Retirement

[doctor Bob]

This is mainly aimed at business owners and the self employed.
Question is when do you know you have enough to retire.

 

[Garno]

I would think it is when you start buying things without first looking at the price.

 

[powertools]

Truth is Bob nobody knows if they have enough to retire unless they know how long they have left to live.

 

[Cabinetman]

I would ask your accountant, but first I would ask your pension pot company for an up-to-date high and low estimate. I think we’re in for a period of higher inflation over the next few years (thanks Joe) and it’s surprising how it can eat into a fixed income. Ian

 

[Cabinetman]

Truth is Bob nobody knows if they have enough to retire unless they know how long they have left to live.

Well not quite true, your pot buys an annuity, if you die sooner they win if you live a long time you win, it’s always worthwhile telling them that you’re a heavy smoker and drinker they’ll think you’re going to die soon so can be a little bit more generous, well it’s worth a try ha ha.

 

[Spectric]

This is mainly aimed at business owners and the self employed.
Question is when do you know you have enough to retire.

Big question that is as much physiological as financial. Before I did it this was a topic of great discussion and many views and arguments for and against. The truth is that for many they cannot see life with a reduced income and or cannot let go of the money, but there are no equations to determine the answer because one of the big variables is time and you cannot give this a real value. Why, because you do not know how much you have and so you do not know the period for which you need to plan. Solution for me was a spreadsheet of all cost and expenditure with all savings and pensions, then hard thinking because you want a decent standard of living but without wanting the impossible, if you aim too high you will set a target for which you will work until you drop, so as they say you will need to cut the cloth to suit the income.

Few pointers to think about.

You will have higher expenditure in the early years because you can and will want to do more because your body allows it.

Once you reach state retirement and you and the missus have full contributions then this gives a reasonable income to support life and the basics, will you have savings to just top it up for the extras?

For me I calculated total expenditure to cover essentials, increased this by 3% per anum upto my state retirement age to see what it cost, and will my incomes cover or will I need to dip into savings, this gives a good idea and is what made me realise I could do it. But as I said time is precious and I have known people who have got close to retiring, then hanging on for an extra period to get more money that they did not really need and then droping so really retiring is a gamble between time left and accumulating more but do a spreadsheet and it may open your eyes, also dependant on your current age.

Finally it is really great when time is all yours, you can do what you want and just get on with living and forget the stress of working, customers, meeting deadlines, jugling jobs and chasing materials.

 

[eribaMotters]

Doctor Bob, I was not self employed, I taught in a secondary school but my method on making the decision on retirement may, or may not be of use.
I worked out that to "exist", food, running 2 cars, basic maintenance on them, gas, electricity, water, insurances etc etc came in at about £1250 a month. When my net pension exceeded this I knew I could retire. My lump sum would have to pay for breakages, items wearing out and holidays until I hit government retirement age and a state pension.
I retired after 35 years in a classroom [I'd had enough of 60+ hr weeks] just short of my 56th birthday. So far 4 years in I think it is working financially although I've had to break down the figures as we moved and took on a big building project.

Colin

 

[Spectric]

Well not quite true, your pot buys an annuity,

The advice given to me was to avoid buying an annuity, the returns these days are very poor compared to the days of 12% plus interest, probably why the old interest only mortgages are no good. An annuity means you are giving away control and your asset, better solution is a draw down system which a good advisor will explain but it can also reduce your tax burden and you still have the lump.

 

[Blackswanwood]

This may help piece it together @doctor Bob

https://www.ons.gov.uk/peoplepopula...les/howlongwillmypensionneedtolast/2015-03-27
The Pension Advisory Service also give free generic advice.

 

[Trainee neophyte]

"Making predictions is hard, especially about the future."

If your pension fund is entirely financial - stocks, shares, annuities etc, then you are dependent on the system continuing without too many boats being rocked. If you retire at 70, and die before you are 80, then you can be reasonably confident that tomorrow will be roughly the same as yesterday, but if you want to retire at 50 you might be looking at needing 40 or 50 years of stability and predictable growth. That sounds like a big ask to me - it's an entire working lifetime.

Income producing assets that can weather a storm sounds like a good idea - don't forget that inflation is a) built into the system and b) always higher in real life than any index shows. What will the world look like in 50 years? How much will a loaf of bread cost, and in what currency?

My thinking is assume that the government and financial system is out to get you, and plan accordingly. Even teachers, with their government supplied index linked, supercharged pensions tend to be pretty poor once they get past 80.

 

[doctor Bob]

Thanks for posts so far.
I think I've done alright in life so far, I have a big house morgage free, other assets such as a 7 acre field with a commercial venture on it (good retirement income). Some decent savings.
I have a pension pot I pay in a lot of money to each month, won't be massive as I only started 15 years ago, but decent. My wife has a very good pension pot.
I'm approaching 56.
Thinking of going at 60.

 

[gregmcateer]

Good thoughts up above.
I'm a business owner, too and do have concerns about income being enough when I'm ready to retire. Not helped by my first pension being with the' rock solid' provider Equitable Life - that weren't bang after I'd been contributing for a few years .
But hey, life goes on. I've got a few investments and now contribute as much as I can to a pension.
Periodic advice from a pension advisor I hope means I'll keep at least sort of on track.
As said above, although it's tedious, you need to look at what you HAVE to spend, what you want to spend and try to think of some unpredictable items.

