daft teenagers in the water!!
Lend us your crystal ball…
This! Someone up ^ there gets by on ~£13k per year, the recent nonsense articles talk about £31k for a 'comfortable' lifestyle.
For people like kennyp who retired in early 50s - are you living on savings and investments now, before your pension kicks in? Did you pick a £number you could afford to live on and divide by the number of years you think you're likely to live?!
The transfer to private fund makes perfect sense btw! Hadn't heard that before.
Only you can work out how much you want/need in retirement. Personally, I'm planning my pot to last until 90, as I will always have my RAF pension & State pension to fall back on.
We are both in good jobs with decent pension provision, so fully aware our position is better than many. 60 is our target, but if investments perform well, that could come forward a few years. My job has an incremental pay scale, so my best earning years are just prior to retirement, which makes staying working longer an easy option. I am already 50% part time, so taken the first steps on the path...
For people like kennyp who retired in early 50s – are you living on savings and investments now, before your pension kicks in? Did you pick a £number you could afford to live on and divide by the number of years you think you’re likely to live?!
We had planned to go mid-fifties, but redundancies and some other stuff allowed us to bring that forward a bit. We reckon that our life expectancy is probably mid-80s, though obviously who knows what lies ahead. We also reckon that from mid-70s onwards our expenditure will drop dramatically (I know, care home fees etc etc but would much rather have fun now) so basically plan to live well (without being silly) for the next quarter century, then see where we are.
The transfer to private fund makes perfect sense btw! Hadn’t heard that before.
Be very, very, very wary of this. We transferred out our DB schemes and into SIPPs and it's worked very well, but both worked in financial services for a long time and comfortable enough with the pros and cons, plus have plenty contacts. It can be a great thing but give it an awful lot of thought before you do. In most situations it's far better to stick with your existing pension. The general advice is don't.
The general advice is don’t.
Not sure if that was the point being made. I understood it as being move your DC pensions to a SIPP, which in my view is good advice. Ref moving DB pensions, this is quite tricky now given the mis-selling that has gone on but I would say often it would be prudent to transfer them also, assuming you are very careful and understand the implications fully.
To use me as an example. I have an old DB pension that is worth around £250k (I cant get the exact figures so this is an estimate based on the benefits) I will get a lump sum of around £30-40k tax free then receive around £400 per month for life. I would have to live around another 40+ years to get my moneys worth. In reality I would rather add the £250,000 to my SIPP and pay myself around another £1000 per month for the next 25 years. I am 57, in 25 years I will be 82 (or dead) and much less active and likely living comfortably on a fraction of what I would like to live on now. Having "large" amounts of income in later life is a waste.
In some ways DB schemes are almost as restrictive as annuities (which were the biggest scam ever) and it pains me to say it but thank goodness for pension freedoms...
as annuities (which were the biggest scam ever)
They really weren't.
It's simply that people don't realise how difficult it is to guarentee a set income each month for life from a lump sum, given you don't know how long you'll live and have no control over the stock markets.
For every annuity where the insurance company made a profit as the recipient died early there is one where the recipient lived longer than average and they probably made a loss.
It’s simply that people don’t realise how difficult it is to guarentee a set income each month for life from a lump sum
They didnt get the opportunity do try. People were forced to take annuities and the market was uncompetitive and stacked in favour of the actuaries. With consideration to inflation, spousal benefits etc the annual income from each £100k was derisory and forced many people to work right up until they were to receive their state pension.
If they are so good will you be taking one?
Id say work out what you actually need in retirement, budget wise
or conversely decide when you want to retire and then adjust your spending accordingly?
In some ways DB schemes are almost as restrictive as annuities (which were the biggest scam ever) and it pains me to say it but thank goodness for pension freedoms…
Hmm, takes a look at one of my DB schemes with it's inflation linked minimum 5% pa uplift..., and the others have equivalent uplifts and spouse pensions.
And looking at my Mum, she's +20 years into her DB pension and 5 years getting the spouse 2/3 from my Dad (he got 20 years before passing). My MIL got 5 years of 2/3 from my late FIL, who'd had his running for +25 years too. All guaranteed, no depending on investments etc.
