Early Retirement Pitfalls, Requirements etc Your opinions

[Kimbers]

Hi Everyone

So my Health is making me rethink working....period. I read so much everywhere of people my age just one day keeling over and after my health scare, Had a heart scare recently, Blood Pressure is high, Cholestrol through the roof, Previous Cancer and now scar tissue on my brain from my Meningitus I had many years ago, causing involuntary ticks and twitching (Most likely cause according to a neurologist) I really do think its time for me to look at life and having one.

Some background. 

Good Salary but mostly commission and currently low due to car industry issues
Retiring from Police at 10 years (no pension as Special)
Me Very little Pension, an old one with £45k in it and my Current one with £65k in it. Thinking of cashing in as income will be rubbish when I retire (See below) 
£500k Equity in house
Just about a 6 figure sum of Assorted Savings/Stocks Shares (selling the Evora) etc
Part Time business buying selling Antique Jewellery making £250 a week for 1 day a week.
Wife Has NHS Pension worth £1600 a month at 55yo
Wife wants to retire and do Art where she currently Makes £2000 a weekend at Shows (Currently only 4 a year)

So our plan is to Sell, Downsize hugely (5 bed to 2-3) get rid of most of outgoings like Mortgage, Sky TV etc etc Do our Part time things "Part Time" and buy a 2 bed place in Cyprus (our fave place) using my pensions to buy it, spending 2-3 months a year there in Spring and Autumn and renting it in Summer. Currently 2 bed Townhouses or nice apartments are £75-95k there. 

So that's the background! What I need to know is any pitfalls those who have done this have found or heard about. Your experiences etc.

 

[gregs24]

You need some proper financial advice from an IFA. They will be able to calculate what you need to meet your likely outgoings over time, remember inflation eats savings.

You need £1m savings for £40k annual income roughly from investments, in order to avoid using capital, adjust up or down based on either demand or savings. If you start using capital to live then the money will run out fast.

Nobody can really advise you what to do, without making these calculations and you working out what you need to live on long term. You may die next week (hopefully not!) but you may live until you are 95, so you don't want to run out of money.

[Sparky]

I jacked it in just before; Tracy shortly after at 52 - both of us with fun but fairly mediocre jobs/salaries.  We just decided we'd had enough corporate bullshit.  Enough pension between us to pay the bills, a reasonable lump sum and a goodly amount of equity.  The only thing we might have less of is money.  We're fabulously rich in what matters though.  No-brainer for us.

[Kimbers]

Its not about IFA's mate, I want real world experiences from people retiring.

I've been told I need £1m in savings which is bollocks as my retirement pot is a tenth of that, but our outgoings will be virtually nill. Plus we are looking at working a few days a week while here. Wendys Pension would pay all the bills even now (excluding Mortgage which would be paid off anyway).

I am firmly of the opinion that most experts Follow the govt line which is don't retire till you are 67 because we want you to keep paying taxes and not claim your pensions until its too late and then you only get back 10% of what you've paid in before you both pop your clogs!

[LOTUSMAN33]

Kimbers you need to do what’s right for you, I’ve been to six funerals in the past 4 months with all but one actually drawing on his pension. Life is about happiness not material things so with Sparky on this one.

Sounds like you have a sound enough plan not trying to live beyond your means and doing a bit of part time work you enjoy so respect ✊ 

Advice is always worth having but it needs to be independent and unbiased with no agendas attached.

I am thinking the same thing as you, I’ve been in the management rat race for endless years and always have my trade to fall back on if things get tough. 
Good luck to the future for you both and Cyprus sounds magic 👍🏻
 

Dave  

[Redwing]

I'm in a similar position as you, but thankfully healthy.  I was considering finishing this July, the end of my company's financial year.  I'm 61.  However, since the commencement of that little sh1t Putin's antics, my partner and I have seen £37k wiped off our pensions and investments.  This could easily get worse and certainly will not be re-bounding any time soon.  This, coupled with the increase in the price of everything, of which we ain't seen nothing yet, is making me think of hanging on for another year, maybe.   My point is, tread very carefully. 

