[Misc] Retirement

[Weststander]

Exactly……myself and several pals/colleagues (all on decent salaries) have all given up work in the last 18 months or so and consensus among us is that (without a mortgage) something like 25-30k pa covers all normal/reasonable outgoings and a pretty comfortable lifestyle for a couple. It doesn’t matter what your salary was in that context. Hence those calculators being pretty useless.

Has Mrs.D carry on paid employment?

Only asking, as they obviously makes a difference to the monthly coffers

 

[dazzer6666]

Has Mrs.D carry on paid employment?

Only asking, as they obviously makes a difference to the monthly coffers

Hasn’t worked for 25 years - conscious decision we made when having kids as I was travelling so much etc. Was quite a struggle for several years.

 

[Weststander]

Hasn’t worked for 25 years - conscious decision we made when having kids as I was travelling so much etc. Was quite a struggle for several years.

What’s incredible, both financially and lifestyle wise, is (touch wood) you could both spend say 30 or 40 further years not working, holidays and hobbies aplenty, without having to work. When essentially, just one individual worked for 40 years.

That’s not uncommon. My Dad through private pension contributing from about 20 years old from the 1960’s onwards, achieved that and retired early.

 

[dejavuatbtn]

Equity release (or lifetime mortgage) is right for some people but can be regarded as an expensive way of borrowing (your own) money, is fine if house prices continue to rise, and if you are happy that if you live a relatively long life there maybe little capital, if any to pass on to your dependants.

Special and independent Financial advice is currently compulsory.

Hmmmm. My step dad owned and lived in a small flat. Took max equity out of it and by the time he had to go into care, the amount borrowed had increased by 200%. The result was his care fees being covered a around three years only.

 

[Doonhamer7]

Moving into pre-retirement financial planning mode now as kids will both be at uni, mortgage gone next year, done the house upgrades (extension, bathrooms), now maximising pension, bonus straight to savings, probably down size cars going forward. Contemplating moving to 4 day week in 3 years time ( I have self employed mgt consultants working for me who charge £1500/day so know where I have to head - less stress than worrying about the programme success, profit/loss of business and keeping people employed / happy) with plan to retire in 10 years time

Was told to maintain a quality life (run car, overseas holidays, meals out etc) to plan for £35k a year and most important don’t get divorced (cause then your working to 70+)

 

[dazzer6666]

What’s incredible, both financially and lifestyle wise, is (touch wood) you could both spend say 30 or 40 further years not working, holidays and hobbies aplenty, without having to work. When essentially, just one individual worked for 40 years.

That’s not uncommon. My Dad through private pension contributing from about 20 years old from the 1960’s onwards, achieved that and retired early.

Hopefully………! I consider myself very lucky. I’m not well educated and sort of fell into a career that turned out ok and happened to pay reasonably well, plus we never got into the ‘keeping up with the Joneses’ stuff that is absolutely rife in banking, leading to ridiculous spending, huge mortgages (and often costly divorces). Also had kids relatively young so all the big commitments fell away which made stopping work viable.

 

[Weststander]

Hopefully………! I consider myself very lucky. I’m not well educated and sort of fell into a career that turned out ok and happened to pay reasonably well, plus we never got into the ‘keeping up with the Joneses’ stuff that is absolutely rife in banking, leading to ridiculous spending, huge mortgages (and often costly divorces). Also had kids relatively young so all the big commitments fell away which made stopping work viable.

For those reading this with little pension/savings provision, but time on their side, a doable plan if they can afford to is to plough as much as they can afford into a low cost pension plan. Taking advice if unsure who with.

And not to listen too much to theories such as the aforementioned “70%” or the “invest annually a percentage of income that’s half your age”. They may be sound numbers, but who can afford that?

 

[Eric the meek]

Exactly……myself and several pals/colleagues (all on decent salaries) have all given up work in the last 18 months or so and consensus among us is that (without a mortgage) something like 25-30k pa covers all normal/reasonable outgoings and a pretty comfortable lifestyle for a couple. It doesn’t matter what your salary was in that context. Hence those calculators being pretty useless.

