First Thoughts On Planning For Retirement

Most retirement planners suggest that planning for retirement should start about 5 years before your target retirement date, I’m 4 years away now but forced retirement AKA redundancy is a possibility before then.  I need to start planning, and there’s lots to think about.  This post sketches out the topics that are top of my list to work through, and will probably turn into blog posts in the near future:

1. When do I want to retire? This is not as easy as it seems, for many years I’d assumed that I wanted to retire at 55, but this may not be realistic or desirable from all perspectives.  Although I’m fairly confident that retiring would be good for my health, that would only be the case if I could live free of money worries and find enough rewarding stuff to do to fill my time and give me enough social interaction.  Neither of these are givens.
2. What will our cost of living be? This is another tricky topic, given that it’s hard to unpick how much it costs for Debbie and I to live from the costs of the 4 kids, all of whom should be working by then, except maybe Anna (in fact they are all working now).  Also we have expenses now, like two cars, that we probably wouldn’t need.  My current assumption is that I will need the average wage to live reasonably well, that’s about £25K,  Debbie’s income will supplement this and we have lower costs than the average as by then we won’t have a mortgage or costs relating to our children. Update: I now think I need a minimum of £22K, ideally £32K
3. How much will our assets be worth and much will they earn?  I’m assuming that they will continue to grow at 5% and that once I retire I will be able to withdraw 4% a year.  Having built up an emergency fund in case of redundancy over the last 2 years I’m planning to max out pension contributions again soon, basically anything that gets 40% tax relief will go into pension.
4. How fast will cost of living increase? I’m making a very risky assumption here by assuming that it will increase very little.  My rationale for this is worth exploring:
   1. I don’t feel the need to buy anything new, so I only need to consider replacing things that break and many of those I won’t need to replace.  It’s surprising how long things last these days if you buy quality and quality stuff is often available in St Annes from charity shops as we have a rich population who do a lot of charitable giving
   2. I already own my own home and it’s in good repair.  I will be able to mostly keep it that way myself
   3. I’m not planning to replace my car and I’m planning to travel via the ‘megabus’ and similar low cost options
   4. I will be time rich and I can already do most jobs around the house and learn or trade for the rest,  even though my health is dodgy it’s better when I move around so DIY is good for me
   5. Most tech gadgets are falling in price at the low end of the market and everything I need I can get from the low end,  for example a GPS, podcast player and a few basic apps that all run fine on an iPhone 4S are all I need from a smartphone
   6. Many of my interests cost very little — sketching, gardening, walking, cycling, swimming and high tech walking and cycling gear is now much cheaper than it was a few years ago thanks to places like Aldi
   7. Thanks to the library many other interests are essentially free – reading books, listening to audio books, reading magazines and I have a huge personal library already that will keep me going for many years and due to the bounty of the internet a lot of others are free, watching videos, listening to music
   8. I’ve transitioned my diet to mostly low cost foods, like vegetables, smoothies, eggs, and relatively cheap meats like basic beef burgers and bacon and we shop at Aldi a lot.  My biggest food expenses are optional and include berries (which I grow a lot of) and eating out
   9. Holiday costs are low because we already live in a holiday resort and my Mum and Debbie’s Mum do too, so we have house swap options, also we have 4 kids who plan to live all over the country/world
   10. Health care costs are mostly free and prescription costs are capped at £99/year
   11. So this only leaves a handful of inflationary costs, that make up less than 10% of the whole, taxes, fuel, health club (optional) and holidays
   12. We’ve got 4 children who will who have been brought up not to expect hand outs
5. What will I spend my time doing when I retire?  I’m currently planning on the following mix of activities, although my variable health and the fact that I like to change my life around every few years means that the mix will vary a lot:
   1. Consuming content, mostly reading and listening to books and podcasts.  I already spend a couple of hours a day doing this, I don’t plan to increase it but I certainly won’t reduce it
   2. Writing, I’ve really enjoyed writing more this year and I expect that to continue as I get better at it
   3. Exercising, a slight increase from my current mix of walking, cycling and swimming.  I’d like to add some extra things like canoeing and long boarding
   4. Arts and craft, although I really like these activities I’ve never had enough time to do them justice,  I’d like to do a lot more sketching and painting and do some high quality joinery work around the house
   5. Holidays, these are an important part of my life currently and I expect that to stay the same, perhaps spending a 1/3 of my time away on long distance walks or cycle rides or chilling in a ‘cottage by the sea’.  I’m planning to figure out low cost ways of doing this though.
   6. Learning new things.  I don’t spend much time on this at the moment but I expect this to be an important part of my day
   7. Helping people and/or the environment.  I don’t spend much time doing this currently but I want to do a lot more, perhaps odd jobs for the elderly, beach cleans, community gardening and the like
   8. Earning some pocket money.  I’d like a way of earning money that nets me about £10 a day with no stress.  Ideally that would be writing or web site related, so that I can do it while travelling

I’m already making some progress and locking down some key decisions:

1. We’ve already decided that we will stay living where we are,  I went through the decision making process in this blog post recently
2. I’ve started to dramatically reduce my living expenses
3. I’ve started to learn how to write, mostly just by practicing right now, rather than any kind of deliberate study
4. I’ve maxed out my holiday entitlement at work so that I can take 4 days holiday a month and because of my health I take one rest week a month as well, so that means I only work alternate weeks
5. I’ve done a massive clear out of our garden buildings, allowing me to create a dedicated workshop
6. I’m actively building my library of audio, paper and eBooks.  For example I have the 24 books/year subscription for audio books from audible.

I cycled down to Cleveleys today to meet Debbie and Jennie for brunch, with views like these who needs to go away on holiday?  Well actually I do, everyone needs a change, but day to day I’m incredibly lucky