Advice on early retirement - who's done it? (1 Viewer)

[Brains]

Is your calculation based on only withdrawing the potential growth (eg 3.5%) and keeping the £350K invested?
You could take more and reduce the £350k to zero over a 25 year period for example.

Yes.
My calculation is based on keeping the £350k intact and living off the interest indefinitely.

You could of course retire early, ensuring you had about £15k in savings for every year before your state pension kicks in.

£100,000 under the mattress means you could retire at 60 and live on £15k a year until you were 66 at which point you would get about the same amount from the state pension.

 

[Brains]

People putting 4375 per annum from their 20’s , you must think of the privileged few, most youngsters are trying to get up the housing ladder and can’t get access to that kind of money to put away in a pension , and even that is difficult enough for most, plenty of youngsters with a masters degree working in Tesco or Mc D

Correct.
Although remember most companies will match your contribution upto a certain amount, so you may 'only' need to find about 7%

Like others in their 20's I only did about 5% for about 15 years until the mortgage was mostly paid off,
at which point I upped the pension contributions considerably.

 

[Fragle]

A pension pot of £350,000 will give you about £235 a week.
Which is the equivalent of 2 days a week job at minimum wage.
It is also roughly the same amount as the state pension.

If you can survive in the UK on that amount, you are doing well.
Many however end up on the street trying to survive on that amount.

You may have 2 x 90 days on the mainland each year,
But you would never be able to afford to replace the motorhome.
One expensive bill (Vehicle, health, etc) could make you destitute overnight.

Sorry but. Totally incorrect.

 

[Brains]

Sorry but. Totally incorrect.

Which bit?
There are at least 5 statements in the paragraph, I'm happy to correct any errors.

 

[JockandRita]

Apart from choosing to be a Fireman, I never really gave much thought to where I was going in life, nor to the finances, and certainly not thinking of joining a pension scheme at 17.5 years of age, and beyond. What on earth was a pension scheme?
After many years in the LA Fire Service, having transferred my 12 x years of pension rights from the RAF, I was forced into early retirement from the job I loved, due to developing Adult Onset Asthma, a condition often triggered by aspects of Firefighting, and especially the wearing of Breathing Apparatus, (chilled air), as well as other triggers.

Prior to being placed on light duties, I was bringing home anywhere from £1360 to £1960 a month net, back in 2004, depending upon how many days I worked part time on the Trucks and Coaches.
Once declared unfit for operational duties, I was pensioned off, with a total net income of £875 a month.....................with still a mortgage to pay off, which initially frightened the life out of Rita, and was really upsetting for her.
We found that by me not working full time, this reduced my monthly costs dramatically, ie, no Mess fees to pay, no football pools syndicate fees, no Social Club fees, no commuting costs, etc, etc. It all mounted up.
Yes, there was a lump sum commutation, but as we were in limbo without a clue as to what the future held for us, we invested that in a safe low profit scheme, ie, very much risk adverse.

I was advised to visit the Job Centre to sign on for my NI Stamp, not for benefits of any description. Oh boy, what an embarrassing and condescending experience that was, and I vowed never to step inside the place ever again.
I was quickly guaranteed 1 x day a week initially with the Haulage employer, which soon became 2 x days, then 3 x days a week, and I also returned to the Coach employer doing school runs in-between, so things began to look survivable. With the recession of 2008 though, that part time work disappeared dramatically.

Initially the aspect of early retirement looked bleak financially, but for us, it turned out okay in the end, as we just cut our cloth to suit our needs.

To the OP, if you can do the figures (with an excess on top for a bit of slack where needed), and it all looks survivable, then go for it. I wish you luck.

Cheers,

Jock.

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[andyman]

If you start early, ideally in your 20's then it's fairly easy.
The later you start, the harder it gets.
Remember most companies will match your contributions up to a point.

The company I worked for back in the late 80's had a Pensions Advisor from the Norwich come in and do a company wide talk.
The one thing I remember was him saying that by the time we all reached retirement age in the late 2020's (soooo far ahead then) then state pension would be almost worthless as the number of recipients would be substantially greater than the number of contributors.

Therefore unless you want to be begging on the streets in old age, get your own personal pension up and running ASAP.

I followed his advice.
With the benefit of hindsight, he was correct.

Retired at 61, with a smaller pot than your £350000. So far doing fine. We don’t want for anything, it’s all about expectations and what you’re happy with.
I always joke if I can’t buy my clothes from Asda or Sainsbury’s I don’t wear them.
Off to the pub, before I run out of money

 

[Ingwe]

 

[Jewellbags]

I won’t discuss sums but I retired last year at 53 and living on cash and some interest (below the personal tax allowance sum ) , now I’m 55 I get my first pension payment at the end of the month , again trying to minimise tax by taking a monthly staged draw down from my private pension - half of it from my 25% tax free chunk and the other half not exceeding the personal allowance . If the pension grows as it has been over the last 20 years then I should be able to just take the growth and leave the pot for emergencies or for the kids .

