Budgeting with no pension

[Minxy]

We retired early - hubby at 51 in Dec 2009 and me at 48 in 2011 (no kids to worry about). The key for us was planning and reviewing our circumstances as well as deciding what money we actually NEEDED to live on rather than 'assuming' it was what we were earning. This is the background to what we did/how we came to leave early.

We had been working towards it since 2003 as we had intended originally to sell our current home and downsize to release some capital and then move to France (we were taking French lessons in preparation!). During that period we decided not to go to France to live so instead bought a smaller bungalow in the UK at Easter 2006 which we were planning on moving to later in the year and at the same time leaving work, but in the meantime rented it out in the interim to cover the mortgage which we'd taken out on our main home to buy it, but due to the UK financial crisis which then developed, we couldn't sell our main home so we just stayed as we were with our new bungalow rented out until things improved. We also decided to keep working for a bit longer and keep saving ... then the state pension ages were pratted around with too which we hadn't foreseen!

In 2009 hubby's job was changing - going more computerised so the likelihood was that in the not too distant future he'd end up having to move to another, not a prospect he was happy about (they never made anyone redundant). So, whilst on holiday in August 2009 we had a chat one rainy day and went over our finances at which point we decided there wasn't any point in us continuing to keep working just to keep topping up the piggy bank and in effect earning money to leave to others in the future! Financially we felt we'd be okay - we had sufficient savings to last up to and beyond the time when hubby could start to draw a work pension (at 60) that would be more than we normally spend each year anyway; we'd still have some savings too; we could always sell our home and move to the other bungalow to release money if needed in the future, plus I'd be able to then take my reduced work pension 5 years after him - so we decided to go for it!

One thing that we hadn't included in our figures though was any other funds we might get. We were aware that at work they had a standard severance package available for those who met the criteria so thought it worth seeing if they'd agree to 'pay hubby off'. After going over everything once home, he spoke to his section Director ran his idea past her - to develop the computerised system so it could in effect make him superfluous and if they would consider a severance for him. Fortunately the powers that be saw the benefit of this for themselves so agreed and he spent from September until Christmas developing the system and training staff to use it.

I, for various reasons (long story) stayed on for another 18 months and in July 2011, just before I was about to hand my notice in, they announced that there was a general severance scheme being rolled out ... I immediately applied as by this time due to what had been going on over the years I was well and truly fed up and wanted out. I was on holiday in France when the decisions as to who had been approved came out and the Assistant Director rang me to let me know the outcome ... fortunately I got it ... as I was gonna go anyway this was a great 'leaving present' ... ecstatic does NOT adequately relay how I felt!!! Although I did stay on until December in order to get things sorted/handover jobs etc and settle in the new acting Director who was starting in September (the Director had left on ill-health grounds) by Christmas 2011 I was finally free! Yaaaaaaaaaaaaay!!!!!

Our getting the severance payments from work were unexpected bonuses and by leaving early it will mean reduced work pensions as we won't have done the maximum number of years, but we can take them at 60 with no penalty which is good but not so with the state pension ... with their being a 5 year difference between us it used to be perfect for us both getting the state pension at the same time, ie 65 for him and 60 for me ... until they changed it! I tell him that's why I married him originally!

Anyway, I can't believe I've been left now for nearly 4 years, and him nearly 6 ... it's flown by! It used to fly by at work too but at least now we don't have the pressure/stress etc that we did as they weren't easy jobs by any means!

So, if you can FINANCIALLY afford to do it then I would give serious consideration to leaving earlier if possible ... you don't need as much money when you're retired although you do have to remember to include more for such things as extra heating in winter as you'll be at home.

 

[DBK]

Just as a counter to too much optimism remember the ogre of inflation. We've lived without it for perhaps so long memories of what double digit inflation can do to savings and pensions has been forgotten.

There were legions who retired to Spain and now find they are on the breadline and not enjoying life quite as much as they had hoped.

