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post #1 of 42 (permalink) Old 11-04-2016, 22:20 Thread Starter
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early retirement questions

I've got it in my head that I'd like to pack in work and retire 5 years early and I'd like your input to either help me go for it, or to hold on a while longer. Just recently several friends and associates around my age have not managed to reach retirement age, and I'd like to cut loose while I still have a chance, then mosey around in the MH on an extended holiday (I'll need to sell that to er indoors yet )

Am I right in thinking that my future state pension entitlement is determined by how many years I've been paying my National Insurance, and that to leave early and not continue to pay in would reduce the value? If so, is it possible to continue to pay in monthly despite not working?

I've done my calculations as to my normal monthly outgoings are likely to be, Gas, Lecky, Water, Council Tax , TV, Food, Car, MH, tax, insurance, fuel, servicing etc. etc. so I've a good idea how much I will spend of my existing personal pension from a previous employment, and then an idea of how much to use of my savings. We have recently overhauled the house, doors, windows, kitchen, carpets, and have no intention of selling, letting or moving.

Please let me know what I'm not considering, pitfalls, other concerns. What have I missed?

thanks

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post #2 of 42 (permalink) Old 11-04-2016, 22:38
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Your standard of living is the best way to calculate this.

Will you be able to afford to live to the same standard on the private and state income you will collect if you retire early.The bills do not get any less.

If you think that stopping working will mean cheaper living then think again, how will you spend your time while not working, what will that cost compared to working costs.

Then again, If you work for another 5 years what improvement will that make to your retirement income in 2021.

You should make the assumption that you will have to consider downsizing at some time in the future. dont leave it so late that it is a problem.

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post #3 of 42 (permalink) Old 11-04-2016, 22:44
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NI contributions is one factor, another is the impact of being contracted out to company schemes, more details here....

https://www.gov.uk/new-state-pension/how-its-calculated

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https://www.tax.service.gov.uk/checkmystatepension

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post #4 of 42 (permalink) Old 11-04-2016, 22:47
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As I understand it once you have the minimum required years of contributions any further contributions don't get you any more pension.

I retired at 50 with 30+ years of contributions and was offered the chance to make "voluntary" contributions to buy added years "I needed" to get a full pension.

I decided not to bother and in the intervening years before I qualified for my pension the number of years "I needed" was reduced to less than I already had in hand, so if I had paid for extra years it would have just been wasted.

And it isn't your current standard of living that matters, it's the standard of living you would be content with.
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post #5 of 42 (permalink) Old 11-04-2016, 23:32
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Spot on Stanner

There can be a major reduction in living expenses once you stop going to work

No more dry cleaning of business suits and buying work clothes/shoes etc in general

No fuel to drive to work (or Train Fares - I was paying >4k pa)

No Work lunches to buy

No having to eat out because you are knackered when you get home and can't be bothered cooking...

Then you find you have time to tackle the standing costs of services that you "just paid" when working

Phone/Elec/Gas/Sky/AA can all be negotiated down if you have the time to hang on the phone and deal with the slick customer retention types

Before I retired, I created a spreadsheet detailing all my outgoings and all my potential sources of income

I was fortunate to have an Army pension in payment (not huge though...) and a frozen final salary company pension as well as some AVCs that could be taken early with minimal impact

I had been able to put some redundancy money into the company pension (rather than taking a world cruise) so it turned out better than anticipated

We had some rent coming in from my mum's flat (that we basically bought for her off the council for 14k at 60% discount back in the day)

And we had some savings (again, not a lot - but we had some)

Mortgage was paid off - we owed nothing to anyone and I had kept on the mortgage endowments that would have fallen short had I not paid off the mortgage early - so when they matured that was cash in the bank

So I was able to pull together the 25% cash drawdown from the various pension funds and that was (just) enough to buy another flat (in wife's name) to ensure another rent coming in.