My granny probably had the best, 40 years of her DB pension and 35 years of my Grandads' 2/3.
Personally I'll leave my DB's where they are and just have my DC's 'exposed'.
or conversely decide when you want to retire and then adjust your spending accordingly?
That's now my approach. I'm currently 40 and I'm hammering away what I can to my pension for the next 5 - 6 years, at that point I'll switch to saving into 'not a pension' to give me money to bridge the gap from retiring somewhere in the region of 50-52 and getting access to the pension at 57. The 50-52 time window is the fixed point, the finances will be what they will be
With respect, you’ve not ‘retired’, you’ve changed jobs.
Well a pension from 55 might allow a change in direction. I have no desire to retire from "work", because I enjoy science too much. It's my passion, vocation an hobby. Taking my pension might allow a salary cut to do so elsewhere. Once I get the two dependents off the payroll! I've not looked at cashing in a DB, but it closes next year anyway, so makes decisions a little easier.
They didnt get the opportunity do try. People were forced to take annuities and the market was uncompetitive and stacked in favour of the actuaries.
The market had plenty of insurance companies competing with each other, so I'd say that was competetive. If it was such a rip off, it would have been easy for a new entrant to enter the market, under cut the others and clean up, yet that never happened.
If they are so good will you be taking one?
That's a good question, to which I don't know the answer.
The option of draw down carries plenty of risk and either requires someone to actively manage your portfolio for you (which will cost and only be applicable to large portfolios) or requires you to manage it yourself. The latter scenario, I would guess, is only of interest to a very small percentage of retirees.
Whilst having options is good, I personally think the recent pension freedoms are probably a bit too free and will end up with a lot of people running out of money early and/or being badly advised / defrauded of their nest eggs looking for better returns.
I personally think the recent pension freedoms are probably a bit too free and will end up with a lot of people running out of money early to being badly advised / defrauded of their nest eggs looking for better returns.
unfortunatly I think you are right and I know one person in that position.
unfortunatly I think you are right and I know one person in that position.
Being able to budget and also sit on a large nest egg avoiding temptation are two things which aren't universally present in human nature!
The market had plenty of insurance companies competing with each other
Really? Its almost as if large financial institutions were in a "competitive" market, bless em.
That’s a good question, to which I don’t know the answer.
Its a bit different when you have a 7 figure pot.
Being able to budget and also sit on a large nest egg avoiding temptation are two things which aren’t universally present in human nature!
Totally agree but I dont think the only alternative is to be fleeced
And looking at my Mum, she’s +20 years into her DB pension and 5 years getting the spouse 2/3 from my Dad (he got 20 years before passing). My MIL got 5 years of 2/3 from my late FIL, who’d had his running for +25 years too. All guaranteed, no depending on investments etc.
My granny probably had the best, 40 years of her DB pension and 35 years of my Grandads’ 2/3.
Interesting and without knowing more detail its difficult comment other than your Gran had a fantastic innings and if she took her pension at 60 had a wonderful 40 years until she received her telegram from the Queen, outliving her peers life expectancy by up to 25 years!
The point is life expectancy (although improving) was far less years ago than it is today. Having a pension that pays out for life sounds wonderful until you die a handful of years after taking it. My father retired at 64 and died at 72.
Having a pension that pays out for life sounds wonderful until you die a handful of years after taking it. My father retired at 64 and died at 72.
But basing your judgement on an outlier case is also rather unwise, 81 is the current average male life expectancy in the UK.
I'm 50 and apparently have a 3% chance of reaching 100. Do I want to be trading shared at 90 in FB's metaverse (or whatever share trading looks like in 40 years time) - probably not.
For every annuity where the insurance company made a profit as the recipient died early there is one where the recipient lived longer than average and they probably made a loss.
is that true though? best buy annuitys seem to sit around 3.5% for a fixed amount (and dropping significantly for one that tracks inflation). The same amount is generally considered "safe" to withdraw from a fund with no reduction of the funds value over the long term. how are annuity providers losing out unless they invest really badly?
btw, I know that market forces mean there probably isn't a lot of money to be made providing annuitys, it just seems odd when the maths on drawdown seems so much more attractive
But basing your judgement on an outlier case is also rather unwise, 81 is the current average male life expectancy in the UK.
