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Thread: How to live off non final salary pension income?

  1. #1
    Craftsman
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    How to live off non final salary pension income?

    Pension question again. I am thinking of early retirement coming up 55.

    No final salary pension but I do have a decent pension fund (defined contribution) plus savings and some rental property. Mathematically I think i can do it.

    However psychologically I am concerned with the transition. Specifically I have been a bit of a saver and not very profligate over the years (watches notwithstanding). However I fear that with no regular income, just savings or drawdown from finite funds, then I might go into financial paranoia mode and try to save for a rainy day for fear of depleting the finite capital pool I have? And end up in self imposed penury.

    If it was a final salary pension then the certainty of the income stream would be comforting. Even if the wealth perspective is little different

    Has anyone faced the same problem and how do you manage a regular income to feel like a reliable pension income that should be enjoyed, without just feeling like you are spending hard fought savings that should be minimized and restricted to the least possible burn rate?

    Probably not a question many folks have experience of but there are a few pension threads here?


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  2. #2
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    Can you maybe find yourself a little part time job, something you enjoy so it's a half way house between work/retirement and the knowledge you have that additional bit of income will keep the mental concerns at bay...After a year or two you may well find moneywise you don't need the extra and can choose to continue if it's enjoyable or not...

    The first couple of years I/we stopped working and lived off income from properties and a couple of other bits and pieces I was religious about tracking everything, with experience it proved we had a pleasant sufficiency so over time I grew more relaxed.

    Best of luck.

  3. #3
    Master mondie's Avatar
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    Good advice from P. There is plenty of speculation that tax rules on pensions will be changing next month but I haven't seen any specifics on what the changes may be. Could be a reduction on contribution allowances or increasing tax on drawdowns, seems the Gov may be leaning towards the latter.

  4. #4
    Whatís the reasoning behind early retirement? At the end of the day if you want the freedom of not working, that will more than likely come at a financial cost. So for me it would be a weigh up of time vs money. If you value your free time more than money, donít sweat it and cut your cloth accordingly. If you like financial freedom, carry on working full or part time. I think youíd be very surprised if you put all your incomings/outgoings into a spreadsheet and potentially made small adjustments that could equate to big savings...
    I personally would like to retire at 55 of which I would hope that a small portfolio of property would provide a decent income to see me through. Out of interest, what type of yearly ďsalaryĒ do you or others think would be a good income to see you through retirement with no worries?

  5. #5
    Master murkeywaters's Avatar
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    I'm a bit off what you would call retirement but did have a think about this the other day, stereotypical retirement is have a monthly income, potter around the garden, meet up with old friends for brunch and drink lots of tea.. not really me.

    55 is not old and I'm sure you would have plenty of plans once retired but you cant beat being busy, keep the mind activated and body moving, maybe its a chance for you to make some money in a sector that really interests you and one that you would enjoy, it would free up your financial concerns and give the mind and body something to do?

  6. #6
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    Factor in the replacement of items that wear out and need replacing.This trickle effect soon adds up.Itís surprising how life changes when retired,try to keep a bit busy ,donít sit in a chair all day.

  7. #7
    Quote Originally Posted by chrisjones3 View Post
    If it was a final salary pension then the certainty of the income stream would be comforting
    Not that I would but you could always buy an annuity?

  8. #8
    I'd be thinking about a part-time career doing something you love, sporting, creative, horology something along those lines. If you're in good health you could have 40+ years of retirement, which at 55 is longer than you'd have worked. That's a long time without work obligations, I think I'd be bored as chuff after a year, especially as you don't sound like the type to go mad on coke and hookers.

  9. #9
    Master pinpull's Avatar
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    How to live off non final salary pension income?

    Iíd be looking at getting my house in order before making any decisions. Financially reduce as much as possible, if not completely, your monthly outgoings such as mortgage(s), loans, credit cards etc, so at least you can consolidate what money you have, or will have, to get you through without those costly regular millstones.

    I realise that if you have more than one property, paying off all mortgages may not be a possibility but worth looking into.

    Just the thing I did before I decided to retire, and I did have existing enjoyable weekend work to carry on with which helped me financially but more importantly, mentally.


