Am I being crazy to consider early retirement, or is it realistic?

[GoldOnyx]

Hi all,

I’d be keen to get your thoughts on whether I could consider early retirement - even though it is still a long way off!

I’m a civil servant in my early thirties, and I’d like to retire at 60 if possible.

I pay into a pension and also pay in extra pension contributions, to be able to retire 3 years before state pension age (whenever that's likely to be, as it might well go up further than 68, which is what it’s predicted to be when I retire).

I also have £35k saved in an S&S LISA. I’m aiming to continue saving into this and then to withdraw some of it at 60, to live off that until state pension age.

I’m also hoping to buy a flat in the next year, and have saved up a deposit.

Thanks.

Certainly possible.

There's quite a low.limit on what you can put into a LISA, so you probably want to consider additional pension options that you can take earlier - AVCs or a SIPP. Then make sure there's enough in those to bridge the gap between 60 and state pension age - allowing for pension age moving up.

The additional pension would also be available before the LISA if you wanted to go a bit before 60. For the same.reason, you'll want an ordinary ISA if you might want to retire before 57.

Thanks for your reply. I’m paying additional contributions into my Civil Service pension. This will mean I can hopefully retire at 65, 3 years before state pension age (if SPA stays at 68 when I retire - which it might not). I also have an ISA, so will use that as well. Thanks.

It is hard to know without knowing what you are paying into a pension and what pension/s you are paying into. If it is a good scheme and I believe most civil services ones are, then there is no reason not to retire early. Unless the government decide to restrict access to private pensions early - I could access my private pension at 55 - you can start to work out how much you will need in there, at the age you want to make a start on drawing it down, as you get closer to the time.

Just don't forget that your job/department/career/family/house/situation can change drastically in those 30 years.

Yes, with some planning.
At some point you need to work out your annual expenditure and make sure you have sufficient from various income sources every year from the point you want to retire.
So at 65 that might be fully funded via drawing on ISA or a DC pension pot.
Then at 65 your DB pension + a smaller amount of draw from ISA or elsewhere.
Then at some point your SP + DB + draw.

Save enough & you can do it.

Hi

Former civil servant here, I'm 59 and left the CS last year under redundancy.
I have a total of 33 years service.
I've just claimed one of my civil service pensions, preserved since 2004, based on 18 years service, full time HEO salary.
This is giving me £10k a year pension.

I also have another civil service pension which pays at 67 which should give me a similar amount.

So it depends what income level you are aiming for. I'm quite happy with £18-20k as I will have state pension on top. I've no grand plans or desire for a luxury cruise style retirement. I'm happy with Wales, the Isle of Wight and my allotment.

Bear in ming there may well be further changes to the state pension that may affect you.
Also depends what you are intending to do - retire completely or do something else.
I'm now a foster carer which will bridge the gap in income for the next 5 years. I hope to properly retire at 65.
So yes entirely do- able but depends on the lifestyle you want to achieve

I would be hesitant about making fixed plans almost thirty years in advance but that said, put away as much as you can as you never know which direction your life will take.
Pensions are obviously critical but also leave yourself some accessable money as you have a couple of decades(+) to go.
Get on that housing ladder and get the mortgage paid down ASAP, this will give massive flexibility for the future whether that be staying put or moving on.

I had always intended to retire at sixty and paid more into my pension, AVC's etc from my forties onwards to (hopefully) enable this. My "master plan" was always to have sufficient pension to enable me to enjoy those extra years while having similar income to when I was working (without hitting my savings).
As it turned out, circumstances changed and I finished work in my mid fifties and am now enjoying the freedom (and financial security) I planned but several years earlier than even I expected.

It is certainly possible with planning and saving. However I am confused as you contradict yourself as your first post states that you want to go at 60 and then the next one is at 65?

I always planned to retire at 60 (that would be this year) and I remember planning this back in the 90s just like you are now. I invested in property, saved money from my salary each month.
I have enough to retire now but have decided to carry on until 62 because I wanted to top the pot up, renovate our forever home and enjoy time with family

Also in the process of selling our home that we’ve owned since 1991 and buying our forever home (and with a salary still coming in) it is beneficial!

One thing to add for you though as I noticed you mentioned about buying a property in the next year. I’m guessing this will be over a 25 year term mortgage?

I am confused as you contradict yourself as your first post states that you want to go at 60 and then the next one is at 65?

I think the OP means she would like to stop work at 60. And she is paying the early retirement buyout premium to allow her to take the pension without reductions at 65 instead of state pension age - this is a peculiarity of defined benefit pension schemes.

