Thinking of retiring or downsizing my career in my 50’s. Would appreciate a 2nd opinion.

G

GSmith

Registered User
Messages
10
First off, thank you so much to AAM and all the regular contributors here who share their expertise so generously. I am genuinely very grateful.

Personal details
Age: 53
Spouse’s/Partner's age: 54
Number and age of children: No children

Income and expenditure
Annual gross income from employment or profession: €94k
Annual gross income of spouse: €55k (working 3 days/week)
Monthly take-home pay: ~€3800 for me
Type of employment: Private sector PAYE

In general are you:
(a) spending more than you earn, or
(b) saving?
Saving. At present, I estimate that I am saving about 15k-20k in cash each year. I am also contributing ~37k into my pension, my pension fund growth is ~ 22k and my ETFs are returning ~12k (after exit tax).

Summary of Assets and Liabilities
Family home is worth €350k-€400k with no mortgage.

I have €225k in the bank in demand accounts.

Fixed Term Deposits: 135k at fixed terms of 1-2 years

State Pension: I would need to make PRSI contributions up to age 69 to get a full state pension so I will probably end up a few years short on that.

UK Pension: I bought back National Insurance contributions for my UK pension, so I now have 26 years of contributions. I intend to back more years in time so I should have a full UK state pension payable from age 67.

Public Service Pension: I have a superannuation pension from the Public Services Pension Scheme of ~4.5k/year. I think this is payable from age 65.

Defined Contribution Pensions: I have an RAC worth €243k but I am not contributing to this anymore.

I also have a PRSA with my current employer. Value at last statement was €249k and I am contributing 30% from me and 10% from my employer per year = ~37k/year total.

ETFs: I invested in ETFs a while back which are currently worth €278k. I have already paid a deemed disposal on these in 2022. If I was to cash them in today, I would owe another ~€10k in exit tax; so the net value of these is ~€268k

No other savings, investments or property.


Family home mortgage information
No mortgage on our home

Other borrowings – car loans/personal loans etc
We don’t use credit cards and we do not have any other borrowings.

Buy to let properties
None

Other savings and investments:
As listed above

Other information which might be relevant
Life insurance: None

Our house takes a bit of maintenance and is quite rural. We may decide to downsize / move to a larger town as we get older.

What specific question do you have or what issues are of concern to you?

First off, I realise that we are in a good place and are very lucky not to have any financial worries. My job is well paid and while it can be a bit stressful, I have become very good at managing that. But I just do not enjoy my job anymore and I am thinking of making a change.

I think I could retire, but to be honest, the prospect is daunting. I am not sure I would enjoy going from fulltime work to nothing!

I could change to a job which is less well paid but more rewarding but I have been struggling to find something suitable.

Working part time in my current job would be good, but my role makes that difficult.

So here are my specific questions:
  • Do I have enough to retire in the next year or two?
  • Is retiring in your mid 50s a mad idea and will I go bananas after the initial excitement wears off? I realise this is subjective, but I would appreciate any insight from anyone in a similar situation.
  • I think I have too much savings in cash but I suspect that I am already well provisioned for retirement income, so I probably need to think about spending this rather than investing it for the long term. For that reason, I was thinking about putting a good chunk of it into prize bonds which give a small return but can be redeemed whenever I like (after the initial 90 days).
  • When I do retire, what is the best way to deplete my savings? I am thinking of using my cash first (lowest returns), then my ETF’s and finally my pensions (highest returns after tax and simpler than ETFs). Does that make sense?
  • If we do decide to move house later in life, I would prefer to buy before we sell as closing two house sales on the same day is just too stressful. Is this a sensible plan? (If we do buy another house in the future, I am thinking we could fund this from the ETFs and tax-free lump sum from the pensions.)
  • If I do retire now, what is the minimum amount that I would need to earn under a PAYE job to keep my PRSI contributions going for my state pension? I think there is an option to retire one of my pensions early and to set up an ARF which will satisfy the PRSI requirements for the state pension, but I need to look into this further.
  • Is there anything else that you might suggest? Anything I have missed in my thinking or just any advice others in a similar position may have.
Many Thanks...
 
A couple of questions -

- What do you project will be your average annual spend in retirement? Your current annual expenditure should be a good guide; and

- Will your spouse continue working after you retire?
 
Hi Sarenco,

I think my annual spend would be ~35k in retirement.

My wife is quite happy where she is, so she would probably not change anything for the time being.

Thanks...
 
You are in a very good financial position.

I was only reading about early retirement this morning and happened across this article: https://metisireland.ie/can-i-retire-early/

I have no affiliation to this firm but there is good information contained in the link.

GSmith said:
Do I have enough to retire in the next year or two?
Click to expand...

