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So more than likely, I will hand in my notice at some point this year - I have to give 6 months notice and will retire. I will be 60 later this year. Mortgage cleared, debts paid off, Kids will be all working once the last one finishes university in June. I am a bit worried having worked for 38 years that I will struggle to fill in my day and be bored...... But I also realize I cannot carry on working in the role I am in now (partly burnt out, partly cynical of the same old stuff)- and part time will not be an option - other than yes you can reduce your hours but we still expect you to do the same job (for less money). Mrs Olddonald goes part time in March after a similar period of work history.
I've read a number of useful / amusing retirement threads on here - I am interested to know what preparation you did or are doing before retiring (if any !) ?
In my year pre retiring I wrote down everything I spent so I then knew what ££ was actually needed and what wasn't in retirement. e.g. needed coffee out daily for people contact, not needed, circa £450 month on fuel.
When I retired I gave myself a three month holiday, so I didn't think 'should be doing this, should be doing that' and if I wanted to pop into pub on the dog walk for a pint at 11am I did, rather than thinking 'that's the road to hell and sleeping on a park bench'
The other person who needs to get used to your retirement is Mrs Olddonald as you might be spending a lot more time together, so does that work for her?
Six months into my retirement I'd broken up with partner of ten years as I'm difficult to live with (the positive of that is that as I didn't need to provide financial support I could close my design business and totally stop work) and got four lots of volunteering a week in my week as I'm better with some structure.
. I am a bit worried having worked for 38 years that I will struggle to fill in my day and be bored
My Dad retired at 55 after working since he was 15. No prior planning- BT were going through a round of redundancies/ work restructuring. If he had stayed til retirement at 60 his responsibilities would have increased significantly and rewards not so- some would have even been reduced.
He had a few weeks to decide if it was worth staying for 5 years to max the pension or get out and accept a reduced pension. Part of the deal was he could get the pension straight away.
Dad didn’t have any hobbies so Mum was a bit concerned he’d vegetate.
Mum retired at the same time, almost immediately they went to my sister in Spain for a few months, especially handy as my nephew had just been born. It gave them the opportunity to spend many months each year in Spain as my nephews grew up.
They joined a local retirement club that organised plenty of social gatherings/ events. It didn’t take long for them to wonder how they ever got the time to work.
Me, I’d spend more time on my hikes, go hiking, catch up with books I’ve not read.
That bits sorted, just need the ££ to fall into place.
I’ve read a number of useful / amusing retirement threads on here – I am interested to know what preparation you did or are doing before retiring (if any !) ?
I knew that what i wanted to do was travel and laid out a series of plans that would occupy the first 18 months in quite a bit of detail and for another 18 months after that. Unfortunately due to circumstances this all went out the window. took a year until I was actually ready to travel. I planned out an ever increasing length series of bike rides culminating in my big ride to Spain. I intend to spend 6 months of the year away from home until I get too old !
Having made a spurious answer on MCTD’s thread I’ll be a bit more serious here,
I will stop working in three months or so as will Mrs Kilo. No kids or mortgage here. We have made a rough assessment of money coming in, savings and regular expenses and are content we won’t end up in the poor-house and don’t have to work. There will be some cutting back but a lot of that is on work related expenses; commuting costs, work clothes, sandwich bar lunches etc and some will be us having more time to shop around and not taking the easiest option with utilities, insurance rather than paying for convenience of a quick fix. We, at present, haven’t got anything we need to cut out that we would really miss, a lot of it seems to be getting cut as a result of the change in direction rather than straight economics.
We will both be 58 so a couple of years off work pensions (60 for both of us) and longer off state pension. Mrs K thinks she may work again in a completely new work area I am decidedly less keen on working again!
Our first decision is we will go travelling for a few months, we both went straight from school into full time work so missed out on loafing around the world. We are young enough to still be able to do so and we are in a period of stability with the health of our remaining parents so this is a good window of opportunity. After that it’s probably a good few months in Ireland doing jobs on our place there and then we will see what happens. Probably more cycling, walking and travel.
A columnist in the Guardian last week said they were looking forwards to doing what they want to do, not what they have to do - we are hoping to really cut back on the have to do shizzle.
I was sat at work one day, thought why am I still here. Handened in my notice that day.
My wife and I both retired a few years ago. Our main goal thru our latter years of work was that post retirement we would only work if we wanted to; not because we needed to, financially. This has panned out OK and neither of us has done a days paid work since. She gardens, I cycle (and motorcycle)...We also cycle, walk/hike and like travel. We manage fine and are never bored. We can put stuff off for a day or a week based on a weather forecast rather than, as previously, having to spend our weekend off doing "###" despite the weather being glorious. (Hope that makes sense)
It is the little stuff that we really appreciate. A leisurely breakfast after getting up when we have naturally woken up. Avoiding lots of stuff on weekends such as visiting a historic town/country hike etc....midweek is so much quieter and less stressful (parking/crowds etc)
Finances haven't been mentioned but it goes without saying that if you've been used to £5k a month and your pension is only £1k a month...you may have to rethink lifestyle ?