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    Last edited by pinpull; 23rd February 2021 at 11:28.

  10. #10
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    Quote Originally Posted by Yeti View Post
    Whatís the reasoning behind early retirement? At the end of the day if you want the freedom of not working, that will more than likely come at a financial cost. So for me it would be a weigh up of time vs money. If you value your free time more than money, donít sweat it and cut your cloth accordingly. If you like financial freedom, carry on working full or part time. I think youíd be very surprised if you put all your incomings/outgoings into a spreadsheet and potentially made small adjustments that could equate to big savings...
    I personally would like to retire at 55 of which I would hope that a small portfolio of property would provide a decent income to see me through. Out of interest, what type of yearly ďsalaryĒ do you or others think would be a good income to see you through retirement with no worries?
    Thanks. The reason for retirement is the relentless intensity of work, all day every day. No vacation day is ever free of meetings/calls. Hugely financially rewarding but pre covid flying 100+ flights a year. So there is lots of money but zero amount of time to do anything other than work. Living away from home (family and wife) since 2014. Last kid has just gone to Uni so would have time to travel, get my motorbike on the road (Triumph Thunderbird 900 that I have not had time to register since bringing it back from an international assignment in 2014). Read a book, something I used to enjoy. Decompress and get a life before I run out of time!

    Like the ideas of something to keep me occupied. Some volunteer work supporting business or local colleges. Or ideally a cheeky non exec role to keep the wolf from the door.

    Have ordered a camper van to spend some time traveling Europe between Uni holidays. Possibly look relocating to Portugal - partly for pension tax reasons.


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  11. #11
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    I've been through this thought process and there were a few stages to me getting comfortable. Firstly, as people have said, I put everything down on a spreadsheet so I had a clear picture of what is going on and what I need to manage vs live comfortably / how I would like. I am pretty organised but was still surprised by the outcome. I then spent quite a bit of time with my IFA planning how the numbers would look if/when I stopped work, major outgoings etc. He was confident my finances were in better shape than I thought (for the same insecurity reasons you highlighted) and helped make sure I was able to generate the income I thought I needed using a mix of investments and by being tax efficient. We included goals like children's education, helping them buy a place, things on my bucket list etc. I then went through it all in detail with my wife so she knew the plan and was bought in.

    I didn't want to stop working but it is very liberating knowing that you can and feeling confident that you will manage well. My industry lends itself well to consultancy work so I am doing that which has taken a considerable amount of pressure off, liberated more free time and gives me flexibility. If I want to work 4 days a week, I can. If I want to do a 3 month road trip, I can. Take the summer off, no problem. That was my goal.

    It took me several passes and about a year to plan it all and get comfortable but it feels good once you are there.

  12. #12
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    Hi Chris,

    I retired late 40s a fair while ago in much the same circumstances - little by way of FS (and too early to access) but a decent bundle of cash. I subsequently sold up in London and moved north, which also helped.

    It does help if you already manage your own investments, or learn to do so, though you have hit the nail on the head problem-wise - no point retiring only to spend the whole time tracking and planning finances and fretting.

    I set an annual budget (with an allowance for hols, repairs, car replacement and obviously watches) and early on tracked assiduously against that. Any residue I didn't roll back into Capital, so I quickly built up a comforting buffer of 'money you ought to have already spent'. You do eventually get used to the idea you're not actually going to run out of money and ease off with the spreadsheets, but a finances/drawdown plan is essential.

    Big market shocks lose you sleep and the temptation is to slash your spend, but saving a few K in one year won't affect a 30+ year retirement plan. Also, you will have lived through so many of these already - black Monday, tech crash, global financial crisis, Brexit, Covid - you are still here and solvent, things recover. Mostly.

    I did think I might get a part-time job, and that is certainly good advice, both to give you a buffer and to occupy you. I found that I was coaching badminton groups, in a running club, going to gym, gardening etc etc, I had less free time than when I was working. Oh, hold on, it is ALL free time!

    I think ultimately it is less about the money and more about how you use and enjoy the time. Good luck!

  13. #13
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    My brother lost two good friends in their 50's around 20 years ago. He gave up his job and opened a market bookstall which gave him an income of around 12k a year (he has no mortgage). He now has the state pension, a private pension of around 3k pa and a small savings pot for emergencies. He lives a low income low outgoing life, doing what he wants and has never been happier.

