Enjoying Retirement

[eyebeebe]

Michael_B said:

It’s sunny enough for us Geneva and Burgundy, which is where our family and social networks are now concentrated. My main interest is classical music and Mrs B’s is creative expression and art therapy; there is a 7ft Austrian/German grand piano and separate art studio in each property.

The thought of reconstructing/transporting all these elements elsewhere to reduce costs and have better weather, is not that attractive to us. Not to mention the fond memories we have of times past with family/friends in each place.

Or, in retirement, the vastly superior standard of Swiss healthcare, and/or indeed French wine/food; though an excess of the latter might cause us then to call more frequently upon the former

Most of our friends in Switzerland are, using politically correct terminology, economic migrants like us and other friends and family are in the UK, where we have no desire to return to. We expect our friends here to move on once their kids are grown up. Some have expressed interest in joining us in Spain. Regardless, we've made new friends as adults, so we don't find that so daunting and we and our current friends will remain mobile. My OH despite wanting to move here for the skiing is over it and finds the summers often too hot. Having skiing on our doorstep, I've found I can take it or leave it, but that may change if it isn't so readily accessible. I've always been a bigger fan of après to be honest and I can do that just as well in the sunshine looking at the sea after a swim, bike or run. The inconsistency of the weather annoys me too. Last week I was sunbathing at nearly 20 degrees. Today there is sleet.

I have to agree that Swiss healthcare is fantastic. I would say best in the world for the man in the street and only bettered by American treatment if you are able to afford it. It highly entertains me to see people defending the NHS having seen what a properly funded and well organised system can offer. However, I understand that the Spanish system is good and being used to paying for health insurance, we'll continue to do so.

I'd take French or Italian food (just) and wine (clearly) over Spanish, but that's a high bar and I find Swiss restaurants generally mediocre and very expensive even compared to the salaries. Likewise the wine - at a given price point French, Italian and Spanish (in that order) wine is far better than Swiss. In any case I'm stocking up on en primeur now and for the next decade to get us well into our retirement!

Michael_B said:

and the annuity rate for workplace pensions when I retire will be 6% (currently 6.5%), and I can have some or all of the pot as capital which is taxed progressively but very lightly compared to other countries.

Are you sure you can elect to take it all as capital. I thought that you had to take an annuity on the compulsory component (up to CHF 85k or so) and then the rest as capital. That's certainly how it works in my scheme. All irrelevant to us though, as we can withdraw it when we leave the country - we'll park it in a vested benefits foundation in Schwyz and pull it out at 4.5% tax, spend the remainder of the calendar year in the UK, as it isn't taxed there and then move to Spain, where it would be taxed as an income event at some hideous rate.

Michael_B said:

Re retirement planning:

Here is Switzerland there is a somewhat irritating rule that says all additional pension contributions (to an occupational DC scheme) made within 3 years of retiring, then become *non* tax-deductible if one takes any part of the resulting pension pot in the form of capital[1] rather than annuity.


[1] No-one here in their right mind would take the entirety of a substantial DC pot as an annuity; the usual split is 50/50, if only to ensure the insurance company doesn't take it all if you croak at age 66, and that there is something for your spouse/children. Also capital drawdowns are taxed very lightly (<10%) compared to most other countries.

Worth noting that unless you are a) close to retirement b) have a crazy marginal tax rate or c) have access to a 1e plan that the tax benefits of overpaying into an occupational scheme are in the long run outweighed by the returns you would get from a diversified equity portfolio, because of the conservative asset allocation the fund is forced to make by law.

My pension scheme has a survivors and orphans pension component, as well as a disability pension. I thought that was pretty standard?

Boring Swiss interlude over!

Armitage.Shanks said:

I've even got my FA telling me to spend more money on holidays now as they'll naturally taper off as I get older!

I've seen the tapering of expenses as you get older mentioned lots of times, including in retirement planning books, but I see it a little bit differently:

Assuming one isn't the FIRE retire at 35 because you've been eating beans on toast for 15 years and have saved enough to continue to do so for the rest of your life

I expect that those talking about retiring early have lived a more than comfortable working life and expect to do so in retirement. I realise that the statistics say that the average care home tenure is 2 years, but there is potentially quite a few steps before getting to that point. Maybe adaptations need making to your house, you want to seek private medical treatment or "upgrade" aids to make your life easier compared to what your healthcare provider will pay for (as this is PH, maybe you want a turbo charged wheelchair), home help or home care. If you do go into a home, do you really want to go from the salubrious environment you've built at home to a care home run at minimum cost. Maybe none of that matters for you personally, but what about how you would want to see your OH treated?