Just popping over from my thread - the amount you spend "going to work" is surprising - even going in 2 days a week is costing me nearly £1500 a year.
All my friends who have fully stopped work are volunteering 2-3 days a week, and have made new social contacts and got new skills - most are involved in outdoor groups.
Being harsh, I always remember the trainer at my first employer saying that he ran the pre-retirement sessions, which included partners. He got them to write down all the jobs and "things" they did round the house, so they could teach the other how to do it for if/when the worst happened.
I was unexpectedly given the opportunity for early retirement on a Friday afternoon and had to have an answer by the Monday lunchtime, so no planning was done. I knew I'd have the mortgage paid off and my wife was all for it so I took the risk.
I sat about the house for a couple of weeks when I first retired (it was a cold, snowy January) then realised I still needed something to be doing so looked at college, volunteering and some part-time work until I was asked to help a riding buddy in his bike shop. The rest is, as they say, history.
I finally stopped working when I reached 60 and now my wife is about to retire too so another big lifestyle change is afoot.
Thanks for the replies - I hadn't seen the thread from MCTD - so apologies for the duplication. Some valuable pointers.
I've done a few things as prep - maxed out the bike to work scheme for the last few years, so bikes are covered, newish laptop, nice radio - I like my indie music. I'm a park runner and also a pool swimmer - the kids and Mrs OldDonald do a bit of outdoor swimming so have done a bit of this too - I'm also a walker with Mrs OldDonald - she's not a cyclists. I am also a history geek (degree in history) - so happy reading a good (text) book. Doing a bit of travelling is on the list - may be one good trip per year. other trips in the UK (I find airports stressful and environmentally it bothers me)
Would like to get a dog and possibly go volunteer for some archeology digs.
Did any of your feel the need to join groups to keep up social contacts , gyms , local chain gang etc. Any of you struggle with the loss of professional status ?
write down all the jobs and “things” they did round the house, so they could teach the other how to do it for if/when the worst happened.
Good point- Dad would have been ok if Mum went first as he could cook and cleaned. Mum struggled with sorting out the finances as Dad did that and obviously diy.looking after the car. For the first year or so after he died, I was getting calls from Mum about the central heating making a funny noise, issues with the washing machine etc
Newly retired here, well I kept a few bits and bobs on which I enjoy, no real change in costs. Soon filled up any time voids with other interests. Never been bored in my life so loads of projects on the go.
Probably the fittest I ve ever been.
Only thing I miss is the banter, some of it on here is just as funny though.
Good luck, just do it.
I didn't really plan but had paid off the mortgage and the kids had graduated and had jobs. I was doing a hyperactive job in teaching (plus academic extra-curricular stuff), had a long commute, got sick of Gove's policies and just wrapped up at 58. Walked out and never looked back. Hobbies wise not much new apart from a bit of wood carving. Moved to be near the Peak district. There's always things to occupy your time and I can cycle offroad virtually from the front door. Travel is pleasanter and cheaper outside of school holidays. We both pay into a household account and a beer account (which doubles for our holiday money) and it's easy to accumulate some dosh by drawing your horns in. Don't worry too much about planning, (all sorts of) things will fall into place and you will be happy as Larry.
I hadn’t seen the thread from MCTD – so apologies for the duplication.
Not much duplication, yours is practical, mine less so.
The four colleagues I know have filled their time very quickly with various activities - I had to organise our Xmas get together, lets say it was easier with us three 'working' colleagues than those that were retired - all busy. My outlook is changing, and if I can get my two kids working (one finishing Uni in June and another keeps getting 'fired' due to ADHD and shocking time keeping).
I thought I could never retire but lockdown showed me that I could happily.
Shame I can't afford to!
Did any of your feel the need to join groups to keep up social contacts , gyms , local chain gang etc. Any of you struggle with the loss of professional status ?
No, it's easy to keep in touch with the few I worked with who I also occasionally socialised with. Never been a gym member so that didn't figure, found cycling solo midweek was fine by me and still had the mates I cycled with on evenings and weekends...so that was also covered (they disliked the fact that I was always a bit fitter than them now). Professional status? nah, I'd got it firmly sorted in my head that on a certain date...I'd be a 'free man', and haven't looked back...oh, and moved abroad 2 years ago so if I had made new contacts, joined new clubs etc...it'd have all been left behind in any case.
