Wednesday, 3 December 2014

Setting Targets for the Final Push

November 2015 will see my husband draw his last ever wage before retirement. So the next 12 months are the last opportunity for me to save and invest substantial amounts of money.

From next Dec until the day I retire we will only have about £350 to invest per month - that is around 25% of what we are currently putting away. I intend to continue to pay £50 in to my LGPS AVC (this can't be taken until I take my my pension which I intend to do at 63 but it can all be taken as part of the tax free lump sum so I think it's worth it) and also continue paying £45 into my CIS FSAVC until such time as I transfer it into my SIPP (not sure when this will be yet). The rest will go into my SIPP.

By the time we both have our defined benefit and state pensions in payment, along with our rental income, we will be up to around £37,000 which is more than enough to maintain our current standard of living. So it is only the years between when I retire and when I get my LGPS pension at 63 that I need to worry about. I have estimated that the minimum income I require each year to take the household total up to the £28,500 we need (with £32,000 being a more comfortable target) is £12,500 until 2018 when my husband draws state pension and £6,800 from then till I draw my LGPS. The sooner I have enough to cover this, the sooner I can retire. But, of course, the sooner I retire, the more I need to cover.

The equation's quite tricky but after some deliberation I've come up with the following conclusions/key facts:
  • The earliest date I can hope to stop working is March 2016. This may happen if the offer of voluntary redundancy/early retirement materialises next year.
  • I could only really take this up if my redundancy pay would be around £20,000 (as expected) and/or my pension would become payable immediately as part of the deal.
  • Without the help of redundancy payments I would need around £80,000 saved in my personal pensions to leave at this date. The bottom line is that we do already have this in our combined funds, but our overall plan includes leaving our S&S ISA capital alone in case we need it for care fees etc so I'm avoiding bringing that and our £20,000 cash emergency fund into the equation. (Although I am allowing myself to figure 3% dividends from the ISA as being available to top up our income).
  • Currently my personal pension stands at £24,600 and I am paying a total of £845 per month into it (made up to £1,057 by HMRC). By March 2016 this can only be expected to have grown to about £40,000 which won't be enough no matter how I cook the books.
  • By March 2017 (the date at which I would realistically like to retire) my personal pension should have increased to around £45,000 (given the reduction in contributions in a year's time). At this point I will need £67,500. So I am short by £22,500 before I figure in ISA dividends. Taking those into account at around £2,000 per year, I am still £10,500 short. (I need £55,500 in total).
  • If I reduce my ISA payment from £300 to £100 per month I could increase my monthly payment into my personal pension for the next 12 months to £1,045 (£1,300 after tax credit). In addition to the reduced contributions (£250/£300 per month) for the remaining 16 months to March 2017 I should have £48,000 which still leaves me £7,500 short.
  • I need to reduce spending enough to be able to up my pension payments to around £1400 per month for the next 12 months or I need to be prepared to reduce our emergency fund to £10,000, or a combination of both to cover the shortfall.
These facts give me the following targets for the next 12 months
  1. Save at least £1045 per month in my SIPP/FSAVC 
  2. Save £100 per month in my ISA
  3. Look at spending very carefully - try to cut back by at least £100 per month to allocate for boosting pension even further.
  4. Cross fingers and hope the markets don't dive :-) 
The final push is on.


  1. Wow Cerridwen. I'm very impressed with your foresight, and at the same time I completely understand why you would take the time to work all of this out.

    I like your plan, and I'm sure now you've set it up like that You'll be able to follow through with it. You seem to be very good at managing money. How would you rate yourself at earning money?

    I feel that I'm very strong at managing my finances, but for 2015, I want to take some steps to improve my income. As soon as I have extra money I'm well versed at investing it. I think I have more capacity to improve how I earn income, than over how I can save or invest money.

    I'm interested to get your thoughts on your situation, if you're happy to share?

    I wish you a strong and fruitful 2015. Good luck!