[exeterjeep]

When I stopped work some 15 years ago, we sold a large 4 bed house, garaging for 6, on a private estate in Hertfordshire and bought a 3 bed bungalow in Devon (does have stables and 5.6 acres, land for garages etc). As a result had over £230k left over, plus my private pension pot from which I also had my tax free amount. Have a small ish pension. but now get state pension as well, wife now has her state pension plus private plus NHS, so we are comfortably off - but not extravagant spenders (ex cars).

I also knew that I would inherit a sizeable sum when my parents passed away, so was not unduly worried about how big my pension/investments would grow. Really glad we made the move.  I still have high blood pressure, but have lost weight, and am more active doing things round the house/fields/garden....

Did not talk to an IFA or anything, just did it...

[Rambo]

@Kimbers After being made redundant from the chemical/pharma industry 3 times (twice voluntarily and once compulsory) I was punted out to pasture on an "early retirement" package after 30 years at the age of 50. Fortunately I could draw down on these 3 separate occupational pensions immediately and, what with the attendant lump sums, had plenty to live on. I took independent financial advice on this ie do I draw down on these or do I keep them for a rainy day. The simple answer was, "take them now, you could be dead tomorrow !!" So I did.

But what to do at the age of 50 with maybe 20-30 years of life left. I was happy to tick along that summer because England were doing wondrously well vs the Aussies in the Ashes. So I set up as a sole trader and did gardening as a professional business, plus a bit of wheeling and dealing in art buying and selling for the next 16 years until I got my State Pension and am just in the process of winding down my business

To be honest, the "early retirement" thing was the best thing that happened to me. It was quite cathartic. I could afford to change my life as I wanted and when I wanted. No corporate numpty telling me what or what not to do

My personal life has been happier and healthier. Sure, at the age of 67 I have an increased diastolic BP, a slight increase in cholesterol, I take pills for gout etc but I'm still here with a full head if hair, all my own teeth, 2 replacement hips and my 3 Lotus cars.

 If you can afford to pay your mortgage off early without penalty do that too. I was advised to do that by the IFA and paid off my mortgage 17 years early. It saved me a fortune !  

It sounds like you have hobbies and ways of making money - you with selling antique jewellery, your wife with her art. This gives you both a chance to expand your business interests but to increase your quality of life

Of course, I can't tell you what to do as everyone's circumstances are different, but my advice is, assuming you've done the maths, go for it. Life's too short. You won't regret it I can assure you 😉

 

[mdw]

We are curranty trying to do this heading Norfolk way.    Problem we are finding is the selection of propery is not great ( if you want a garage!!).  

We plan to get a buy to let mortgage on our home for 40% of the value and buy outright in Norfolk paying it back over the next 10 years.  Can you keep the home asset and live on the rental income?

[TAR]

Making a mistake with your pension options now could leave you in a poor financial place for a very long time. IFA really is a must in my opinion. Free independent advice is available from https://www.moneyhelper.org.uk/

Don't forget if you get/take more that around £12.5K from your pension pot in a year, you'll start to pay tax.

What about the choice between taking a 25% tax free lump sum and drawdown or leaving the lump sum and taking 25% of each drawdown tax free? With inflation running high, any money in the bank is losing it's value hand over fist at the moment. 

How about combining your pension pots and possibly moving them to another provider, pension options have changed considerably since you would have taken them out. You don't have to take an annuity any more if you don't want to.

If your 'part time' work could cover a more simple lifestyle, it maybe better not to crystallise your pensions straight away.

Real world experience is going to be very dependent on circumstance so what's right for someone else is highly unlikely to be suitable for you.

Do your sums and try to look at all scenarios before diving in. Good luck with whatever decision you make. Health and happiness should drive us all.  