I retire on the first of march. I’m 56 and after 40 years with the same company I’ve had enough. Final salary pension takes a hit but you can’t buy time. Pension will be roughly half my salary but I’m taking a 25% lump sum plus I’ll sell my company shares. They will buy me a small camper and I’ll invest the lump. Paperwork dropped through the letterbox this morning! I cycle fell walk and kayak plus I’ve just bought a nice camera as I want to get back into that. Mortgage and debt free and can’t wait.
I am a bit worried having worked for 38 years that I will struggle to fill in my day and be bored……
No one I know who is retired has ever found that to be a problem. They all say 'how did I ever manage to fit a job in?!'
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I'm only 43 and minimal pension so sadly not looking likely for me any time soon. Should have the mortgage cleared in ten years then going to drop to part time though.
No one I know who is retired has ever found that to be a problem.
As above, I.found it a bit hard to adjust. If I'd not ended up working for @ojom, might life might have taken a very different turn. Possibly different if you're a bit older (I was 50), you've no dependants tying you to home and/or your partner is retired too as then you've a bit more freedom anyway.
Winter is challenging, Summer is good, whatever you save from commuting will get absorbed by more coffee, lunch, beer stops.
What is rarely discussed is if retirement actually suits you? It doesn't suit me so I still work three days a week in my business. I have watched friends retire recently and you can see some are bored shitless. Also they are not used to spending a lot more time with partners.....
For me I will need to remain working in some shape or form as my brain simply doesn't like being in "neutral"
You just have to be honest with yourself
Did any of your feel the need to join groups to keep up social contacts , gyms , local chain gang etc. Any of you struggle with the loss of professional status ?
My circumstances made the loneliness aspect more acute. I have worked very hard with friends to maintain social contact. When someone says " you must come round sometime" I reply "great - lets set a date now" I retired earlier than many of my friends indeed most are still working. I certainly have had to work at this
I have joined a motorcycle club that a bunch of my pals that I have know for decades are in.
Loss of professional status - nope.
I have worked very hard with friends to maintain social contact. When someone says ” you must come round sometime” I reply “great – lets set a date now”
That echoes advice my Mum was given after Dad died- take up invites. You may not be keen initially being newly solo, but if you keep saying no eventually the invites dry up.
Watching this and MCTD's co-thread with interest - I declared my situation on a recent thread about SIPPs, etc:
For many retirement is not a single event. I hope to retire, partially at first in about 5 years (go to part time) when I’ll be 60-62, and then fully a few years later, and closer to my and my wife’s state pensions starting to pay out, and also her local authority CASE scheme properly maturing.
If you read the rest of that post, I'm possibly further forward in the planning than it sounds some are, I've been paying in as much as I needed to max out the employer contribs since I started work at 21 - my Dad schooled me on that and I'm very grateful - 35 years with 12-15% of salary going in on average. So without being all BBB about it, my pot's getting near to £0.5m and with continuing to pay in and the cpd interest, I should have a very healthy pot when the time comes.
My wife has two CASE pensions, second is a local authority school scheme so like MCTD she can take earlier but gets quite heavily penalised for that. She had a career break for 10 years when kids were born, but is paid up for NI and gets full state at 67 like me.
But like I said - not to be all look at me! about it but I'm struggling big time with the fear of money running out...... I've one child leaving Uni in 6 months, and hopefully another starting (stage school) in Oct 25, so another 3 years of topping up grants, etc. Son has quite a big meds bill that we have to pay privately. Both are aiming for careers in insecure industries; daughter wants to work in theatre production, son as I say is going to stage school and wants to act. Both know that might mean waiting tables too, but if I have to support them while they pursue their dreams that's what I'll do.
TLDR - despite the comparatively massive pension pot, I'm quite jealous of those that can throw off material things and focus on what matters, in the meantime I'm stuck chasing more and more because of the fear of running out. Fortunately; I like what I do in the main and can hopefully keep doing it and then keep doing it at a reduced level in future as well - so continuing to earn and not draw on the pension for a while yet.
That echoes advice my Mum was given after Dad died- take up invites. You may not be keen initially being newly solo, but if you keep saying no eventually the invites dry up.
I have also been living with "say yes to everything" ( you can say no afterwards if you have a good reason) and "eff it - just do it" Its taken me to some strange places literally and metaphorically
That post up there reminds me a bit of a recent conversation my wife recalled at a recent uni reunion, with a well-paid contemporary who was wistfully envious of her early retirement "but my daughter has a horse". Well, sure, people are allowed to have different priorities, and I'm not going to be critical of his choices, but it's a simple fact of financial life that you can't save it all and spend it all as well!
I appreciate all the replies - all the retirement threads have been interesting reads. I like the advice on taking up the invites, it makes sense - some of those from my work place who have retired clearly miss the banter/ social / purpose.
"Effective immediately, I resign.