  2. Hi Huw, thanks for your comment.

    That's an interesting point you make because,of course, earning money is the other side of the FI equation. Unfortunately I think I've passed my peak on this as, although I'm still in a decently paid job (approx £34,000 pa full time equivalent), I went part-time last year and love it so I won't be changing that. Additionally there is zero chance of any progression in the organisation I work for at the moment - I've got far more chance of getting booted out than promoted. :-)

    However your comment has made me think about the potential for other forms of income and whether I have skills that could help me to earn outside the work environment. Nothing obvious has sprung to mind yet but thanks for the prod in this direction.

    Good luck with your own income-increasing efforts in 2015. Have you any particular plans as yet?

  3. Hi Cerridwen,
    I actually read your post within hours of you posting but I decided not to comment until I'd read it again.

    And printed it off to read again offline!

    I've always known that there is a big flaw in my own FI/early retirement calculations because I haven't conducted the detailed analysis and review that you have done as above - all I've done is a very high-level version, so thanks for pointing me in the right direction and showing what I need to do! How long did that take you to do?

    That is a great plan you have - one which is workable. As you say, now you just need to work at cutting back on your spending to free up cash to invest.

    The best of luck with this final push - we'll be rooting for you! :-)

    1. As I am closer to retiring than you, I think my job of producing a firm target (or set of them) is a lot easier than yours. Even so I did have to do a lot of work around working out "The Number" we need for retirement income, a timeline of what income/pensions we will have at which point and how much we can expect (and need) our savings and investments to grow (the Motley Fool compound interest calculator is one of my most used bookmarks :-))

      I do feel better now I have condensed all this information to a target date and number needed and have a firm target "save" each month to get my teeth into.

      Good look with your own calculations and thank you so much for your support.

  4. Hi Cerridwen

    I have done something similar to yourself as I am reasonably close to being able to stop working (could be as early as 2017 for me, but more likely to be a little later).

    It is a difficult balancing act, as you don't want to leave yourself short later on, but also don't want to go on working only to find out when you do pack it in that you could have done so earlier.

    I think it's great that you are retiring as soon as you can afford and personally don't understand the people who can afford to retire keeping going (I don't disagree with them wanting to be mentally active, but how about supporting a charity for free, or volunteering to help local people who need assistance, never mind that they are keeping their job from someone who may need the work).

    Good luck on your road to retirement and hope everything works to plan.
    FI UK

  5. Thanks FI UK.

    I'm very interested to learn how people with different types of pension and situations work out exactly when they can actually retire, especially those who are fairly close like you and I.

    I'm going to head off over to your blog and may pester you with questions when I've done some reading there.

  6. Good planning going on here, like it!

    One thing that crossed my mine, is there any scope for doing some non-financial investments now or when you pull the plug on the day job, to lower your expenses even further. Ermine's post here is a good start with many ideas:

    I notice you said "...I have estimated that the minimum income I require each year to take the household total up to the £28,500 we need..." and mentioned about maintaining the same standard of living. I would hazard a guess that there is no reason that with a little more time on your hands you can mainain the same (or perhaps an even better, home grown organic fruit and veg, surely beats shop bought etc...) standard of living for less than what you are spending now.

    Sorry if I am being presumptive, you might already be smashing it on this front already so feel free to tell me to shut my cakehole :)

  7. Thanks TFS. I suspect you are quite right and we will find that we don't need as much as I think we're going to need given the fact that we will have more time to shop, cook and grow our own. When I was trying to work out what we needed I decided to just take our current monthly spend (minus savings) as a good measure but I didn't put much thought into it - thanks for reminding me that taking a proper look at our budget might show me some areas where I could be over-estimating. More work here could pay dividends :-)

    I love the idea of growing our own veg and did have a go at some potatoes in grow sacks this Autumn which were meant to be ready in time for Christmas Day but which are very spindly affairs on top so I don't suppose there's much going on below - more practise needed.

    (btw thanks for the link to ermine's post - I have read some of his archives but not all and this was something I hadn't seen - it makes a lot of sense, as always).

  8. The final push is on :D Amazing. Thanks for being so open with the above, a superb analysis of your position. You are so close now, must almost be able to taste the freedom :)

    All the best for 2015!

    (Thanks for the addition to your blogroll :)

    Mr Z

    1. Thanks Mr Z. All the best for 2015 to you too :-)