Retiring very early- what do I need to consider?

[BippityBobbityBoo]

I’m 42 and planning to retire early, probably next year, I earn £40k. My DH is already retired and mortgage is paid off. We will probably downsize and will live off the proceeds, some savings and his small pension. He will get state pension in 5 years and I may do some small jobs to bring income (cleaning/care) My pension pot isn’t very big. What can I do to make sure I have a good pension? Thanks

Thanks for this, it’s easy to get swept away with it all. I will think very carefully, see an IFA and look closely at my pension options. I’m thinking now that a small part time job and a small property or two might be the way forward.

I’ll report back with any progress in case it helps others. You’ve all been really helpful and given me lots to think about, thanks so much x

www.gov.uk/check-state-pension

You may want to look at this blog. This lady and her husband lived on a boat and now have to sell due to health issues with both of them. snittykittys.blogspot.com/

With regards to NI contributions and State Pension - I good some good advice from the Pensions helpline.

I've only paid 32 years contributions (was 31 1/2 but I paid up the other 1/2 year). Originally I'd only needed 29 years but the Government moved the goal posts.

Anyway, the advice given to me was that you can make up the missing years anytime up to 6 months before your state retirement date. Whenever you make up the contribution, you do it at the current year's price. If you intent to go back to work earning enough money to pay NI then don't voluntarily pay contributions now otherwise you might end up paying more than you need to.

I'd definitely recommend a phone call with an advisor (I think it's called Pensionwise) to discuss where you are at contribution wise.

Not true. You need 35 years unless you achieved 30 years before 2016

2 things that you cannot buy

Time - spent together

Your health

@BippityBobbityBoo with respect, although it's an advantage, caring for family members in your own home doesn't prepare you for caring in the community. Vast array of health needs and support and not everyone lives in a lovely clean home with a lovely family helping to support them.

That's brilliant! You can see contributions for each year to check but sounds like you have worked 30 years.

Of course. I just know myself and know I’d enjoy it and be good at it. My MIL
in particular is difficult with two types of Alzheimer’s. I care for her with care and respect and I don’t even like her!

Ha thanks. it was a bit tongue in cheek, you don’t get your NI card til 15 do you so I don’t think I could have been paying it on my little brown envelope cash. Would be interesting to know why the system says I only need five more years of contribution though.

Many people enjoy working, being busy, progressing their career, feeling productive, buying lots of consumer goods, building their earning potential. These are mostly the expectations of our parents, school, work-life and society in general. The idea of being 'successful' is sold to us at a very young age!
Other people sooner or later realise that they dislike the corporate world, value independence, their time and the freedom to take life at a simpler, slower pace.

How is it done? Well, here's a very simplified example...
Suppose you begin work age 20 until age 40. You buy a modest house. Never take on debt other than a mortgage, which you pay off as quickly as possible. You save half of what you earn after the mortgage payments are accounted for and invest it in a stocks and shares portfolio. You also invest as much as possible in a pension (or several pensions).

By the time you reach 40, you own a property outright. You no longer have a mortgage or housing costs. You have no debt. You are used to living on half your salary. You have 20 years worth of savings invested. You have a pension pot.

So from age 40 you live off your savings for 15 years until you can access your pension age 55. Maybe you have a part time job which you enjoy, with minimal flexible hours and very little stress - because you know you are already financially secure. You top up your NI contributions to boost your state pension later in life.

Nobody else is paying for you for up to 60 years - it is a combination of prudent financial self-management, foresight, and a clear vision of which priorities are important to you. And these priorities mostly contradict the prevailing ethos.
It's also a different outlook on the utility of money and it's value. Money - viewed as time, the freedom to make choices and to provide security.

I would not take all your money out of property and put it in a narrowboat.

Keep a property you can live in when narrowboat living becomes too much when you get older.

In fact whatever you do keep a house or flat that you can either be renting out (to find your lifestyle) or living in. Otherwise you will be stuffed if house prices rise (which over the 40 + years you have ahead of you, they will).

You know you can't withdraw your private pension until you are 55?

I would be saving like crazy into your pension because the Govt gives you a free 20% on top of your contributions.

You know you can't withdraw your private pension until you are 55?