Blah blah"
That email sat on my computer screen for about 15 minutes before I pressed the send button on September 9th last year.
I'd procrastinated (see below*) for about 9 months as to when to retire. It was marginal that I'd actually have enough money from my various pensions and savings to live on for approx 30 years of retirement, without having to sell the house.
I'd tentatively pencilled in Jan 1 2025 as my first date of retirement but was kinda hoping to get made redundant before so I'd have some extra funds. That date would be a couple of months after my 61st birthday.
I have an old defined benefit pension which I knew would provide somewhere around £12k per annum depending on when I actually started claiming it. (The value increases slightly for every year deferred.)
As an experiment, it occurred to me that I could start claiming the pension but carry on working. I'd "lose" some of the pensions value by drawing it before it was needed but it would let me validate that I could live on the pension only whilst still working (my salary would be banked/invested in the meantime and any "extra" investment should offset the slightly reduced pension value).
So, for about four months I was claiming my DB pension AND working full time (from home) - I lived off the pension only and the salary was invested as planned.
These four months proved I could "live off" my salary BUT wouldn't afford me any major purchases, or holidays or cover any emergencies or any future health care related costs.
In the meantime, I'd been getting more and more bored at work but there was little stress, so it was tolerable.
What finally pushed me over the edge was an email from my CEO asking me to plan out work for someone else's teams. This was one of many questionable "decisions" by the CEO (who is also the private company owner). So I drafted out that email above, made a coffee and dithered about sending it. When the caffeine kicked in, I sent the resignation email. That was just before I turned 61.
I then sent a message to MrsVlad to tell her I'd retired!
(I'll admit my unannounced resignation was a bit of a dick move as I'd not told anyone in work about my impending departure. Apart from a very brief conversation with the CEO when I returned my work laptop and a couple of emails about outstanding salary payment, I've not had any dealings with the company since and have slept SO MUCH BETTER. I don't miss work or the people AT ALL!).
I've no intention of needing paid work in the future though I may do some voluntary work but I've been fairly aimless in the four months I've been retired. I've done plenty of walking the dog and riding but the time of year/weather isn't favourable for longer rides or trips away.
I've toyed with the idea of buying a camper van but haven't really got anywhere secure to park it and, having a dog has sort of put a dampener of most of my multi-day epic rides/bike touring I'd like to do.
(Unfortunately, my dog doesn't get on with other dogs at all, so it would cost of LOT of money for private/individual care - not that it's fair to off-load him onto someone else anyway... Mrs Vlad still intends to work full time for at least another three years so I feel a little in limbo at the moment. Come the better weather, Mrs Vlad and I will need to figure out how she can look after the mutt when I'm away and she's still working....)
In the meantime, this winter Mrs Vlad has plans for a LOT of DIY around the house to keep me occupied - expect lots of stupid threads from me about painting, decorating, electrics and hardwood flooring. I'm most definitely not a DIY'er! 🙁
*My planning
In total, I'll have three different, relatively predictable value pensions kicking in at various times, two of which increase in value the later you claim them. Two of the three are also subject to exchange rate fluctuations from when I was working abroad. I've also got some money stashed in EFTs which are obviously subject the how the markets do.
All of these factors mean my future overall income is difficult to predict. And obviously it's very difficult to predict exactly when you're gonna drop dead.
I'd read many articles and blog posts about retirement planning - most of these seem to suggest planning your needs based around 80% of your final salary.
Now, apart from a couple of splurges on bike purchases and a couple of big US/Canadian road trip holidays, for about the last thirty years I've been pretty frugal: mortgage is paid off, no kids. But there was no way I'd be able to retire "early" based on 80% salary equivalence for 30+ years. I may be able to have 80% equivalence if my life expectancy was only 10-15 years!
So I'd been monitoring my outgoing and using spreadsheets to do some "what if" analysis to try to figure out how my finances would pan out over a thirty year retirement period.
Based on my final gross salary equivalence, I'll have about
20% of the income between 61 - 64
35% at 65 (when my second, smaller pension kicks in)
45% at 67 (when my third and final and smallest pension kicks in)
I've got to use savings and/or cash-in investments in the intervening years to make up any shortfall - in reality, my pensions SHOULD easily cover my regular monthly outgoings and some largish purchases by the time I'm 67.
But, in the intervening years, I'm somewhat vulnerable to investment values plunging (eg if Trump crashes the US economy and any ripple affects that will inevitably occur...)
Theoretically, my savings/investments should last until I'm about 90 and then I'll just have my 3 pensions to live off. That won't pay for long term care in a nursing home if I'm unfortunate enough to need it but I'll worry about that some other time....
i made no plans. told my boss i was retiring 1 month before my 55th birthday. finished 2 days before.
phoned pension people the same day. found me a annuity which was ok for me. all done and dusted.
first 3 years passed in a flash, we were looking after 2 youngest grandkids 3 days a week.
they are at school fulltime now. wife does a few hours a week for a friend. i cycle. we walk a couple of times per week. we will walk and cycle until we are unable. it makes us happy.
