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Forced to Consider Retirement at 50

Including Financial Independence and Retiring Early (FIRE)
AWOL
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Forced to Consider Retirement at 50

#349264

Postby AWOL » October 20th, 2020, 5:32 pm

Moderator Message:
RS: Topic moved to "FIRE" from "Pensions"


Hi,

Old timer from around 97 or 98 vintage on the other place, first post here and looking for some feedback.

So, I am 50 and at the age of 49 I was made redundant and after almost a year of looking for work I have decided that I should take stock and accept that I may never get back on the horse. I cannot take my pensions until 55 at the earliest and am waiting for updated quotes including the at 55 value but I reckon I could have a modest retirement if that's the way things play out but I'd like your thoughts.

I have
£220k of accessible investments
$530k of DB fund.
$9k of final salary if taken at 60.
$9k of state pension available from 67 (although this may raise to 68).

My thoughts are to consider the investments as one pot of $750 although I can only draw from the accessible funds at the moment and draw down at the rate of 3% of the value of those funds per annum (so income will fluctuate). Given the starting age of 50 and that I am fit and well is that sustainable?

I have young children so want to leave as much as possible while still enjoying a decent life. Not the retirement I planned at 60 but still okay.

My wife's finances are separate but she will get an NHS pension and I am mortgage free. She is a decade younger than me. Life sucks :lol: I am not considering her position to any great extent as she will be fine.

My problem with my approach is that my income will take two steps up at 60 and 67 and I'd probably rather live more evenly. I may take my final salary at 55 reducing it by an estimated quarter. TBC. I will start drawing from my pension at this time and start incurring income tax.

Current forecast rough income:
50-59 £22.6k
60 £32k
67 £41k

Would taking a larger but reducing percentage earlier incur greater risk of running out of money? Is my 3% of the funds value at the time of withdrawal approach balanced?

I am willing to accept some volatility and can live on a take home of £1.2k per month plus say £5k for an annual holiday.

Thanks for your view,
Awol.

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Re: Forced to Consider Retirement at 50

#349280

Postby Urbandreamer » October 20th, 2020, 6:24 pm

AWOL wrote:Would taking a larger but reducing percentage earlier incur greater risk of running out of money?


First, did you really mean DB (Defined benefit) when you described your pension? The huge advantage of DB over DC schemes is that the former doesn't run out of money. Instead the benefit (amount that you get) is set by the pension scheme.

Assuming that you actually meant DC (Defined contribution), then yes, taking more money earlier greatly* increases risks later. Some take the attitude that is acceptable and fairly soon they won't be fit enough to enjoy spending the money. They are usually significantly older than you and plan on dying before too long. You could easily be looking at living another 40 years.

I hope things work out, but consider looking for any job rather than the same job that you used to do. Every little helps.

*Compound interest works less and less well with greater draw early on.
https://www.ftadviser.com/pensions/2019 ... s-pension/

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Re: Forced to Consider Retirement at 50

#349300

Postby AWOL » October 20th, 2020, 7:35 pm

Thank you.

You are correct I should have written $530k of DC fund. The DB will be used poorly to provide a reliable base income together with the state pension. The early years will be more subject to the whims of the market. Given the state of bonds I am considering being 100% equities with 32k of premium bonds just in case. My accessible find are all in tax exempt forms e.g. ISA. I am tempted to move into a global tracker and away from my current habit of smaller companies ITs which can go to huge discounts in bear markets.

I think 3% looks like a fairly safe rate even with my long time horizons. Later on I can reduce the rate if my capital is declining to a concerning degree.

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Re: Forced to Consider Retirement at 50

#349303

Postby JohnB » October 20th, 2020, 7:51 pm

Your big problem is with a young family your costs are likely to be much higher for the next decade than the years afterwards. £18k from 67 is bearable if you are frugal and have a supportive wife, but I think you need to plan to spend more now and work harder with bridging funds until you get there. A job of any kind will help a lot as you can use all your personal allowances.