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  14. #14
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    I retired at 56. I have a decent SIPP pot and a good financial advisor but the main thing that helped me was to create a spreadsheet that calculated a rough and ready cash flow for the next 40 years or so.

    Using our financial history I calculated how much we would need each month in order to maintain a similar lifestyle to when I was working. Of course, that number is a bit of a guess but 3 years later I have to say my assumptions have played out ok. I factored in some bigger purchases (replacing cars, helping kids etc) and worked out what sort of return on investment I'd need to achieve the monthly income without eroding the capital too quickly. My IFA then suggested some investment strategies to deliver those goals.

    At first I was obsessive about looking at the state of the SIPP pot very frequently but I've now come to terms with the fact it's a long-term strategy and day-to-day bumps are not worth thinking about. I see a few guys on the other investment thread who seem to use their SIPP as a day-trading tool. That's not for me.

    For me, a regular income is important (psychologically) so I arranged to get monthly payments from a combination of pension, TFC and cash savings - designed to minimise income tax etc.

    I now realise that I sacrificed a lot of my personal time whilst at work. Won't make that mistake again!

  15. #15
    Master
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    I transferred my FS scheme to a personal pension three years ago and retired at 58.
    I engaged the services of an IFA (I had to for the transfer) and did various cash flow projections which I found very useful and gave me the confidence to retire.
    It does take a bit of getting used to not saving though. Mortgage paid off and no debts but I did need to get my youngest son through University and then all the holidays my wife wants to go on!
    Best thing I ever did though!

  16. #16
    This is quite useful - https://www.which.co.uk/money/pensio...t-awvp49g8uq6l. Don't be afraid to take out what the model suggests each year.

    Don't waste money on ifas.

    Get all your incomings/outgoings on a spreadsheet.

    Do the maths, not difficult really!

  17. #17
    Grand Master sundial's Avatar
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    Quote Originally Posted by chrisjones3 View Post
    Thanks. The reason for retirement is the relentless intensity of work, all day every day. No vacation day is ever free of meetings/calls. Hugely financially rewarding but pre covid flying 100+ flights a year. So there is lots of money but zero amount of time to do anything other than work. Living away from home (family and wife) since 2014. Last kid has just gone to Uni so would have time to travel, get my motorbike on the road (Triumph Thunderbird 900 that I have not had time to register since bringing it back from an international assignment in 2014). Read a book, something I used to enjoy. Decompress and get a life before I run out of time!

    Like the ideas of something to keep me occupied. Some volunteer work supporting business or local colleges. Or ideally a cheeky non exec role to keep the wolf from the door.

    Have ordered a camper van to spend some time traveling Europe between Uni holidays. Possibly look relocating to Portugal - partly for pension tax reasons.


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    Have you considered consulting an occupational psychologist? A friend is a retired occupational psychologist and he's helped many professionals steer their careers onto more even and rewarding (in every sense of the word) keels ... he specialised in successfully helping totally stressed out NHS consultants ... many of whom who were working far too long hours with their 'golden nugget' private work ... 55 years is 'no age' and you could have many 'much happier' working years ahead of you. You'd be surprised how many professionals / senior executives find themselves in similar situations to your own.

    BW

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  18. #18
    Master Lammylee's Avatar
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    How to live off non final salary pension income?

    I am aiming to go part time when 60 which is realistic for me. Mortgage on home will be paid off, income from a rental flat would be £7K and I have no debt.

    Leaving my private pension until Iím 65 ( I currently put in £5K per annum )and then I wonít work another day in my life ( by then I would have done 49 years gardening and will also sell my share of the company) Iím not waiting for the state pension Ií will probably be dead by then.
    Last edited by Lammylee; 23rd February 2021 at 15:05.

