Getting nervous about early retirement - anyone else recognise this anxiety?

[PrimRoseLaffington]

Me and DH planning to retire early in a couple of years.

We've been planning it for years and have modelled various scenarios. It'll be OK. We have enough money, and we'll have enough income.
We're not extravagant people - we actually don't need much money at all to live very happily.

But I can't help feeling like I've missed something or that there'll be a massive black hole that'll only become apparent once its too late.

It feels like stepping into the unknown.

Sorry, I'm not sure why I'm posting this.
DH can't understand my anxiety so I guess I'm looking for outside perspectives.

Did anyone else feel this way when heading into early retirement? How did you solve it?

If you have a DC pension then there will always be a risk.

But assuning you are targeting a lifestyle you can tone-down if things go badly wrong then I don't think there's a "magic" thing you are missing - just keep in mind those expensive "one-offs" like a new roof or whatever.

Most of us tend to spend less as we get older.

Thanks so much for replying.

My pension is actually hybrid - DC and DB - so the risk is slightly lessened. We're planning to start taking pensions in our early-60s and rely on income from ISAs until then.

We have maximum PB holdings which we've always seen as the "expensive one-off fund" for retirement - we can dip in and then drip-feed back in if we chose.

It’s completely normal. Before retirement you can spend freely, because you know that money can be replaced. When you retire it is a huge mental shift because you know that that is it, whatever you have got has got to last you forever, and that could be another 50 years! You suddenly become terrified of wasting money because you’ll never have the opportunity to get it back and it could run out.

You see people on here complaining about their parents being tight, and refusing to spend money even when they are very comfortable, and I completely get it from their parent’s perspective. So will they one day.

What made me feel better was to do a budget. Every month I look at how much is in the pot (DC pension) and despite taking a decent (but not extravagant) amount out each year, that pot keeps growing. We are, on paper, worth more now than when we retired 6 years ago. As long as that keeps up, I feel relaxed enough to book a holiday or decorate the bedroom. Once it starts going backwards I will reassess.

@MrsPapillon Thank you for taking the time to reply. You've summed it up so well about money being replaced during work, not so much in retirement.

When you say that you "do a budget", do you mean you figure out how much you're allowed to spend the coming month? Or do you mean you just sit down and see how much money you have, where it is, how it's performing etc?

DH and I have been doing the latter for years. But we've never used our monthly finance sessions as a space for budgeting.

When you say that you "do a budget", do you mean you figure out how much you're allowed to spend the coming month? Or do you mean you just sit down and see how much money you have, where it is, how it's performing etc?

All of that really. We work out a budget at the beginning of the year, then every month I’ll run through the bank statements and work out how much has been spent and where it has gone. So we’ll usually keep to budget in most areas, but overspend in some and underspend in others. I keep a running total of each area. So far this year for example, we’ve overspent a bit on holidays and underspent on home and garden. I can see that overall we have underspent, but that means I can overspend at Christmas a bit.

At the same time I have a quick look at how the investments are performing so there are no shocks. I’m not super strict with it either, it just gives me peace of mind that I won’t wake up one day and realise we’ve lost £200K in investments while I’ve been spending money like Elton John!

Yes I recognise it

you are stepping into the unknown and the world is so fragile

my budget had significant allowances for inflation and disasters and the like

our financial spreadsheet tracks everything so we can see as soon as any deviations occur when and why they occur

and I am aware that part time low paid work would be an option if I need to boost the cash

sometimes you have to leap into the inknown

i am lucky and have a good few friends a little early - they were all concerned and now all day it’s the best thing they ever did

Thank you. This makes so much sense, really sensible approach.

We don't really budget at the moment - we track finances monthly to see how investments are performing but we don't track what we spend in any area of life.

I absolutely agree - life's short and you can't get time back, so I'm keen not to waste a second more than needed on working!

I think it’s very normal. Switching from saver to spender is hard (complete mindset shift). And the loss of the comfort blanket of a regular salary is massive.
If you’ve done the sums you know you’ll be fine, but it is difficult. Trust the process (and yourself!). It’s time to enjoy your hard work, you don’t want to leave all your money for someone else to enjoy.

I think it's also important to continue "saving" through retirement so that you can actually cope with large, one-off expenses. We had to replace our boiler and all the radiators earlier this year, which would have been a massive hit had we not set aside money in anticipation of it (and other things like it).

I retired two years ago next month and haven’t looked back . Two things I’d say , I
am spending more money than ever because I want to see and do everything I’ve wanted to , a feeling of last throw of the dice . Secondly people talk in terms of income but don’t forget a big pot for emergencies , replacing large items ie car , roof etc and for repairs , unexpected medical costs , carers , gardeners , chiropodists, eye care etc everything needs help as we age .

It is a big step, and like you, I was nervous about how we'd cope. Three years down the line we're OK. Learning lessons as we go, but generally it's working well. Covid sort of stopped our business, so we were forced into a decision, which I think was actually helpful for us!

Please may I ask how much people have as an income? And how much you have in an "emergency pot"?

Sorry if that's nosey.

My concern if I was fit and well is what on earth am I going to do every day rather than do I have enough money.

The amounts anyone has an "income" and "savings for emergencies" will be dependent on how much pension savings and other money they have to start with and how frugal or not their retirement lifestyle is. Similarly how much you need to save should be based realistically on what is likely to need to be replaced/repaired during the time you hope to be living off retirement savings. And that should err on the generous side. For many of us it also includes a pot of money for social care when we hit old age or infirmity. What proportion of your retirement pot of money you feel you will be able to put aside for these future expenditures while still funding a lifestyle you are comfortable with is really an individual decision. I'm sure there's some sort of calculator and best advice on this somewhere, but what might work for me and my DH might not be right for you.