The cash I’ve moved to a joint account so we can benefit from 50% of the wife’s tax allowance and put some into ISAs - although should have done that a few years ago . But we will continue to move cash to ISAs now .

Think it’ll work fine and like many on here we spend on what we need now not on what we “want” . Also helps that mrs bags doesn’t do designer clothes , jewellery , fancy meals etc

 

[The Wino]

I won’t discuss sums but I retired last year at 53 and living on cash and some interest (below the personal tax allowance sum ) , now I’m 55 I get my first pension payment at the end of the month , again trying to minimise tax by taking a monthly staged draw down from my private pension - half of it from my 25% tax free chunk and the other half not exceeding the personal allowance . If the pension grows as it has been over the last 20 years then I should be able to just take the growth and leave the pot for emergencies or for the kids .

The cash I’ve moved to a joint account so we can benefit from 50% of the wife’s tax allowance and put some into ISAs - although should have done that a few years ago . But we will continue to move cash to ISAs now .

Think it’ll work fine and like many on here we spend on what we need now not on what we “want” . Also helps that mrs bags doesn’t do designer clothes , jewellery , fancy meals etc

Don't forget you can still put £2880 in a pension every year and get it grossed up as if you were taxpayers even if your not paying tax.

 

[Jewellbags]

Don't forget you can still put £2880 in a pension every year and get it grossed up as if you were taxpayers even if your not paying tax.

But would be as a 25% tax payer ? And I will pay tax on it when I eventually draw from it ?

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[RowleyBirkinQC]

Don't forget you can still put £2880 in a pension every year and get it grossed up as if you were taxpayers even if your not paying tax.

Is that if retired or merely financially inactive (not working) when below pension age?

 

[Saucer]

Is that if retired or merely financially inactive (not working) when below pension age?

It’s anyone who is not earning and so not using their tax free allowance

 

[Saucer]

Cut and paste from Hargreave Lansdowne website ‘If you’re earning less than £3,600, or you’re a non-earner, you might be surprised to learn that you can still pay in up to £2,880 each tax year and the government will automatically add up to £720 (20% tax relief) on top.k

 

[Jo-jo]

But would be as a 25% tax payer ? And I will pay tax on it when I eventually draw from it ?

Yes, if you have no employment income. You'll get 25% tax-free when you eventually draw from it, the rest will be taxed at your marginal rate at the time if you take any out. You may decide to leave the pot for your beneficiaries, which is currently tax-free for them if you die before age 75.
After you've accessed your pension, the rules are different.

Also, if your wife is a non-tax-payer, are you utilising the starting rate for savings?

 

[The Wino]

But would be as a 25% tax payer ? And I will pay tax on it when I eventually draw from it ?

The amount you can pay into a pension depends on earnings not income so for example if you let out a property its income so doesn't count towards what you can put into a pension. It depends on how your money is split in our case we have quite a bit in cash and ISAs some from letting other in pensions. We're better to leave the money in the pensions in fact add to it as we get tax relief on the way in despite us being below the tax threshold and money in a personal pension is exempt from inheritance tax.

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[gus-lopez]

you can still pay in up to £2,880 each tax year and the government will automatically add up to £720 (20% tax relief) on top.k

I really can"t get my head around this? What half wit came up with this idea of giving money to people who aren"t working ? It is the same as "working tax credits" . Neither of which could I do as they do not sit well with me. Like unearned income.

 

[The Wino]

I really can"t get my head around this? What half wit came up with this idea of giving money to people who aren"t working ? It is the same as "working tax credits" . Neither of which could I do as they do not sit well with me. Like unearned income.

I think the idea is that people who earn below the amount to pay tax still have an incentive to put a relatively small amount into a pension every year. It does as you say make no sense but neither does it make sense not to use it.

 

[Yorick]

I think the idea is that people who earn below the amount to pay tax still have an incentive to put a relatively small amount into a pension every year. It does as you say make no sense but neither does it make sense not to use it.

They'll pay tax when they take it out.

 

[bigtwin]

They'll pay tax when they take it out.

Only if the total of all of their income exceeds their personal allowance amount, otherwise they wont pay tax on it.

Ian

 

[Barti Ddu]

They'll pay tax when they take it out.

Yes. Exactly. Tax relief on pension contributions for most people is only really deferring the tax eventually due.