[mikeiow]

tertius said:

Ha, that's pretty well identical to my spreadsheet. Though I keep wrestling with the tax year vs age year vs calendar year as different things kick in at different dates.

I retired almost a year ago, aged 54.

Expect to start drawing down my DC pension from next tax year, initially at the most tax efficient level simply to avoid losing my tax allowance.

I put the year on the left, but I feel it really is the start of the tax year.
Must admit I have wrestled with that one too…..& our birthdays are almost 6 months apart, so we can’t base it on one or t’other of those either!!

[LeoSayer]

radovich said:

Also been dipping into this one regularly and thoroughly enjoying it. So much food for thought. Just turned 59 with 43 years work under my belt and head’s all over the place about when to finish. Two teenage children, eldest shortly off to uni in London, so probably not any time soon unfortunately!

Got various DB and DC pensions with varying retirement ages. A retained DB one with NRA 62 is showing a less than 4% penalty if I take it now. Apart from being whipped for higher rate tax for as long as I’m still working, what’s not to like there? It’s not as if it has a fixed term, as long as I’m still chugging along, so is surely just free extra money. Or am I missing something patently obvious…

A few things spring to mind.

I would have expected a reduction of 4% for every year you take a DB pension early - so 3 years early = 12%. A 4% reduction overall sounds suspiciously low.

You'd have to live with the reduction (whatever it is) for the rest of your life.

The treatment of inflation increases in DB pensions is usually different depending whether they are deferred or in payment. It's worth understanding the calculations given current and forecast inflation rates because this could make a difference to your decision.

You haven't said whether you actually need the money or what would you do with it. Without a plan you just be paying a load of extra tax just for the extra money to sit in your bank account, losing value to inflation.

[Carbon Sasquatch]

LeoSayer said:

A few things spring to mind.

I would have expected a reduction of 4% for every year you take a DB pension early - so 3 years early = 12%. A 4% reduction overall sounds suspiciously low.

You'd have to live with the reduction (whatever it is) for the rest of your life.

The treatment of inflation increases in DB pensions is usually different depending whether they are deferred or in payment. It's worth understanding the calculations given current and forecast inflation rates because this could make a difference to your decision.

You haven't said whether you actually need the money or what would you do with it. Without a plan you just be paying a load of extra tax just for the extra money to sit in your bank account, losing value to inflation.

I have 3 DB's and one of them has a NRA of 65 but no penalty for taking at 60. So if I took that one at 59 then I would only incur something around 4%. I agree with you otherwise though.

I've just paid an IFA to run the numbers on all my pensions and help me figure out the optimal age to take each. As well as the reduction factor for taking early - and the difference in revaluation in deferment vs increase in payment - there was also a GMP factor on two of them to consider. All very complicated and I'm glad I paid for help - the first time I think I've ever said that about an IFA

[mikeiow]

anonymous said:

[redacted]

Grandchildren alert?!!
We have no plans to downsize in the foreseeable....nice to enjoy the place as we have it before making that kind of BigChange™!

We figure we can plot and plan for late 60's to early 70s for that move....but not much later than that. Maybe we won't want to. Who knows!
Ours will be late 30s & probably settled, so we might have a better idea where to move to remain in touch.

[Carbon Sasquatch]

You need to downsize whilst you still have the energy.

Past a certain age, you won't do it unless it's into a care home.

[PF62]

Carbon Sasquatch said:

I have 3 DB's and one of them has a NRA of 65 but no penalty for taking at 60.

Why wouldn’t everyone take that DB at 60 and get five years of extra pension, or are there other conditions restricting you on when you can take it?

[TwigtheWonderkid]

nickfrog said:

TwigtheWonderkid said:

nickfrog said:

GT3Manthey said:

We might be in a position to pay it off for her or , like most students, she’ll have to take that on herself but I’m sure we can help .

We paid it off because of the very high interest rate but we are charging her back at typical mortgage rate. Win win.

The high increase rate could be more than offset by the fact that depending on what they do for a living, how much they earn. and how much they actually have to pay back. I read that only 20% of graduates are expected to ever pay off their loan in full before it's written off after 35 years or whatever the rules are.

Also, no one wants to think about it, but people sometimes die in their 20s or 30s. Paying off a student loan for a child who dies in an accident aged 25 is obviously a terrible idea in hindsight.

