Merkur

I am an ex-pat that has worked in the US for the past 25 years in a good position in a major corporation. I am 54 years old. The salary and benefits are good and we have put two kids through good colleges. That being said, the earliest I can see retiring is in another 5-6 years when I’ll be 60ish.

One thing that I just cannot work out is how my friends, in similar large companies in the UK can afford to retire at around 54. I have just got an email from a friend in the same company I work for in the UK, and he is retiring at 54. It makes no sense to me when the salaries are lower, the taxes higher, the house and car prices the same. The only things that cost more in the US are what we spend on our kid’s education, health care, what we have to put aside for care in retirement.

This has puzzled me for years, and I am very interested in a comparison of the net worth of people in similar positions in the UK and in the US and what their annual taxes and expenditures break out to be. Are the pension plans that much better in the UK than in the US? Is social security that much higher?

I am very interested in your opinions on this. I am ready to retire!

Paul

TruBrit

an old boy who works at my OH's place is going to be 80 later this month and he's still on the pay roll full time ....mthly medical for his wife is very high apparently....

christmasoompa

I would think that the major flaw in your reasoning is that salaries are lower in the UK. Every job we've seen in the US has been no more than 2/3rds of what my husband is on now. Admittedly he's on a London salary so earns more than he would for a comparable role in other parts of the UK but anybody that works in London is likely to earn much more than they would in the US I would have thought?

And you mentioned education and healthcare but presumably they are things that cost quite a bit? As both are free here that must account for a fairly substantial saving over time.

I have not yet lived in the US so cannot comment on cost of living, etc, over there, but those are just my observations so far.

nun

Healthcare and education aren't free, but the cost is more evenly spread in the UK that in the US. Also it's difficult to generalize about retirement age as it's so dependent on how each individual plans and invests. I'm in the US and i hope to retire in 8 years at 55, even with the present recession.

robin1234

First, let's say the person in the UK who wants to retire at 54 or 60 has fully paid off the mortgage. Their major housing expenditure from then on is Council Tax; I don't know much about Council Tax, but isn't it likely to be lower than Property Taxes in the US, especially for an older couple or single person?

Then, let's say they've put two or three children through college. In the US, there are much more likely to be significant loans to pay off than in the UK.

Leaving aside the comparison between Social Security and OAP, it seems to me that there are many programs in the UK that mean that retired folk who are content to live quietly & simply can live very comfortably & securely on a relatively low income (NHS, free prescriptions, free bus pass, train discounts etc.) in the USA by contrast, we are bombarded with lifestyle pressures that convince us that we'll need about the same income after retirement as before in order to travel, play golf, and indeed survive (Medicare Part X,Y,Z etc.)

nun

US SS is a higher benefit that the UK state pension. What cripples people in the US is healthcare costs before thy reach medicare age, education, $40k/year to go to a private college is just stupid, and too much discretionary spending and borrowing, although it looks like that is over. Financial firms often say you need 70 or 80% of pre retirement income to maintain your lifestyle in retirement. This is ridiculous, once the mortgage is paid off and you don't have to save for retirement I estimate I'll only need 30% of my current income. This is often discussed at

http://www.early-retirement.org/forums/f28/

robin1234

This is a good point. My wife and I (we're in our late fifties) currently cream off about 40% of our income to go straight into our 403b retirement accounts. Obviously this is very beneficial in terms of putting us in a lower marginal tax bracket. But, as you suggest, the general financial advice "you'll need at least 80% of your pre-retirement earnings after you retire" never spells out the good news, that you obviously will no longer need the $20,500 (per person) current income that you previously put straight into your 403b..

christmasoompa

How are they not free? My children can both get good education and free healthcare without us having to pay for it. Admittedly, they are paid for using taxes but I would still count that as free as we don't have to find any extra money to pay for them. And even if we weren't paying taxes we'd still all be eligible to use them - so therefore they are free services for any UK citizen if they choose to avail themselves of them.

Just out of interest, what would it cost to give a child in the US healthcare and education say to the age of 21? I'm guessing tens of thousands of dollars, particularly to pay for a college education, so it doesn't even compare to the tiny percentage of our taxes that we pay for the same service here.

That must be a major saving and one reason why the OP's British friends are retiring earlier than those in the US.

tamms_1965

Aren't you "fined" if you take out certain types of retirement funds before you hit 59 in the U.S.? Plus, individual companies have limits on the types of benefits you'll get if you retire too early. Some people need the Medicare as a backup insurance when they retire and I don't think you can apply for that until you're 65.

Mummy in the foothills

Early retirement in US is a sorry thing. Dh now has two co workers who retired a few years back (at 55) and have both come back to work full time and it's killing them physically (they are slinging big rig tires) both came back for the health care benefits for the family, both have a sick wives (one with cancer) and it was too expensive to get them care without retuning to work for the excellent medical the teamsters provide.
I told Dh we are one major illness away from disaster too, I am really wanting to go home so I can pay more in my OAP in UK and me eligible for that at retirement. That way I don't have to worry so much about the tire smut and chemicals he's probably breathing in daily.

tamms_1965

My DH is 11 years older than I, so he doesn't really want to retire until he's 65 & I'm 54. I'm off all summer anyway, so we will be able to do things together then and he'll be on my insurance still. I can't retire until I'l 59 to receive the best package. The nice thing is he worked 30+ years in UK and put into a private pension plan in addition to the govt. and he'll get a small retirement from the US place he works.

robin1234

But if you retire when he's 65 and you are 54, what will you do for healthcare for the 11 years up till you are eligible for Medicare at the age of 65? (Or are you moving to the UK at retirement?)

nethead

I think Tammy said she will continue working even after her husband retires.

tamms_1965

I will work until I'm 59. After that.....He works for city government and they pay a percentage of our healthcare when he retires (or he can bank it for several years so the following years are paid in full). I am a teacher so I have a similar deal. Obviously, we will go with the least expensive since at the moment the coverage is the same.

robin1234

OK - sorry about that, I thought I read your post carefully but part of it must have passed me by. Wait, that means I need to retire RIGHT NOW!