DH retiring and how to sort money

[Moneyponders]

Posting here for traffic! My DH is going to retire at 55. I totally agree with this decision as his job is extremely stressful.

He will get a lump sum of £60k and £900pm.

I am self employed and he has said he will help me run my business. In my busy periods this will be a good thing. But not necessary as I’ve managed alone for 15 years!

I don’t know how to sort the money though? He currently sends me £1k a month which covers his half of the bills. When he retires (in 2 years) the bills will be lower because the mortgage will be finished. His half of the bills without food will be £300. With food probably £500/£600. I’d feel bad taking £500 of his £900 if he’s helping me. But a lot of the time I actually don’t need help and I’m going to be £1k a month down.

Can’t see the wood for the trees! What do you think? Should I just pay for everything?

He pays the 300 of his half of the bills and then 50% of food. Sit down and work out a good budget between you. Then he can send that at the beginning of the month also.

Don't take his help with the business. It will complicate things and he will feel entitled to your earnings.

You are valid to want to keep finances separate as he is a big spender. I do worry though about his expectations of you funding him.

He will have around 300 a month (I'm guessing), left after bills and food. Is this enough? Not if he is used to a fair amount of online shopping.

I reckon you should be quite strict because he is plenty young enough to get a very low stress job. Even two or three days a week in a shop would be fine to supplement his 900.

Whatever you decide now WILL become the standard and your trap for the next (potentially) 15 years.

What else in your personal life is “the business” paying for, as this sounds like tax evasion to me?

One thing to note OP. On another recent thread the OP's husband had died. She was the second wife and had moved into the home that he already owned. They then had a child together + he had two children from his first marriage. The only will he had made was before his marriage to the second wife and left the house to his children from his first marriage and nothing to his wife. When he died suddenly the current wife found the will and was worried that The second wife was advise that their marriage voided the will made before the marriage therefore she inherited the first £365k ish (cant remember the exact amount). She will also inherit 50% of what was left above this and his kids will get a quarter share of what is remaining. You may want to check where your children stand legally from an inheritance perspective. A marriage, it seems, can invalidate a will.

A lump sum of 60,000 divided by 600 per month is 8.3 years. That's how much time he has to figure out how to generate other income or do other work. He's only 55, he should be able to do other work. Plus he will have that 900 per month coming in. He will be using more resources at home because he will be home all the time. You don't have to have the answer right this minute. There is a cushion.

If you’re not prepared to support him to some extent then he can’t retire. £900pm is not enough. How does he think it will work? Presumably he knows you are unwilling to pay more?

My OH was in the same position, but didn't take the lump sum, but added it to his pension-bringing it to around £1100 a month. We are very frugal, but this amount is stretched since the huge increases in power and food costs, it's definitely not viable until your mortgage is paid off- expecting to still have £3000 a month to spend is expecting an awful lot TBH. When your DH retires it absolutely normal to be down on the deal. Definitely don't include ANY inheritance chickens-there could easily be nothing, or be so far down the line it's not relevant.
You have to decide, is the health of your husband or having £3000 a month to spend more important?

Exactly, if he is retiring fairly young surely it makes more sense to get the lowest lump sum possible?

You need to sit him down and have a proper heart to heart about this.

him retiring shouldn’t see you out of pocket, in fact you should be better off if the mortgage is paid off by then.

you also need to tell him that your business doesn’t need help, you shouldn’t use it as an excuse to fund him. Ie he helps so you knock off ££’s off his monthly contribution, just no! This will lead to all sorts of issues especially further down the line when you retire

if he wants to retire early he needs a part time job to make up for his loss in earnings or dip into his 60k to cover holidays etc. £900 simply isn’t enough to cover his half of the bills and give him enough to live on.

Sounds like you need to pay him a set 'wage' for when he is needed in your business and employ him strictly on a 'casual' basis and maybe he can find alterative work (if he needs the income) for when he isn't needed by you? You don't say if he has any limitations regarding his skill set and capabilities, but there are various casual careers he can explore such as shop work, cab driving etc. You need to make him aware of your limits in terms of employing him are so that you personally don't suffer too much financially also, and consequently both of you in the long run.

If it's 2 years away he has plenty of time to look into job options if he doesn't feel he can manage on what's left of his pension after making contribution to household bills, though his financial needs depend on how costly his and your lifestyle and leisure activities are - some people can live on less as are very frugal and can make cut backs in grocery shopping. I have relatives who claim they spend a lot less on groceries in retirement as no longer need to do 'big shop' once a week, where food gets wasted if not eaten in time, so worth looking at your outgoings jointly to see where cutbacks can be made in readiness for his retirement - it needn't mean living on the breadline

😀I am sure things will work out once you have your finances sorted, and he will be more content and happier without his current work stressors and in turn will be a bigger support to you in life, which will be good for both your morale.