Aiming at 80% of your salary is nuts if you're currently saving a decent whack of it.
Towards the end of our last proper jobs my wife and I were saving literally all of her salary plus a chunk of mine (which was near enough the same). Which was admittedly a slightly unusual and very fortunate situation to be in (there was some downside in terms of career development, but the tradeoff seemed reasonable). But why on earth would we suddenly need 80% of our gross income now, when we only needed 40% of it then?
Yep im in a similar situation - worked out that if I take out mortgage, overpaying it, ISA, pension, income protection life insurance on mortgage and car repayments out, I’m living very comfortably on 40% of my take home pay. Taking into account higher rate tax I’d likely need about 30% of my gross income in retirement. I’m aiming for 50% but mainly because my wife won’t get quite as good a pension as me. Overall I think it would be maybe 45% of our combined working pay but likely we’d be fine on a bit less than this.
.
But why on earth would we suddenly need 80% of our gross income now, when we only needed 40% of it then?
I fully agree with you but
(A) that seems to be the what is promoted as a target in the press and by the professionals. I'm pretty sure part of that is due to commission professionals receive - it's in the their interests to "oversell"
(B) for people on relatively low incomes (and whose current incomes barely covers necessities), those figures are probably correct.
Fortunately for me, I'm not in category B and my spending habits and lifestyle don't necessitate category A either. At this stage in my life, I'm actually finding it harder to switch modes from accumulation of savings to decumulation
But why on earth would we suddenly need 80% of our gross income now, when we only needed 40% of it then?
Agree with Vlad, also if you are one of the 35% of the population living in rented accommodation then 80% is probably needed as housing is still a major cost and still need to save for care costs in later life. Unlike house owners who have usually paid off their mortgage at retirement and its common to treat the house as the capital to pay for later life care.
I agree if you’re stretched on current income then maybe 80% is a realistically ballpark to be looking at but in that case you’re hardly likely to be aiming for early retirement
it’s a simple fact of financial life that you can’t save it all and spend it all as well!
Very true, but also saving a little early is as good if not better than saving a lot later on.
This might be controversial, but I'll say it - bit devil's advocate too, don't flame me for asking because if people are looking for advice it's important they get a balance.
Those that have thrown it in early and live frugally rather than work a few years longer - would you prefer to have more money, is there any element of 'trying to convince yourself' that you're happy with how it's turned out to avoid admitting that you didn't plan sufficiently? If not, then I'll admit again I'm jealous because I could probably hand my notice in tomorrow and survive, but I've worked hard and saved hard, making some sacrifices on the way and I'm still scared of running out in later life.
I get the need to eg: MCTD to get out of a toxic work environment - I know, I was there and don't mind being open that I stood on a train platform thinking two big steps and no more problems. I just would caution about an impulsive decision before weighing up all sides.
would you prefer to have more money, is there any element of ‘trying to convince yourself’ that you’re happy with how it’s turned out to avoid admitting that you didn’t plan sufficiently?
No and no. The only thing I regret is cashing in a few years of superannuation when I was in my early 20s. That was stupid.
I have never been motivated by money and material things. If I have enough money to live a relatively simple life and a cushion in case of the unexpected I am happy
I am in a better financial position than I would have been if Mrs TJ did not die. However what we would have had for the two of us would have been fine. The major difference this makes is I do not have to holiday let my flat while off travelling to replenish the reserve
My big bike ride was done very cheaply for example. Cycling and camping for 4 months did not cost much at all
I understand that I am in a very privileged place however. Both by being content with less than many folk and by having that reserve of cash.
I was a bit concerned that I'd get bored once I retired at 60 and looked into the possibilities of part time work or volunteering. It's been two and a half years now. No problem.
Having had kids relatively late in life, I'm 51 kids are 9, 7 and 4, I am envious of all the stories of retirement in your 50s. I hope to go part time at 60 and fully retire about 64 or 65. If I can manage that I'll be very pleased.
^ that's a good example.
I had kids in my mid 30's and had compromises on lifestyle, etc as a result - their cost and also wife not working.
You *could* have maxed out pensions and investments at the time and then with the benefit of another 15-20 years of cpd interest on that, might be no worse off, even better off rather than being envious now.
I know that sounds critical, not meant to be, we all make our own choices and of course IDK what you did with any spare income in your 30's and 40's, if you indeed had any spare. Hopefully not C&H, but being STW 😉
We are not good at teaching this from early - school, even. I'm very lucky my Dad insisted this for me, and it's one thing as a line manager that I've always included as part of my managing of younger staff, telling them to at least do their own research.
