Retiring early – How did you do it ?

OMG_OMG

Registered User
Messages
70
Thank you so much freelance , great advice,
Yes the big 50 in May, that is good to know about the pension I wasn't aware of that I will certainly look into that for the next month.

You can now put 30% into your pension for the whole of 2021. Not just from the date you turn 50.
Its the year in which you turn 50.
 

OMG_OMG

Registered User
Messages
70
I retired last year in my 50s.
Got redundancy and mortgage was done just decided to go for it.
I was actually surprised that once the mortgage was gone how low my annual expenses actually are.
We actually have more disposable income now than we had at the beginning of last year and ive retired.
The wife is still working for now though will be retiring soon enough too.
Even after that we still will have more disposable income than we had before I retired.
Have to say im enjoying it, but COVID has put a little bit of a damper on it with the lockdowns.
 

iamaspinner

Frequent Poster
Messages
180
At 49 you have time to sort it out so no need to panic but don't waste time either. Note that when you go from 49 to 50 your maximum pension contribution for tax purposes (excluding the employer contribution) increases from 25% to 30%, and this increase is available in the year of your 50th birthday and is available for the full year (people often assume it doesn't kick in until the following year).
Excuse my ignorance, but what does that mean in practical terms? I find it difficult to get my head around anything related to pensions?
 

moneymakeover

Frequent Poster
Messages
667
I think it was in response to thewire2020 having 128k in his pension

It's not great if planning to retire early

But age 50 they can increase the pension contributions
 

Freelance

Frequent Poster
Messages
62
Hi iamapsinner. I'm not sure which part of it is confusing, so I'll try to assist on a couple of points:

The amount you can contribute to your pension and get full benefit of tax relief changes as you get older. The increased amount is available in the year of your birthday - this isn't always understood. So somebody who is currently 49 and will turn 50 later in 2021 can contribute 30% in that year. See the following table.
AgePercentage limit
Under 3015%
30-3920%
40-4925%
50-5430%
55-5935%
60 or over40%

Regarding the need to make preparations for early retirement look at it this way. Say you are single and have a modest lifestyle and want to be in a position to spend €25,000 yearly after you retire (This includes all bills and expenses but excludes mortgage as you have that paid off). If you retire at 66 (the state pension contributory age) and if you are entitled to the full state contributory pension of €13,000 you will need a personal pension of €12,000 to make up the difference. So you will need a pension fund at the time you retire at 66 sufficient to pay out €12,000 yearly.

However if you want to retire at 60, two things change. Firstly you have no income for the years from 60-66 so you will need a pension pot at 60 that can pay you the full €25,000 for each of the first six years, therefore your pension pot has to be at least €150,000 greater (to keep this simple I'll ignore the Benefit Payment for 65 Year Olds). Secondly, by retiring six years earlier, you have six years less contributions going into your pension pot. So for our 49y/o (almost 50) to retire at 60 he has 10 years rather than 16 years to build up his pension pot. And he needs a considerably larger pot to fully fund the first six years of retirement. I hope that this makes sense.

My comments here are just by way of example and I have ignored a huge number of very relevant factors such as State Pension eligibility and sliding scales, Availibility of Jobseekers Benefit, Disability Benefits, Inflation, Indexation, Compounded Growth, Investment Choices, Employers contributions, etc etc, all of which matter). There are a number of pension specialists around these parts who will do a far better job than I can at working out exactly how much you need in order to retire early and have a reasonable income. But the basic message is that early retirement needs planning and the sooner you get started the better.

Last point - don't let yourself be bamboozled by pension speak - if your adviser isn't making sense thats not your fault, tell him/her to try again, try harder or replace them !
 
