Pleasantly surprised how cheap retirement is..

[Reproician]

Two years ago I was earning £70k and living very nicely on it.

Then stuff happened and I decided to take very early retirement. I have good pensions to come in 5 years' time, but meantime have some casual work which earns £4k pa and investment income of about £12k. I planned to live off savings to fill the gap and budgeted up to £20k pa.

Now, I realise I am very fortunate and I am definitely not claiming poverty. I realise being well set up and then moving to a lower income is entirely different to a lifetime lived on a low income. My mortgage is paid off etc, but I am finding I only need to draw on the saving for one off big purchases. I've drawn £6k altogether in 2 years.

I'm still living a good life. I still spend without thinking to hard on the things I want, I still have a busy social life, I still travel multiple times a year.

Being able to be fully flexible means everything is cheaper. I can at the time of the week/month/year when flights are cheapest etc. And the money I must have been spending on clothes, food, travel for work etc. PlusbI think when you're working hard there's a tendency to spend on "treats" that you don't feel the need for when lofe is.lore relaxed.

Just me and an adult son at home. He pays some keep, but I don't make any profit out of him.

No, I don't either.

I suspect it's more like jealousy

Very simply, most building societies will offer a savings bond which pays about 4.5% (current rates) with no risk at all. So if you had £300k, you’d get back £12k per year. If you have any other pension or work then you would have to pay tax on any amount taking you over approximately £12.5k. Every year you can save a certain amount in an ISA which is tax free but it would take several years to build up to the total amount being tax free. It sounds a huge amount to save but for someone who is an only child it’s the inheritance from selling a fairly normal family home (no IHT).

I expect there are ways to make this amount from a lower capital if you are brave enough to do stocks and shares.

Relying upon interest from a bank account is a losing game. The interest barely matches inflation, so your capital will devalue every year. 10 years of that and your £12k will only be worth £6k. Another 10 years and it will only be worth £3k.

A low cost global tracker fund held within an ISA would almost certainly be a better option.

Whilst I agree a tracker fund would probably work out better, bank interest can also work. Some people's "inflation" is different to others. Things rise in price at different rates - it's not the same rate across all goods/services. Some costs/prices have barely changed in a decade and some have reduced in price.

There is no way under any historical calculations that interest income will beat a low-cost diversified tracker fund over 30-40 years of retirement. Inflation will erode the value of the retirement pot from Day 1. After 30 years, the real value of 12K (assuming it is still 4.5% interest) or 300K will hardly cover living expenses.

OP should see an IFA if she had 300K.

But inflation for unavoidable living costs is much higher.

• Council Tax is rising at 5% per annum in pretty much every area. Wandsworth has just seen a 100% increase.
• Energy bills doubled during the past few years.
• Food inflation has been really high and we're being warned that more is coming.
• Petrol and diesel have shot up due to the current conflict.
• Building materials keep seeing large price increases.
• The minimum wage is increasing, so that pushes up the prices in cafes, pubs and restaurants.

Some items like flat screen TVs might have gotten cheaper, but you can't live on those.

I would strongly advise people in the early stages of retirement to avoid trying to live long-term upon cash savings and interest. That advice would probably change as you approach the end-of-life because you need money on hand and simply don't have time to ride out stock market crashes.

We've been having some work done. If you need £1k for scaffolding (and even one side of a house can exceed that) you £500 for maintenance is not going to paint your windows. Yes getting anything done for you has become very expensive.

Well, bloody good for you! (yes I'm envious and bitter!)

@ThisOldThang

Your first statement is inaccurate - Wandsworth hasn't just had a 100% council tax increase, council tax increases in April, not September. They're threatening to put it up by 94% which would bring it in line with neighbouring boroughs.

I've moved from one council tax area to another, to another. Each time the house I live in has increased band (C to D to E) and each time the tax has decreased despite being in a higher band! The most recent move, to a Wandsworth adjacent borough, has the cheapest council tax of all 3

Well done 👏 not only you took care of your children’s future but also taught them invaluable lesson.

I wish I had started saving/investing in my twenties, but it’s never too late as they say. I am grateful for this thread.

Yes. It does sound a good idea to go for stocks and shares ISAs and more risky investments than secure bank interest from bonds etc because of the inflation argument, but isn't this only the case is you have at least 5 years to invest and better still, 10 years or longer (going on Martin Lewis's recommendations). So if you're in your 40s or younger, do it now. But what if you're in your 60s and may be dead in 10 years? You can't do anything with those gains yourself. Age and health come into it. Of course you could live to 90 plus but you just don't know.

With 300k a mix spreads the risk.

So a third in a 80/20 equity/bonds fund, a third in 40/60 and a third in high interest cash. You can spend the cash and top up annually into cash by rebalancing from the lower risk fund..

This rebalancing is the key and what an IFA would do.

Pension funds automatically rebalance as you get older to de-risk.

Absolutely there is an underlying point often trying to made (which is legitimately that people don't contribute to or give enough attention to their pensions!). I'm a financial coach and we start the conversation by taking someone's spending currently, then working out what will change - mortgage paid off? Downsizing? Upvaluing to a nicer/seaside location? More time for hobbies/travel? Then deduct all the work related expenses and more often than not, people are reassured by the answer that things are more or less on track! It has to be said that it usually banks on continuing to work until State Pension Age, and women (still) see the impact of raising a family with time out/reducing hours etc. Important to have the conversation as a couple obviously too (and make sure you have a minimum of personal provision just in case!)

@Schnapps00 no one should have to work til state pension age!

Actually our brains use simultaneous equations for eg prices of things quite often without realising. Additionally, the brain automatically does calculus and some people use differentiation as a fundamental aspect of their jobs. (The most successful examples of these ‘mathematicians’ are known to us as …. footballers, rugby and netball players.)

Separately, as I commented recently on another thread, it’s sad to say it but we often assume we will live to our parents’ age plus x years for modern medicine.
Sadly, anecdotal observation of our generation contradicts this.

I was similar. I got to 57 and felt burned out after my Mum died and I gave up my job to go and care for her as told she had up to 6 months left and she died 6 weeks later. I felt truly drained and even though they offered me my job back I didn't want it. I had a SIPP I turned into an annuity paid over 10 years until state pension kicked in. I've got under 2 years to go now until I get a full SP. I've also got my lump sum I have not touched yet and put it into a s&s ISA over 2 years. I've got a BTL portfolio I now manage myself instead of paying an EA to do it for me. I don't spend anywhere near what I get coming in and in fact give money to my 3 DC to pay into their pensions out of my income.

Some of us are working at 70.