How would you approach our finances in retirement?

[dietmonkey]

Hi all. Looking for some outside opinions on money, as we approach retirement!

DH is going to retire at 55. I totally support this, as his job is stressful. He will take his pension then, and will receive a lump sum of £60k and £900 per month. This will happen in 2 years time.

I am going to continue with my self employment, as it's done from home and is pretty easy. I earn £2500pm in quiet months, up to £4000 in busy months.

Mortgage will be finished by then, so outgoings will be low - around £600 a month for bills, and say, £500 for food. In addition, I am going to take my pension at the same time, which will pay me £83k lump sum, and £1000pm.

My question is, do I just pay for everything from my income, and let DH keep his £900pm to himself, or, should we continue to split bills down the middle? We have always kept finances separate, as we got together later in life. Also, I should add, I am a saver, whereas he loves to spend, often buying a lot of "stuff" that I would not want to be paying half for.

My fear is that he won't have much left over for holidays etc, if he is paying half of the bills.

We haven't discussed this at all. Crazy, I know! On the one hand, I feel we should both pay, but how can that be fair if my income is so much higher than his?

Maybe I should pay for everything? All being well, he should have a hefty inheritance at some point, maybe I should pay for everything until he gets that? But that could be several years away?

Feel very confused as to the best way forward, and would love some comments from unbiased folks!

DH and I have always combined our money so I am really not sure how I would approach finances in your situation.

I have a few thoughts:

55 seems to me to be very young to totally retire. Does your husband plan on never doing paid employment again. How does he intend to spend his time. What is the plan for the lump sum. He has 12/13 years until State Pension age. How does he intend to fund this.

I don’t mean to badger you or question his decision but these are the questions I would be asking my husband in your situation before I decided how to manage finances.

As I am being nosy, can I ask why you are taking your pension? With an income of £2.5 - 4k per month what are your plans for the £1k per month and the lump sum. You are going to pay a lot of that on tax if you take it whilst still earning.

Thanks for replying! He's retiring at 55 because his job is horrendous. Well paid, but very stressful and after 20 years of it, he's had enough. The shifts are awful times too. He often has to get up at 5am, or work until midnight.

Re my pension, I am eager to get the lump sum into my bank, tbh. That way at least if anything happens to me, my DH or kids can have it. It's a DB pension, so it will never run out.

Even if he retires from that job, there’s nothing stopping him getting another less stressful job to supplement his income…
If he doesn’t want to work at all, I’d get him to contribute something, even if it’s not half. Or get him to put x amount into a joint account to save towards holidays maybe?

If he’s (and you) always wanted split and separate finances then he had to carry on with this, it’s incredibly unfair for you to find his life style choices 100%. In your shoes I would be saying 50/50 on bills but I’d treat him to the occasional nice holiday and not expect anything in return.

He is making a choice to give up his income and it is only right that he accepts his choice has consequences. As he is a spender I would make sure that all bills are spit 50/50. You will have an income and higher savings and so could pay for a larger share of other things. Holidays, new car re-furnishings etc..Only do this when you feel comfortable.

You could easily live 30 to 40 years in retirement. Although those sums seem large now do the maths to get a realistic estimate.

You'll have a massive early retirement factor applied taking your pension early. Why do that if its not needed?

Did you post about this before?

I wouldn’t take your pension now as you’ll lose out significantly. I would also assume your partner will take some other kind of work rather than down tools completely. I would split costs according to proportion of income, broadly -so if you account for 2/3rds income, you pay 2/3rds of the bills. However this doesn’t always work if you want joint savings and expenditure goals - if you’re a saver and want to save money, why would you contribute to him spending on loads of stuff you don’t want to?

I think you need proper advice on taking your pension early. It doesn’t seem the most tax efficient thing to do while you’re still earning.

I wouldn't take yours if you don't need to. Nor his in fact.

You don't mention any savings? Are there none?

Basically you need to work out what your annual outgoings will be in retirement, think for the rest of your life so include things like travelling, car replacement, boiler replacement etc. as well as what you spend day to day. I recommend tracking what you spend now for at least a year.

Then you know your income needs each year. You then need a spreadsheet of what you will have coming in each year and can work out what the gap is and the best way to fill that. Maybe from your income, your DH lump sum for a couple of years, and don't forget your SP kicking in (68?) AND check you both have entitlement to full SP.

I agree, I wouldn’t take your pension now - dropping your joint income to 1900 a month once you retire fully will be a nasty shock. My life insurance runs until I am 65 though, and I have a death in service benefit as well. Do you have life insurance?

