Possible to retire at 50?

[ArthurMcB]

Is this scenario, could the person retire at age 50:

1. Current age = 41
2. Current corporate pension fund balance = 300k
3. Contributions per annum = 41k approx (10% employer; 25% employee at 115k)
4. 100% in equities
5. Will (hopefully) get full UK and full Irish state pensions. Currently buying bk UK yrs.
6. Est. annual expenses (from age 50) = 55k
7. Wife and 2 kids. Kids will be starting 3rd level when around age 50.
8. Wife will get public sector pension of around 30k per annum from age 60, 10 yrs after spouse retiremement. Both are same age.
9. No other assets or investments to speak of.
10. Mortgage will be paid off before age 50.

With the above, could the person retire at age 50 and use corporate pension to bridge the gap to age 70 approx when 2 state pensions (hopefully) get drawn and at that point reduce drawdown of corporate pension accordingly.

Would keep corporate pension fully invested in equities with a withdrawal rate of about 4% (Age 50 - 70) or to cover est. annual expenses.

I think pension fund would be close to 1m at age 50 assuming growth rate of 4%.

Does this look feasible? Any thoughts?

Wife supports spouse retiring at 50 and they woukd have lots of ways to occupy their time.

Thanks.

 

[Wolframius]

What are your estimated annual expenses when retired?

 

[Flybytheseat]

6. Est. annual expenses (from age 50) = 45k

 

[MrEarl]

Hello,

You think that you'll need €45k per year (after tax) to live on, incl. covering two children in university, for the initial three - four years. That looks low, to provide for four adults, be honest.

I think you need to also be building a cash stockpile of excess €250k.

Also, are you sure that you'll have met the necessary level of contributions, to qualify for the full state pension?

 

[Ruffian]

Wife will get public sector pension of around 40k per annum from age 60, 10 yrs after spouse retiremement. Both are same age.

Will your wife continue to work until 60 or is this a preserved pension? It seems fairly high for someone with service only up to age 50 - particularly as it is a coordinated pension and presumably the 40k is separate from any State Pension.

 

[Premos]

What is the €45k? Your contribution/expenses or your family expenses? My understanding is that your wife would still be working. And if her pension estimate comes to €40k at 60, her wage is probably substantial. Is that taken into account in the €45k.
€45k for 4 adults is low, even without a mortgage.

 

[Annieindublin]

Aged 50 means you won’t have full contributory pension here. You’ll be maybe 10 years (520) contributions short. About a quarter of the pension. You might be able to address that
Also buying further Uk years will get more expensive, only slightly though.

I’m a natural worrier so I may be overthinking it but is it likely that the goal posts for Uk or Irish state pension will move in the next 25/6 years? (67-41)

 

[Protocol]

Will your wife continue to work until 60 or is this a preserved pension? It seems fairly high for someone with service only up to age 50 - particularly as it is a coordinated pension and presumably the 40k is separate from any State Pension.

The wife would retire at age 60, ten years after the main poster retires at age 50.

 

[ArthurMcB]

What are your estimated annual expenses when retired

About 45k. But per other feedback, may need to revisit this and make it 55k. Had calculated itd be about 45k but good to have a buffer.

I think you need to also be building a cash stockpile of excess €250k

Thanks, whats your thinking here? With pension income and wife still working id have thought they'd be ok and maybe have a small rainy day fund of 6 months expenses. Why 250k? It seems excessive.

are you sure that you'll have met the necessary level of contributions, to qualify for the full state pension

The plan would be to keep up prsi through pension drawdown, if thats possible?

Will your wife continue to work until 60

WIfe would continue till 60.

It seems fairly high for someone with service only up to age 50

At 60 she would have approx 40 yrs service.

What is the €45k? Your contribution/expenses or your family expenses? My understanding is that your wife would still be working. And if her pension estimate comes to €40k at 60, her wage is probably substantial. Is that taken into account in the €45k.
€45k for 4 adults is low, even without a mortgage

45k was family expenses but, based on feedback here, maybe this should be 55k. I have updated op for this.

wifes pension estimate is prob too high. A secondary school teacher with 40 yrs service, im not sure what that'd equate to, maybe 30k? Have updated this in op aswell.

Aged 50 means you won’t have full contributory pension here. You’ll be maybe 10 years (520) contributions short. About a quarter of the pension. You might be able to address that

I wonder can a different class prsi be paid somehow, through arf drawdown maybe?

 

[Ruffian]

wifes pension estimate is prob too high. A secondary school teacher with 40 yrs service, im not sure what that'd equate to, maybe 30k? Have updated this in op aswell.

If your wife is a member of the pre-April 2004 pension scheme then your figures may be in the ballpark. With 40 years service at 60 and a salary of about 80k she would be eligible for a pension of about €25k. Provided she does not take up any insurable employment she should also qualify for a Supplementary Pension of about €15k to take her up to State Pension age.
However, if she is post April 2004 this doesn't work - normal retirement age is then 65.

 

[misemoi]

Are you certain your wife will have full 40 years at 60? She would have had to begin at 20?