  19. #19
    Grand Master ryanb741's Avatar
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    Correct me if I'm wrong but final salary pensions give a fixed amount each month but you don't have a pot of cash. So if you die your kids get nothing? If so I think a SIPP is better for me as if you had a million quid in it you could take £40k out a year and pretty much keep that £1m stable. Add in state pension etc and job done. And most people on this forum would.be able to get to £1m in a SIPP. If you had £100k in a Sipp at age 30 you could just go index trackers and you'd have a million quid in it by age 64 even if you didn't contribute another penny after the age of 30

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  20. #20
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    Quote Originally Posted by ryanb741 View Post
    Correct me if I'm wrong but final salary pensions give a fixed amount each month but you don't have a pot of cash. So if you die your kids get nothing?
    Basically correct (payments may be indexed too - CPI or RPI). There will almost certainly be a widow/widower's pension and provision for children up to a certain age/full time education but no pot that reverts to your estate, etc..

    Quote Originally Posted by ryanb741 View Post
    If so I think a SIPP is better for me as if you had a million quid in it you could take £40k out a year and pretty much never run out.
    Also some IHT benefits for pension savings.
    Last edited by David_D; 23rd February 2021 at 13:26.

  21. #21
    Quote Originally Posted by ryanb741 View Post
    And most people on this forum would.be able to get to £1m in a SIPP. If you had £100k in a Sipp at age 30 you could just go index trackers and you'd have a million quid in it by age 64 even if you didn't contribute another penny after the age of 30
    Most people donít learn the power of compound growth until it is too late, or theyíve spaffed all their money in their 20ís and donít even have £100k invested by 30 because theyíve either opted out of pension schemes or chose to make only minimum contributions.

    £1m in 34 years isnít going to be quite the same, so best keep contributing.

  22. #22
    Master Yorkshiremadmick's Avatar
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    I took early retirement due to stress. A pittance of a salary, even though it was final salary. I got 15/60ths plus a tiny private pension. The big question you need to ask yourself. What do you need, what can you manage with. We have our own house, mortgage paid at point of retirement. We pay no income tax as weíre below the threshold.
    Iím happy, relaxed, no stress.
    Money isnít my driver.
    Could do with more! Do I need it? No.
    Master of my life.


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  23. #23
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    Quote Originally Posted by ryanb741 View Post
    Correct me if I'm wrong but final salary pensions give a fixed amount each month but you don't have a pot of cash. So if you die your kids get nothing? If so I think a SIPP is better for me as if you had a million quid in it you could take £40k out a year and pretty much keep that £1m stable. Add in state pension etc and job done. And most people on this forum would.be able to get to £1m in a SIPP. If you had £100k in a Sipp at age 30 you could just go index trackers and you'd have a million quid in it by age 64 even if you didn't contribute another penny after the age of 30

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    Lol
    £100K by 30
    Way too busy squandering it till long after that.
    Cars,holidays,nite clubs and ridiculously priced clothes.
    Normal activities for the young.


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  24. #24
    Quote Originally Posted by ryanb741 View Post
    Correct me if I'm wrong but final salary pensions give a fixed amount each month but you don't have a pot of cash. So if you die your kids get nothing? If so I think a SIPP is better for me as if you had a million quid in it you could take £40k out a year and pretty much keep that £1m stable. Add in state pension etc and job done. And most people on this forum would.be able to get to £1m in a SIPP. If you had £100k in a Sipp at age 30 you could just go index trackers and you'd have a million quid in it by age 64 even if you didn't contribute another penny after the age of 30

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    My only final salary pension, from a few years working for one employer, provides a fixed pension and will pay a fixed lump sum upon my death for any named dependents.
    It's just a matter of time...

  25. #25
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    Quote Originally Posted by Hood View Post
    Lol
    £100K by 30
    Way too busy squandering it till long after that.
    Cars,holidays,nite clubs and ridiculously priced clothes.
    Normal activities for the young.


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    Same, I donít know a single person who had 100k in their pension at 30 !