84 for me, with 2/3 expecting to live to 90 - so that's 30 years of retirement to 'finance'.
Key thing though is that once you reach a certain age, your expenditure does reduce - based on parents & in-laws, but I can never see it reducing enough to live on £1100 a month...
I’m 50 and apparently have a 3% chance of reaching 100. Do I want to be trading shared at 90 in FB’s metaverse (or whatever share trading looks like in 40 years time) – probably not.
Odd. FF is clearly very good at investing, and says a lot of wise things, but I'm starting to think he's just arguing for the sake of it. The answer to the above is "no, you don't want to be trading at that stage, so obviously you stick it somewhere where someone else manages it for you"
And IIRC you were one of the strong advocates of investing over trading anyway, so it's a bit disingenuous of you to ask if it's not a bit of a bad idea to be trading as a nonaganarion. (sp)
With respect, you’ve not ‘retired’, you’ve changed jobs.
No, I’m definitely in the process of retiring. It is a surprisingly big psychological jump from building up savings, pension, etc. and starting to draw on them.
84 for me, with 2/3 expecting to live to 90 – so that’s 30 years of retirement to ‘finance’
But a scheme that offers you the equivalent buying power when you are 90 as when you are 60 is unlikely to be good value. Security yes but anything that promises this will be offering a paltry return in the years when you can most enjoy it in order to guarantee it in 40 years time.
No, I’m definitely in the process of retiring. It is a surprisingly big psychological jump from building up savings, pension, etc. and starting to draw on them.
yep.....
I 've no plans to sell my db pension, the recent pay increases have been mid single figures and it's guaranteed. I know it dies with the holder/spouse but when you get offers of c35x income you have to question why.
The meaningful money podcast covered this v subject and he s an if a so vested interest in selling something.
Anecdotal observation but the wealthiest pensioners I know are actually the most frugal, nor is a miserable way but they just know the best tips for living well for less.
Love this thread, my own pension pot is well diversified in property, shares, state pension and private pension. If 1 goes pear shaped the rest should still perform.
I don’t hold rental property, but my own house will be paid off by mid 50’s. Currently a 4 bed so downsizing definitely an option in retirement.
I do have a RAF pension (15kpa from 60, & 3x lump sum) and we’ve both pretty good DC pots.
When I left the RAF I had the option to roll it into my company scheme, but very glad I didn’t. 15k index linked from 60 will always be there, plus state from 68(?) so that gives me leeway to play more aggressively with my DC pot. I manage it myself within the wrapper of my company scheme. Planning on moving it to II for drawdown as I hate the Aviva platform, but a lot will change between now and then.
My plan is retiring at 60, use my 25% lump sum to fund my retirement sailing, keep 90% of the remainder invested in funds, with 10% in bonds/cash to pay my drawdown income, keeping below the HRT threshold.
I’m fully aware I’m in a much stronger position than many(although still not as good as some) I just hope some find the spread/ plan useful.
The thing is, if you do run out of cash at 85 there's always the option of releasing housing equity to fund the last few years. Most housing is probably worth enough to be able to release around 10k a year at that age
Plus if my pot ran out when I’m 85 I’d still have £25k/Yr (RAF + state) and I can sell my retirement boat if necessary.
If I'm in sound enough health & mind to spend anywhere near £25k/yr when I'm 85 I'll be a very happy man 😀
More seriously, I guess it'd fund some half-decent home help...
Steering away from the finances a bit again - one thing I've not seen anyone mention is the advantage of having free time to look after your parents and partner. At the age most are looking to retire, it's likely that their parents could already be infirm or ill, needing support and assistance. That was certainly the case for me when I first retired at 50, with both my folks dead before I was 53. And now not having the worry of trying to balance work with supporting my wife through her cancer is another positive .
Do you love your job? My immediate response to your post is to ask why you're waiting till you're 60.
You having given any DC detail, but I'm getting the impression you could retire a helluva lot earlier.
( not judging BTW, just interested)
You having given any DC detail, but I’m getting the impression you could retire a helluva lot earlier.
( not judging BTW, just interested)
I was thinking the same. I'm just crunching my numbers at the moment and if I had that pot I'd be out of here.
