Early retirement pros and cons.

ceoltoir

I have three years to go to retirement (at age 65) from a public service job. However, I would like to retire early and move from Dublin to my home-place in rural Ireland. Perhaps do some of the things I’ve always wanted to do while it’s still possible.

I’ve inherited the family home, so there’s a place to live and no rent. There’s a €6,000 car loan but that should be paid off in the next few years. No other debts.

The problem is that my public service pension is not very big and would be reduced by about €50 per week on early retirement. 

I don’t have any savings and would rely entirely on the PS pension plus the state pension at 66, about €14,000 a year in total, if I’m lucky. I have digital technology skills and would be willing to continue working part time, either for myself or for others. The prospect of having to survive on very little money is somewhat terrifying.

My lump-sum payment would be just under €50,000. A large portion of that would have to go into an emergency fund.

I’ve spoken to financial advisers in the past but they seem more geared towards people who have a large pot of cash to play with and who want to buy AVCs or similar products. There isn’t much they can say to me since I don’t have any ready cash.

Would it be foolish of me to go early forgo €50 a week in payments, just to go early? In the end, that’s probably a question that only I myself can answer but it would be nice to hear other people’s views on early retirement and the challenges involved.

SuperBowserWorld

Can you work mostly remotely for the next 3 years ?

ceoltoir

https://www.boards.ie/discussion/comment/119057256#Comment_119057256

Unfortunately not. I work remotely for three days in the week but must be available for meetings at short notice. Remote working wouldn't be practical in future as I'm moving to the other end of the country. There may be a possibility of doing outsourced work.

So best of luck whatever you decide OP. A few questions for you.

1. Any possible inheritances in coming years (not guaranteed I know but worth considering)
2. Possibilty of selling your house for a smaller one and releasing capital for savings?
3. Employability- what in demand skills do you have for say working part time?

2400 euro is a hell of a lot of money when you’re going to be on a small pension- just look at rising prices right now - I’d consider staying on to get the full pension entitlement as it sounds like every euro will be important to you.

Addle

It’s not just €50 less pension a week for the rest of your life, it’s possibly 3 years salary and savings your missing out on.

I couldn’t go early if I was in your position.

Sleepy

Also worth considering if the home place might need some modernising? Renovations are insanely expensive at the moment and, with energy costs only going one way, should insulation be lacking or the heating system out-dated, you could find running costs escalating beyond a fixed income.

Quitelife

Your health is a big thing , i intend to retire at 60 and hopefully have twenty years of retirement , i dont have a massive pension but i'll manage. Have you 14K plus state pension thats 26K per annum if you do. ill be similar at 60 and i'll manage with that .

Id be happy to able to for day trips,walks , stuff midweek while im able at 60 rather than keep going to 65 and have less years to do things . Im working since 18 and after 42 years ive done my bit.

Can I clarify something here- what exactly will be your PS pension? Is it 14k if you retired right now but a bit more if you wait until 65 and then you also get the state pension at 66/67 or whatever the age is ?

Also, my understanding is that with public service pensions you could look at buying service years if short - so might be worth exploring that and working out your remaining time as well as investing in buying additional years service if you’re not at 40 years service pension right now or whatever it is that gives you a max pension

Finally if you didn’t take the 50k tax free lump sum what would your pension be? While taking this lump sum can be beneficial it will require careful budgeting if it’s to last you your retirement - an old family home with leaking roof, bad electrics etc will see that gone and more besides - proceed with caution

rolling boh

Seems you would be fairly tight financially on those figures so I think you might find it a bit tough and possibly regret going early .I know everybody talks about health etc which is of course important but running short of money in later years would be problematic and most likely too late to increase your income .

ceoltoir

https://www.boards.ie/discussion/comment/119057322#Comment_119057322

Thank you.

1. Possible (small) inheritance from my mother.
2. A possibility but I'd like to hold on to the family home. Property prices aren't very good in that part of the country anyway.
3. Graphic design, photography and video skills.

ceoltoir

https://www.boards.ie/discussion/comment/119057362#Comment_119057362

That's very true. The loss would be fairly substantial.

There's a bit of a moral dilemma too, as my very elderly mother lives in the house. Her care falls almost entirely on other family members. I feel I should be there to give me assistance.

ceoltoir

https://www.boards.ie/discussion/comment/119057425#Comment_119057425

Yes, that's one of the big worries. The house is in good condition but somewhat old-fashioned. The septic tank needs to be replaced and the electrical and plumbing systems could do with being updated. It would probably cost a fair bit.

ceoltoir

https://www.boards.ie/discussion/2058245745/early-retirement-pros-and-cons

Thank you all for the replies. I was away over the weekend and didn't get a chance to reply. All the advice/observations have been extremely useful and have given me lots to consider. In the end I suppose it's up to me to make the final decision. Thanks again.

covidcustomer

https://www.boards.ie/discussion/2058245745/early-retirement-pros-and-cons

Hi Ceoltoir, how many years service do you have if you don't mind me asking?

https://www.boards.ie/discussion/2058245745/early-retirement-pros-and-cons

Talk to your pension Dept, if you are class A PRSI, they might pay the old age pension on top of the civil service pension. I forget the exact term used, it's not widely publicised, but it happens to balance the A and D class pensioners.

covidcustomer

https://www.boards.ie/discussion/comment/119074924#Comment_119074924

"Integrated Pension" is the term I believe and in that case a "supplementary" pension is paid until he is 66 when the PRSI entitlement kicks in (reaches State Pension age).