  26. #26
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    Quote Originally Posted by ryanb741 View Post
    Correct me if I'm wrong but final salary pensions give a fixed amount each month but you don't have a pot of cash. So if you die your kids get nothing? If so I think a SIPP is better for me as if you had a million quid in it you could take £40k out a year and pretty much keep that £1m stable. Add in state pension etc and job done. And most people on this forum would.be able to get to £1m in a SIPP. If you had £100k in a Sipp at age 30 you could just go index trackers and you'd have a million quid in it by age 64 even if you didn't contribute another penny after the age of 30

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    But £40k a year probably won't get you very far in 34 years time

  27. #27
    Grand Master ryanb741's Avatar
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    Quote Originally Posted by thegreatdogwood View Post
    But £40k a year probably won't get you very far in 34 years time
    £40k a year in today's money. Based on pot growing 10% a year, less 3% inflation/fees. Net return 7% a year

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  28. #28
    £100k by 30 is insane and hardly anyone will have that. Even if you do have that, what will it have cost you in the grand scheme of things?

    I'm 35 and I've only started taking it seriously in the last 2-3 years. I previously set my pensions to the minimum or opted out entirely and put everything into buying a house when all my mates were buying flats. We're now buying a nice house while all my mates are trying to buy a mid-terrace or the same type of semi we just sold. Couldn't have done that if we were going mental with pension contributions trying to have £100k by 30 instead of over paying the mortgage.

  29. #29
    Quote Originally Posted by Ivan Drago View Post
    Same, I donít know a single person who had 100k in their pension at 30 !
    Unfortunately, in the 80's I saw that only too often (usually around that or more each year), as we were looking at huge pension contributions for professional sportsman - the government had to take some action and introduced pension caps, as things were getting silly, and they were able to access their pensions at a younger age once they retired from their chosen sport!
    It's just a matter of time...

  30. #30
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    Quote Originally Posted by Omegamanic View Post
    My only final salary pension, from a few years working for one employer, provides a fixed pension and will pay a fixed lump sum upon my death for any named dependents.
    Mine is index linked, rises by the previous years inflation ?
    Capped at 5%
    Likewise paying out on death plus 1/2 pension for Mrs.


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  31. #31
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    Quote Originally Posted by ryanb741 View Post
    £40k a year in today's money. Based on pot growing 10% a year, less 3% inflation/fees. Net return 7% a year

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    I certainly wouldn't be assuming 10% p.a average compound growth over the next 34 years...

  32. #32
    Quote Originally Posted by thegreatdogwood View Post
    I certainly wouldn't be assuming 10% p.a average compound growth over the next 34 years...

    Agreed, my pension pot went up by 4% last year, utter waste of time

  33. #33
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    Quote Originally Posted by thegreatdogwood View Post
    I certainly wouldn't be assuming 10% p.a average compound growth over the next 34 years...
    Agree- in retirement mine assumes 4% but being a bit more adventurous 6/7%

  34. #34
    Grand Master ryanb741's Avatar
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    Quote Originally Posted by wileeeeeey View Post

    I'm 35 and I've only started taking it seriously in the last 2-3 years. I previously set my pensions to the minimum or opted out entirely and put everything into buying a house when all my mates were buying flats. We're now buying a nice house while all my mates are trying to buy a mid-terrace or the same type of semi we just sold. Couldn't have done that if we were going mental with pension contributions trying to have £100k by 30 instead of over paying the mortgage.
    Depends on priority. I'm in my 40s and live in a flat out of choice - houses you have to do a lot of work to (gardening), they tend not to be conveniently located for urban centres and so on. High end shopping I mean, not Ealing Broadway etc. Cinemas, wide range of restaurants nearby, Cinemas etc. Heaven for me. Depends on priorities. But what do you do in a big house? Sit in a slightly bigger room? Park an extra car in the double garage you need in order to get anywhere decent. Decide whether leisure will be walk the dog, or pub, or walk the dog then pub? Seems like hell to me but then I'm a city boy.

    In return I could buy a load of watches, fill out a pension as a single earner supporting a family etc. But to be honest it is a British thing that a house is somehow more prestigious than a condominium apartment. My definition of compromise is having to live in a 2nd hand home - and not being the original owner. Each to their own.

    If I won the Euromillions I would spank £50m on an apartment at 1 Hyde Park. That would be my dream home.


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    Last edited by ryanb741; 23rd February 2021 at 17:56.

  35. #35
    Grand Master ryanb741's Avatar
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    Quote Originally Posted by Vanguard View Post
    Agreed, my pension pot went up by 4% last year, utter waste of time
    That's crazy. A tracker would have done a better job.