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Re: Forced to Consider Retirement at 50

#349330

Postby AWOL » October 20th, 2020, 9:03 pm

I agree with your analysis. I am working on the job thing but it is not going well and I am worried that it may not come good. I am looking for all kinds of employment including applying for living wage and part time work as a small income would make a big difference.

I have also got a separate pot of money to fund the children's university places should they go that way in life. One of my children is had a developmental disorders and this introduces some uncertainly which is why I am nervous about running down the pot.

I wouldn't be choosing to retire at this age because of the risks that the period of time, my children's ages, and the lack of access to pension funds introduce. Drawing my final salary at 50 would smooth things a bit.

My wife is fairly well paid but we kept separate finances and I couldn't ask for her to pay more than her fair share now just because I earn less. Previously I earned more and paid the excess to my pension not to her. In retirement if I am still alive I think we will pool funds at that's a fresh slate.

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Re: Forced to Consider Retirement at 50

#349361

Postby Urbandreamer » October 20th, 2020, 10:18 pm

Ok, now that we have more ideas.

If you have to make it on what you have got, it's easily possible. I would STRONGLY recommend finding out what you spend and upon what. I recently did so again and was shocked. How had I managed to spend so much less than I use to? Answer, I'm not paying for holidays for us and the kids, mostly because the "kids" are not any more.

Seriously school trips and "summer school" or my alternative (fsc) costs. That was my concern about your post. That said, you could become a house husband. Home making is a VERY valid job.

As you say 3% seems possible from your funds.

Ps, if you don't yet cook, START!

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Re: Forced to Consider Retirement at 50

#349385

Postby AWOL » October 21st, 2020, 12:17 am

I am spending £1100 a month at the moment (£13200) but am doing less socially than normal due to the pandemic. Plus say £5k for a holiday means I need £18.2k plus a bit more for weekend fun taking me to say a relaxed £20k of take home pay as a basic retirement with a European holiday and the odd trip.

Here are the estimated take home incomes (mixture of tax treatments) and they all seam to support a little better life than the above.

50-59 £22.6k
60-66 £30.2k
67 £36.4K

I must say that although any employment will transform things, I am surprised how much money I used to fritter away versus how little I need and am increasingly thinking that this is doable.

At some point I may inherit something but I hope that is a long way away and am not going to assume I get anything as my parents should enjoy what they earned.

I've looked at some modelling and 3% seams to be about the right risk level. Sequencing of returns could mess things up but life isn't risk free.

On domestic matters, I cook most of the meals, ferry the kids about, help with homework, read to them, and all the other fatherly things. I have increased my housework but will increase it further if I eventually stop chasing phantom jobs. In fact I will increase it anyway. I've reduced the average cost of the wine I buy and spend more time seeking exceptional value wines and less on taking punts on expensive bottles from more popular locations. More importantly I am spending more time with my children.

Unfortunately I have lost a few friends prematurely this year but I intend to spend more time with those that remain (although the pandemic really makes socialising difficult in the darker and wetter months).

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Re: Forced to Consider Retirement at 50

#349416

Postby JohnB » October 21st, 2020, 7:56 am

It seems odd that you are so keen to keep your finances separate from your wife when you have a young family. Surely as an economic unit you are so tightly bound with commitments to childcare and running a household that you and your wife should share earning, caring and spending. On that basis a minimum wage job makes much less sense if you are running the household instead.

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Re: Forced to Consider Retirement at 50

#349430

Postby Urbandreamer » October 21st, 2020, 8:42 am

JohnB wrote:It seems odd that you are so keen to keep your finances separate from your wife when you have a young family. Surely as an economic unit you are so tightly bound with commitments to childcare and running a household that you and your wife should share earning, caring and spending. On that basis a minimum wage job makes much less sense if you are running the household instead.


Not so much odd, but I suspect a habit. My wife and I keep "seperate" finances even after many years of marrage and throughout no children, young children and grownup children leaving home. Sure I played a larger role in financing the family imeadiatly after a birth, but on the whole we regard seperate finances as a good thing. As my wife has said over the years to people who ask why we don't pool our fincances "How do you buy a surprise birthday present if they are going to see it in the joint account". I suspect that we will continue to keep "seperate" finances once retired, though I expect that I'll have to increase my direct debit to the household bills account as I'll have more available income than she will.