Yes sure it's a risk. She is a high earner already. But the bigger risk is that she works abroad for the rest of her life as I don't think she then has to pay it back. (not sure). She is currently on a 24 month expat contract in Paris for starters...
The other risk is that she marries someone super wealthy and doesn't work ever again. She is not the type to lose her independence.

If I was wanting to pay off my kids student loan, I'd just reimburse them every month the amount they were paying.

[nickfrog]

TwigtheWonderkid said:

If I was wanting to pay off my kids student loan, I'd just reimburse them every month the amount they were paying.

I am not paying anything off. I am just advancing the capital to avoid them paying 6%+ and I am charging them a nominal 2% on the capital, which they are paying me back.

[craig1912]

TwigtheWonderkid said:

If I was wanting to pay off my kids student loan, I'd just reimburse them every month the amount they were paying.

I’m with you on this one. Our youngest will be starting his Masters this year. Will end up with circa £50k debt. I don’t think he will he will be a particularly high earner so at the moment I’ve no intention of paying off his loan. I’d rather help him get on the housing ladder.

[Carbon Sasquatch]

PF62 said:

Carbon Sasquatch said:

I have 3 DB's and one of them has a NRA of 65 but no penalty for taking at 60.

Why wouldn’t everyone take that DB at 60 and get five years of extra pension, or are there other conditions restricting you on when you can take it?

No idea - and I didn't ask - my only questions were whether to take at 55 or 60.

It was my earliest DB pension from the early 90's - maybe it was some sort of attempt at gender equalisation because at the time women retired at 60 and men at 65 ?

[eyebeebe]

nickfrog said:

Yes sure it's a risk. She is a high earner already. But the bigger risk is that she works abroad for the rest of her life as I don't think she then has to pay it back. (not sure). She is currently on a 24 month expat contract in Paris for starters...
The other risk is that she marries someone super wealthy and doesn't work ever again. She is not the type to lose her independence.

When I took a student loan in 1999-2003 the deal with repaying if you went abroad is that you had to contact HMRC and agree a repayment schedule. I'm sure many didn't. No idea if they have found a more robust way of ensuring repayments with the schemes that have succeeded it.

[PistonHead007]

Sometimes you can have an earlier NRA because you joined the scheme a long time ago and before the NRA was increased to a higher age.

In the majority of cases taking a pension from the earliest unreduced age makes sense. However, there can be some funny quirks with Guaranteed Minimum Pension (GMP) and how that's franked.

I have seen a pension where the member could take their pension unreduced from age 60 due to the rule of 85. However, it included a significant proportion of GMP with fixed revaluation at 7%pa up to age 65. The scheme is allowed to offset the cost of meeting that GMP liability fully against all the excess pension if you retire before NRA. It's a mess to explain but the long and the short of it was a pension at 60 of £10.9k or a pension at 65 of £18.5k. Crap idea to take it early because you miss out on the fixed rate GMP revaluation due it being offset against the rest of the pension.

[Michael_B]

eyebeebe said:

I'd take French or Italian food (just) and wine (clearly) over Spanish, but that's a high bar and I find Swiss restaurants generally mediocre and very expensive even compared to the salaries. Likewise the wine - at a given price point French, Italian and Spanish (in that order) wine is far better than Swiss. In any case I'm stocking up on en primeur now and for the next decade to get us well into our retirement!

Oh yes, I'd agree in general about Swiss restaurants, though there are some exceptions for certain Asian establishments and the odd traditional jewel you can find out in the countryside. We usually eat in or are invited to friend's places: as it's often better both in quality and value than anything around here.

Wines? Last year's visit to Italy (our son is marrying a Florentine lady this summer) has converted me to all manner of Tuscan wine. For everyday stuff in Geneva I drink local Chasselas/Gamay from local vineyards. A bit expensive for what it is, but gotta keep the local economy going somehow.

For the French house I stock up on bi-annual trips to Chalon-sur-Saône, Auxey-Duresses, Volnay and Pommard (about 40 minutes away) for reds; for white I just buy whatever €~5 Mâcon-Villages and local Chardonnay is on special offer at the Leclerc supermarket.

Decent stuff laid down there is a ~200-bottle mixture of Burgundy, Bordeaux, Southern Rhône and now a few Tuscan reds; consume/replace 20-25 bottles/year.