Re the % of your income in retirement, a few articles I’ve read suggest you need a higher amount when you’re younger as you’re still active and can do stuff but as you get older that diminishes.
Pension advisor that came into work called it Go Go - you're as fit as you were when working and now have all the time to do what you want; Go Slow - still do stuff but maybe not as active as you were and/or all the bucket list stuff is done now, and then No Go, when you need to heat, eat, and pay for the TV licence and not much besides.
Pension advisor that came into work called it Go Go – you’re as fit as you were when working and now have all the time to do what you want; Go Slow...
I think i may have had a session from the same bloke!
I’ll be 59 next month and this is a bit of a focus, with aim being in around 2 years time ideally. We have 2 boys at home, both recently started working but still major financial drains, whether food, utilities, running 4 cars etc etc.
I am in a good position with a reasonable pot, a likely moderate inheritance not far away, and high enough earnings to be maxing out salary sacrifice pension contributions and S&S ISA allowance, though only been doing this for past year. We have a nice house and no mortgage however no plans to downsize for at least 10 years.
The plan, if all works out will be a big reduction in outgoings when boys ever leave home, purchase of a modest EV ( I currently have a posh one through a work lease), and try to live off savings and investments till state pension age or towards it, and at that stage start drawing down pension, which is in a SIPP. I won’t need to take 25% as a lump sum as the only cash we will need will be car/cars and I think sticking with 4yr PCPs will be more tax effective.
wife is 4 years younger than me, works part time, and plans to go on a bit longer, plus she has minimal pension funds, so I’ll need to cover the majority.
i do often wonder how much will be enough as an annual income for us, the views in this post are extremely useful in shaping my thoughts on this.
I have previously been lured into the idea that a £1M pot is required to keep a good lifestyle but I am quickly realising that much of that is pension sales pitch and the reality may be much less. My pot will never be that large, but I may get 60-70% of the way there.
£1m pot is a sensible aim if you want a comfortable retirement and enough for contingencies, plus hopefully enough left to leave to the kid(s)…
I won’t need to take 25% as a lump sum as the only cash we will need will be car/cars and I think sticking with 4yr PCPs will be more tax effective.
You might have a rethink on that
1/ if you leave it in and drawdown then you'll pay tax on it as income above the threshold; having it sat as 'savings' that you can dip into is not income.
2/ if it's in stocks and shares type funds then you might need to be drawing out during a crash, which will cost you more as a % of your pot even if the absolute is the same. Holding some in cash or bonds to ride out a storm might be prudent.
I wrote more on (2) in another thread but I don't think we want to then have three threads on the same topic running at the same time, so here's the link to it.
You’re going to get 25% tax free either way - I guess the better option is to use this in the earlier years and minimise tax, then once you reach state retirement age try to use savings more? That way minimising tax bill as state pension contributes to taxable income.
I have previously been lured into the idea that a £1M pot is required to keep a good lifestyle
I have read the same but if you have say £1m, take £200k in cash tax free for whatever reason and assume that makes no interest but the rest invested.
At 5% pa, that is making £40k a year in interest (FTSE100 last 25 years = 6.3% annualised as a reference)
Add in two state pensions - at say £12.5k pa - you could have 65k per year, minus tax, and your 800k remains untouched. That would be pretty decent lifestyle for most, I'd say, assuming mortgage free, kids free, and so on....
Of course, 65k won't be worth 65k in 20 year's time, so pot will diminish due to effect of inflation meaning you need more than 40k, and then also as pot diminishes you get less than 40k pa interest, but even then I can't see £1m being anything other than very conservative.
Yes , but there is an alternative.
You use the 25% lump sum to invest in something called a Bond Ladder.
Fixed interest Bonds with a set maturity date . The returns are fixed and at maturity you either keep the cash or re - invest it.
Thus eliminating some of the market volativity in favor of financial security.
Government Bonds are traded , but you arent trading these . Just using them as fixed term interest vehicle.
Presumably though once you decide to reinvest the 25% you’re liable to pay tax on the proceeds? I’d have thought leaving it invested in the pension still makes more sense, then take 25% tax free each time you draw money down. You can easily transfer a percentage of your pot into bonds / bond funds etc without withdrawing it from the pension first.
Pension will be roughly half my salary but I’m taking a 25% lump sum
That was my original thought, then a watched a couple of YouTube vids and I now realise that I don't have to take a "lump sum", but can take it over years to keep my taxes lower - once my State Pension kicks in even if the allowances rise it may be possible I'm paying higher-rate income tax.
For me my only planning has been ensuring I've always paid in enough to my (various) work pensions to ensure I get the maximum contribution from my employer, plus I've +15 years of Final Salary Pensions from earlier in my working life. Kids left home years ago and the mortgage was paid off +10 years ago.
