Retirement?

[IVFNewbie]

We have no mortgage left to pay, 100K in savings but only around 120K pensions. No kids. We're in our 50s. When could we retire? Not worried about being rich in retirement. Just want to DIY, hobbies like gardening, reading, making music and dog walking- all quite cheap to do.

£120k in a pension pot would only equate to about £5k a year on retirement - about £400 a month. You would be very limited as to what you could do after the payment of your regular bills and food shopping.

Before anyone can really give an answer to that, you really need to get a closer handle on your expenditure - but as @Parker231 says, from what you say so far it's likely that you'll just have enough to be covering essential bills (if that) with little or nothing left over.

Are you both on track for full state pensions ? (you can check your forecast online). Is that private pension split evenly between the two of you ?

You also need to think about how the other would manage financially when the first dies. Unfortunately the saying that 'two can live as cheaply as one' is close to the truth.

Can you downshift your home? Maybe if DIY is your thing, get the maximum for your area, buy another doer-upper in a location where you can do your hobbies?
With such a small joint pension, I'd have considered your house part of the pension pot.

BTW If you are in employment and your health, can you not increase your work pension contributions now your mortgage is paid? I'd have thought you could aim for 60/62, depending on outgoings.

In short, I'd say no.

It'd be an incredibly meager existence if you could do it at all.
What's your current yearly expenditure?

What would you anticipate yearly expenditure to be once you'd finished work?

What rate of return are you currently getting on savings? Is it enough to live on or would you need to chip into the £100K?

Even if your hobbies and activities are quite cheap, life is still expensive with bills, food and transport. All of these things are subject to change and inflation which you need to consider and bake in.

You're not leaving yourself much wiggle room for spending on things that aren't important now but might be in future. You say you're content to just potter and have a simple life but what about if you start getting itchy feet for a big holiday in five years? You won't have the money. Same with things like house renovations - being at home all the time, you might start to dream about a new bathroom but, again, you won't have the money.

You're also not leaving yourself room for unexpected expenses like a huge vet bill, a new boiler, house modifications if one of you becomes disabled.

Me and DP are planning on retiring in our 50s and looking at a minimum savings pot of £1M. We also are content to potter at home and don't plan on an extravagant life.

I am not great at these things but I would say count you house as part of your assets and see if you could live the life you want if you can free up some equity and still buy a nice place to live. I think State pension kcks in at 67 at the moment for people who missed the cut off - so 17 ish years is a while to wait.

Lovely to have this savings but if you are going to have to dip into them regularly they won't last forever.

I am not a fan of lifetime mortgages , really not but if you have no dependents or people you want to pass money on to it might be worth taking some proper financial advice as to whether it would suit you. I am seriously not a fan of them but it is just possible it might suit you - But read the Ts and Cs and small print very carefully if you decide to look at it. (My DFIL did not 😥)

Is the £120k your total retirement pot or are you for example going to downsize and release money?

£120k would give you c.£400 pcm. I personally couldn't live off of that.

120k each or combined?
but either way 😱 that isn’t much I’m afraid…

If you can do 40/60k gross contributions each for a decade or so you could conceivably retire at 60/ 65. Alternatively could you downsize to release equity. However its not clear if you are mortgage free in a £1m home or a £300k home…big difference in options

No. That combination would yield at very best £10,000 a year.

You could downsize and invest some equity. For every £100k you'll get between £5-7,000 a year but this won't be index linked, so the value will fall every year as you are not reinvesting into the pot.

You could work less, but still work and let that £10,000 income subsidise your working hours.

Realistically could you pay your bills and factor in food, running a car, Christmas, visiting family, white goods breaking down, on approx £800 a month. I know I couldn't.

How much do you spend now? And how much will that expenditure change in retirement (eg commuting costs that will go away etc).
State pension won’t kick in until you are 67 so I suspect you’ll need to work until then or close to then unless you can free up some money from downsizing property

It depends on whether your income in retirement reaches an acceptable standard of living for you.

If you both have sufficient contributions to claim a full state pension, is this amount alone, plus some savings for emergencies, sufficient to cover your living and leisure expenses when you reach the state retirement age?

If so, you could use your private pensions and perhaps some of your savings as an income until your state retirement pensions kick in. The majority of your private pensions payments would then likely fall within the tax free personal allowances.

One way to assess if this is feasible is to try living on only this amount for a year and see how you'd manage.

As someone who was fortunate enough to be able to retire at 57 I can tell you that unfortunately, that is nothing like enough.
Even without a mortgage, there are plenty of other bills to cover and with only 100k of savings I would be wanting to at least double that before I was 60 as well as increasing my pension pots and not have to dip into it for day to day expenses.
The state pension (when you eventually get it) will not pay for much more than the basics so to even think of dipping into your private/work pension early and attacking your savings makes no sense at all.
I am all for people retiring early and living their best life (what is good for the goose etc....) but it has to be affordable to ensure you are not impoverished. In your mid 50's you still have the ability to earn & save whereas if you were to retire early and deplete your savings/pensions you may find it difficult to start work again in your 60's.

Not worried about being rich in retirement. Just want to DIY, hobbies like gardening, reading, making music and dog walking- all quite cheap to do.

Believe me, in retirement there is a wide band between being 'rich' and being content with the above activities. Pottering around is all very well but I think you'll find it's not enough to fulfill - you'll want a decent holiday, good quality food and drink, days out, visits here and there, signing up for say an art course, etc., and it all costs money.

