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Part time to full retirement?

Discussion in 'Retirement' started by sandy shaw, May 8, 2019.

  1. sandy shaw

    sandy shaw New commenter

    I worry about giving up paid employment. How much pension do I need for a reasonably comfortable retirement. I don't do expensive holidays. Its just the thought of a disappearing salary. I could carry on part time for an extra year and be nearer to my state pension but I am finding work tiring.

    I'd be grateful for any thoughts. I really want to have a life after teaching!
  2. ikon66

    ikon66 Occasional commenter

    Find out exactly what your pension will be.

    I started by looking at what I spent each month over a year period. Then took away things I would spend on when I was at work ie travel costs, work clothes etc. You’ll need to factor in extra utility bills as you may be in the house longer so use more G & E.

    Look at your bills next, switch suppliers, look at house n car insurance and switch to save money. Get a water meter fitted if you’ve not got one and don’t use lots of water

    Try to haggle down or switch things like broadband and subscription tv providers

    Get a more economical car

    Use your lump sum to pay off mortgage and any credit cards, start with highest interest ones first.

    Get a 0% credit card to help spread the cost of any higher value items you may need to buy.

    Look at what savings you have, are they getting you the best returns?

    Just a few initial thoughts
    Last edited: May 9, 2019
    emerald52 likes this.
  3. diddydave

    diddydave Established commenter

    It's such a personal question that only you'll be able to work out what is 'comfortable' for you.

    We started making plans 5 years ahead of what we thought would be when we would go and this is what we did:

    1) Record absolutely every expense - paying by card for everything so we had a record and could itemise all allowed us to see exactly how much we were spending and therefore needed.
    2) Put half our salaries into a savings account to see if we could genuinely live on half wages
    3) Checked our pension amounts and history were correct (we have one 5-day period that still needs to be corrected!!!)
    4) Made a spreadsheet to work out the pension amounts for ourselves and did a day-by-day projection of what the amounts would be for every day worked - also what the AAB reduction amounts would be
    5) Took advantage of the free visit from the Wesleyan to confirm the figures and ask other questions.
    6) Put money into the Prudential AVCs to take advantage of the new flexibilities to save on tax later
    7) Considered how much we needed for a rainy day (new roof, car, other large expenses - and how often) - we don't have children or other dependants so this isn't a large amount.
    8) Paid off all outstanding debts - mortgage etc.

    In the end we worked out that we could go 2 years ahead of our initial 5 year plan - we were very surprised at how little we actually need. We allowed ourselves a maximum of £3000 a month but aimed for half that and without any major expenses have achieved that. I still do examining work and the little extras like golf club membership and holidays etc come out of that.

    When you draw your pension you don't pay quite as much tax (no N.I. at 12%, no pension contributions of 10% and the first £12,500 of income is tax-free) so going from a teacher's gross salary of £40k+ to a pension of £15-20k isn't quite as daunting as may first appear.

    We delayed taking one pension for a year to reduce the AAB effect and took £16,000 out of the AVCs instead but having looked again at the numbers have decided to take the pension anyway as the reduced amount takes around 20 years to be overtaken by the full amount (i.e. we'd be in out 80s by the time we'd be 'better off').

    The first year of not-working (we're too young to be retired!) was interesting and the anxiety of not having any formal income is certainly a factor that we can understand, but having a budget and watching it carefully allowed us to realise that we were not going to have any problems...£3000 a month was never going to be reached and most of the time we were around the £1000 figure.

    So for us £12,000 a year would be difficult but achievable, £18,000 more so but still need to be careful and £24,000 very comfortable.
    Last edited: May 9, 2019
  4. eljefeb90

    eljefeb90 Senior commenter

    Great post from @diddydave . I took ARB three years ago and have followed lots of threads based on 'how much is enough to get by'. There are really too many variables involved to give you a hard and fast answer although previous threads have said the bottom line for a comfortable retirement is about 12k per adult in a household if you are mortgage free. Personally, I managed to pay the last chunk...under £3k ...of my mortgage nearly a year early out of the lump sum which made a huge difference. To be honest, the biggest factor was my children getting jobs and fleeing the nest, which decreased my outgoings on food, fuel, transport, handouts enormously. The final factor is the availability of paid work. I hadn't really considered what I would, or could do but I vowed never to work in teaching again . I do lots of invigilating at universities and work for the local council on the electoral roll. I have been surprised how much work is available.On average, this brings in £400-£700 per month on top of my pension. I could work more or less; it is all 'gig economy ' type work, but it is stress free and I have met lots of interesting people.
    Compared to being a sole wage earner with a mortgage and three kids to support, this is bliss. I am better off now than I have ever been. The years of overdrafts, zero savings and scrimping are just a bad memory.
    Look on your pension as a safety net, a secure foundation. Then , cast around for other opportunities safe in the knowledge that you can take it or leave it. It's a great feeling!
  5. diddydave

    diddydave Established commenter

    One other thing to consider*, and you will need to look very carefully at your figures, is whether your pension will go up, down or have any difference if you work another year - especially as you are considering a part-time role. *Get some expert advice - I am not one!