I was going to retire at the beginning of 2024, and then realised I was better waiting until 1st March and resigning as my 3-months notice would run into the new tax year so I'd get the tax paid back. At the beginning of February the Bank I work for announced it would be closing and the likely run-out was 12-24 months. I've been there enough years that the redundancy is worth waiting for. I'm now just waiting to be let go.
My OH retired early in 2024.
Money-wise we should be fine, and worse-case we'll down size.
I’d have thought leaving it invested in the pension still makes more sense, then take 25% tax free each time you draw money down
this was my thinking, though I didn’t really explain it well.
my pot is likely to be made up of approx 60% SIPP, 30% inheritances, (so cash or invested), and 10% S&S ISA (I am putting the maximum annual of 20k into this and will continue to do so post retirement from the inheritance cash/investment fund if tax allows)
Andy .
The point is to remove risk of a market adjustment just before you have to realise capital. Your going to be taxed regardless , clever people juggle it to avoid 40%. So you accept the potential gains / losses of shares wont be happening by moving your money out of the stock market, which is volatile . Then buying fixed terms bonds / Gilts with the intention of holding them , Its what PPP fund with Life Strategy kind of do . Switch out of Shares into bonds and cash as you near retirement so you dont get clobbered in a down turn . You are just doing it with a tax free lump sum outside of the pension provider. You have the option , once 55 , to leave your money in risky investments and hopefully time it to switch to fixed term bonds at a high point in the market inside the pension wrapper .
Its not as critical as it used to be , when you had a set time period to purchace an annuity .
You can do staged drawdown , which you hope the markets stay bouyant , but if theres a big adjustment it can take years for stocks to recover . some never do.
So you build a Bond Ladder to enable you to sleep at night a little better as you know your lump sum is safe , its earning a competetive rate of interest and you are in control. As always there is a risk.- firstly interest rates / inflation will soar and fiscal drift means your capital is being erroded and the rate of return is now un competetive . Plus , you might mis time your crystalistaion and buy a shed ton of Bonds as the market jumps on a Bull run and you miss out on a spectacular 20% jump so that Benatau 38 is now a Mirror Dinghy.
Yes - get all of that although I can’t easily find Bonds other than Bond funds on my SIPP. I’m sure there is a way of doing it but not really a concern for some time yet.
On Interactive Investor there is a not terrible 3.3% interest on cash balances although I guess you’d hope for closer to 5% on bonds. Just haven’t exactly worked out how to do it yet! Bond funds have terrible returns over the last 5 years but that’s still massively affected by COVID.
Theotherjonv, I did, so yes my pension will be considerable.. i'll likely see no drop in income when I retire. If I get to enjoy it, great.
My point is, you can plan but the future is unpredictable. While singlevand paying extra into a pension I was heading for an early retirement, but then I met my wife, had kids, circumstances changed. I'm still in a good position but not the same one.
Oh and you have to balance, live now vs save for future. I remember a fit 58 year old at work dieing one Christmas of a cardiac arrest. I had been about to stick a bit extra in my pension but chose to buy a Ti456 instead when they happened. I don't regret that
That's also fair. I've said I'm worried about running out, but also there is a 'fear' of overdoing it - 'no pockets in coffins', etc. At least you can spend it on kids, or leave it to them in the worst case. I wonder if akin to the 'wish I'd spent less time at work' there are many who really regret scrimping as their younger selves; I'd suspect maybe not as by its nature investing for a pension is small C conservative and risk averse.
I was impressed by the advisor that came into work for that reason. I know IFA's don't get a good write up in general, and undoubtedly he'd take your money if you wanted specific advice but at the same time as espousing the benefits of free money from the company, tax efficiency, and the miracle of compound interest he was very fair that paying down debt (not student loans though) and living a little also need to be priorities - as he said, you won't be 20-something living on the edge of one of the world's great cities for ever.
The point is to remove risk of a market adjustment just before you have to realise capital....
I'm not convinced by your arguements..it would be true if one were buying an annuity, but assuming you draw down then I don't see why you'd do what you describe. Be interested to hear more.
have read the same but if you have say £1m, take £200k in cash tax free for whatever reason and assume that makes no interest but the rest invested.
£1m pot....
At 5% pa, that is making £40k a year in interest (FTSE100 last 25 years = 6.3% annualised as a reference)
Add in two state pensions
But each person only gets one pension. You seem to be suggesting that the £1m target is for a couple, rather than each?
I've also heard the mill figure, but had assumed it was per person.....
it would be true if one were buying an annuity, but assuming you draw down then I don’t see why you’d do what you describe.
