Retirement

[Spectric]

Up to age 75 are the golden years (health dependent) when you are likely to need more money

You cannot beat getting good advice on both retirement and finance, I was lucky the company put on a retirement seminar to cover all aspects and that was an eye opener.

Hopefully upto 75 is when the body is still allowing you to do many things, but as you say the important factor is also not a certainty which is health, so in many ways what ever you do once retired is going to be a gamble. Once you go I believe you lose your state pension because we claim as individuals and not as a couple now so I will not defer my state pension at 67 because I want to use this before all personal assets so that if I drop they are there for my partner.

 

[NickM]

I never thought of it as a mortgage but a roof over my head that I wanted to own rather than leave it as debt.

I completely agree and have always viewed it in the same way.

 

[doctor Bob]

I cleared my mortgage by 42, best thing I ever did, over paid by the max.
When I built the new house I took out a big loan and paid it off over 2 years.

For me personally I dislike debt whether it's a morgage, car loans, etc. I think it's just thinking passed on to me from parents, Not sure it's the best way but I feel comfortable with debt free.

 

[Glitch]

I cleared my mortgage by 42, best thing I ever did, over paid by the max.
When I built the new house I took out a big loan and paid it off over 2 years.

For me personally I dislike debt whether it's a morgage, car loans, etc. I think it's just thinking passed on to me from parents, Not sure it's the best way but I feel comfortable with debt free.

There’s good debt and bad debt.

Nice to pay it all off if you can still live the life you want to lead.

I was discussing with a friend today about her situation. She’s 65 owns her house without a mortgage. She had inherited her Mums house years ago and lets her son live there at a subsidised rent. The son and his girlfriend earn between them around £140k pa. and he wants his mum to extend the house (£100k) at her expense.
She gets his rent which she saves. She earns £5k per year as a dressmaker and will soon be getting her state pension. Her partner is in a full time but low paid job as pays the bills for the house they live in

Asset rich but penny poor. Debt free property worth over £1.5m and an income of £17k - plus state pension later in the year and a son totally taking the pee.
She should be spending money on herself, not increasing the value of her son’s inheritance.

 

[harryc]

I have been lucky working in a major blue chip company all my working life where contributions have been 18% of earnings a year, which currently is £16K a year.

I know not all are that fortunate so only advice I would offer is rely on the magic of compound interest and start early plus diversify as much as you can admittedly I am relying on pension, personal ISA and dividends from shares.

I have been predicting the housing market to collapse for the last 15 years

 

[doctor Bob]

I have been lucky working in a major blue chip company all my working life where contributions have been 18% of earnings a year, which currently is £16K a year.

Nice, wife had a similar pension with CAA, later NATS. Mine is totally private but I'm lucky to be able to chuck big sums into it each year.

 

[Glitch]

I was lucky to have a ‘Final Salary’ defined benefit pension, although sadly it had been capped years ago. I declined the 7 figure quote to transfer it out.

I ploughed as much as I could into salary sacrifice Additional Voluntary Contributions in the final few years.

It came out of my gross salary before tax and the company added another 5%.

There’s a £40k allowance per year and you can use unused allowance from previous two years.

I maxed mine out mine out in the last 2-3 years. I used savings and a two year interest free credit card to pay for living costs.

I could then take out the AVC contributions as the tax free lump sum without reducing my pension. It paid off the mortgage which I had changed to interest only to free up pension contribution money. I had to pay off the interest free credit card.

Much more efficient use of the money than paying mortgage off early and a rare chance to legally avoid a shed load of tax. .

In my final year I was taking a salary and the pension and could still use the £40k allowance which I transferred out to a SIPP when I left.

Undoubtedly biased towards higher earners with a good pension scheme but anyone can use the available tax allowances and employers contributions to boost their pension.

 

[Flynnwood]

For me personally I dislike debt whether it's a morgage, car loans, etc. I think it's just thinking passed on to me from parents, Not sure it's the best way but I feel comfortable with debt free.