 

[gregmcateer]

Oh, and when you're ready to stop, don't keep your share of any business you had, unless you are prepared to stay out of running it - you'll just get fed up, and p*** off your old employees/ partners

 

[mikej460]

I retired at 60 after a successful career where I earned a very good income. After our house was paid for I'd had enough of work and commuting was just too stressful. We had good financial advice (not cheap but worth it) and my pension pot together with a lot of 'what if' spreadsheets etc, convinced me it was doable. I'll never be as well off as I was but I'm far happier in this new stage in my life after being retired now for over 4 years. One piece of advice I can offer is to think about what your outgoings will be at 10 year intervals because as you age you will likely to need less. I've seen income projections that gave me the same income at 90+ years of age! I think I would struggle to spend even my state pension in my 80s. I do think a contingency pot is a good idea, just in case of major unforeseen issues arising.

 

[Lons]

I retired at 68 Bob and could easily have kept going although finances made retirement possible several years earlier but I was still enjoying work even though I had started taking time away for extended long haul trips which I'm now pleased I did because my wife has had a series of issues and on Friday will be having her 5th operation in the last 5 years so with hindsight I now wish I'd retired at 60.
I agree with what spectric said and you'll find that once you've adjusted your whole outlook on life will change as you start to relax and explore other interests, the only people I know who have struggled are those with few interests away from work.

On the other side, I have a close friend who owns a distribution business which he's been trying to sell for a while, he's now 76 and I rang him this morning as he's not well. Struggling with a seriously painful back they can not fix, he has diabetes, had a heart attack 3 years ago and has just been told one of his kidneys is operating at only 20% and the other at 15% so he will need dialysis 3 times a week and quite possibly a transplant. He's left it too late to enjoy any retirement so the one piece of advice is do it as soon as you can possibly afford to as the most important thing going forward is your health.

Try to keep back a decent emergency fund, this operation for my missus is having to be paid for privately as she just can't afford to wait 2 years for the NHS. ( there goes my new car fund. )

 

[doctor Bob]

Yes when I go I want out completely.
whether I worked 1 or 7 days a week, I'd still stress the same about the business.
Talked to my business partner today to plant the seed.

 

[Myfordman]

I agonised long and hard over the when to retire question. Every spreadsheet I created could be made to give a different answer according to figures picked for inflation and investment yields and how long I might live. No help at all
In the end it was a mixture of quality of life (how much of my job I still enjoyed becoming less and less) and the degree of care needed by my wife.
I jumped at just over 55 years and consoled myself with being able to get a shelf stacking job at B&Q because I knew a fair bit about DIY.
That was 12 years ago. Absolutely no regrets I took as much cash as I was allowed to and started a new business buying and renting out local property. I can do it all from home apart from the odd bit of maintenance either myself or supporting a few local tradesmen.

My advice would be JFDI Bob

 

[D_W]

Can you draw 3-4% per year from your assets, take a little investment risk and live comfortably? If you can, you've got enough to retire.

My parents got a bit past that point but retired very early (54) and then found that they spent less in retirement than they expected because they were out of the rate race and comparing themselves to a smaller group. Dad expected to spend a lot of money golfing and offset it by working part time (don't ask - house rule with my mom - no house money spent on golf regardless of the surplus) and mom spent her time making and selling things rather than traveling (she tried traveling, dad did, too, and after a couple of years of off and on vacations to far off places, they liked being at home better).

Buying something like an annuity here is generally an asset settlement (you've traded all risk at that point for a lower return). If you plan on living for a long time, some of your egg should probably remain invested with spendable bits for a nearer horizon kept a little safer. dividend paying equity (like consumer staples and industrials) are sort of the new fixed assets here in the states and over every historical period have beaten annuities badly.

 

[Spectric]

I retired at 60 after a successful career where I earned a very good income. After our house was paid for I'd had enough of work and commuting was just too stressful. We had good financial advice (not cheap but worth it) and my pension pot together with a lot of 'what if' spreadsheets etc, convinced me it was doable. I'll never be as well off as I was but I'm far happier in this new stage in my life after being retired now for over 4 years.

I can remember from a pre-retirement workshop that for many it is that step into the unknown, a big change in daily routine and the fact you are entering that 3rd stage but once over that step it can be a great feeling, Mike realised that you have to give up some income to get over this step but quote "I'm far happier in this new stage in my life ".

I can also say the same, and a big part is keeping occupied which can be easy or difficult depending on yourself but most seem to say they do not know how they had time to actually go to work. I know some people who do voluntary work for a few hours a week and others who work part time doing something they really like rather than the job they had but you do need to get to grips with the finances, good financial advice may be helpful. What you don't want to end up doing is having to work for less because you got the sums very badly wrong and only you know your finances. Also don't keep finding excuses to put it off, take a positive approach otherwise you end up chasing a moving target you never reach and so many also get it wrong, wake up one day and realise they have missed any chance of a decent retirement, eg read @Lons post.

 

[Spectric]

Remembered a couple of retirement stories from some years back. Got talking to a couple in a narrow boat on the grand union canal, nice couple in there fifties and happy doing what they had always wanted, cruising the 2000 miles of Uk canals and visiting many places. They sold everything, house, cars the lot and brought this boat to live on to live the dream. I asked what will happen when you get to old to live this lifestyle, the reply was we will be hopefully skint, very old and will crawl into social services to get free accomodation in an old peoples home and let the state keep us.

Another couple I bumped into was in Colarado, living in a camper van and craving UK tea. They were touring the states, visiting anything and everything and were really enjoying themselves, just missing some home comforts like tea and the sign on their camper said " we are british and just spending the kids inheritance"