If I was in your shoes, I would first consider the likely expenditure that your assets have to support. Be clinical about this. Review the regular expenses - food, utilities, insurance (health, home, car), holidays, gifts, subscriptions, car servicing etc. I would also build in likely capital expenditure. For instance, if you replace the car every 5 years, subtract a resale value from the purchase price and divide by 5 to get a rough idea of what this expenditure would equate to on annual basis. I'd also build in a % of the value of your home, say 1.25%, to account for future capital expenditure. This would be an annual expense of €4 - €5k in your case. It's not the case that you will spend this every year, but if in 5 years the windows and the boiler need replacing, provision has been made for it. If you purchase a new top of the range iphone every 3 years for €1,200, bump up your expenditure budget by €400. You get the drift.

Once you have a good handle on what your lifestyle requires, the next step is assessing the adequacy (and liquidity) of your assets to see if this level of expenditure can be supported well into the future.

Are you married? What are your partner's plans?

GSmith said:
Is retiring in your mid 50s a mad idea and will I go bananas after the initial excitement wears off? I realise this is subjective, but I would appreciate any insight from anyone in a similar situation.
Click to expand...

Not a mad idea at all, but it's horses for courses. You mention that you don't enjoy your work anymore. Are there any aspects of work that you would miss if you went full stop on working for the man? Are there challenges or interactions that work provides that you would miss? Is work a large part of your identity? If you are the kind of person that is never bored, has interests outside of work or are endlessly curious about the world, then you'll be grand.

In terms of what other early retiree experiences are, it can be hard to get input on this as it is a niche area. Check out the Joe Kuhn Youtube channel. He retired at 54. While it is US-centric (the financial side at least), the personal side of early retirement is universal and there is some good discussions of what went well and what surprised him about the journey.
 
GSmith said:
I think I could retire, but to be honest, the prospect is daunting. I am not sure I would enjoy going from fulltime work to nothing!

I could change to a job which is less well paid but more rewarding but I have been struggling to find something suitable
Click to expand...
It sounds like you are stuck in a rut and not sure what to do. Something that I notice regularly on AAM is that people tend to think of their options as extremes and either/or scenarios.

There is a lot of middle ground between fully retiring and jumping from one job to the next. For example, you could resolve to take 6-12 months out of work. You have more than enough wealth to do this.

You could plan this for May/June next year which would give you time to plan for it and be tax efficient in 2024. You could try to make it a sabbatical where you have the option to return to work or yo could just leave, whatever works best.

Doing something like this would give you time to experience retirement and whether you have the urge to return to work. It would also give you time to meet and interview with other companies without the need to immediately take a job for the sake of it. It might even open up opportunities with your current employer to return to part time or take 2-3 months unpaid each year.

GSmith said:
Is there anything else that you might suggest? Anything I have missed in my thinking or just any advice others in a similar position may have.
Click to expand...
You haven't mentioned your spouse/partner much above.

Your finances alone look good but does your spouse/partner have their own wealth? It will make a big difference to your ability to retire. They may not like the idea of you retiring while they continue to work (even part-time). If they wanted to retire with you, how would that change your financial planning?
 
GSmith said:
Hi Sarenco,

I think my annual spend would be ~35k in retirement.

My wife is quite happy where she is, so she would probably not change anything for the time being.
Click to expand...
Thanks - €35k per annum looks like a realistic figure.

First off, I don't think retiring in your mid-50's is a mad idea at all if you can afford it. I know quite few people that have done just that and none have expressed any regrets.

On a back of an envelope basis, it looks like you will be entitled to around €25k per annum from 66, between your public service pension, your UK State pension and your partial Irish State pension.

So, out of your other assets, you will have to fund for €35k a year for 12 years and €10k a year for 30 years (let's assume you live a long life!). So, €720k total.

Between your RAC, PRSA, after-tax cash savings and ETFs, you already have €1,120k.

So, with a projected annual spend of €35k per annum, I think you have more than sufficient assets to retire in the next year with some confidence.

Notes:

- For these purposes, I have assumed that your investment returns, after all costs and taxes, simply match inflation, which is actually very conservative.

- I've ignored income tax, etc., on your pension income/drawdowns for simplicity but these won't really move the dial much in your circumstances.
 
GSmith said:
I think there is an option to retire one of my pensions early and to set up an ARF which will satisfy the PRSI requirements for the state pension, but I need to look into this further
Click to expand...
To maintain your PRSI record, you could retire the PRSA (you can't retire the RAC until you are 60), take the 25% tax-free lump sum and draw €12.5k per annum from an ARF.

That would be below the threshold for income tax or USC but you would pay sufficient PRSI to maintain your record.

So, you could live on the €12.5k per annum, plus your after-tax savings, for 15 years, at which point you could consider retiring the RAC.
 