I hate debt. Always have.
I once worked for a UK PLC that seriously burned through shareholders over many Companies/Takeovers over 12 years. The former CEO is very well off and retired.

He was full of rhetoric and had high contacts to raise the money over and again, across many business failures.

 

[Duncan A]

I'm sure Dr Bob is financially sophisticated enough to do the sums for himself, especially as they are, in essence, blindingly simple: will my savings/pension scheme/investments produce the income I need to live the way I want in retirement?
This is not so much about money but about deciding what sort of life you really want to have - and a surprising number of people have rather vague and unrealistic dreams. Witness all those life-long city dwellers who have suddenly decided that country life is what they crave!
Dr Bob seems to be pretty clear on what he wants so I suspect he's pretty much made his decision. Good luck with the plan and make the best use of the fruits of your hard work!

Something that I have not seen much discussion of is "social care". Personally, I very much don't want to have to rely upon our local government worthies to look after us in our dotage and instead hope to have sufficient assets to choose our own care providers. There are too many horror stories of councils shutting down care homes and summarily moving everyone out to somewhere of a lower standard or miles away from family.
Budget £30k - £50k p.a. at today's prices - more to be sure of adequate cover. I read somewhere that the average stay in a nursing home (£50k p.a.) is 3 years so I reckon about £500k should do it for two people in most cases. This is a lot of money, and beyond many people but well within reach of many of those commenting in this thread.
Personally, I don't see why a young family struggling to pay student debt and a massive mortgage with uncertain job security should pay for my care if I have sufficient assets, so I have no difficulty with the house being used to pay for care. I realise that not everybody feels that way but we all have to make our own minds up on these sort of things.
BTW, retirement is great , go for it!
Duncan

 

[Spectric]

Something that I have not seen much discussion of is "social care". Personally, I very much don't want to have to rely upon our local government worthies to look after us in our dotage and instead hope to have sufficient assets to choose our own care providers. There are too many horror stories of councils shutting down care homes and summarily moving everyone out to somewhere of a lower standard or miles away from family.

But what I dislike hear is that lets say there is this nice care home with glowing reports and in a great location, plus somewhat sought after and you love it so because of your financial situation achieved through a life of working it will cost you say £900 a week, no probs because your house can help pay it rather than leave it as family inheritance. Now in this care home could be a resident who pays nothing, because they have sponged off the state all their lives and own no property so get it free, same home and living standards as yourself but free. To me that is just unfair, it is just rewarding those who have already milked the state for years rather than work and contribute to the system.

 

[Duncan A]

Yebbut that's a whole separate subject and not really part of Dr Bob's retirement thread, so all I was doing was pointing out that my approach is to try and cover an estimated cost. No politics for me
Duncan

 

[Glitch]

My parents both worked all their adult lives. Never took benefits. Paid their NI and taxes.
Lived in council houses, paid their rent. Never exercised their right to buy. Saved a small amount for their retirement. Had small private pensions but relied on state pension to live on.

Dad had a stroke (a failed op to clear his carotid artery) and needed carers because he was bedridden.

Went to a couple of nursing homes. Horrible places. They took his pension to help pay for it.
Eventually Mum did the right thing and brought him home with support from carers. Nightmare getting and keeping good ones who were brilliant. Think they still had to pay a bit towards it. He lasted 18 months before dying of bowel cancer that hadn’t been diagnosed until it was too late.

Social care is means tested. Some people have very little and they’ll take that too if they can.

Labelling all those that can’t pay as spongers is such a stupid, narrow minded view and an insult to people like my hardworking parents.

We have a welfare state, get over it.

Plan well ahead if you want to protect your legacy/inheritance.

 

[Glitch]

Yebbut that's a whole separate subject and not really part of Dr Bob's retirement thread, so all I was doing was pointing out that my approach is to try and cover an estimated cost. No politics for me
Duncan

Yebbut you raised the subject of social care after a claim of how simple pension planning is.