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  36. #36
    Quote Originally Posted by ryanb741 View Post
    Depends on priority. I'm in my 40s and live in a flat out of choice - houses you have to do a lot of work to (gardening), they tend not to be conveniently located for urban centres and so on. High end shopping I mean, not Ealing Broadway etc. Depends on priorities. But in return I could buy a load of watches, fill out a pension as a single earner supporting a family etc. But to be honest it is a British thing that a house is somehow more prestigious than a condominium apartment. My definition of compromise is having to live in a 2nd hand home - and not being the original owner. Each to their own.



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    Sorry, when I say flats I don't mean all flats. There are obviously flats which cost significantly more than many houses. Two of the properties I sold during my time in estate agency a decade ago which I still think about now are flats and would still be my absolute dream. The main one being a purpose built two bed duplex flat in Hampstead Garden Suburb overlooking the Heath Extension, a few doors down from Jonathan Ross and some Prince of Greece. Beautiful, and a great neighborhood.

    In the real world however and in the true Suburbs on the edge of London where I grew up and went to school the majority will want to go out and buy a flat, sell it for a house, then sell that for a bigger house with a drive/side access etc, moving up the traditional ladder.

    I can assure you the flat you're in with Porsches in the garage aren't the same flats my mates are buying in Leyton, Enfield, Cheshunt, Stevenage, or if they're lucky/trendy, Stoke Newington. I'm talking about an MX5 and you're in a Targa or R8 Spyder.

  37. #37
    Grand Master ryanb741's Avatar
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    Quote Originally Posted by wileeeeeey View Post
    Sorry, when I say flats I don't mean all flats. There are obviously flats which cost significantly more than many houses. Two of the properties I sold during my time in estate agency a decade ago which I still think about now are flats and would still be my absolute dream. The main one being a purpose built two bed duplex flat in Hampstead Garden Suburb overlooking the Heath Extension, a few doors down from Jonathan Ross and some Prince of Greece. Beautiful, and a great neighborhood.

    In the real world however and in the true Suburbs on the edge of London where I grew up and went to school the majority will want to go out and buy a flat, sell it for a house, then sell that for a bigger house with a drive/side access etc, moving up the traditional ladder.

    I can assure you the flat you're in with Porsches in the garage aren't the same flats my mates are buying in Leyton, Enfield, Cheshunt, Stevenage, or if they're lucky/trendy, Stoke Newington. I'm talking about an MX5 and you're in a Targa or R8 Spyder.
    Yeah fair enough. For me it is the location above all. There aren't any houses where I am and if they were I'm sure I couldn't afford one :)

    As it happens we have a house in Thailand plus I'll inherit my mother's house in Poole but I really like apartment living to be honest. Apart from the service charge:(

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  38. #38
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    OP - go to Monevator.com and a new series of articles is being posted about just this (decumulation).

  39. #39
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    Quote Originally Posted by ryanb741 View Post
    Yeah fair enough. For me it is the location above all. There aren't any houses where I am and if they were I'm sure I couldn't afford one :)

    As it happens we have a house in Thailand plus I'll inherit my mother's house in Poole but I really like apartment living to be honest. Apart from the service charge:(

    Sent from my SM-G950F using Tapatalk
    Ideally I'd choose city apartment/flat in winter and a house for the summer.
    One of life's pleasures putting coffee on and a seat outside for breakfast or a beer after work in the sunlight.

  40. #40
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    Quote Originally Posted by ryanb741 View Post
    That's crazy. A tracker would have done a better job.

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    Depends what it was invested in. There are two key variables, risk and return. If you are close to retirement then a low risk solution offering 4% over the year would have been a pretty sensible choice, even if other (higher risk) options would have outperformed with the benefit of hindsight. Why risk a market correction at the last minute when you have accumulated what you need.

    If you are decades away and want to roll the dice with a relatively small pot and many years to recover, why not go all in at higher risk. Two different strategies for two different situations. The skill is matching risk profile to needs and constantly reviewing options. Can't recall the exact stat but something like 95% of the returns over the past 30 years have been made in 1% of the trading days too.