Last edited:

Sadim

Frequent Poster
Messages
159
I think that there’s a lot to be said for trying to create a sensible glide path towards retirement. For example, looking to move to a four day week and then to a three day week in the final years.
I have always thought that once you cross 60 you should have a statutory right to work part-time and start that glide path you referred to. Like, up until 4 - 5 years ago I was doing 50 - 60 hour weeks and always under pressure with deadlines and ungrateful bosses. Then in the end was made redundant so, all that effort was worth nothing. It has put me off corporate life forever and now, I earn considerably less but have only one daughter going through college now, wife soon to retire from the public service and have a modest pension fund myself.... besides, I think I've only worn a suit 2 - 3 times in the last 4 years and one of them was a wedding! Nope, I do not miss the rat race
 

Marco 1972

Registered User
Messages
46
Hi iamapsinner. I'm not sure which part of it is confusing, so I'll try to assist on a couple of points:

The amount you can contribute to your pension and get full benefit of tax relief changes as you get older. The increased amount is available in the year of your birthday - this isn't always understood. So somebody who is currently 49 and will turn 50 later in 2021 can contribute 30% in that year. See the following table.
AgePercentage limit
Under 3015%
30-3920%
40-4925%
50-5430%
55-5935%
60 or over40%

Regarding the need to make preparations for early retirement look at it this way. Say you are single and have a modest lifestyle and want to be in a position to spend €25,000 yearly after you retire (This includes all bills and expenses but excludes mortgage as you have that paid off). If you retire at 66 (the state pension contributory age) you you are entitled to the full state contributory pension of €13,000 you will need a personal pension of €12,000 to make up the difference. So you will need a pension fund at the time you retire at 66 sufficient to pay out €12,000 yearly.

However if you want to retire at 60, two things change. Firstly you have no income for the years from 60-66 so you will need a pension pot at 60 that can pay you the full €25,000 for each of the first six years, therefore your pension pot has to be at least €150,000 greater (to keep this simple I'll ignore the Benefit Payment for 65 Year Olds). Secondly, by retiring six years earlier, you have six years less contributions going into your pension pot. So for our 49y/o (almost 50) to retire at 60 he has 10 years rather than 16 years to build up his pension pot. And he needs a considerably larger pot to fully fund the first six years of retirement. I hope that this makes sense.

My comments here are just by way of example and I have ignored a huge number of very relevant factors such as State Pension eligibility and sliding scales, Availibility of Jobseekers Benefit, Disability Benefits, Inflation, Indexation, Compounded Growth, Investment Choices, Employers contributions, etc etc, all of which matter). There are a number of pension specialists around these parts who will do a far better job than I can at working out exactly how much you need in order to retire early and have a reasonable income. But the basic message is that early retirement needs planning and the sooner you get started the better.

Last point - don't let yourself be bamboozled by pension speak - if your adviser isn't making sense thats not your fault, tell him/her to try again, try harder or replace them !
Some good advice there, didn't realise that you can contribute the extra amount the whole year when you bracket changing birthday occurs as it were...

Think we should be like Japan where older workers can claim lump sums, pensions etc but still work in their old employ on a more casual basis.

That would be my plan, not to retire 'retire' but get out with lump sum, small pension, pay mortgage off and do part time work. like another poster, it's the mortgage that is the big drain, without that it's a lot easier ....
 

iamaspinner

Frequent Poster
Messages
180
@Freelance Thank you for explaining that. I don't know how that applies to me being on a public service pension though (I joined in 2007). I am buying extra years (notional service) and even then I won't have the full 40 years if I retire at 65 (I will have 35 years at 65). I'm nearing my 50th birthday. I wonder if the changes in tax relief and contributions are applied automatically. I must ask how it works.

In any case I suppose it doesn't look great for me to retire at 60 or before.
 

Sadim

Frequent Poster
Messages
159
Some good advice there, didn't realise that you can contribute the extra amount the whole year when you bracket changing birthday occurs as it were...

Think we should be like Japan where older workers can claim lump sums, pensions etc but still work in their old employ on a more casual basis.

That would be my plan, not to retire 'retire' but get out with lump sum, small pension, pay mortgage off and do part time work. like another poster, it's the mortgage that is the big drain, without that it's a lot easier ....

Yes I don't like the word "retire" either, a glide path as some contributor has referred to it or some bit of scaling back would be ideal. Nobody went to their grave shouting I wished I had worked longer!
 
Top