The only certainty* is any pension you might have wont keep pace with inflation, your spending power will be slowly eroded. The higher the rate of inflation the sooner this will happen.

*Apart that is for the other certainty - you're a long time dead and if you want to and can afford to get away and travel, go for it!

 

[TUCANO]

Sandra,

WE had plans and a budget, Kay died, I still have a budget and I am STILL planning

Norman.

 

[ceejayt]

I plan that the last cheque I write will be to the undertaker - and it will bounce. Tough calculation though.

As mentioned above - do not rule out inflation and the compounding effect it will have on your finances. At just 2% per annum, something costing £1 today will cost £1.45 in 20 years and at 3% would be £1.75. The Old Age Pension may have a triple lock (for now) but annuities generally do not unless specifically provided for so the value of your money will reduce substantially.

 

[Spidey]

We would sell up and retire now at 53, but have a 15 year old still in school. So not much point really as we are tied to the next 4 years of school. So our plan is to sell up release money and enjoy life in 4 years. We will but a smaller house in a cheaper location. Not to worried about money we don't have extravagent tastes.

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[Wombles]

After illness & family bereavements we decided that life really is too short. We worked out that if we downsize & use the money released to top up our early retirement private pensions (not in themselves enough to live on) then that should hopefully last until then topped up by our state pensions. We will always be on a low income now but have done all we can for our son who will be off to uni next year - hopefully he is all set to make his own money & not rely on any inheritance. Would rather use the money that we have earned to enjoy this stage of our life rather than it all go on care home fees... seen my grandparents go without, work & save hard all their lives only to have to spend all their savings on care.

 

[Wombles]

On a lighter note have to add that reading about all the Funsters lives on here did influence our decision & made us realise that, after a lifetime of caring for & trying to please others, it is ok to grab a bit of life for ourselves while we still can

 

[Chockswahay]

Plan to live longer than the national average
In reality your expenses will probably be higher than expected and that your planned income will be less than you hoped for

Wow! There's a reality check! aint that the brutal truth

 

[Gellyneck]

We all live too long or die too soon.
The best advice ever is DO IT NOW.

Don't you dare, Sandra @irnbru, pop your clogs NOW! Just because everything thing is free in the hereafter you don't want to be thinking about giving up the day job just yet!

For you the solution is dead (pardon the pun) easy. 90 year old, dog loving multi-millionaire (billionaire is just being greedy!) with a serious medical condition. Oh, and his older (or maybe younger?) brother for Mum!

 

[GJH]

@burtspieeater how can you post if you are a "Read only" funster??

It was the last of his 5 free posts

And then our esteemed leaders will dump on you from a great height and change the pension rules making your pension pot pretty much worthless.
It seems the government want you to invest in your retirement but don't want you to benefit by it.

I'm doing OK so far

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[Judge Mental]

That's what happened to my sister, put all her money away "for a rainy day", then dropped down dead at 64, not even having time to enjoy herself as she could have done, we now live each day as it comes, sod tomorrow, and if we are skint when we die, somebody will bury us, I won't care anyway.

or the people who wait till the eleventh hour to start living and pop their clogs at ten oclock....

 

[The Wino]

Its very difficult calculation for those of us without a final salary pension scheme we have saved an amount that would traditionally have provided a reasonable annuity but with rates the way they are it woldn.t go far

 

[DuxDeluxe]

After illness & family bereavements we decided that life really is too short. We worked out that if we downsize & use the money released to top up our early retirement private pensions (not in themselves enough to live on) then that should hopefully last until then topped up by our state pensions. We will always be on a low income now but have done all we can for our son who will be off to uni next year - hopefully he is all set to make his own money & not rely on any inheritance. Would rather use the money that we have earned to enjoy this stage of our life rather than it all go on care home fees... seen my grandparents go without, work & save hard all their lives only to have to spend all their savings on care.