In most circumstances, people taking advantage of the £2880 pension contribution allowance (being made up to £3600 with the 20% tax relief) will not be able to gain much if they have other sources of unearned taxable income (including a state pension) as most of it will be taxed on the way out again at 20%. Frozen tax thresholds have made it even less of an attractive proposition.

Exemption from inheritance tax is one reason to keep using the £2880 allowance as personal pension pots are currently exempt, but so few people are affected by inheritance tax it's mostly a non-issue, but with the change in government taxation rules are rumoured to change to make personal pension pots liable for inheritance tax too.

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[our poppy llll]

Just think you are all going to have to rethink your retirement plans now Labour are in control, the loss of your heating allowance, the raid on your pension funds, the NI that will be paid by pensioners, and all those masks and gloves you’ll need when Labour buy the latest virus from China to kill off all the old folk.
Also, I hope you all can live in your moho’s because they’ll bang up your council tax to pay for them that won’t work or are in hotels at our expense.
Just don’t forget to tell your kids and grand kids that they won’t be getting a inheritance when you pop it, nor do you want them to bang you in an expensive care home, na just get them to turn the gas and electric off and sit you by the window so the hypothermia can get to work faster,,

 

[nicholsong]

The amount you can pay into a pension depends on earnings not income so for example if you let out a property its income so doesn't count towards what you can put into a pension. It depends on how your money is split in our case we have quite a bit in cash and ISAs some from letting other in pensions. We're better to leave the money in the pensions in fact add to it as we get tax relief on the way in despite us being below the tax threshold and money in a personal pension is exempt from inheritance tax.

It seems that you are referring to the rules applying to pension contributions on which you can claim tax relief.

Anyone can give millions to a pension manager.

 

[The Wino]

It seems that you are referring to the rules applying to pension contributions on which you can claim tax relief.

Anyone can give millions to a pension manager.

Yes I was talking about tax relief.

 

[our poppy llll]

Whoo hoo it’s the 8th August Tomorrow! My first state pension payment! So I got my bus pass late June, waited until Sunday 14 July to get on a free bus, in Cromer in the Moho! Buses don’t run on Sunday in Cromer, then went to Scotland, can’t use English bus passes in Scotland, so we got here to Whitby and yesterday whooo hoooo got on a bus, saved £2.00 whoo hoo I’m rich! waited 66 years to get in a free bus and it was packed so we had to stand!
Anyway, my monthly interest is 5x the state pension on several savings accounts. So soon the Tax man will start screaming for money, we want your money, we want your money, we want your money?… I might make em wait, take the £100.00 fine.. for 3 months, I’ll get £3,000 in interest?

 

[Jimbohorlicks]

Just do it. Time is too short.

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[The Wino]

They'll pay tax when they take it out.

It depends on the way the tax thresholds and state pension change. Until recently there was a gap where you could receive a small pension above the standard state pension before paying tax you can also take 25% tax free

 

[nicholsong]

Whoo hoo it’s the 8th August Tomorrow! My first state pension payment! So I got my bus pass late June, waited until Sunday 14 July to get on a free bus, in Cromer in the Moho! Buses don’t run on Sunday in Cromer, then went to Scotland, can’t use English bus passes in Scotland, so we got here to Whitby and yesterday whooo hoooo got on a bus, saved £2.00 whoo hoo I’m rich! waited 66 years to get in a free bus and it was packed so we had to stand!
Anyway, my monthly interest is 5x the state pension on several savings accounts. So soon the Tax man will start screaming for money, we want your money, we want your money, we want your money?… I might make em wait, take the £100.00 fine.. for 3 months, I’ll get £3,000 in interest?

Oh dear, why did you not roll over £20K every year into a Self-Invested ISA in the same investments, and take the interest tax free?

I am not writing this to castigate you, but to educate others into saving in the same way.

I have assiduously every year rolled over my investments into my Self-Invested ISA (originally PEP) and now have all my investments in the ISA free off interest, dividend and Capital Gains Tax.

 

[BouncyBoatFolk]

Oh dear, why did you not roll over £20K every year into a Self-Invested ISA in the same investments, and take the interest tax free?

I am not writing this to castigate you, but to educate others into saving in the same way.

I have assiduously every year rolled over my investments into my Self-Invested ISA (originally PEP) and now have all my investments in the ISA free off interest, dividend and Capital Gains Tax.

For now!!
Mike.

 

[VXman]

Anyway, my monthly interest is 5x the state pension on several savings accounts. So soon the Tax man will start screaming for money, we want your money, we want your money, we want your money?… I might make em wait, take the £100.00 fine.. for 3 months, I’ll get £3,000 in interest?

thats a lot of savings. why is not in an isa?

 

[nicholsong]

For now!!
Mike.

Mike

You might be surprised how one can swiftly move money off-shore at any sniff of a change in rules.

Geoff

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