  41. #41
    Quote Originally Posted by Yorkshiremadmick View Post
    I took early retirement due to stress. A pittance of a salary, even though it was final salary. I got 15/60ths plus a tiny private pension. The big question you need to ask yourself. What do you need, what can you manage with. We have our own house, mortgage paid at point of retirement. We pay no income tax as weíre below the threshold.
    Iím happy, relaxed, no stress.
    Money isnít my driver.
    Could do with more! Do I need it? No.
    Master of my life.


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    I am in a pretty similar position to you Mick and the same mentality I think, very poor pension but we don't smoke, don't drink, in normal times we don't go out for fancy meals, no credit cards, no mortgage, decent car only 10 years old, a few nice watches, couple of nice holidays a year in the UK (cruiser Norfolk Broads) and best of all NO STRESS as above would I like more money ? sure we always want more but don't really need more.

    NO STRESS and being reasonably happy is worth a great deal of money.

  42. #42
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    Back to the OPs real issue and that is the mental process for changing from a lifetime of saving and acquiring to a new phase of decumulation. After 40 years of saving and watching a pot increase, it's a very big mental adjustment to switch to watching the pot drain.

    I had plans to retire at 55, then adjusted it to 57 but 6 years later, I still enjoy my job so much, I'm staying on. The furlough/covid effect has meant a lot more time at home on reduced salary but feels like retirement but no drain on the pot as yet. Having stayed in a job I love for nearly 10 years more than I planned to, I am now set to retire in 2 years on full salary. A combo of DB, DC and state pension will net me the same as I get paid. My plan is actually to draw higher than that initially to go on a bender for the first 5-10 years of my retirement then slow down later.

    I've made the mental switch to decumulation, just haven't started it yet.

  43. #43
    Master alfat33's Avatar
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    Quote Originally Posted by thegreatdogwood View Post
    If you are close to retirement then a low risk solution offering 4% over the year would have been a pretty sensible choice, even if other (higher risk) options would have outperformed with the benefit of hindsight.
    As a recent retiree, to me what you say makes a lot of sense. That said, I only partly agree with this statement. You will maybe hope to live 20-30 years in retirement. You donít want to have all your money tied up in safe, low return investments. Maybe better to have some short term liquid funds, plenty of medium term relatively safe stuff and something more speculative for the longer term.

    And remember to spend it early enough on the stuff you want to do :).

  44. #44
    Grand Master Andyg's Avatar
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    For what itís worth. I retired at 56, spend the first 3 years living off my pension and only started drawing my pensions last year (one of which is a very small company pension and second is from my SIPP). I have no mortgage and am debt free.

    Firstly estimate what you think you will spend annually. Include a few luxury items like holidays, car replacement plus give yourself some ďad hoc spendingĒ money.

    Secondly try not to exceed your personal tax allowance by keeping your company pension + taxable drawdown pension within your threshold. Then use your tax free income to increase your income as necessary. This will change again once you start getting OA Pension. In short use savings and tax free pots to reduce your tax liabilities.

    Finally assuming you are sensible you will spend less than you think. Last year I didnít take 50% of my predicted tax Free income as I simply wouldnít have spent it. In theory I could have taken it and paid it back into my pension, but a) HMRC take a very dim view b) I am very close to my LTA number,

    As for the advice about not using an IFA. Stupid IMHO.

    Good luck with whatever you decide, but personally speaking retiring when I did was the best thing I did in the last 18 years.

    Whoever does not know how to hit the nail on the head should be asked not to hit it at all.
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  45. #45
    Craftsman Halitosis's Avatar
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    Very interesting thread as I think I'm a few years behind the OP in terms of approaching retirement (though likely with a more modest financial position).

    As an accountant I love spreadsheets and have everything mapped out with forecasts and cash flows. Counting down the years and hoping to be in a position to retire at 60 (7 years time). I found a book called "Beyond the 4% Rule" quite good, and a strategy that might be appropriate to the OP's concern is to take 4% of the 'pot' in the first year. If the pot has grown by more than that, then your second year's drawdown will be greater and so on. For me the magic figure will be around £40k between the two of us per year (including state pensions when they kick in so drawdown would reduce accordingly).

    On the other hand, my wife tells me I'm far too focussed on the saving and need to 'live for today' a bit more (like she appears to judging by the parcel deliveries!). So I've ordered a counter opinion book called "Die With Zero" which apparently helps the reader to spend it on experiences and memories before getting too old.