Not really helpful but it really depends on your individual circumstances. We have budgeted for a new car every five years, a new boiler in the next five years etc. We’ve recently had a new roof, kitchen and bathrooms so they should be okay for the foreseeable. Any surprises would come out of our current budget, or if it exceeded that we would just have to take it out of our pension pot.

We’re planning on downsizing eventually and if we need care it will cover it. If we don’t end up needing care then the DCs will inherit it one day (I hope!) but in the event of some economic disaster it’s reassuring to know we will have a fall back.

At the moment we’re taking £4K a month income, but with no mortgage we live very comfortably on that (despite the experts saying you need £5K a month for a ‘moderate’ lifestyle). Our bills, cars and food are roughly £2K which leaves £2K a month for discretionary spending - house, leisure, holidays, Christmas and birthdays etc

You know the things you enjoy doing when you’re off work - loads more of that! Pottering round the house and garden, visiting friends and relatives, days out, hobby groups, walks in the park or the countryside, cinema, theatre, nipping out for a coffee, babysitting the little relatives, all kinds of stuff!

I retired early 3 years ago. We have been lucky that the stock market has been very positive since then so although we spent more than planned and withdrew more than planned our overall pots have actually gone up.

I think you need a bigger spreadsheet with more info, that's what gives me confidence all is ok Vs needing to cut back on spending. I feel in control of it.

I have one tracking spending in various categories. I do set an amount for each category that I expect us to spend but it isn't a limit as such, it's for planning purposes. I look at this each month.

The second tracks our pots (DC, ISAs and PBs) I look at this each quarter.

The third has a year by year plan of expected (net)income (from DB and annuities with SP kicking in at the appropriate age), the expected outgoings and thus the expected draw from the pot. I look at this each year.

You might find if you did this now, you might not need to work those last two years, or could spend more than you think!

Without being specific on numbers, our DB and annuities covers our fixed outgoings and usually spends. We withdraw for holidays and other more discretionary spending.

All the best!

Agree with others, you need to sit down and write a list of every single thing you spend your money on. Look at where it goes, and how necessary that expenditure was. Decide whether there are things you would be able to cope without, or where you could reduce outgoings.

For starters, when neither of you are working you will spend far less on petrol or public transport.

On the other hand, we've noticed that when you are at home all day, you use a lot more tea, coffee, milk and toilet rolls!

We have always kept a record of expenditure, we have known our baseline since 1997. It gives confidence in decision making. You need to do that.

We thought long and hard about what we wanted to do with our time and how much it would cost. It’s all about travelling. In the last year we have bought a Motorhome, electric bikes and have been away for many weeks. We haven’t been overseas yet but will be.

We also factored in inflation and interest. It’s all about holding your nerve.We have the absolute Mother of all spreadsheets.

Unless you are going to live in a state of penury why wouldn’t you retire early if you have the luxury of a choice not afforded to everyone.

Thank you so much to everyone who took the time to reply.

This is all so reassuring to read. We're retiring very early which is adding to the sense that I'm missing something - i.e. because no-one else my age is doing this!

I think you're right @FeFiFoFumretiree that it'd be good to start those spending spreadsheets now! That's my mission for this weekend.

I can highly recommend the Emma app. It tracks all your spending and scrapes from your bank accounts and credit cards automatically. So once you have set a budget - you can easily keep track of what’s going on. It’s the same as a spreadsheet without the need for data input.

We (husband) have a DB index linked pension but I need to top this up via dividends from our investments/my SIPP withdrawals. I am very cautious as most world tracker funds now really only track the US tech companies as they are so dominant in size. However without trying to be melodramatic I do think that the mother of all crashes is about to come - maybe in the next year - maybe in the next 2. But having companies valued at 65x earnings isn’t sustainable - whatever your view on AI is.
It’s great that my tracker has risen by 35% in the last year but it makes me nervous. So I now have around half of my investments in a money market fund - which grows by 4.7% a a year. That’s my comfort blanket. I think everyone who relies on investments for retirement needs to know that they will have enough to live off for 3 years without having to sell any investments. When everyone was buying Sony products in the 80s - the Japanese markets subsequently then crashed to a point that it took 20 years to recover. This tech/AI explosion in valuations feels similar. You can ride that out if you are younger - but less so in retirement.

AI can stress test your retirement investments/pensions and can be very helpful. Remember that inflation is the real killer, invest to cover off that and have at least 3 years worth of ‘safe’ cash or cash like investments to draw down on during a market dive.

You also may need to factor in how either of you are going to react to being "retired". Not everyone finds it easy, even if you've got oodles of money to do as you like. So you may want to discuss how it might affect your plans should one of you decide you'd rather return to some sort of part-time work. Hopefully, you'll both find retirement enjoyable. But since you haven't said the age at which you're actually planning to retire (just when you'll take your pensions), it's a consideration you should be taking into account. Most of us will live well into our 80s or even 90s, so our retirement is not an insignificant chunk of our lives. Good luck.

@tramtracks I agree with you completely about the coming crash. Like you, we've moved to less risky investments which aren't as reliant on US markets tied to big tech companies.

I've spent a lot of time throwing scenarios and numbers and plans at Claude 😅

My wife and me retired when she was 60 and me 61. She was nervous to start with but now thinks that it was the best decision she made! We've been retired 8 yrs.