That 25-30k sounds about right for me and Mrs ETM as well.

However, with inflation looking like it will threaten double figures shortly, we'll need 27.5 - 33k the following year. Which takes me back to compound interest, which was mentioned earlier.

Compound interest is great when you're accumulating wealth. But it's not so good when you want to spend the income that spins off all that capital, when you find that inflation means your income buys you less. So in retirement, contrary to perceived wisdom, you still want the bulk of your pension pot to be invested in assets that will produce capital growth, and just top slice a bit of income when you need it.

 

[WATFORD zero]

Hopefully………! I consider myself very lucky. I’m not well educated and sort of fell into a career that turned out ok and happened to pay reasonably well, plus we never got into the ‘keeping up with the Joneses’ stuff that is absolutely rife in banking, leading to ridiculous spending, huge mortgages (and often costly divorces). Also had kids relatively young so all the big commitments fell away which made stopping work viable.

Absolutely. I remember when I paid off my mortgage at 40ish one of my associates at a similar level at work was stunned. He still had a huge Mortgage and couldn't understand how his kids at Public school, Brand new very flash cars for him and his Mrs every two years and multiple Caribbean holidays at exclusive resorts and Skiing holidays in USA/Canada had effected his ability to do likewise

 

[Paulie Gualtieri]

Reading here in envy as have 20 years before I hit sixty

Mortgage will be gone if not overpaid on my 60th, have around £9k per annum (index linked) previous final salary pension and putting away £12K a year into a new pension (current pot £40k) for me plus the wife’s c4k per annum.

No idea what the state pension will look like when our time comes

Might be the time now to ensure we are on the right track and seek the view of an IFA as have no intention what so ever of working beyond my state retirement age (67), ideally wrapped up before

 

[banjo]

21 months to go. (Not that I’m counting down the days) Then I’ll probably get a PT job a couple of days a week, can’t wait.

 

[Mancgull]

I'm packing in my full time role in 12 months so that I start the 2023/24 tax year for my pension income.
I'm going to have two/ three months off and then look for a part time role but it won't be essential. I want to do something that I'll enjoy doing but for no more than three days a week maximum.
I work as a pension adviser and what I'd say is essential for everyone looking to retire is to spend some time working out what you need to live off on a net monthly basis. It's important to factor in annual spend too such as holidays and contingencies. Eg every five years I'll need to replace my car so that's another £150 pm. Also factor in increasing heating costs and some inflation. Better to over estimate the monthly costs.
The other thing I'd recommend to people is to reduce their biggest outgoings, if you can, ready for retirement. It's not a great move to still have your mortgage if you can avoid it. Pay off any credit card debts etc. If you have low outgoings you can then live off a lower income and the way that the tax system works you can then generate a very tax efficient income to meet your costs, by way of using your personal income tax allowances and using the tax free cash from your pensions to generate 'income'.

For me retirement brings freedom and choices and one of those choices will be a part time job, but if that on my terms then that's fine.

 

[BN9 BHA]

Absolutely. I remember when I paid off my mortgage at 40ish one of my associates at a similar level at work was stunned. He still had a huge Mortgage and couldn't understand how his kids at Public school, Brand new very flash cars for him and his Mrs every two years and multiple Caribbean holidays at exclusive resorts and Skiing holidays in USA/Canada had effected his ability to do likewise

He obviously didn’t have a public school education

 

[WATFORD zero]

He obviously didn’t have a public school education

IIRC he did, and I don't think he had ever seen one of these in his life



Helped keep you focused on the important stuff growing up

 

[birthofanorange]

There's a good reason for that.......