 

[MrEarl]

@ArthurMcB

My suggestion for the cash stockpile of €250k comes from a combination of things:

- you'll most likely be supporting two adults through university.
- thereafter, possibly contributing to their weddings, helping them get their first homes, that trip around the world that one of them has always wanted to do etc etc.
- you will likely to want to do a few good holidays
- you may well want to update your car(s)
- you will quite possibly invest in upgrading your home
- you'll want an emergency fund.

The €250 didn't come from a specific formula, but between all of the above, I think you'll hit an average of €20k per year, above day to day living costs, during the term year period, with the remaining €50k being for emergencies.

No matter what anyone ever thinks or says, we all burn through money faster than we think we will.

 

[Ruffian]

Are you certain your wife will have full 40 years at 60? She would have had to begin at 20?

I think teachers can have 1 to 2 years added to pensionable service for pre-entry qualifications. But it would still be cutting it tight.

 

[ArthurMcB]

Are you certain your wife will have full 40 years at 60? She would have had to begin at 20

WIfe did start at 20 so will have 40 yrs at 60.

However, if she is post April 2004 this doesn't work - normal retirement age is then 65.

She is post 2004. @Ruffian - Does this mean she cannot retire at 60? Thanks.

Fair points @MrEarl, i think with a 4% arf drawdown + wifes salary + tax free lumpsum they should be ok especially as they wont have mortgage or retirees work related expenses. The tax free lump sum will be key here and woukd be close to the figure you suggest.

Say 1m less 25% TFLS @4% draw is 30k
Wifes salary in 10 yrs might be say 55k
Tfls of 250k

Few assumptions there but i think they would be ok.

 

[Annieindublin]

If your wife is ok with working while you retire early it seems manageable.

If your kids are able to live at home while at college third level might not be too expensive. Most degrees seem to be 5 years now..4 minimum and that much rent in another city is expensive.

 

[Ruffian]

She is post 2004. @Ruffian - Does this mean she cannot retire at 60? Thanks.

She could take Cost Neutral Early Retirement at any age from 55. If taking it at 60 the actuarial reduction on the pension would be about 25%. And she would not become eligible for a Supplementary Pension before 65.

 

[ArthurMcB]

Thanks all. Seem as though it might be possible to do in the circumstances. Wife is ok with spouse retiring at 50 and kids would live at home, if they decide to do 3rd level.

@Ruffian thanks re the pointers on wifes pension. Can i ask what you mean by cost neutral retirement? Also, is the supp pension a top on their teacher pension until they reach state pension age? Am i right in saying she would be penalised heavily by retiring before 65 even if she has 40 yrs servive at 60?

 

[Dr Strangelove]

This “retire at age x” discourse is a bit pointless.

All you can do is act as best you can today do put you in a position to retire sooner.

There is never a magic age.

 

[Ruffian]

Can i ask what you mean by cost neutral retirement? Also, is the supp pension a top on their teacher pension until they reach state pension age? Am i right in saying she would be penalised heavily by retiring before 65 even if she has 40 yrs servive at 60?

A teacher (or other public servant) who is a pre-April 2004 entrant is eligible for a Supplementary Pension from 60 on top of their Occupational Pension. That is provided they are not working or on a Social Welfare Benefit (or the Social Welfare benefit is of lesser value). If they are post April 2004 then they do not become eligible for the Supplementary until 65 - and it would then stop in any event at State Pension age. 65 is "normal retirement age" for post 2004s.

Yes, your wife would be "penalised" if she took Cost Neutral Early Retirement at 60. The actuarial reduction is about 25%. So with the 40 years pensionable service and a salary of (say) €80k the full Occupational Pension would be about €25k. If taking CNER at 60 this would reduce to about €18,750 pa (for life).

PS. Alternatively she could retire (or resign) at 60 and defer her pension until 65. There would be no actuarial reduction in this event.

 

[AAAContributor]

Can i ask what you mean by cost neutral retirement?

The post 1-April 2004 Pension Scheme's normal retirement age (or 'preserved age' in the Scheme lingo) is 65.

That's the age at which the Scheme is contracted to pay out the retirement benefits - the lump sum and annual pension.

If a member wishes to retire before age 65, these retirement benefits can be accessed from age 55, but actuarial haircuts will be applied to the annual pension and lump sum, to reflect that the benefits are being paid earlier (lump sum) and for a longer period (pension), and so have to be 'cost-neutral' to the Pension Scheme. It does not matter that full service may have been attained before age 65 - benefits drawn before age 65 will incur a haircut.

For Scheme members with a preserved age of 65 who wish to take their benefits at age 60, the actuarial factors applied are:

- Lump Sum: 90.70%
- Annual Pension: 74.80% (i.e. ~25% lifetime reduction as mentioned in Post#19 above)

These % figures increase from this point towards 100% the closer one retires to 65 (and reduce the closer one retires to 55).

If a member decides to avail of CNER and retires on actuarially reduced benefits, they cannot switch to payment of a preserved pension at the normal preserved age.

It's worth noting that benefits payable under Spouses’ and Children’s Pension Schemes will not be affected by a decision to accept cost neutral early retirement in lieu of preserved benefits, i.e. any benefits payable under Spouses’ and Children’s Pension Schemes to survivors of early retirees will be the same as those payable to survivors of staff who opt for preservation of benefits.

More info on CNER here.