I must confess, I am in similar position to your DH, will retire in 1 week's time at age 58 after 41 years of work (past 5 years been stressed and miserable) and I cannot wait. My DH will need to continue working for 2-3 years. We have discussed our finances leading up to this many times and we are confident we can manage household/leisure costs plus save a healthy amount still (due to mortgage finishing). I wish you both the best of luck!

If he’s been paying towards the mortgage it’s no longer just your property. Tbh you sound a bit money grabbing! Why should he still pay £1k when there’s no mortgage? Are you wanting to make a profit out of him! What are your expectations when he inherits?

He needs to use some of his £60k lump sum to buy an annuity to take him just up to he will get state pension. On the Legal & General pension annuity calculator he could invest £45 k over a 10 year annuity from 57 to 67 and he'd get £5325 pa which works out at £443 per month. If he added this to his £900 he'd have £1343 per month but remember he'd pay tax on some of this money.

He needs a part time job to get him out of the house and to earn himself extra pocket money. Make itvclear he isn't adding value to your business if he's helping when its not required. You don't want an unemployed husband lolling anout all day getting on your nerves

Yes, it's his parent. Seriously wealthy.

I actually don't understand Annuities. Is the capital at risk?

Can you employ him and pay him up to his tax free limit? You don’t need to register as an employer for that level of pay, just use expenses and it will save you some tax, paying him £1770 will save you £500 in tax / NI.
DH used to employ me at £5k as per the above to use up my tax allowance and now is my ‘official’ employer paying me £7k so I can get NI credits, is your DH fully up to date with his NI for state pension?

OK.

Firstly, thanks but no thanks to the offer of supporting your business. You will regret it if you don’t take this advice.

Secondly, if he has time and energy to spare for working for you, he can just as easily work for someone else PT.

My friend retired from MD role and delivers parcels part time. Gives him spending money for his golf and lovely holidays.

You cant use a TFLS to buy an annuity, it has to come from crystallised funds, which a DB pension obviously doesn’t have.
He could set up a Gilt ladder over a few years to give him income but whether it would pay more than a cash isa or a money market fund within a S&S isa is debatable.

He is able to take advantage of the starter savings rate so a fixed term savings product might be better, on £60k he’d be well within the starter rate, he’d get £2800 interest at 4.75%. My 212 ISA gives me 4.5%

What is TFLS? Have googled but no joy..

Tax free lump sum, or sometimes called PCLS ( pension commencement lump sum).
In a DC pension ( pot of money/investments) if you take all of the 25% as a tfls, what’s left behind is known as Crystallised, as in there is no more tax free cash to be had, even if the amount doubled over a few years.
DB pensions are different, there is no “pot’ , you simply get a lump sum and a guaranteed income.

So why do you approve of him retiring? If the shoe were on the other foot you would currently be having your arse handed to you on a plate frankly.

Well he won't be paying you £1000 a month but you won't have a mortgage.

This

Apologies if someone has already said this, but I have read all your posts and don't see it being addressed.

I don't understand how you'll be £1,000 down.

He contributes £1,000 for half the bills, presumably you do that too. So £2,000 total.

The bills will be going down to £500/£600 per month. So £1,200 total.

If he then contributes, as you suggested, £300, that leaves £900 to be paid - which is less than you are currently paying.

How are you going to be down £1,000?

The capital gets used to pay you the monthly income. If he invested £45k that money would pay him the monthly rate. He would still keep £15k of his lump sum for whatever he wants to spend it on. If he did the 10 year annuity at 57 it would pay him that regular money every month until he was 67 and could claim his state pension. It would be a guaranteed amount he'd have every month for 10 years. It would enable him to live for 10 years without having the stress of working. He could possibly decide to help you when you were busy or maybe get a part time job if and when he became bored or needed too. The thing is if he retires on only £900 a month he won't be able to afford to do anything much. Eg go to the cinema, bowling, a day trip out, lunch out, holidays all cost money he won't have so it won't be much of a retirement. I retired at from teaching at 57, last September DH retired at 60. I have my Teachers Pension of a little over £800 pcm plus an annuity of almost £400 pcm up until I'm 67 and a btl income of £900 pcm. DH gets £1580 pension plus an annuity of ££260 pcm for life and income from btl of £200 pcm. We will both have to wait until 67 for state pension but we only retired when we were certain we'd have enough to live on until state pension kicks in. There's not much point in being retired if you can't enjoy yourselves. If your DH carried on working until he was 60 he'd get a higher work pension and a higher lump sum.

Your DH cannot afford to retire without significantly impacting your joint quality of life. You will become the sole breadwinner at an age where there is a high risk of unexpected health changes. Your ability to work or live independently can change in a heart beat.

What your DH wants to do is at odds with creating financial security. There are lots of seasonal and/or contract jobs with significantly less stress, which will allow him to pull his financial weight and enjoy the extended holidays you would like to take.