If he sticks to not working at all, he’s going to have an income around a quarter/third of yours for now. I would discuss him paying about a third of the bills and food (say around 300 a month) with the expectation that he keeps to his spending from the remainder of his income and aims to keep his lump sum untouched/ideally saves a bit more into it. You’d then be paying 800 a month on general costs and could pay for bigger annual costs like maintenance and holidays (plus more saving) with the remaining 1k to 3k a month, while having about the same 600 for personal spending.

If he gets another job in a couple of years obviously this would all need reviewing.

Oh, and re: how you work finances between you, DH and I operated separately until retirement when I realised it just didn't make sense any more. For tax planning reasons primarily but also because the amount available to us to spend on travel depended on the total amount available. I just couldn't look individually any more.

Does he want to live on that little for ever? He surely can't afford to retire and needs a different job.

Taking a DB pension at 55 is a crazy move if you don’t need the money. Look at the early retirement percentage. It’s horrendous. If you die before your pensionable age your family will receive benefits worth way more than the lump sum would be.

Are you worried about the 25% tax free element going away? Are both pensions index linked?

£600 for bills seems very low for 2 people, council tax, utilities, insurances, cars costs, petrol, subscriptions etc.

On the question of joint finances. If his own income is £900 then you can agree a reasonable spend allowance, say£100 per week and the rest goes to bills. I think 55 is very young to completely stop working so he should be considering some additional work/income.

If one person is still working and another off work/spending money there is likely to be resentment.

I agree with PP that he could still do some sort of work to supplement his income. He is 12 years off his state pension retirement date, and that is a long time.

I would say do it proportionately if your circumstances were more equal and you were both working, however I would not want to fund a 55 year old to sit on their arse all day while I worked my arse off, so keep it at 50/50. If he can't afford it he can get himself a job.

Thanks everyone, some interesting points. Yes, I do want to take the 25% from my DB pension, when I am 58. I'm concerned that the Government might change the rules and stop people from doing this. I could earn good interest from the lump sum too (around £270pm).

DH may get another job, but probably not, as we have plans to travel for maybe 3 months at a time, and no job would give him that much time off. He will help me with my job a little bit.

We both qualify for the full state pension, so even without my job, our household income at that point would be circa £4k a month. And tbh, I think I will definitely stop working at 67 (but who knows!)

We do have savings, mine are significantly larger than his, like I say he is a spender!!

I don’t know much about pensions but I will say this - if you’re still working and he doesn’t plan to get any kind of job, make sure he’s pulling his weight with everything else otherwise you’ll build up resentment.

He currently gives me £1000 a month towards bills and food (which is half). Obviously he can't give me that if he's only getting £900pm from his pension, so when he stops working, I will be getting way less from him (if anything), but by then the bills will be low - around £600pm on utilities, and around £500pm on food.

My DH has a stressful job and is also planning to retire at 55, he doesn't plan to work after this. I will be continuing until 60 myself then will take my DB pension early. I think this is really personal and only you two as a couple can agree the best way forward.

This has been posted before ....

But the pension part will be massively reduced. What a waste when you dont really need it

I know.

What are you after, OP?

lol. How you gonna fund traveling for three months a year on those incomes.

OK I'll bite as our circumstances regarding separate money match yours.

DH retired (was made redundant) at 62. Yes he moaned non-stop about his job so OK then... The proviso was that it would not be at the expense of reducing my/our standard of living. Which meant that he either had to budget carefully and use his redundancy lump sum or dig into his massive inheritance. He mostly chose the latter. Incidentally, the cards may have fallen differently if at that point he'd paid our (joint) mortgage off.
I am younger and have effectively bank rolled our current lifestyle for 30 years, having a decent career, short maternity leaves and paying for reliable childcare, into a pension.
In order to balance the books, I made him pay the council tax, energy bills and car/his own phone which was proportionate to our incomings. As our mortgage is now paid off, I offered to take over the council tax. But I could have taken over everything. However, I see no willingness to take on the management of our home so chores are still at 50/50 which I assume is the downside of what happened as a result of our arrangement.
This is all in the context of wildly divergent approaches to money, work and bringing up children.
People will say that they will do the financial split different or better.
My DH doesn't seem enthusiastic about holidays so we have no joint plans (and 2 adult children at home still).
Deep down I can see how stopping work at 62 was damaging for his self esteem and now 4 years out of the workforce, recruitment practices have changed how to get work exponentially.
As he's aged, his organisational skills have declined, although he was always untidy and chaotic.
I've recently gone down to part-time and taken my non-acturarily reduced DB pension.
Working is still my main source of income (I now have 3 income streams equivalent to working full-time) and this is giving me more choice and agency over my life.

So he’s going to be contributing about 20-25% of your income? I would suggest therefore you split the bills in the same way. If he put in 200 that leaves him a decent amount remaining and you pay more because you earn more. When you stop work it can be a more fifty/fifty split in line with your income