However now would be a good time to consider family finances as a whole. We have done so off and on over the last five or ten years, when planning retirement or when the wife decided to go part time. We are comfortable enough that we don't need to look at what we each spend upon. Just how much we spend and our wealth level. I suspect that you have discussed the idea of retiring with your wife, but have you been through the financial side with her? It is worth doing.

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Re: Forced to Consider Retirement at 50

#349445

Postby Adamski » October 21st, 2020, 9:26 am

I'm about the same age in semi retirement. I'd consider a hobby job which brings in some income and is tax free below the personal allowance. In a good position having built up a decent pot. I'd go for mainly trackers too. Cheers

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Re: Forced to Consider Retirement at 50

#349451

Postby seagles » October 21st, 2020, 9:46 am

I retired at 49. Was made "redundant" with a nice handshake and decided I had enough of the pressures after 30 years in IT. Lasted 2 months, as I had a bit of a buffer decided to work just for the benefit of keeping busy and active (took a db pension at 50 so another buffer), worked filling shelves at Tesco, then concierge at 4 star hotel, then customer service advisor, followed by underwriter (sub-prime), before drifting into managing a bookers close to home. That took care of another 11 years. There is always some work out there and if you are not in need of the money (or as much money) then try an alternative. I finally fully retired last year at 65 (last few years part-time as stock controller with Tesco's). At 55 I transferred all my DC pensions into a single SIPP with HL and drewdown the tax free portion of 25%. It can be done. Although I was "single" at the time, but shortly after my daughter moved back with me and I needed to support and keep her for a "few" years.

good luck.

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Re: Forced to Consider Retirement at 50

#349457

Postby swill453 » October 21st, 2020, 9:59 am

Each to their own, but my wife and I couldn't have both retired as early as we could (56 and 53 respectively) if we hadn't completely pooled our resources and agreed to give up work simultaneously. Well 2 weeks apart anyway.

Everything is treated jointly so we can make best use of any tax allowances going. For example we each have ISAs, but move money into either of them from whatever source when it becomes available.

Buying secret presents and the like isn't an issue, we're quite happy not doing that sort of thing. But I guess it could be handled by having separate savings accounts financed from the joint money.

Scott.

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Re: Forced to Consider Retirement at 50

#349464

Postby kempiejon » October 21st, 2020, 10:22 am

Urbandreamer wrote:If you have to make it on what you have got, it's easily possible. I would STRONGLY recommend finding out what you spend and upon what. I recently did so again and was shocked. How had I managed to spend so much less than I use to?
Another vote for Urbandreamer's suggestion of working out where you spend your money.

My redundancy came out of the blue 10 years ago in an industry in decline (totally stymied by the pandemic now) with little hope of re-employment at a similar level. After giving myself a few weeks off I scrutinised my spending as I knew my meagre pay off was going to have to be eked out to protect my savings while looking for work. Trawling through bank and credit card statements and keeping a spending diary was a revelation, once you have to pare spending back you see how much you fritter and what discretionary spending can be reduced and how to make savings. If you know where the major expenses are targeting reducing them quickly pays off.

I also took on seasonal temping work and part time jobs and discovered I could make do satisfactorily on a portion of my previous wage that I thought wasn't quite enough! 3 years later I found a new "proper" job. I'm a few years in now and pleased to be safe in employment. I am earning less than pre redundancy, much happier and able to look at my financial independence in a different light.

AWOL wrote: £20k of take home pay as a basic retirement with a European holiday and the odd trip.

Here are the estimated take home incomes (mixture of tax treatments) and they all seam to support a little better life than the above.

50-59 £22.6k
60-66 £30.2k
67 £36.4K

I must say that although any employment will transform things, I am surprised how much money I used to fritter away versus how little I need and am increasingly thinking that this is doable.