Michael_B said:

and the annuity rate for workplace pensions when I retire will be 6% (currently 6.5%), and I can have some or all of the pot as capital which is taxed progressively but very lightly compared to other countries.

eyebeebe said:

Are you sure you can elect to take it all as capital. I thought that you had to take an annuity on the compulsory component (up to CHF 85k or so) and then the rest as capital. That's certainly how it works in my scheme. All irrelevant to us though, as we can withdraw it when we leave the country - we'll park it in a vested benefits foundation in Schwyz and pull it out at 4.5% tax, spend the remainder of the calendar year in the UK, as it isn't taxed there and then move to Spain, where it would be taxed as an income event at some hideous rate.

So Brexit wasn't all bad

Every LPP/BVG scheme in Switzerland has its own rules within a fairly wide framework. Despite the annual statement always stating the compulsory and overpaid voluntary components separately, there is usually no legal obligation to take any amount as an annuity unless you activate the policy before the age of 65, where certain institutions insist upon a certain % of the equivalent AVS/AHV pension. But as you say, that won't really apply to your exit strategy, if you are emigrating to a non-EU country in the interim.

eyebeebe said:

My pension scheme has a survivors and orphans pension component, as well as a disability pension. I thought that was pretty standard?

Yes it is. A % of my gross salary goes in as savings, and a further smaller amount is an insurance premium for widows/orphan pension (though my kids are both >25 so the latter is no longer relevant), plus enhanced disability benefits. My employer pays all of these amounts, which is not a standard situation, applying to only me and two fellow company directors, as negotiated with the shareholders and tax authorities. I also tend to stick another 10-15% of annual salary in to further reduce my tax bill and build up a decent pot. It is, as you say, pretty much free money with no risk.

For a few years now both our children have been financially independent and debt-free. We financed their university education to Masters level. With our help one has just exchanged contracts on a flat in NE London, and the other still rents in Geneva. But we are slinging the annual maximum into his 3rd pillar pension/savings (ISA) account over the next 5 years for an equivalent total amount. One element of relief in our retirement planning is that we no longer have to budget for further education or Bank of Mum & Dad property ladder subsidies.

eyebeebe said:

Boring Swiss interlude over!

Don't speak too soon!

[TwigtheWonderkid]

nickfrog said:

TwigtheWonderkid said:

If I was wanting to pay off my kids student loan, I'd just reimburse them every month the amount they were paying.

I am not paying anything off. I am just advancing the capital to avoid them paying 6%+ and I am charging them a nominal 2% on the capital, which they are paying me back.

Ok, so you are loaning the money to your child to pay off their loan, and they will pay you back. But my concerns are the same, and if I was your child, I'd be declining that offer. There's far too many variables in play that could well mean that they'll end up paying you far more that they would have paid without your intervention, despite your lower interest rate. Even more so with a daughter, with the increased likelihood of a career break to bring up children.

If you want to loan your child £30K+, do it so they need to borrow less on their mortgage. Yes, the mortgage rate may be lower than the student loan rate, but it ain't ever getting written off.

[bennno]

nickfrog said:

TwigtheWonderkid said:

If I was wanting to pay off my kids student loan, I'd just reimburse them every month the amount they were paying.

I am not paying anything off. I am just advancing the capital to avoid them paying 6%+ and I am charging them a nominal 2% on the capital, which they are paying me back.

That’s a pretty good return, must be at least 4x better than you’d get from bank interest rate.

[nickfrog]

TwigtheWonderkid said:

nickfrog said:

TwigtheWonderkid said:

If I was wanting to pay off my kids student loan, I'd just reimburse them every month the amount they were paying.

I am not paying anything off. I am just advancing the capital to avoid them paying 6%+ and I am charging them a nominal 2% on the capital, which they are paying me back.

Ok, so you are loaning the money to your child to pay off their loan, and they will pay you back. But my concerns are the same, and if I was your child, I'd be declining that offer. There's far too many variables in play that could well mean that they'll end up paying you far more that they would have paid without your intervention, despite your lower interest rate. Even more so with a daughter, with the increased likelihood of a career break to bring up children.

If you want to loan your child £30K+, do it so they need to borrow less on their mortgage. Yes, the mortgage rate may be lower than the student loan rate, but it ain't ever getting written off.

I really appreciate your concern and, again, I am well aware of the risk ; I also admire your ability to have a view on her behalf. As you say it also depends on "what they do for a living, how much they earn and how much they actually have to pay back".

In her particular circumstances (which you probably don't know) I estimate the risk of her paying me back more than she would have done otherwise to be very small. Small enough for us to decide together that it was the best way forward for both parties as she is also very confident that she would have to pay the lot back relatively quickly considering her earnings and despite her 2 years in Paris . I haven't done the precise actuarial work I admit but the compound saving between 2% and 6% is significant.