Indeed - my folks cashed-in on the equity release, thinking that they probably wouldn't live long enough for it to become an issue. They didn't take advice and chose to not take my suggestion of down-sizing, which would have given them even more funds whilst retaining ownership of a smaller property.
They're still going strong, nearly 20 years on, and there is no equity left in their house, having effectively sold it for a fraction of it's value. To make things worse, they now struggle with the stairs etc. yet are unable to sell and move into a more manageable place, like a ground floor flat/similar.
As said, it may work for some, but you seriously need to consider all the future implications.

 

[Jim in the West]

Met a financial advisor a couple of weeks ago. Had several things to discuss, one of which was avoiding inheritance tax. Only two options he said - spend it, or give it away. I need to go back to my old audit team’s favourite bar in Miami so I can ‘give it away’ and help fund those girls through college

There are definitely other options. And obviously IHT only kicks in above a certain threshold (which could be £1m, if your spouse/partner has transferred their allowances to you on their death). Pension assets and investments in Business Property funds are IHT-free. The latter might sound slightly risky, but my Dad invested in some BPR funds which were very stable. The other thing is, you can take out a life insurance policy which pays out enough to cover the IHT. Obviously this gets more expensive as you get older, but can be a useful short to medium term move which effectively mitigates an IHT bill if you were to die early.

PS: I'm not an expert (just did some research for my Dad a few years ago).

 

[Seagull58]

That 25-30k sounds about right for me and Mrs ETM as well.

However, with inflation looking like it will threaten double figures shortly, we'll need 27.5 - 33k the following year. Which takes me back to compound interest, which was mentioned earlier.

Compound interest is great when you're accumulating wealth. But it's not so good when you want to spend the income that spins off all that capital, when you find that inflation means your income buys you less. So in retirement, contrary to perceived wisdom, you still want the bulk of your pension pot to be invested in assets that will produce capital growth, and just top slice a bit of income when you need it.

My QROPS (offshore equivalent of a SIPP for non-UK resident) has 33% invested in fixed interest structured notes that are linked to a basket of stock market indices. Providing none of the stock markets is at less that 70% of the initial level at the observation point each year, the notes pay annual (or biannual) interest at a fixed percentage. The other 67% is invested in growth-oriented equity funds. The objective is to live off the income from the fixed interest notes as much as possible but with the option to dip into the equity funds when necessary, thus preserving and growing capital.

 

[Seagull58]

Reading here in envy as have 20 years before I hit sixty

Mortgage will be gone if not overpaid on my 60th, have around £9k per annum (index linked) previous final salary pension and putting away £12K a year into a new pension (current pot £40k) for me plus the wife’s c4k per annum.

No idea what the state pension will look like when our time comes

Might be the time now to ensure we are on the right track and seek the view of an IFA as have no intention what so ever of working beyond my state retirement age (67), ideally wrapped up before

16K p.a. for the next 20 years is 320K. If that is being invested sensibly you should have around 400K to 500K in the pot in 20 years time. State pension will be around 1000 per month in today's money so around 1,300 to 1500, possibly.

 

[Eric the meek]

My QROPS (offshore equivalent of a SIPP for non-UK resident) has 33% invested in fixed interest structured notes that are linked to a basket of stock market indices. Providing none of the stock markets is at less that 70% of the initial level at the observation point each year, the notes pay annual (or biannual) interest at a fixed percentage. The other 67% is invested in growth-oriented equity funds. The objective is to live off the income from the fixed interest notes as much as possible but with the option to dip into the equity funds when necessary, thus preserving and growing capital.

If you are happy with that percent split between income and growth, then that's a good arrangement for you. There isn't a right or wrong answer - it's what you feel comfortable with, in terms of attitude to, and appetite for, risk. What price being able to sleep at night?

 

[HalfaSeatOn]

Not a nice thought, but inheritance income can be factored in to future finances. I reckon for our life style £35k per year being mortgage free would be about right, providing for our current, non extravagant, lifestyle. Main challenge to achieving that will be age 60 to 66. Once state pension kicks in, as espoused by [MENTION=21158]Weststander[/MENTION], things will be fine. I’ve been mortgage free for 8 years so no gain in that regards.