Well, that sounds a bit familiar. To cut a long story short, my job, although very successful, simply became too stressful and I negotiated an early departure. Pension reduced but had my naval pension (both final salary) and Dawn's pension. By cashing in the tax free 25% and using that to top up until I'm 65, we are reasonably comfortable. At 65 and just after, I have another pension maturing plus the state pension. The house equity is the kids inheritance and both our investments will fund enjoying retirement.

Being better off than most makes me feel a bit guilty but then think of the massively stressful job that led to it, and the hard work over the last 45 years.

 

[buttons]

Well, that sounds a bit familiar. To cut a long story short, my job, although very successful, simply became too stressful and I negotiated an early departure. Pension reduced but had my naval pension (both final salary) and Dawn's pension. By cashing in the tax free 25% and using that to top up until I'm 65, we are reasonably comfortable. At 65 and just after, I have another pension maturing plus the state pension. The house equity is the kids inheritance and both our investments will fund enjoying retirement.

Being better off than most makes me feel a bit guilty but then think of the massively stressful job that led to it, and the hard work over the last 45 years.

You could be just the sort of candidate that George is eyeing up for means tested old age pensions.

 

[DuxDeluxe]

You could be just the sort of candidate that George is eyeing up for means tested old age pensions.

It already has been. Despite paying NI all my life (voluntary when working overseas) my new flat rate all singing, all dancing state pension of £140 a week when I collect it is actually worth £111 a week...............

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[gus-lopez]

It already has been. Despite paying NI all my life (voluntary when working overseas) my new flat rate all singing, all dancing state pension of £140 a week when I collect it is actually worth £111 a week...............

Yes, a lot of people are finding that.

 

[buttons]

It already has been. Despite paying NI all my life (voluntary when working overseas) my new flat rate all singing, all dancing state pension of £140 a week when I collect it is actually worth £111 a week...............

You could upset a few funsters, that £140 is more than many OAPs on here get before tax.

 

[GJH]

It already has been. Despite paying NI all my life (voluntary when working overseas) my new flat rate all singing, all dancing state pension of £140 a week when I collect it is actually worth £111 a week...............

Yes, a lot of people are finding that.

Nothing new about that. Those of us paying tax on occupational pensions have always been liable to pay tax on the state pension. It's still a nice bonus of £5k a year though

Means testing of the basic state pension is highly unlikely, not least because it would be so unpopular but also because the cost of doing so would be so high. As I've said before, though, I can easily see that the basic will be restricted and the winter fuel allowance will be scrapped (not sure about the free TV licence now that it is going to come from the BBC's budget). Nobody should be surprised by such measures though as the pension that we are all "entitled to" has never been a guaranteed sum. There were many changes during my working life and there will be many more in the future.

 

[gus-lopez]

You could upset a few funsters, that £140 is more than many OAPs on here get before tax.

Why would they be paying tax ? Isn't the tax free allowance around 10k ?
I certainly won't be paying tax .

 

[GJH]

Why would they be paying tax ? Isn't the tax free allowance around 10k ?
I certainly won't be paying tax .

Don't rise to it. It's his normal tactic.

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[ABZSteve]

I started planning for early retirement after my wife became ill. I was 50 this past July and had planned on packing in work at 55 but after some more thought (i.e. fanancial reasons), decided to move that out to 58. We will be mortgage free by then with enough savings for us to match my salary minus the mortgage payments. To supplement this, at a later date, we plan to sell our house (5 bed detatched) and move in to our "retirement flat" which is just just around the corner from where we live now. We purchased the flat a couple of years ago in preparation for retirement. No drive for MoHo but has private parking on a no-through road which I plan to use. So, all being well, when I am 62 we will sell up and move on. Hopefully, if the finances work out (savings and pensions), we will only be skint when I am 95 . So I guess the answer to the question is planning, although a lot of people don't like that idea, I do. In an attempt to negate inflation, I have based our retirement on my salary but in reality, we will not need that much. If you have no pension, might be an idea to start a decent savings scheme.

 

[buttons]

Why would they be paying tax ? Isn't the tax free allowance around 10k ?
I certainly won't be paying tax .