It's going up to 57 in 2028 and I think there's a reasonable expectation it will go up again when the state pension age goes up. I would work on 58 if I were the OP.

Personally I think it sounds bonkers! You could still be alive in 50 years time. I totally get the feeling of wanting to enjoy life and not going to a job you hate every day, but surely it would be more sensible to take a few years out now to do what you want, with a view to returning to the workforce on a few years time, possibly to a less stressful part time job which you enjoy more.

I retired at 51 with a £440000 pot on a defined benefit company pension and got a £15,000 per annum with index linking.I am 65 now. Fortunately had some good increases on my pension due to reasonable retail price index rates. I agree with other posts to get independent advice. It’s well worth it. Good luck in your ventures.

At some point, a narrow boat and a camper van are Not going to be suitable housing for a person in their upper 70s. They need warmer conditions, dryer digs, adaptations for disability, lack of steps, walk in showers, etc.

It's great fun when fit and well, but don't sink everything into a boat. They are a bit like cars they depreciate and need upkeep. If you could work it so you rented out a house you could have fun for a few years, but do hire one first, in winter to see how you like it

seekingasimplelife
Love your post. That's exactly what I've been thinking and reading about.

Very much like Financial Independence Retire Early.

What about your PILS ? You said they live with you.

@seekingasimplelife whilst I totally get what you say- it's not quite so simple-- a lot of this is much easier to achieve if you dont have children and have a partner that feels 100% the same way about money . Factor in child care etc and saving half your salary after mortgage costs isn't that simple- and that's presuming you can get the deposit together for a mortgage in the first place- not easy in many more pleasant parts of the country to live (and I don't just mean London). Then you have to factor in partners who may not be in the same ballpark and be more happy with several nice holidays a year, decent car , buying into businesses etc - this is not always obvious until you are basically tied up together moneywise. your plan works way easier with you 100% in control and with no kids or partners to muddy the waters and enough cash on tap when quite young to buy a house.

You can also look at Class 2 NI as you might do some work, self employed from time to time. You can also pay in to pension when you have an earned income and even when you don't have earned income you can pay up to £2880 (£3600 gross once tax relief is claimed by pension provider) to a pension.

Retirement does not mean stopping doing work. From time to time you may want to do something and that may start out being voluntary but become a paid position. It can be surprising what turns up. What does change is that you are in control of when you work, what you do. You don't need to work... you work because you want to. There are times when you don't want to and times when you like having something to do a few hours a week.
Don't make retirement a cliff edge... have a slope, so you reduce work to a level you are happy with.

Good luck - stick with it - it is possible!

@Crikeyalmighty Very true - it isn't simple, and it isn't easy (but it is worthwhile).
I take your point about a partner not being onboard. I think that makes it much trickier, and the logistics of it may prove too difficult to navigate in some respects.
I have done it as a lone parent, without any support from a partner or ex. I didn't have any cash on tap - (I had to sell my first property in negative equity, in the days of 13% mortgage rates).

The financial environment was somewhat different, and there will always be hurdles to overcome. I do think it's possible to start small - focusing on avoiding/clearing debt, building up savings, learning about pensions and investments. Mighty oaks from little acorns as the saying goes... once you decide to make a start it can be surprising where it leads!

@seekingasimplelife Yes in principle I agree with you. To be honest I looked at your post 100% from my angle. I could have done this , but only on my own and either without children or as a single mum. When other adults are involved, I think it gets far harder to control the agenda - and whilst it's often easy to be on the same page early on - people can change -- my H for instance seems to have morphed from quite a bohemian non materialistic 30 year old to a 58 year old who will only live in nice areas, stay in very good hotels, drive a nice car etc- and prioritises this totally over saving or security - although he will inherit a reasonable amount. None of this is down to me- and it has caused arguments too - it's like childbirth- the theory for me of what it would be like - was very different to the reality

Living for twenty years without income terrifies me!

narrow Boats and camper vans are depreciating assets - narrow bots need a lot of maintenance.

I assume you have worked out your living costs - and factored in things you will need on top of the basics - occasional new clothes - family weddings - Christmas presents - holidays - repairs - occasional meals out etc etc. you wit. Get state pension until late sixties - if it exists by then.

I agree a financial advisor is essential. It sounds like you could be very financial vulnerable in your sixties.