Wow - so many responses in such a short time. Sincerest thanks for all your input.

I'll reply to each one over the next few hours...
 
AAAContributor said:
If I was in your shoes, I would first consider the likely expenditure that your assets have to support. Be clinical about this. Review the regular expenses - food, utilities, insurance (health, home, car), holidays, gifts, subscriptions, car servicing etc. I would also build in likely capital expenditure. For instance, if you replace the car every 5 years, subtract a resale value from the purchase price and divide by 5 to get a rough idea of what this expenditure would equate to on annual basis. I'd also build in a % of the value of your home, say 1.25%, to account for future capital expenditure. This would be an annual expense of €4 - €5k in your case. It's not the case that you will spend this every year, but if in 5 years the windows and the boiler need replacing, provision has been made for it. If you purchase a new top of the range iphone every 3 years for €1,200, bump up your expenditure budget by €400. You get the drift.
Click to expand...
Great advice. As an example I am currently thru my first year of trainee retiring. My initial back of the envelope maths were a bit short - I was about 20% short on my perceived spending. Things that caught me out were medical insurance (and excess costs), computer/printer equipment, oh and bog roll. These were all paid for by work.
 
@AAAContributor Thanks for your comments and yes that link is very useful. I think I need to do a bit more work to define my income needs - there are definitely some items on your list that I have not considered. e.g. my phone and health insurance are paid by work at the moment so I have probably missed them...

Re my wife, she is already on 3 days a week so she is already a step ahead of me on this journey so I am really just catching up. I don't think she will make any major changes until she sees how things pan out for me. One change at a time I suppose.

I will check out that Joe Kuhn Youtube channel as well - thanks.

@_OkGo_ You are right, I am probably in a bit of a rut, and maybe a more moderate move might be better. I like the idea of 6-12 months off and I just never thought of that as a solution.

As for my wife. we have been discussing all this already so this is a decision that we will take together. As we never had children, we have always been financially independent of one another but you are right that this decision will involve us deciding how to live our lives out together with the wealth that we have as a couple.

@Sarenco Good to hear that 35k is in the right ballpark - thank you. I think I came to the same conclusion but it is very reassuring to hear it from someone else.
Just a couple of questions on your response.
1. I did not realise that I can retire the PRSA now. Is that a blanket rule for all PRSAs or do I need to check with my employer?
2. I had heard that the ARF would keep my PRSI contributions up so thanks for confirming that. Is there a max age above which I cannot make further PRSI contributions (maybe retirement age?)
3. I can see why you suggest 12.5k to keep below the threshold for tax and USC. If there was a chance that my pension income in future might hit the higher tax rate, would I be better to take more in the early years in order to shift some income from the higher rate to the lower rate of tax?

Many Thanks again for all your responses.
 
Your finances seem fine so this is primarily a career issue.

You need to talk to a career advisor/counsellor and/or a good friend/colleague in your sector.

Forget finances for a while.

What role would you like assuming finance is just not an issue?
Would you prefer that role to retirement?

If you were not going to work this coming Monday what would you do? How do you intend to occupy yourself in retirement?

There is nothing stopping you from quitting your job now and taking a few years off.

Then if you do become bored, you can look for a job.

Brendan
 
GSmith said:
Good to hear that 35k is in the right ballpark
Click to expand...
I would encourage you to rigorously interrogate your likely expenses (including large occasional expenses like changing your car) in retirement.

As others have said, this is critical from a planning perspective.
GSmith said:
1. I did not realise that I can retire the PRSA now. Is that a blanket rule for all PRSAs or do I need to check with my employer?
Click to expand...
You can take benefits from a PRSA if you retire from employment at age 50 or over. There's no need to check with your employer.
GSmith said:
2. I had heard that the ARF would keep my PRSI contributions up so thanks for confirming that. Is there a max age above which I cannot make further PRSI contributions (maybe retirement age?)
Click to expand...
Currently there's an exemption from paying PRSI once you reach 66. Of course that could change in the future.
GSmith said:
3. I can see why you suggest 12.5k to keep below the threshold for tax and USC. If there was a chance that my pension income in future might hit the higher tax rate, would I be better to take more in the early years in order to shift some income from the higher rate to the lower rate of tax?
Click to expand...
Maybe. But given the imputed distributions that apply to ARFs from 60, I would be inclined to leave the RAC alone for as long as possible.
 
I retired in my mid 50's. My wife also retired at the same time.

Started travelling almost immediately. We live on less than €35k annually, including about €6k on holidays.

No interest in clothes, bling, golf, weekly visits to hairstylist, don't smoke and drink very little etc.

Don't miss the commute to work, the responsibilities of work.

More time for family. More time for gardening ( not sure if that is a positive). Two breakfasts every day.

There is nothing I miss about work.