Correct gl but not many manage on their basic state pension so your state pension will be added to other earnings for tax purposes.

 

[berni109]

No one knows when the grim reaper will come knocking - live for today spend the kids inheritance.
You certainly dont want assets when you are on your last legs.
Where did all those years go bringing up kids, paying mortgages, etc. etc. Nose to the grindstone, 60hr weeks, 4 wks holiday all to make someone else rich.
If you aint completed your bucket list by 75 will you ever tick them all off. (apologies to our older and active members)
Give up work as soon as you possibly can and retire with or without a pension.
Get the state to fund you - just think how much you have contributed over the years and where all that money went.
Its a different take on life - wish i had taken my own advice before being forced into it.
Work out how much you need to maintain or improve you lifestyle - what you can cut out(be ruthless) - and then figure where to find that amount. You might be working for years to come but keep looking for a way out of the rat race.

 

[Bacchus]

This is a very interesting thread.

I have worked for myself for the last twenty five years as an independent contractor, this year I turned down a lucrative six months in favour of "freedom".

I am only(!) 51 can't really afford to retire as such, but my son has finished school, I have investments which cover my basic outgoings so don't have much need of income (at the moment!!), and could re-arrange things (downsize) to be comfortable enough to do the work that I want to rather than the daily grind - I have just finished the first draft of my first novel, I don't expect it to be a best seller or to win the booker prize, but I am already excited about writing the second and would rather be an impecunious writer than a wealthy commuter, or, indeed, the richest man in the graveyard (the males in my family aren't famed for longevity)

One of the things I have looked at is the "pension" which can be accessed from age 55 and annuities. The freeing up of this system is, IMHO the best thing that this government has done; OK they did it in the hope of a tax windfall from people taking out their pension savings to splash on a shiny new MotorHome, but the net result is that we don't HAVE to buy an annuity with any pension savings, and that has to be good. Personally, I think that the annuity is the work of the devil, designed principally to grab your savings when you die and keep them out of the hands of your successors, we can now invest any pension savings how we want, say in a SIPP, and we can draw slightly more than is required to preserve the capital; effectively you need a smaller lump sum because you can run it down to zero when you die instead of preserving (or even growing) it for the pension provider!

If anyone is interested I have created a spreadsheet to see how long your lump sum (from downsizing or elsewhere) might last, so for example a £200000 lump sum would last 37 years if I can invest it at 5% and draw a thousand a month from it, whereas it would only buy an annuity of around £300 a month! I don't think I will live another 37 years, and if I do I probably won't want for much.

The spreadsheet allows you to change the lump sum, the expected interest rate, and the rate of drawing to see what effect it has. It doesn't change how long you live, that's up to you and your god.

I presume I can upload the file, if so I hope that it may be of some interest to others.

 

[Zains Pops]

This is a very interesting thread.

I have worked for myself for the last twenty five years as an independent contractor, this year I turned down a lucrative six months in favour of "freedom".

I am only(!) 51 can't really afford to retire as such, but my son has finished school, I have investments which cover my basic outgoings so don't have much need of income (at the moment!!), and could re-arrange things (downsize) to be comfortable enough to do the work that I want to rather than the daily grind - I have just finished the first draft of my first novel, I don't expect it to be a best seller or to win the booker prize, but I am already excited about writing the second and would rather be an impecunious writer than a wealthy commuter, or, indeed, the richest man in the graveyard (the males in my family aren't famed for longevity)

One of the things I have looked at is the "pension" which can be accessed from age 55 and annuities. The freeing up of this system is, IMHO the best thing that this government has done; OK they did it in the hope of a tax windfall from people taking out their pension savings to splash on a shiny new MotorHome, but the net result is that we don't HAVE to buy an annuity with any pension savings, and that has to be good. Personally, I think that the annuity is the work of the devil, designed principally to grab your savings when you die and keep them out of the hands of your successors, we can now invest any pension savings how we want, say in a SIPP, and we can draw slightly more than is required to preserve the capital; effectively you need a smaller lump sum because you can run it down to zero when you die instead of preserving (or even growing) it for the pension provider!