I'd say doable, embrace the opportunity, with your base line of £20k satisfied, mortgage free and a healthy capital amount behind you a low nuisance part time role or a sting of temporary short term filler jobs can bring in the extra money for Christmas or treats or extra expenses and keep that capital for erosion. Find some fun things to fill the extra time or I understand parenting can be a thing and you can't get them that young again.

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Re: Forced to Consider Retirement at 50

#349479

Postby AWOL » October 21st, 2020, 10:58 am

I will continue to look for a job but this emerging plan allows me to feel secure that I can maintain financial independence although if disaster struck I have the insurance policy of a young, healthy, securely employed, DB pensioned wife :lol: My dream scenario is to land a job although there are some roles that would not suit me.

I note from some posts that other people have different views on retaining independent finances from my wife but I've never been financially dependent on anyone since I left home at 17 to go to Uni (worked as a bouncer to boost me £1100 student grant) and it would take desperation to make me feel differently now. If need be my wife would assist.

Regarding investments, I have grown my investments half through Smaller Companies ITs covering the globe and half from global large cap equity funds/trackers. I am considering changing to something less volatile than ITs and Smaller Companies and am thinking of something like putting almost everything into a global index fund like the Vanguard Lifestyle ones. My long term plan was to go 60/40 using something like the Vanguard Lifestyle 60 but I am deeply uncomfortable with bonds as an investment and really nervous about them continuing to provide a counterweight to equities. The historic data shows that 60/40 worked really well giving most of the benefit and minimising the downside. Next time I fear it could be different. Is this view rational?

So I am thinking of biting the bullet and using Vanguard Lifestyle 100 or some other similar world equity fund and not diversifying asset classes but being geographically diversified and to some extent diversified on currency. Once my defined income sources of DB and state pension kick in they will provide the bond-like side of my portfolio. However before that I am taking a risk so perhaps 80:20 would be better until then although that 20% doesn't deliver a huge amount of downside protection.

My thinking is sitting at something like Vanguard Lifestyle 100% equity plus 30-50k of cash (Premium bonds) to ride out the first two years of a crash. I would reduce this once I have that DB income. Please feel free to contradict me. Thoughts please?

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Re: Forced to Consider Retirement at 50

#349507

Postby Urbandreamer » October 21st, 2020, 11:34 am

AWOL wrote: My long term plan was to go 60/40 using something like the Vanguard Lifestyle 60 but I am deeply uncomfortable with bonds as an investment and really nervous about them continuing to provide a counterweight to equities. The historic data shows that 60/40 worked really well giving most of the benefit and minimising the downside. Next time I fear it could be different. Is this view rational?


I don't know about rational, but it's the view that I hold.

AWOL wrote:
My thinking is sitting at something like Vanguard Lifestyle 100% equity plus 30-50k of cash (Premium bonds) to ride out the first two years of a crash. I would reduce this once I have that DB income. Please feel free to contradict me. Thoughts please?


I know that we were suggesting not spending money, but this book is well worth a read.
https://www.amazon.co.uk/Beyond-4-Rule- ... 095&sr=8-1

It starts by explaining that there is NO one size fit's all pension plan. It goes on to consider alternatives. I plan to be in excess of 90% equities during retirment. Yes I expect that means I'll feel ill when the market drops like it did earlier this year. However I really don't like bonds and in time will have the safety net of a modest DB payout and the state pension the same as you.

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Re: Forced to Consider Retirement at 50

#349525

Postby kempiejon » October 21st, 2020, 12:22 pm

Urbandreamer wrote: / I plan to be in excess of 90% equities during retirment. Yes I expect that means I'll feel ill when the market drops like it did earlier this year. However I really don't like bonds and in time will have the safety net of a modest DB payout and the state pension the same as you.


If one considers what capital needed to obtain the state pension and a modest DB and compare that amount to your capital now 90% equities you may well find that your bonds:stocks ratio is surprisingly high. That's the way my thinking goes for now.

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Re: Forced to Consider Retirement at 50

#349527

Postby AWOL » October 21st, 2020, 12:32 pm

I am getting very cheerful about this new phase in life and the freedoms that come with it. In some ways being pre-pension age makes it easier for me to try it without pension/tax complications and see if I can get a nice balance with ideally a bit of work too.