If you're doing drawdown then you need to be regularly converting investments (stocks and shares in the main) into cash. If those shares are depressed because eg covid, or financial crisis, then you have to cash in at a time that you don't really want to. You can't get by with no money waiting it out.
So you need some held in safer forms, that you can use when the time isn't right to realise capital. If you were going to use all for an annuity - that's the 'old' thinking of as you get closer to retirement move more and more into low risk bonds, etc., but as per other thread I hope to be retired for 20+ years and can therefore hope that any downturns will also have time to recover.
But each person only gets one pension. You seem to be suggesting that the £1m target is for a couple, rather than each?
I’ve also heard the mill figure, but had assumed it was per person…..
It's not a firm number, but my reasoning is that you don't get double costs for a couple - one house, one heating, council tax, etc..... I've seen about £50k for a single person and £65 for a couple. A million would get to that £65k by the calc above with 2 state pensions and doesn't take into account any pension the second partner has, so that £1mill is probably still plenty for a couple where both have pensions irrespective of how much each brings, and if both have £1mill pensions then they have plenty - can probably have over £100k per year between them.
you need some held in safer forms, that you can use when the time isn’t right to realise capital. If you were going to use all for an annuity –
I've tried a few times to trace our mutual quotes, but TBH it's not clear which point I'm even replying to, as you appear to be replying on behalf of someone else. Either way, we both appear to be saying exactly the same thing - that you can keep s bit of your dough in non equities so you aren't forced to sell at a loss to pay for short term stuff, but you should keep the vast bulk in equities or you ain't making any money long term.
that’s the ‘old’ thinking of as you get closer to retirement move more and more into low risk bonds, etc., but as per other thread I hope to be retired for 20+ years and can therefore hope that any downturns will also have time to recover
Exactly
Agreed - when I saw an adviser last year they told me the long term yield from a properly balanced portfolio (ie mix equities/ bonds) has historically been 7-8% but could be lower if you are unlucky and particularly if there is a fall early in retirement and you have to sell off equities at a loss (sequencing risk).
Key is to keep a balanced portfolio for the long term to achieve this return.
By holding sufficient bonds hopefully can “sit out” any stock market fall and not have to sell early - and if bonds carefully selected they may be even counter cyclical (ie increase in value when equities fall) providing an extra buffer.
I’m in the final stages of getting ready to retire - I’m aiming to hold 2 years worth of income as bonds / cash - I’m lucky enough that I’ve got a reasonable sized pot so can sit out any fall for a few years and hopefully get decent long term returns on equities. Given growing warnings about inflated stock valuations I’m thinking of adding an extra year to the “buffer”.
OK, point taken and I'll try to stay in lane.
that’s the ‘old’ thinking of as you get closer to retirement move more and more into low risk bonds, etc., but as per other thread I hope to be retired for 20+ years and can therefore hope that any downturns will also have time to recover
Yes, but the rational is that you'll not earn any more money to be able to top it back up - your approach is 'riskier'.
Yes, but the rational is that you’ll not earn any more money to be able to top it back up – your approach is ‘riskier’.
I would argue that's potentially not actually the case. If you leave more invested then you are indeed at risk of it dropping. BUT if you take it out and put it in something safe and hence less lucrative you are also actually taking a risk of not making as much money. In fact the likelihood of that risk is much higher than his risk. You don't realise it is a risk, precisely due to that high probability.... you probably see it as a fact or certainty and just accept it
£1m pot is a sensible aim if you want a comfortable retirement and enough for contingencies, plus hopefully enough left to leave to the kid(s)…
So we know comfortable is subjective, particularly for people who don't already live that standard of living!
Comfortable probably also changes as you age - expectations as an early retiree in late 50's might be very different from early 80's, and obviously the income changes when state pension age is reached.
Then we have "contingencies" which are clearly just guesswork.
And then a notional idea that "we" have kids or the same number of kids, or that in order to build up the magic million to give them some of when I die I might forfeit giving them cash today (e.g. to help with a house deposit). Assuming its an either or question would £15K today or £100K in perhaps 30-40 years time help my children (and thus their children) have a better foundation in life?
So it is really just a plucked out the air convenient number, before anyone even considers if that's for one or two people; if you have a house you might downsize; if you may be likely to inherit anything yourself (probably a really bad retirement planning strategy - but in terms of what might get passed on to my children is likely to be a factor) etc...
My number is that when we both reach 67 and I fully retire we will be slightly better off than we are while I work 22 hrs per week just now. A combination of Mrs IRC getting her OAP tax free as no other income and me dropping part time job income but gaining OAP and no longer being a higher rate taxpayer.
The big question is whether I want to retire fully before 67. Actually I like my part time job and have the shifts arranged so I am off for a full week at least once a month for doing hobbies.
Still not as much as the supposed income requirement for a couple to have a comfortable living but it seems comfortable enough to us.