Result - Financial independence (although I still do some Traffic Surveys to fund the flights to Aus to see the family there)

And, priceless to me - I don't have to get out of bed until 10 if I like (which I do) - and that costs nothing

Do the homework - work it out and you will be amazed what you actually have available

Enjoy it while you can - we are all a long time dead

Cheers

Dave
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post #6 of 42 (permalink) Old 12-04-2016, 01:22
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Not quite spot on Stanner; one very important point that was missed is that if the OP has been in an employer's Contracted Out pension scheme and has some years of NI at the Contracted out rate, the State Pension under new rules will be somewhat less than the headline figure of 155.65 per week.
If you are short of the 35 years at full NI rate, yes you can buy extra years, either Class 3 contributions, or the special scheme announced a couple of budgets back, the detail of which we don't yet have but will be some time before 2019 I believe.
If you want to do this properly, get yourself across to the MSE forum
http://forums.moneysavingexpert.com/
and put your case on the Pensions and Retirement Planning section. Lots of good advice there from people who seem to live and breathe pensions finance.....
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post #7 of 42 (permalink) Old 12-04-2016, 01:41
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Originally Posted by mgdavid View Post
Not quite spot on Stanner; one very important point that was missed is that if the OP has been in an employer's Contracted Out pension scheme and has some years of NI at the Contracted out rate, the State Pension under new rules will be somewhat less than the headline figure of 155.65 per week.
If you are short of the 35 years at full NI rate, yes you can buy extra years, either Class 3 contributions, or the special scheme announced a couple of budgets back, the detail of which we don't yet have but will be some time before 2019 I believe.
If you want to do this properly, get yourself across to the MSE forum
http://forums.moneysavingexpert.com/
and put your case on the Pensions and Retirement Planning section. Lots of good advice there from people who seem to live and breathe pensions finance.....
I retired 16 years ago and qualified for my (state) pension last year, so I have no idea of the current position in respect of years needed to get what - I would venture to suggest that the way things are going no one has any idea what they will get or what they will need to have to have paid in to get it more than a couple of years ahead.

The pension appears to be the contract one side can re-write anytime they want to and the other side can't do a thing about it.

Luckily in my case they re-wrote it in my favour before re-writing it back again a couple of years later.
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post #8 of 42 (permalink) Old 12-04-2016, 07:50
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hi sprinta

at age 59 i just decided i had had enough partly through health issues and also having friends that took the plunge early

w have no pension till age 66 but do have savings and a little coming in from else were

the house is looked at regularly by my son and in fact they may be moving in for a while while they look for a new house to buy

we are on our second 6 month stint in portugal and feel so much better for it

i would say if you have enough put by go for it and give it a try as they say you only live once and i have seen people the last couple of years that wish they started earlier

you could try it for a year and if funds are getting low then there is allways the option of doing a little work in the summer at home to top up savings a little

over here it seems that you can live well on a little or as some do go out for meals every day when we go out the meals with drink costs about euro 10 each so it is a nice treat


hope something works out for you

barry
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post #9 of 42 (permalink) Old 12-04-2016, 12:24 Thread Starter
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hi sprinta

at age 59 i just decided i had had enough partly through health issues and also having friends that took the plunge early

w have no pension till age 66 but do have savings and a little coming in from else were

the house is looked at regularly by my son and in fact they may be moving in for a while while they look for a new house to buy

we are on our second 6 month stint in portugal and feel so much better for it

i would say if you have enough put by go for it and give it a try as they say you only live once and i have seen people the last couple of years that wish they started earlier

you could try it for a year and if funds are getting low then there is allways the option of doing a little work in the summer at home to top up savings a little

over here it seems that you can live well on a little or as some do go out for meals every day when we go out the meals with drink costs about euro 10 each so it is a nice treat


hope something works out for you

barry
Barry, that sounds good to me. Health issues are a pain, no pun intended, we have savings to work with and a small pension coming in already. Costings I threw together last night seem to make it very workable (barring unforeseen calamity) for a good number of years - that may outlast me . Fortunately we don't cost a lot to run, don't drink or smoke (she does a little), and we have no food fads either. Having said that I'm off on the motorbike for 2 weeks to Austria soon - maybe time to phase that out as it's a very expensive pastime
I hadn't thought about Portugal as an option, but have seen some nice spots on another site, it's sparked more interest. We're off to France for 3 weeks again in September so I'll make some notes as to where to spend more time, for some reason Spain has never seemed to appeal to me, perhaps because I only speak French and German a little.

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post #10 of 42 (permalink) Old 12-04-2016, 12:51
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Watching this thread with interest as I'm in the same position as the OP, except it will only be 4 years early that I'm considering retiring. Have been doing the sums for a while now and just getting to the final stages with the financial adviser. Hopefully in a month or so it'll all be sorted

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