 

[D_W]

But where can you get more returns than you are paying interest on a mortgage these days, it is because the rates are so low that is is even easier to hit it harder but this reduces the financial sectors returns. I never thought of it as a mortgage but a roof over my head that I wanted to own rather than leave it as debt.

The interest rates went through the roof under thatcher, great for savers but many people just gave their house keys back as it was not affordable, and this was after she allowed council tennants to buy their homes so they could not take part in union strikes without risking their home. I think she should have been burnt at the stake or put through a coal processing plant, I dare say there are many who would have partied for days. I recon that many would have retired earlier had she left them with a decent job rather than working till later in life.

You're thinking too hard about this. The financial advisors don't make anything if you pay down debt, but most of them get initial and annuity income on money you invest with them.

 

[Blackswanwood]

You're thinking too hard about this. The financial advisors don't make anything if you pay down debt, but most of them get initial and annuity income on money you invest with them.

In the U.K. commission has been banned on investment products. Some advisers do have a fee structure that is based on a percentage of the fund - imho they are not the good ones. More often than not it is far better to pay for advice by the hour just as you would pay a solicitor or accountant.

 

[Glitch]

I can understand that people are uncomfortable with debt of any kind and prefer to pay it off as quickly as possible.

There is good debt such as mortgages (property historically increase in value) and business loans (builds business and creates more income/profit)

There is bad debt - Credit cards (ridiculous rates if you don't pay it off each month) Loans for unnecessary luxuries (expensive holidays, the unused hot tub)

The base rate has been incredibly low for years. There's little or no interest paid on cash products. Mortgages are cheap. Credit card rate crazily high.
The stockmarket always out performs cash if you smooth out the inevitable highs and lows.

If you have spare cash after paying your normal living costs what should you do with it?
No point putting it in the bank because inflation will make it worth less in real terms.

If you put money in a pension you can claim tax relief on it - up to £40k per year and you can use unused allowance from previous two years.

For a PAYE earner like me every £140 of contribution cost £100. Where else can you get returns like that?
Yes, you'll be liable for tax when you take it back out but I have personal tax allowance of £12k, 25% of the fund can be withdrawn tax free and I will try to keep under the 40% tax bracket. The pension gets invested in various funds, bonds, stock, etc If you're lucky this will increase in value quicker than cash only.
If could go down but as you get nearer to retirement you shift a larger proportion into low risk products.

Self employed get the same tax breaks for pension contributions. Most of the contractors I worked with paid as little tax as possible but there is surely still some benefit in there.

Should I max my pensions savings or pay off a low interest mortgage? I did and used a proportion of the tax free lump sum to pay off what was left of my mortgage.

Sounds like Dr Bob is in an excellent position but far from typical. If you have so much spare money you can max out your pension contributions, pay extra towards your debt and still have some left.

Most people need to prioritise their disposable income more carefully. Just think about the best place to use the money. It can make a very big difference to the quality of your retirement.

 

[doctor Bob]

Thanks for all the replies and I appreciate I am in a very lucky situation compared to a lot of folks.
I've got a couple of years to ponder and then if I decide to go 3 years to impliment it.

 

[Glitch]

I really wouldn't ponder. You need to plan now.
Probably boost your pension pot or fund other schemes that provide reliable income when you stop work.
Extremely hard to catch up in the final 2-3 years

 

[doctor Bob]

I really wouldn't ponder. You need to plan now.
Probably boost your pension pot or fund other schemes that provide reliable income when you stop work.
Extremely hard to catch up in the final 2-3 years

as I said previously
I'm putting close to max in currently.
I have a second business which will fund retirement quite well.
I don't think I have to catch up, it's more about just knowing when to go.

The planning was more for how IU hand over the business and when.

 

[Spectric]

Just remember that the one thing you cannot buy even if you are the richest person on Earth is TIME, and our timelines are unfortunately unknown.