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Where to start?

Discussion in 'Retirement' started by BSL1, Jul 10, 2019.

  1. BSL1

    BSL1 New commenter

    Hi all. I would really appreciate your advise on where and when to start to plan for retirement. I am aiming to do 2 more years but may finish at the end of next year. And more importantly what do I need to do, what do I do to start the process. Do I have to apply for retirement or does HR do all the paperwork for me?
     
  2. FrankWolley

    FrankWolley Star commenter

    Start by registering with TPS (assuming you have a teachers' pension), and reading up about the process there*. I would also work out what budget I need to live, so that I can see how retiring might affect my lifestyle.


    *And then come back with any specific questions...
     
    border_walker likes this.
  3. diddydave

    diddydave Occasional commenter

    For the process it's done online by yourself through the TPS website. Pretty straight-forward so long as your service record is accurate. They ask you to start the process several months before the date when you want your pension to start.

    Here's one I posted earlier, regarding advice on planning for the final working years, to another thread:
    https://community.tes.com/threads/part-time-to-full-retirement.790089/#post-12817752 (copied below)

    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.
     
    Prim and Dorsetdreams like this.
  4. binaryhex

    binaryhex Lead commenter

    Good decision and good advice above. It's worth checking your NI contributions / state pension . You have to register and then it takes a week or so to jump through the hoops:

    https://www.gov.uk/check-state-pension

    It's certainly a very good idea to get into a position where you are crystal clear about all your finances. That means making a table / spreadsheet of all your current monthly / annual incomes and outgoings with amounts, date due, savings and investments, food and socialising bills, usual amount spent on breaks and holidays, petrol, likely future pension from TP and state, predictable future lump sum outgoings (e.g. new car, helping children at uni etc) so you really know and understand where your money goes. A surprising number of people have only a vague idea about their finances.

    Once you really understand your financial position, you could usefully start looking at reducing outgoings without reducing your lifestyle. Look at utility bills, cheaper insurances, where you shop and the food bill, do you need two cars if applicable, moving savings into better savings accounts (look at newer protected banks like Oak North etc).

    Another thing that I did that gets you into the right frame of mind is to start the process of completely decluttering the house. The amount of rubbish that we accumulate that we don't need or haven't looked at for 10 years is pretty shocking. Having less is definitely having more. I would also start looking at lifestyle. Teaching is draining and people rarely have time to eat or exercise properly. Starting the process of eating better and exercising more (you may already be doing this) gets your mind into the right frame. You might also start thinking about what you will do when you retire. There's a lot of hours to fill. It's all about getting into the right frame of mind over the coming months and getting excited about a new beginning, once the decision to go has been made.

    Fortunately, with a year to go, you have plenty of time to get all the above done. Make a list!

    Good luck.
     
    eljefeb90 and Dorsetdreams like this.
  5. PeterQuint

    PeterQuint Lead commenter

    Make sure your TPS record is up to date, and that all your contributions have been logged.
     
    border_walker likes this.
  6. mustntgrumble

    mustntgrumble New commenter

    I started process three years ago with intention of retiring in late 2020. After looking at it very closely and as a higher rate tax payer we (three of us) independently opted for as much additional pension on the TPS as we could take. Once you reclaim tax it works out at 6 to 7% return a year indexed linked. There is nothing else out there that compares. I really have doubts that any AVC can match this return. Indeed one long term payer into them (26 years) in my organisation has not been impressed with return. Much depends on your precise financial situation but high interest loansshould be cleared first. Current mortgage rates means that it is moot to clear a mortgage.
    Finally get to love the tax man. There's likely to be fun and games ahead if you go phased etc
     
    eljefeb90 likes this.
  7. TonyM19

    TonyM19 New commenter

    Indeed there is :(

    Don't know if I'd call it fun though
     
  8. yodaami2

    yodaami2 Lead commenter

    Yep, I'm going phased and expect the tax man to get it wrong! So keeping good notes of income and tax paid, ready to fight the fight!
    To OP, there's a lot to be said for the phrase, you cuts your cloth to.....

    Make sure you can keep the roof over your head, pay the fuel bills/ council tax and feed yourselves.
    After that it's cutting your cloth to match your income, if that means staying in for a month reading old books on your kindle, going for walks with a flask, visiting friends,within walking distance because you haven't got fuel, then so be it. All sounds good to me. Maybe next month you can forgo the flask and visit a coffee establishment.
    Really the only planning you need outside of housing and feeeding yourselves is planning to be happy. There's lots of free stuff to do.
     
    eljefeb90 likes this.
  9. eljefeb90

    eljefeb90 Senior commenter

    Perhaps I was lucky , but early retirement was sort of spring on me by necessity in order to get out of a toxic school environment that was only going to get worse. I only had a few months to plan and, as the sole earner with three kids and a mortgage, no savings or investments and always slightly overdrawn at the end of each month, I was very concerned about finances.
    Three and a half years in, I have far more disposable income . Paying off the last few thousand of my mortgage from my lump sum made all the difference, as did the offspring becoming independent. Admittedly, I had been a HoD with 35 years in the bag so my pension, even with 12% taken off under ARB, was substantial. As @diddydave says in his very informative post, with union fees , pension contributions, national insurance etc. , the gap between your net income when working and your pension income is not so daunting. It was about £1000 in my case, but paying off the mortgage reduced that gap to £450 a month . Almost as big a factor was the kids moving out/ finishing university. Even though they were earning, we only charged token amounts for food and accommodation as then they could save for mortgage deposits.
    I also discovered a range of invigilation and casual work to keep me busy at various times.
    In summary, I may be one of the lucky ones, but my retirement three years in has been one of a total lack of financial worries. I have far , far more disposable income now than I ever did when raising a family. Retirement has meant silk shirts not hairshirts.
     
    yodaami2 likes this.
  10. Rott Weiler

    Rott Weiler Star commenter Forum guide

    Have a look at this thread too

    https://community.tes.com/threads/reducing-expenditure-in-retirement.776612/

    Possibly the most important financial question for many people is whether your mortgage is paid off yet (assuming you had one!) and if not whether your TPS lump sum will be sufficient to pay it off. Being able to start retirement mortgage-free is a great help in retirement planning, financially in reduced outgoings of course, but also I found psychologically (as in, I knew the roof over my head was now mine!).
     
    eljefeb90 likes this.

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