[MPx]

As I said to Andy in a similar thread a while back, I think life is more about having fun than just having material stuff (though that stuff can add to the fun).  But in retirement you need to have all sorts of things you want to do and then make sure you've got enough dosh to cover doing those things.  If you dont have stuff to do, you'd very quickly get bored and need ever more money to find things to distract you from your boredom.  I retired in 2006 and always have more things to do than I can fit in.  Like Keith we sold up in the SE and moved West netting £100k or so while still getting a substantially bigger place.  One "benefit" of a big place is the endless jobs and maintenance required to keep it going ... and as luck would have it I like having endless projects doing the place up....but that pace has to be adjusted to match income/cashflow.

One thing where I'm probably different to most is that I dont regard "mortgage free" as a good thing.  When we peg it I have absolutely no interest in anyone else enjoying my money.  If I could book a date that would be best but given the unknown I'd like to run out of equity soon after I'm 80 or so.  While I know lots of 85+ year olds, I dont know any whose life I envy no matter how rich they are.  So I'm not looking to fund that to any great degree - we'll manage on pension income alone if we manage to survive that long.   We were mortgage free for about a decade, but I thought it daft having significant equity in the house when I'd have more fun spending the money (again!).  Mortgage money has been very cheap for the last 15 years or so - maybe not so going forward.  So having use of £200k costs me £270/mth.  Seems fair....

[exeterjeep]

10 minutes ago, MPx said:

One "benefit" of a big place is the endless jobs and maintenance required to keep it going ..

Agree, we find that, but it is worse during the winter and bad weather as so many things need to be done outdoors. But the winter is often short and the weather is ok for a couple of hours work outside.

So having other interests is a really good idea.

[910Esprit]

Don't 'cash in' any pensions until/unless you know the implications of doing so.   There could possibly be punitive penalties for early withdrawal, or conversely bonus's for leaving them until a certain age.   The fact that wife will have a decent guaranteed pension and you both have hobbies that can generate an income, I'd just do what you want to do!

[Kimbers]

The thing is re: pensions, one is worth £45,000 and when I retire it is showing as getting me an income of £between £87 and £129 a month. In my calculation, apart from being just enough to fill my car once it is going to take me 30 years just to get my money back (at the highest rate they are estimating). So I will be 97 years old AT BEST.

My other pension IF i keep paying in at £350 a month like I do now, will be worth between £260 and £320 a month. From my estimation the pot will be £120400 around meaning again, even at the top rate I will get my money back at 99 years old.

And thats if I continue working 24/7. 

You mustn't forget I didn't start any savings or pension till I was 40 because we had 4 kids, a big mortgage and were paying £500 a month for 5 years to send our daughter through medical university! I couldn't afford a Pension at £30k a year until then.

Everyone keeps spouting the Govt and IFA guidelines "you must save this or that to be able to afford this or that" but what If I don't want to anymore? What if I want to live offgrid, not pay tax or anything? Houseboat comes to mind (and yes we have been looking at one).

In terms of income. I can earn more spending £100,00 that I have in my pensions on a nice Townhouse or Apartment in my fave area of Cyprus than keeping them. For a start in peak season (we always go out peak) I can get £300-500 a week from a Broker, rental wise (they pay to clean & manage etc). Plus we go every year and rent a villa that costs me around £3500 with flights. that saves me £3000 a year after removing the flights. It seems like a no brainer to me!!

When we are too old to travel it will offer up a nice income.

One thing I do know. If I keep working like I have been I won't reach retirement age. Yes things may be a struggle but who's to say I can't Manage on working 2 days a week doing something totally non stressful.

You forget, Our hobbies are earning us £250 a week me and £2000 a weekend Wendy (when she does a show, so lets say £8000 a year plus sales online and Prize money which is already about £5000 a year ontop) and we do those 1 day a week at most!

[C8RKH]

IFAs exist to sell you financial services.

They want you to die at a future date not having reduced the capital value of your pension.

Why?

Because that increases your Inheritance and then gives them the opportunity to advise your offspring/ benefactors and sell them more financial services products.

End of.

They have"rules" to comply with now but basically it's about them selling products for as long as possible.

Re your pensions, remember you can only take out 25% of the value tax free. Anything above that as a lump sum is taxed accordingly. So very quickly your expected £130k may become c£90k. Congrats you just gave the taxman almost a quarter of your pension pot!