Provided of course that he is paying Class A PRSI.

Sleepy

https://www.boards.ie/discussion/comment/119074864#Comment_119074864

Re-plumbing and re-wiring an older property? Sadly you're looking at close to 6 figures there for that and insulation upgrades alone. The Deep Retrofit grants may be worth looking into and I believe there are some upgrade schemes for OAPs which your mother may be entitled to (obviously better to get these done sooner rather than later as they'd improve her quality of life).

ceoltoir

https://www.boards.ie/discussion/comment/119074924#Comment_119074924

Yes, luckily I'm entitled to the State pension at 66. That should be a big help.

ceoltoir

https://www.boards.ie/discussion/comment/119075986#Comment_119075986

I imagine that sort of thing doesn't come cheap. Happily, the house is in very good condition at the moment and my mother is entirely comfortable there. There's attic insulation and the everything else works fine. It's more in the long-term that it would need to be upgraded.

Sleepy

The deep retrofits don't come cheap but worth investigating the other options. Found the scheme I was thinking of:

https://www.citizensinformation.ie/en/housing/housing_grants_and_schemes/warmer_homes_scheme.html

Your mother would qualify if she's already getting the Fuel Allowance which she'd be entitled to if she's in receipt of a state pension and it can cover additional attic insulation, wall insulation etc.

Worth looking into :)

ceoltoir

https://www.boards.ie/discussion/comment/119077585#Comment_119077585

That's very useful Sleepy. Thanks for looking it up.

https://www.boards.ie/discussion/comment/119076661#Comment_119076661

what I am saying is that the civil service might give the eqivalent of the old age pension you now, and not wait until you are 65. They add it onto your pension, so that the A and D people get the same.

I know for fact it's done in the dept I work for.

Ask, and they shall receive...............

Spanish Eyes

Have you calculated exactly how much three more years will mean to you pension wise?

I know that if you retire now or soon you will lose your annual salary to be substituted by an actuarially reduced pension, but will that pension be much greater after three years and no reduction?

If you are determined and willing to do it, you could consider selling the inherited home (if it needs major upgrades) and purchase a future proofed good spec small property in a similar location for your dotage!

Have you worked out exactly how much you will need to live on? Do a budget based on your retirement income. Work out how much of your lump sum you would need for three years to subsidise it. Consider smaller car, foregoing things like holidays for a bit and so on. You don't have to become a monk and live on bread and water though!

The big question is what financial advantage in €per month is it to stay on. I don't know, but I can't see three years adding a huge amount to your pension.

You could always consider a three day week or some variation of work sharing up to retirement date also. Think about that one too.

ceoltoir

https://www.boards.ie/discussion/comment/119080163#Comment_119080163

Having looked again, the loss is not as large as I initially thought. If I retired next year (aged 63) my annual PS pension would be €8,348 per annum. Lump sum of €48,000. I'll have 26 years of service.

If I retired at age 65, my PS pension would be €9,000 per annum, with a lump sum of €51,400.

I would lose about €13 per week by going at 63.

The house is in good condition. It's just that it's more in my parents style than mine, so a little updating would do.

I've done a rough budget but it looks fairly tight. There's no getting away from the recurring bills. Still, life in the country would be considerable cheaper.

Thank you very much for all your suggestions.

ceoltoir

https://www.boards.ie/discussion/comment/119080141#Comment_119080141

I've never heard of that one. Would that not be a huge extra cost for them? I work in a university, so it might be slightly different.

https://www.boards.ie/discussion/comment/119080276#Comment_119080276

It happens frequently, might be at local discretion, I am not sure,

Jim2007

https://www.boards.ie/discussion/comment/119080268#Comment_119080268

Here is the thing that would concern me - you don't seem to have any credible skills in managing your finances... You are a couple of years away from retirement and from what you say, you have no saving, no emergency fund, no assets acquired through savings and a debt of 6k.... and now you are expecting to live on a substantially lower income.