If anyone is interested I have created a spreadsheet to see how long your lump sum (from downsizing or elsewhere) might last, so for example a £200000 lump sum would last 37 years if I can invest it at 5% and draw a thousand a month from it, whereas it would only buy an annuity of around £300 a month! I don't think I will live another 37 years, and if I do I probably won't want for much.

The spreadsheet allows you to change the lump sum, the expected interest rate, and the rate of drawing to see what effect it has. It doesn't change how long you live, that's up to you and your god.

I presume I can upload the file, if so I hope that it may be of some interest to others.

Interesting spreadsheet, however in today's marketplace achieving 5% returns year on year is no easy ask. 2% is nearer the mark for low risk cash or near cash investments.

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[Deleted34567]

Retirement is not something to aim for.
I was able to afford to retire in my early 40's, have nice house in Spain and off we went. Stood it 6 months and ended up back working here again as I couldn't take not being in the thick of it.
House in Spain now in long term let and a recent health scare has left me taking life much easier and spending prolonged times away in the MH.
Retirement isn't for everyone, certainly not for me.

 

[Judge Mental]

Just as a counter to too much optimism remember the ogre of inflation. We've lived without it for perhaps so long memories of what double digit inflation can do to savings and pensions has been forgotten.

There were legions who retired to Spain and now find they are on the breadline and not enjoying life quite as much as they had hoped.

The only certainty* is any pension you might have wont keep pace with inflation, your spending power will be slowly eroded. The higher the rate of inflation the sooner this will happen.

*Apart that is for the other certainty - you're a long time dead and if you want to and can afford to get away and travel, go for it!

We have been in a period of low inflation so long people forget how devastating it can be. Pundits are saying we are nearer the next crash then away from the last one.

Well, that sounds a bit familiar. To cut a long story short, my job, although very successful, simply became too stressful and I negotiated an early departure. Pension reduced but had my naval pension (both final salary) and Dawn's pension. By cashing in the tax free 25% and using that to top up until I'm 65, we are reasonably comfortable. At 65 and just after, I have another pension maturing plus the state pension. The house equity is the kids inheritance and both our investments will fund enjoying retirement.

Being better off than most makes me feel a bit guilty but then think of the massively stressful job that led to it, and the hard work over the last 45 years.

Many around the world work real hard their whole life simply to eat......
Count your blessings!

 

[Bacchus]

Interesting spreadsheet, however in today's marketplace achieving 5% returns year on year is no easy ask. 2% is nearer the mark for low risk cash or near cash investments.

2% would be 'zero risk high street' - you can get 3% on up to sixty grand (if you have a partner) from Santander, but the point of the spreadsheet is just that; change the interest rate to 2% and £200k would still last 20 years drawing £12,000 pa, if you're 65 that might be long enough!

My father only made 65 and my grandfather 55, so I am not planning on working in somebody else's office until I'm 68; I might not make any money writing, but it is still work and I can do it until they nail down the lid or I lose my last marble, in either case I shan't be troubled by lack of money

 

[Cat53]

Don't know. But enjoy it while you can. Dad died at 69. Mum went at 87 ( dementia) husband crippled from car crash at 44....f**k it. Enough said, enough, stuff tomorrow, it's now that counts.

 

[Bacchus]

In the strict interest of balance, I would like to add that my mother is 92 next birthday, is deaf and losing her sight to macular degeneration, but otherwise is as fit as a butcher's dog, lives on her own, and does the telegraph crossword every day. She only gave up her (golf GTi) about five years ago, for a while she was entitled to drive it AND carry a white stick! She has drawn 2/3 of my father's work pension since he died 28 years ago, so despite dying young, he looked after her very well.

I hope to take after her...

Plan for the future, live for the day. (I might make this my tag-line...)

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