For now, I’m still paying the mortgage (SE England, but not bonkers) & have 2 kids to fund through uni.
I do still enjoy my job, yes (airline captain). I’m typing this from Barcelona, where I’ve been on a stand over, walking around the city & chilling in coffee shops. If I get back to long haul flying, I used to take my road bike with me, and regularly did 100km rides on my days away in San Francisco, Tokyo, San Diego & many others.
I deliberately didn’t put any DC fund sizes up. My employer pays in 15% and I add 6%. I’m 50% part time, so already get a fortnight off a month. My wife enjoys the intellectual challenges of her job (lawyer) but does find it stressful. If the pension investments perform to/above expectations, we could well retire a few years earlier than 60.
As for the caring point, very much so. My mum (74 ) has just moved into our village to be near us, and my wife’s parents are close by too. They took care of Jackie’s Nan in her final years, even though she stayed independent in her own house.
one thing I’ve not seen anyone mention is the advantage of having free time to look after your parents
That certainly figured in my thinking, but the opposite way around: I was banking on having 5-10 years carefree while still fit enough to make the most of it before being drawn into the inevitable care duties.
The general covid stasis and my mum having a heart-attack and a Parkinson’s diagnosis have buggered that up though (she lives alone, at the opposite end of the country).
We play the cards we’re dealt…
one thing I’ve not seen anyone mention is the advantage of having free time to look after your parents
I wish 🙁 One died at 29 and the other at 71. I’m thinking take the DB and lump sum at 55 (220 days), and work at something else. Life expectancy for me is 85, so a possible thirty years of what could be a healthy salary/pension plus an extra income is possible. Also resigning to another job loses benefits that retiring maintains.
My great grandfather retired at 65 and had 34 years of gas board pension.
Interesting thread....
I'm 37, self employed chippy. No kids.
Although I enjoy what I do I'm quite sure that my body won't want to be working as much in 20 years time as it currently does.
I own zero property.
Thanks to some savvy tips and not spunking cash up the wall when younger I've got a pot of ~£350k.
~90k in an ISA that I can no longer invest into (resident in Germany for the last 14 years).
~110k in a SIPP. (am I right in thinking I can't touch this till I'm 57?)
~150k in a fund and share account.
I've no UK state pension as I left the UK with only 9 out of the required 10 years of NI contribution.
I've no pension pot here in Germany.
My plan is to use the F&S account cash to buy a property somewhere for around 150-200€ south of the alps (had enough of long, cold winters and I've no desire to spend my time wrapped up indoors whilst paying stupidly high heating costs) in the next few years. Due to being outside of the UK for so long I'm no longer eligible for capital gains tax in the UK. (was thinking about coming back to the UK (at least on paper) to make up the missing one year NI contribution, but that'll wait till I've made use of the cash).
Hitting my numbers into a compound interest calculator says my 200k should be around 450k when I'm 57 (based on 5% annual growth (up till now I've averaged between 7-10% growth pa))
Using this website ( https://www.which.co.uk/money/pensions-and-retirement/pensions-retirement-calculators/income-drawdown-calculator-a5pj57u5134k) and assuming I can start drawing on my SIPP/ISA at 57 I should be good.... Like forever...
Which has got me thinking.... Look to buy a cheaper property (~100€), keep playing with my funds and retire mid forties.
The GF is likely to inherit (along with her sister) two Munich flats together valued at ~1m€.
The crazy thing is... This seems so surreal as we can barely afford a decent lifestyle here in Munich on the money we earn (the tax man rapes my bank account monthly... Yay for Munich's ridiculously high business tax rates).
Alpin - looks like you have a decent plan.
TiRed - has the pandemic accelerated your plans at all? Be careful with taking your pension at 55 & working caps future pension input quite substantially.
TiRed – has the pandemic accelerated your plans at all?
Not really. A trip back to academia is one possibility of interest. Or civil service. I’m in the fortunate position of a full LTA by 55 since I saved hard in AVCs, so future pension contributions will incur full tax liability.
Alpin – looks like you have a decent plan.
Does it? Feels like I'm winging it.
However, speaking to friends a good 15 years older than me I would say I'm in a good position.