    Rather sad, but thinking about retirement is truly the most exciting thing for me these days!

  46. #46
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    Quote Originally Posted by Andyg View Post
    For what itís worth. I retired at 56, spend the first 3 years living off my pension and only started drawing my pensions last year (one of which is a very small company pension and second is from my SIPP). I have no mortgage and am debt free.

    Firstly estimate what you think you will spend annually. Include a few luxury items like holidays, car replacement plus give yourself some ďad hoc spendingĒ money.

    Secondly try not to exceed your personal tax allowance by keeping your company pension + taxable drawdown pension within your threshold. Then use your tax free income to increase your income as necessary. This will change again once you start getting OA Pension. In short use savings and tax free pots to reduce your tax liabilities.

    Finally assuming you are sensible you will spend less than you think. Last year I didnít take 50% of my predicted tax Free income as I simply wouldnít have spent it. In theory I could have taken it and paid it back into my pension, but a) HMRC take a very dim view b) I am very close to my LTA number,

    As for the advice about not using an IFA. Stupid IMHO.

    Good luck with whatever you decide, but personally speaking retiring when I did was the best thing I did in the last 18 years.
    This is me though I make sure I take all of my tax free every year whether I need it or not, if I don't need it I stick it in an ISA so that I have easy tax free access should I need it in the future.
    I pay £2880 a year back into the pension max for a non tax payer) topped up to £3600 by the gov.

  47. #47
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    Quote Originally Posted by broxie View Post
    Back to the OPs real issue and that is the mental process for changing from a lifetime of saving and acquiring to a new phase of decumulation. After 40 years of saving and watching a pot increase, it's a very big mental adjustment to switch to watching the pot drain.

    I had plans to retire at 55, then adjusted it to 57 but 6 years later, I still enjoy my job so much, I'm staying on. The furlough/covid effect has meant a lot more time at home on reduced salary but feels like retirement but no drain on the pot as yet. Having stayed in a job I love for nearly 10 years more than I planned to, I am now set to retire in 2 years on full salary. A combo of DB, DC and state pension will net me the same as I get paid. My plan is actually to draw higher than that initially to go on a bender for the first 5-10 years of my retirement then slow down later.

    I've made the mental switch to decumulation, just haven't started it yet.
    Had to check your job out there when you said you still love working.
    Airline Pilot
    Makes sense. Plenty time away from the Mrs and you get to wear a uniform.

  48. #48
    Grand Master 100thmonkey's Avatar
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    I retired at 46 and worked part time with anything I earned being savings as pension covered bills and living. I thought not working as much would be great but you need a balance so maybe earning just enough to pay the bills and a few thrills might be your best option rather than flogging yourself to Ďbuy stuff you dont need to impress people you dont likeí
    "When You Go Home, Tell Them Of Us And Say,
    For Their Tomorrow, We Gave Our Today"

  49. #49
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    Quote Originally Posted by TheTigerUK View Post
    I am in a pretty similar position to you Mick and the same mentality I think, very poor pension but we don't smoke, don't drink, in normal times we don't go out for fancy meals, no credit cards, no mortgage, decent car only 10 years old, a few nice watches, couple of nice holidays a year in the UK (cruiser Norfolk Broads) and best of all NO STRESS as above would I like more money ? sure we always want more but don't really need more.

    NO STRESS and being reasonably happy is worth a great deal of money.
    Absolutely this was my thought process on getting off the tread mill and away from the rat race.
    Silly as it when my state pension kicks in at 66 (2years time, hopefully) it stands to give me £125/wk
    Thatís a huge lift and will be a great help.
    I know Iíve a few watches I can sell if times are desperate.




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  50. #50
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    Quote Originally Posted by thegreatdogwood View Post
    I certainly wouldn't be assuming 10% p.a average compound growth over the next 34 years...
    I think you need to assess market volatility in determining your average growth rate and fund management costs. 3-4% net growth on a risk rating of 4 is probably reasonable. This means with a reasonable drawdown and a full state pension a £1.25mn pot at 55 years old would mean you run out in your early 90Ēs.


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