So not a contradiction, just using 'retire' to mean 'stop work' in the first case and 'draw pension' in the second.

@GoldOnyx you are doing all the right things to potentially retire at 60. The key things that will help are owning your property and having savings as well as pension.

The CS DB pension is a good one as it is also index linked. The hard part is rationalising the actuarial reduction for taking it early. What you have to remember is overall you get about the same £ but you either have a lower pension for longer or a higher pension but work to 65. I went with having less monthly income for longer and don’t regret it.

I think it's wayyyy too early to be thinking about retiring early. There's too much that can change, in both your own personal situation and just the world in general. It's nice at this stage to day dream, but if you're not on the property ladder yet it's definitely too early. You're not yet used to the costs of being a property owner. For example do you have other savings which you can actually use for large expenses like new roof, new boiler or some other disaster? Or just general wear and tear and maintenance? Or fluctuating interest rates?

If I were you I would just keep plugging away at making additional pension contributions, and saving into different pots, for short and long term goals, and a mixture of things that you can dip into if needed or not. Scrutinise your pension benefits statement each year.

Oh, and make sure you have fun now. In the last 3 months I know 2 people who have died very suddenly and unexpectedly, both under 50, one only in his 30s. There is no point squirrelling everything away while you live like a pauper till retirement For all you know by the time you retire you may have health or mobility issues that stop you spending your time how you'd planned to.

Not crazy at all...I'll be retiring around 57 and that's on predominantly sole income, with a now teenager and started with a whole lot of debt!

Highly recommend you have a plan though...have a look at Dave Ramsey Baby Steps or Rebel Finance School.

In the civil service there are also options like partial retirement where you start to take your pension earlier and continue to work part time and contribute to your pension, albeit at a lower level.

But another huge factor is how you spend and save money. There's so many things to spend money on and quite a difference on what you need to pay that you only need to adjust your spending a little to massively improve your chances of retiring earlier.

You don't have to go fill FIRE where you spend nothing with the aim of saving everything possible for retirement but if you are happy to spend less and save more it can significantly reduce the amount of time you have to work because it means you can save more and it will grow more. It also means you need less money to live on if you're not spending everything you earn on things you could happily live without.

For middle income people there could easily be a difference of hundreds of pounds a month between high and low spenders on things like cars, food and drink out of the house, travel/holidays, clothes, grooming and accessories, tech, hobbies etc.

So be mindful about what you spend and whether the things you're buying and doing are worth more to you than putting the money it costs into your retirement pot.

I retired at 66 and have both state penson and 3 separate workplace pensions. My DH is 6 yrs younger than me but retired at the same time as we had saved enough to provide a small income until his work pension kicks in at 63 and his state pension at 67. This has allowed us to travel while we are still healthy enough - worried if he continued working to 67 I would be 73 and maybe not able to have such active travel plans. I'll be 69 next birthday and so far its working well

Insufficient information for anyone to give you advice.

Have you been on the pension portal? How much does it say you'll get per annum based on your current earnings?

@DeliciousApples yep I’ve been on the pension portal to have a look.

I currently earn £37.5k, and if I retire at 68 - and continue working full-time in the CS until then with no pay rises or promotions - the pension portal predicts I’ll get £36k per year.

If I retire at 65, after working continuously in the CS and with no pay rises or promotions, the portal predicts I’ll get £28,300 per year. That doesn’t take into account that I pay extra contributions into my CS pension to be able to retire 3 years before state pension age, whenever that will be.

All of this really depends on whether I stay working in the CS for the rest of my working life. I don’t imagine I will, as I’d like to try out other industries and sectors too, but would like to balance that with building a decent CS pension to use as a base to help me retire at 60 if possible.

I think it is perfectly possible to retire early based on the information you have provided particularly as you are thinking, planning and taking appropriate action now, while you are fairly young. The Civil Service pension scheme is very good/secure and making AVC is sensible and tax efficient.

However, while it is good to have a goal, it is important to not let this drive all your decision making. Enjoying life now (having holidays, socialising with family and friends, owning the odd luxury item, etc.) is also important. You need to give these priority too (without being too extravagant).

You mentioned that you were planning to buy a flat in the next year and possibly change jobs to a different sector, so you obviously have other goals. These goals will hopefully complement each other, however, my experience tells me they won’t always. Life rarely goes to plan, however, it is good to have one (even if you need to flex it occasionally). Good Luck!