[drdoom]

The IFA's we've heard from have wisely and ethically pointed out the need to draw down our wealth over the later decades, and I'm funneling plenty into one Esprit S2 already.

Much of my own experience, and of others' for that matter, echoed in the comments posted here. Time is the most precious asset.

[DJW]

Planned to retire at 55 and hammered money into pension in last 4 years including all, back allowances.  Best bit of advice I was ever given was the true value of your life between 55-65 is worth 4 x that of between 65-75, taking  into account health,  mortality. 
 

So I did 2 things to help model retirement. :-

1) downloaded all bank statements for last year into a spreadsheet and tag group the amounts to house bills, car , etc etc.  From that I established the minimum I needed to live a comfortable life with a more basic car, house and less hols, that I would be happy with. 
 

2)  created a 2nd spreadsheet that totalled up all my pensions, for wife and I , plus savings , plus equity release from downsizing.  From that I modelled what I could “drawdown” from pension each year against my age,  take from savings and also take into account state pension at 67 onwards.  
 

For us personally we wanted a bit more money when younger so front loaded based on following calcs 

- reserve 25% of all pots for contingency 

- between age 55-66 drawdown approx 5% of pension and savings each year

- between age 67-80 drawdown approx 3% of pension and savings each year  

-  basically aim to empty the pots by 80 enjoying life , with 25% reserve in place plus state pension. 
 

it’s a very simple model but works for us, to such an extent that whilst I’m only 53 I retired a month ago as had enough of rat race.  
 

Note this is something that works for us, but may not for others so please do your research and take professional advice if needs be. 
 

Now have dilemma of whether to proceed with June Emira and enjoy for a few months at minimal loss or possibly none, or just bail and enjoy the Plus 2.   Either way enjoying life whilst you can is the most important thing. YOLO. 

Edited March 18 by DJW

[exeterjeep]

When I retired at around 52, I had 31 full years of NI contributions so would have got over the 30 years needed for a full state pension. But when I approached the state pension retirement age of 65 years 11 months 3.5 weeks (as I was in the transition period for those affected by the change from 65 to 66), the NIC years  required had changed to 35. We discussed it and I paid up for 3 of the missing years. So hopefully will live long enough for that to have been the best thing to do. 

[Sparky]

@DJWPretty much what we did!  Spent months towards the end at BA working scenario spreadsheets, and every scenario told me we'd survive.  We jumped, and it's the best decision we ever made.  Tracy's loving it just doing the craft stuff she enjoys, and I've somehow ended up doing more Lotus work than I expected (and shedloads of Lego amongst other hobby stuff), but I'm lovin' it!

Follow the white rabbit; take the red pill.

[SFO]

On 16/03/2022 at 19:41, TAR said:

What about the choice between taking a 25% tax free lump sum and drawdown or leaving the lump sum and taking 25% of each drawdown tax free? With inflation running high, any money in the bank is losing it's value hand over fist at the moment. 

If you don't need the money AND you are below or expect to be below the Lifetime Allowance, best to keep the cash invested within the pension. 

if your pension pots cumulatively exceed or is likely to exceed the Lifetime Allowance, get the tax free sum out of the pensions and reinvest - it doesn't have to sit in a savings account. 

Edited March 18 by SFO

[Sparky]

@Kimbers if the opportunity presents itself, the four of us should get together and talk about this...

[pete]

Hate to think what the bar bill will be. Not sure what I am looking at posts on retirement😜

 

[oneshot]

I retired at 55 with a private pension. I took the 25% and haven't yet had to draw down from the pot. My wife retired after 38 years in teaching so has a decent pension.

[DJW]

My understanding is the 25% tax free part of a private pension is there whether you decide to take as a lump sum, or as part of a regular draw down over the years.  I’ve decided to go latter as unless you need the lump sum, as others state just leave it in pension to hopefully accumulate growth and drawdown when needed.  
 

Edited March 19 by DJW

[pete]

drawdown definitely the way to go.  Haven`t touched mine and it has doubled in 8 years meaning the 25% has also doubled