Books are something that I do indulge myself in however in this case I think I'll pick the book up for free by taking a trial of Kindle Unlimited as part of being careful. This looks like one of the kinds of books I like. I bought the Meb Faber books but I see that my favourite "Global Asset Allocation" can be downloaded for free here https://mebfaber.com/books/ and I heartily recommend it even though I am ignoring it's findings.

@Urbandreamer it's reassuring that your thoughts are similar on this matter. Not sure if that makes us Birds of a Feather or Fools Flocking Together 8-) Only time will tell.

I think my main challenges beyond job hunting are to up my social engagement and to not be too careful with money and remember to live life to it's full but just do so within my means.

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Re: Forced to Consider Retirement at 50

#349528

Postby AWOL » October 21st, 2020, 12:34 pm

kempiejon wrote:
Urbandreamer wrote: / I plan to be in excess of 90% equities during retirment. Yes I expect that means I'll feel ill when the market drops like it did earlier this year. However I really don't like bonds and in time will have the safety net of a modest DB payout and the state pension the same as you.


If one considers what capital needed to obtain the state pension and a modest DB and compare that amount to your capital now 90% equities you may well find that your bonds:stocks ratio is surprisingly high. That's the way my thinking goes for now.


This is exactly my thinking on the topic. I think considering ones assets in the round leads to this conclusion.

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Re: Forced to Consider Retirement at 50

#349619

Postby airbus330 » October 21st, 2020, 5:32 pm

Urbandreamer wrote:
It starts by explaining that there is NO one size fit's all pension plan. It goes on to consider alternatives. I plan to be in excess of 90% equities during retirment. Yes I expect that means I'll feel ill when the market drops like it did earlier this year. However I really don't like bonds and in time will have the safety net of a modest DB payout and the state pension the same as you.


I'm in a similar position to the OP.
My gameplan was exactly the same as yours, remaining nearly fully invested and riding the bumps along the way. When the big correction occurred in March I saw a dramatic reduction in my wealth which was several years income. The psychological stress of sitting watching the fall was very difficult and it gave sleepless nights. I hung on in, but recognised that I did not want to experience that again, particularly when older and less able to work if I had to. So, as the market recovered I moved nearly 80% of my equity into gilts/bonds and although I realise these are not a panacea, I can at least see the benefits of a differentiated portfolio when there are periods of instability. It hurts to watch US stocks reach new highs and lose 80% of the benefit, but I sleep better. When the Covid/Brexit/Trump situation calms a bit I will move gradually back to 60/40, which I think is where I should have been to start.

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Re: Forced to Consider Retirement at 50

#349633

Postby dealtn » October 21st, 2020, 6:24 pm

airbus330 wrote:
Urbandreamer wrote:
It starts by explaining that there is NO one size fit's all pension plan. It goes on to consider alternatives. I plan to be in excess of 90% equities during retirment. Yes I expect that means I'll feel ill when the market drops like it did earlier this year. However I really don't like bonds and in time will have the safety net of a modest DB payout and the state pension the same as you.


I'm in a similar position to the OP.
My gameplan was exactly the same as yours, remaining nearly fully invested and riding the bumps along the way. When the big correction occurred in March I saw a dramatic reduction in my wealth which was several years income. The psychological stress of sitting watching the fall was very difficult and it gave sleepless nights. I hung on in, but recognised that I did not want to experience that again, particularly when older and less able to work if I had to. So, as the market recovered I moved nearly 80% of my equity into gilts/bonds and although I realise these are not a panacea, I can at least see the benefits of a differentiated portfolio when there are periods of instability. It hurts to watch US stocks reach new highs and lose 80% of the benefit, but I sleep better. When the Covid/Brexit/Trump situation calms a bit I will move gradually back to 60/40, which I think is where I should have been to start.


What are your thoughts on how well you might sleep if that 80% invested in gilts/bonds suffers a "big correction"?


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