As for the woman being the main child raiser, this is not 1953 and you haven't met her

Edited by nickfrog on Friday 1st April 20:06

[TwigtheWonderkid]

nickfrog said:

TwigtheWonderkid said:

nickfrog said:

TwigtheWonderkid said:

If I was wanting to pay off my kids student loan, I'd just reimburse them every month the amount they were paying.

I am not paying anything off. I am just advancing the capital to avoid them paying 6%+ and I am charging them a nominal 2% on the capital, which they are paying me back.

Ok, so you are loaning the money to your child to pay off their loan, and they will pay you back. But my concerns are the same, and if I was your child, I'd be declining that offer. There's far too many variables in play that could well mean that they'll end up paying you far more that they would have paid without your intervention, despite your lower interest rate. Even more so with a daughter, with the increased likelihood of a career break to bring up children.

If you want to loan your child £30K+, do it so they need to borrow less on their mortgage. Yes, the mortgage rate may be lower than the student loan rate, but it ain't ever getting written off.

I really appreciate your concern and, again, I am well aware of the risk ; I also admire your ability to have a view on her behalf. As you say it also depends on "what they do for a living, how much they earn and how much they actually have to pay back".

In her particular circumstances (which you probably don't know) I estimate the risk of her paying me back more than she would have done otherwise to be very small. Small enough for us to decide together that it was the best way forward for both parties as she is also very confident that she would have to pay the lot back relatively quickly considering her earnings and despite her 2 years in Paris . I haven't done the precise actuarial work I admit but the compound saving between 2% and 6% is significant.

As for the woman being the main child raiser, this is not 1953 and you haven't met her

Edited by nickfrog on Friday 1st April 20:06

Of course, it can indeed pan out well in many cases, and probably will in yours. But I still think there are a lot of variables, even in seemingly clear cut cases. I think it was Martyn Lewis who said that student loan was a poor description, and in fact it was far closer to a student supplementary tax. Very few people would pay the next 30 years tax today in return for a discount. Because no one knows what tax they will pay in the future. They could make an educated guess, but that's all.

[nickfrog]

TwigtheWonderkid said:

Of course, it can indeed pan out well in many cases, and probably will in yours. But I still think there are a lot of variables, even in seemingly clear cut cases. I think it was Martyn Lewis who said that student loan was a poor description, and in fact it was far closer to a student supplementary tax. Very few people would pay the next 30 years tax today in return for a discount. Because no one knows what tax they will pay in the future. They could make an educated guess, but that's all.

Again, as you said, it depends on "what they do for a living, how much they earn and how much they actually have to pay back".

Her debt would have been paid back in 8 years, not 30.

[m30dus]

Been following this thread with great interest - some great contributions and insight.

Having started my own gig back in 2007 I finally hung up the jacket early 2020 just in time to benefit from the more favourable ER lifetime limit that was changed in the March budget.

Work was a tough gig often seeing me away from home 4 nights a week only to be stuck in the office when I returned home for the weekend! Whilst in the large part it was still doing it for me, it was clearly depreciating and I just couldn’t get together with todays work ethics so better to stand aside than be the angry dinosaur stomping around the office..

Having put a lot of focus into winding down and with the hope of starting a family just before we both turned the big 40, my better half suffered a seizure in the weeks following the buyout. A few weeks on from that we are being sat down to be told it’s terminal cancer. Bugger!

We are two years in now, she’s doing great and best part through her primary care. Whilst family is clearly a no-go we are now focusing efforts on her treatment and on that finishing this summer, hopefully get some good travelling etc in.

Retirement for me has been great despite the obvious setback. Absolutely no idea how I functioned before at any level and just going into the office one day a week on a consultancy role wipes new out! No emails, no work mobile and no never ending list of demands is just bliss.

My days now start 3-4 hours later than they did just a couple of years ago, walking the dog, taking an hour to eat breakfast and drink copious amounts of coffee and just take the rest of the day as it goes, largely weather dependant!!

Am running 50/miles week and getting involved in a few property renovations, but only in the same street as where I live, or round the corner as to ensure there is no commute, bliss!

Life’s very, very short guys, and most of all unpredictable. You won’t regret it, any compromise is heavily outweighed by the seemingly never ending benefits. Just make sure your focus includes social interaction/hobbies/purpose/etc and not just finances. I, like most probably focussed too much on the latter but it’s the former you need most once you actually step back.