    You are probably a protected member fully in the final salary scheme, based on how close you are to NPA. Unless you have had any recent jumps in salary then the salary used to work out your pension will be your best 3 in your last 10. To work this out your past salaries are brought into 'todays money' so it is highly likely that your best 3 are the ones 10, 9 and 8 years ago (as we've not had any pay rises that beat inflation in the last 10 years).

    The lower salary used next year is normally counteracted by the fact you have an extra year's service, so you get 1/80th more...but if you take on a part-time role you won't get a full year's extra service added so it is possible that your pension could go down*. *Get an expert's advice - I am not one!
  6. sandy shaw

    sandy shaw New commenter

  7. sandy shaw

    sandy shaw New commenter

    Thanks for your great thoughts. I started jotting down all my monthly bills and also my annual bills like building insurance etc. I'm trying to work out my outgoings on a monthly basis.
    ikon66 likes this.
  8. sandy shaw

    sandy shaw New commenter

    Great ideas, thank you. I've started to think about changing broadband provider /energy supplier. I don't think I've ever really thought about the deal I am getting. I know that with my pension and a small AVC I'll be on 20,000 a year with my mortgage already paid off. Reckon I'm going to spend the weekend putting all outgoings into a spread sheet. I've already roughly worked out what my pension will give me per month after tax. I'll have to wait a couple of years for my state pension and then I know I'll be comfortable. Its just the in between bit that worries me. It would be easy to not hand my notice in and work part time for a year. But I don't think I could bear going back in September. A year seems such a long time.
    ikon66 likes this.
  9. sandy shaw

    sandy shaw New commenter

  10. sandy shaw

    sandy shaw New commenter

    Brilliant ideas, thank you. I am mortgage free but the house needs things like bathroom and kitchen refurb. I know I can take my time but I worry about bills. When you have a salary coming in, you have a comfort blanket.
  11. eljefeb90

    eljefeb90 Senior commenter

    @diddydave has pointed out that a big chunk of your salary goes on union fees, National Insurance and , ironically, on your pension , so the fall in net income isn't so great. An inflation linked pension of 20k sounds like a pretty good comfort blanket and you haven't even mentioned your tax free lump sum! And there is nothing stopping you taking up part time work, either as a teacher or in another role. I have eaten into my lump sum having spent about £20k on home improvements, including a new kitchen. Spending so much time at home, I get the benefit of a nicer house and garden and I am investing in my main asset. I am convinced that this is a better investment than accruing pathetic rates of interest.
    emerald52 and richest1 like this.
  12. sandy shaw

    sandy shaw New commenter

    As you said eljefeb90 I am going to use lump sum for a new kitchen and refurb bathroom etc. I don't really do expensive holidays but do want to invest in my house which is my main asset.
    I am feeling so tired I know the sensible thing is to retire. I will only have to wait two years for my state pension and that will help.
    eljefeb90 likes this.
  13. catmother

    catmother Star commenter

    Think of your pension as your new salary and in your case,pensions in 2 years times. Money in your bank account= new salaries,except you don't have to get up at 6am,drive to work and face a room full of teenagers all day,without to mention annoying colleagues.

    If you are 2 years from your state pension,why have you not claimed your teaching one already?
    eljefeb90 likes this.
  14. sandy shaw

    sandy shaw New commenter

  15. sandy shaw

    sandy shaw New commenter

    You are right -money in bank account from my pension is like a salary. My problem is that its less money. But as you said in 2 years time I know I will be fine with my state pension. I have just been very slow to relinquish working in school. Perhaps its the fear of what will I do next with my time? However, I do have grandchildren and I'm thinking of volunteering (but not in education sector). I could stay on part time for another year at school but I reckon that could kill me! I need to just go for it.
  16. catmother

    catmother Star commenter

    In that case,it's probably a very good idea to go! How much money does one really need versus sanity?
    eljefeb90 likes this.
  17. eljefeb90

    eljefeb90 Senior commenter

    I would do a bit of cost/benefit analysis, Sandy. Is the extra few hundred quid worth it? You seem to recognise that work is getting you down, but are reluctant to give up on a salary. You only have two years to wait until you pick up your state pension...surely part of your lump sum could be used to bridge the gap? Pre retirees are often concerned about the lack of structure about what they'll do with so much time on their hands. Is that the real issue?

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