I don't expect you to answer here, but I think you need to ask yourself - what happened, where did the money go? Your profile is a long way from those of people taking early retirement and I'd have serious concerns about you pulling it off, since you appear to have been unable to live below your means in the past.

ceoltoir

https://www.boards.ie/discussion/comment/119080740#Comment_119080740

Guilty as charged Jim2007, though I think your judgement is a bit harsh.

True, my money management skills leave a lot to be desired. In my defence, I did come to the world of work in the 1980s, a time of great economic depression in Ireland. It was impossible to find steady employment during that time. That and not knowing what I wanted to do in life. Which I still don't know!

I was lucky to get a permanent full time job in my late 30s. That came with a not very big salary and, combined with living in Dublin, left very little for savings. There was an SSIA account but some of that was spent on clearing a car loan. The rest was probably spent foolishly. Having said that, I've never lived an extravagant or high-spending lifestyle. I don't have much to show for it now.

I'll be relying on my contributory pension plus the state pension. While that won't be huge, it will still be more than half of my present salary. Part of my final lump sum will go towards an emergency fund.

I also intend to take on some part time private work after retirement

So, yes, the reality of the situation is dawning on me but it seems there's little I can do about it now.

Jim2007

https://www.boards.ie/discussion/comment/119081750#Comment_119081750

Yes my assessment is brutal, but when it comes to finances there is no room for sentiment, this is not a decision that can be reversed. The 80s were a long time ago and I was there too. It's been 40 years ago and you have been in permanent job since your mid thirties and not having any accumulated savings at this stage, means that you have been accustomed to spending it all. So cutting your spend by at least 50%is a big ask. In my experience people can usually get by on 65% - 70%.

I know you said you have 'Graphic design, photography and video skills', but unless you have an established reputation, it will be hard going as you will be competing against college kids and people like those on say fiverr (https://www.fiverr.com) and so on.

My suggestion would be to try living on say 60% of your income for the next 12 months and see if you can do it and see how it makes you feel. You'll also have some saving by then as well.

Murt10

https://www.boards.ie/discussion/comment/119083406#Comment_119083406

None of my businness but....

I presume OP is paying rent while living in Dublin. This could be considerable but will disappear when he moves home so there's that to be taken into account. There are also a lot of expenses from going work, - travel, lunch, coffee breaks, work clothes, collections etc. These will also cease when he moves home.

At the same time, he's now going to have a lot more time on his hands to spend, which he couldn't do while he was working, so if he's a shopaholic or indiciplined he's heading for trouble.

If he wants to travel he will be in a much better position to take advantage of all the over 60's deals both here and abroad.

One major consideration is that his VHI (or whoever) premiums will remain the same when he retires and so comprise a far larger portion of hid income.while all his other deductions will stop or reduce significantly.

As for health, the only certainty in life is that every day we are another day nearer meeting our creator. None of us is ever going to be as healthy as we are today. Our health is on a downwards trajectory. The long term prognosis for every one of us, without exception, is death. 😀😀😀

So for my money, I'd take the money now and run and get as much enjoyment out of lufe as he can.

covidcustomer

https://www.boards.ie/discussion/comment/119080276#Comment_119080276

https://assets.gov.ie/95435/fc9c661d-5c97-4c6a-81b0-1326af9610a4.pdf

From the Dept. of Education. Might be helpful regarding payment of the supplementary pension.

ceoltoir

https://www.boards.ie/discussion/comment/119091293#Comment_119091293

Some very good advice there. I forgot to thank you at the time. It's very tempting to make the jump!

Doodah7

If you haven't gone yet, you should stay until at least the next PS pay increase (October). This will bump your lump sum and pension slightly. With possible future increases of 5%+, it might be worth staying another year or so. This would also give you the opportunity to start a small savings pile in the interim, if you could be frugal and disciplined with your spending.

Jim2007

https://www.boards.ie/discussion/comment/119422544#Comment_119422544

We don't know how the financial situation will pan out, yes there is a recession going on as far as most people are concerned and how deep or how long it will last is anyone's guess. Probably not a good time to lock yourself into a fixed income.

ceoltoir

https://www.boards.ie/discussion/comment/119422544#Comment_119422544

Haven't gone yet. It would probably take me a year anyway to tidy up my affairs in Dublin. I'm saving a bit already, so it wouldn't be too much of a problem to add to that.

Thank you.

ceoltoir

https://www.boards.ie/discussion/comment/119422906#Comment_119422906

That's a fair point. I would be more than willing to take on some sort of part-time work, not necessarily connected to my present skills.

While the financial aspect is the most important part, I'm also worried that I might leave it too late and miss out on things I want to do in life. Problems, problems!

Jim2007

https://www.boards.ie/discussion/comment/119425607#Comment_119425607

In a recession the casual jobs disappear... they do come back first after one but you still have to live through the period. Any chance of going part time as an alternative to start with?

Jim2007

@coylemj OK, I think I have cleaned it up now. Let me know if there is anything else.