Why on earth would you retire at 50 when these are your assets? It costs such a lot to maintain a house even with no mortgage!
Council charge 220 and liable to increase under this gov
110 for gas and electricity
45 for water
Tv sub 48
Internet about 45
That's about 450 a month without house insurance and a tv licence.
What about repairs to things ? Eg washing machine ?
Will you not have a car?

You may find it helpful to look at MSE- Money Saving Expert forum. They have a section on retirement with lots of useful threads. I think as PP say, your first aim is to ensure you have a clear budget which allows not only for the bare essentials, but also for a few what-ifs / emergencies.

You also need to think hard about the state of big things such as - kitchen, bathroom, roof, car, boiler,etc. Do any of them need replacing or are coming to the end of their life ? I would suggest pay for any of those (if needed) before you think about stopping earning.

Assumming that you don't withdraw or use your pension worth £120k until state pension kicks in, you will need to use £100k for to bridge the 17 years gap, without an additional income. I used this: https://www.which.co.uk/money/pensions-and-retirement/options-for-cashing-in-your-pensions/pension-income-drawdown/income-drawdown-calculator-making-your-money-last-ajWVD8L3bN92 and simulate how long your £100k will last if you take £10k/year and the results are below:

"Your results: You can expect to run out of money after year 14 of your retirement. That’s assuming that once you retire, your cash investment grows at an average of 0.50% a year, fixed interest at 4.75% a year and equities at 7.25% a year." - which is quite an optimistic growth.

So, unfortunately OP, I don't think that your current pension fund is sufficient. Especially if this pension pot is meant to cover you and your partner. Please note that the £10k/year for the 14 years does not take into account the inflation. So, £10k/year might be enough ish-for now if you scrimp, but in few years down the line, it will be very tight.

Perhaps, you could work for a few more years to build up the gap between the early retirement and state pension age?

Try the money helper pension calculator which lets you put in your pension pot and it shows you roughly how much income it would give you for the rest of your life. You can then alter it to show how much more or less you get if you increase the age of retirement or contributions.

I second the person above who said you really need to get a handle on likely expenses.

thanks all! House is worth around £600k. I suspect I need to do a few more years yet at work.

DH and I retired in our early 50s OP and live a very contented but extremely frugal life. No mortgage here either. We downsized to release some capital and now live what feels like a very rich life on about £20k a year between us.

We're early 60s now and our days are filled with volunteering, gardening (we grow our own fruit and veg and keep hens), art, craft, walking the dog miles each day, camping in the UK, wild swimming, charity shop and vintage market clothes and furniture, books from the library, mending things. Our biggest expenditure is food.

We live in a part of the world where lots of people come to live a life like we do. There's a lot of trading of skills/labour and bartering. We help a farmer with various seasonal tasks in exchange for our winter logs. We have to chop and transport them.

Things are expensive and you have to be resourceful, learn new skills (UTube). Happier now than I ever was and that moment a PP mentioned about wanting a 'decent holiday' (??) has never kicked in. A cruise or long haul or anywhere we can't take the dog would be our idea of a nightmare. Days out are with a picnic and flask, we are NT members so one expense a year buys a lot of days out. Our van is decrepit but DH has learned to fix it.

We can't keep up with the Joneses....but we don't want to. I can't tell you how key that is to being able to do this.

Could you work out what you spend now, then make any cuts you can. Build in a fund for things like your oven blowing up and see what you need and what you'll have.

We both have trades so for a few months a year we do a little work to make ends meet - we never make enough to pay tax but it keeps us solvent. That might be a halfway house from where you are now to where you want to be. Good luck - in my opinion it's worth the effort.

Oh - should have added that despite other posters saying that the state pension is frugal when we get it it will double our annual income. We will be rich at 67!

I'd say you need to work until you get your State Pension, unless you're planning on downsizing or doing equity release.

DH retired 4 years before State Pension age. He was fortunate enough to have a final salary pension from 20 years employment in a previous career. I also have a smaller final salary pension but I'm still 6 years off State Pension. Our joint income is over £2000pm net and we still need to draw on savings some months (eg when oil tank needs filling) and we don't live a particularly lavish lifestyle.
Once both our State Pensions kick in we'll be well off.

The answer is "not now".

It depends what your outgoings are, what you expect them to be (taking into account the odd inevitable big purchase like car, house repairs etc), if you both have full state pensions, if you can contribute more to your pension between now and retiring, how much £ you could realise with downsizing...

So in basic terms you have £220k. Divide that by the number of years you expect to live off it. At 67 you would get state pension so that can be added on.
I guess you could sell up and release a few more hundred k but that's assuming you can find a suitable home.

You have put fifties, that is a 10 year span but my answer if the same.
This is what we did

Worked out our outgoings to the penny over the last year and then we went from there. We also had a discussion over a number of weeks as to how we wanted to run our retirement and what was an acceptable standard of living. So the plan was for DH to retire in a year but Universities are offering severance deals and he managed to get a good deal, equivalent of a years wages so has recently left.

Our annual expenses last year running one car and with zero housing was 28k. That’s with just me retired so this year will have a good saving on petrol and no parking fees for DH at work but that’s it. We do have DS at home so he does add to bills because of laundry and eats twice as much as me but that was what I would call a comfortable year . Two holidays in the UK a cottage for a week and a campervan hire for a week.