However the winter can be long. I certainly create jobs for myself around the house.
 
Sarenco said:
Currently there's an exemption from paying PRSI once you reach 66. Of course that could change in the future.
Click to expand...
This is barely material in your own case, but I doubt this will change.

The system is built on a principle whereby you contribute to a certain age, and receive benefits after that age.

Sarenco said:
I would encourage you to rigorously interrogate your likely expenses (including large occasional expenses like changing your car) in retirement.
Click to expand...
I can’t agree more with this. And early retirement is a long retirement, and there are just going to be certain lumpy expenses over the course of decades. These can be things like a new car, essential homerepairs, or medical costs. Remember that you won’t be able to earn your way out of these setbacks the way you can now.
 
Another early retiree here, heading into my thirteenth year and never once have I regretted the decision to become an early retiree
The three areas in my opinion that you need to give thought to are your finances, how you're going to fill your day and how you think about things.

Retirement and especially early retirement will for most people require an acuite knowledge about your personal finances and spending habits
When a person decides to retire early they are moving financially from a secure monthly income to living off their accumulated savings
Knowing how much money your going to need each year and how this relates to the longevity of your savings is key to whether you can fully retire early and will greatly reduce the anxiety of making the leap from accumulating wealth to decumulating wealth

How your fill your day is just as equally important as the finances and probably will require more thought as this is it, this is your life now
You are in total control of the direction your life/retirement will head in and this will take time to perfect and fine tune till you get it right
I do see one small issue that will need to be addressed by the OP and that is that their partner is not retiring at the same time,
it's not a major issue but it does mean that some things/ideas will have to be put on the long finger until both are retired

For me the last one "how you think about things" is the most important and is the one that has given me the most joy and security to my early retirement journey and it involves letting go of the past and embracing a new future without purpose or direction and just letting life evolve around you, kind of like adopting a "Wu Wei" attitude to life

I'm not going to say that early retirement is something that everybody should strive for, for some people it's just not an option or something that they would consider given their lifestyle choices but for those that do there's an old saying that I'm sure most would relate to

"Everybody has two lives and the second begins when they realize they only have one"
 
Cervelo said:
How your fill your day is just as equally important as the finances and probably will require more thought as this is it, this is your life now
You are in total control of the direction your life/retirement will head in and this will take time to perfect and fine tune till you get it right
I do see one small issue that will need to be addressed by the OP and that is that their partner is not retiring at the same time,
it's not a major issue but it does mean that some things/ideas will have to be put on the long finger until both are retired

For me the last one "how you think about things" is the most important and is the one that has given me the most joy and security to my early retirement journey and it involves letting go of the past and embracing a new future without purpose or direction and just letting life evolve around you, kind of like adopting a "Wu Wei" attitude to life

I'm not going to say that early retirement is something that everybody should strive for, for some people it's just not an option or something that they would consider given their lifestyle choices but for those that do there's an old saying that I'm sure most would relate to

"Everybody has two lives and the second begins when they realize they only have one"
Click to expand...
Thanks Cervelo.

Not saying that I have the finances part totally sorted yet, but I agree that the softer questions - like how to fill your day and attitude - are much more difficult to plan for...
 
AAAContributor said:
In terms of what other early retiree experiences are, it can be hard to get input on this as it is a niche area. Check out the Joe Kuhn Youtube channel. He retired at 54. While it is US-centric (the financial side at least), the personal side of early retirement is universal and there is some good discussions of what went well and what surprised him about the journey.
Click to expand...
Hi AAAContributor,

Thanks for you earlier response to my thread. I have been watched some videos by Joe Kuhn and he does give a great insight to the positives and negatives of early retirement. In fact, it's probably a good resource for those preparing for retirement at any age...
 
1. I'm not going to offer much financial advice to you as I am probably the least financial savvy person on this forum having lost heavily in AIB and Eircom shares. But, once you get financially secure (something I never got) the rest of your decisions to retire are easy.
2. I retired age 48/49 on a lumpsum from a former employer and two days later I had another job with another public service body which I was delighted to get so I had a 2nd retirement on which to look forward.
3. I worked full term and on my 65th birthday I settled into retirement mode after 65years and 10 minutes. The ten minutes were driving home from work.
4. I miss my work colleagues but my main regret is that I didn't retire earlier. I couldn't have afforded to retire early, but I would have found a way. Furthermore, I knew everybody can be done without.
5. How you spend your retirement is your own business. i put much work into making our gardens as labour free as possible. Mrs Lep bought into retirement too; we don't waste food, use free public transport for long journeys, pick concerts that we really want to experience, exercise a lot daily, unfortunately we have to attend funerals of people who didn't retire because they thought they couldn't be done without.
6. And yes we spend up to six months per year (different times) in warmer climes and cheaper living.
 
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