Financial Divorce Implications at Retirement Age*

Divorce can have a significant emotional and financial impact during any stage in life, though this is often felt more acutely during retirement. The long-term impacts of a disrupted joint income need to be considered as well as the initial cost of divorce. Although the fees for a quick divorce may be relatively manageable, cases which come up against unforeseen complications can result in spiraling fees.

One member of a partnership may feel the effects of divorce during retirement more significantly if they have earned less over the years and therefore have a lower income from their pension. This may be most worrying for women, as research has shown that women in the UK are twice as likely to suffer from poverty in retirement than men. It has also been found that 70% of women face financial hardship following the death of or divorce from their husband.

A Comparison of UK House Prices – November 2012 Update

The last time we looked at UK House Price Indices we ended up with more questions than answers.  I believe there is now a simple answer to why that was the case which I’d like to demonstrate in today’s post.  To help with this we need to first take a step away from the published Rightmove, Nationwide, Halifax, Acadametrics and Land Registry House Price Indices and instead start with an analysis of some very raw data.  This data comes courtesy of the Land Registry and is the database of actual sales in England and Wales for the month of September 2012.  It is a list of 64,173 sales.  If we plot these sales as a histogram we end up with the chart below.

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UK House Value vs UK House Affordability – October 2012

This is the monthly UK House Affordability update which is the metric that I believe is the key driver of UK House Prices.  It is also the update for UK House Value which is the metric I am using to assess when it is time to buy a UK home. 

Let’s first update the key data being used to calculate both UK House Value and UK House Affordability:

• UK Nominal House Prices.  In recent posts we have been comparing the different UK House Price Indices however for now we will stay with using the Nationwide Historical House Price dataset for this topic.  September 2012 house prices were reported as £163,964.  Month on month that is a fall of £765 (0.5%).  Year on year sees a decrease of £2,292 (-1.4%).
• UK Real House Prices.  If we account for the devaluation of the £ through inflation (the Retail Prices Index) we see a very different story.  Month on month that £765 decrease turns into a decrease of £1,761 (-1.1%) and year on year that £2,292 decrease grows to £6,880 (-4.2%).  In real terms prices are now back to those around March 2003. 
• UK Nominal Earnings.  I choose to use the Office for National Statistics (ONS) Average Weekly Earnings KAB9 dataset which is the seasonally adjusted average weekly earnings of both the public and private sector including bonuses.  August 2012 sees earnings rise to £473.  Month on month that is an increase of £2.  Year on year the increase is £10 (2.2%).  With inflation (the Retail Prices Index) running at 2.9% over the same yearly period purchasing power of those that work continues to be eroded.
• UK Mortgage Rates.  The proxy I use to monitor mortgage interest rates is the Bank of England dataset IUMTLMV which is the monthly interest rate of UK resident banks and building societies sterling Standard Variable Rate (SVR) mortgage to households (not seasonally adjusted).  September 2012 sees this reach 4.28% which month on month is a tiny uptick of 0.01% and year on year is an increase of 0.18%.  So while the Bank of England holds the Bank Rate at 0.5% out in the real world we are seeing mortgages creeping up very slowly. 

The ASX 200 Cyclically Adjusted PE (aka ASX 200 PE10 or ASX200 CAPE) – October 2012 Update

This is the Retirement Investing Today monthly update for the Australian ASX 200 Cyclically Adjusted PE (ASX 200 CAPE).  The last update can be found here.

Before we run the analysis we need to discuss an anomaly with the dataset that has been built over many years.  The dataset is calculated using data published by the Reserve Bank of Australia.  I show a screen grab of this data below.  Reading this table I have always assumed that the columns “Dividend yield per cent per annum” and “Price/Earnings ratio” referred to the ASX200.  It turns out that this was a bad assumption and this month I have noticed some small print that highlights that these two columns actually refer to the MSCI Australia Index with all other columns being the ASX200.  This to me is just bizarre but if we want to continue with this dataset it looks like I am going to have to think outside the box as I’ve tried searching for new data that details the P/E and Dividend Yield of the ASX200 and not surprisingly drawn a blank.

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Does frugal living cause reclusive tendencies and limit career opportunities?

I started down the road to early retirement in 2007, with a step change in my attempts starting in 2009 when I also started this blog to hold myself accountable.  As detailed in the link above, one of the key methods I have chosen to help me reach early retirement is to move to a more frugal lifestyle.  This frugal lifestyle means I need less to live on per month which then has the knock on benefit of meaning that I can save more per month.  This then gives a further knock on benefit that I need a smaller Retirement Investing Today Low Charge Portfolio to retire on because I spend less per month.

My move to frugality did not happen overnight and was possible with two key direction changes.  The first was to get more value from the money I was currently earning.  Some of the techniques I have used (and continue to use) include:

• Achieve the lowest price grocery bill possible whilst satisfying my taste buds;-    Ensure I am on the lowest cost tariffs for electricity, gas, broadband and mobile phone;
• Wait until shoes and clothes wear out rather than become unfashionable;
• Stop everyday little treats that really made no impact on the lifestyle I want to lead;
• Cut back on alcohol which also means less regular nights out (this also had a very noticeable effect on both my health and the sharpness of my mind);
• Generally shunning consumerism; and
• Before buying something always ask myself will this make a difference to my life 3 months from today.  This means I own very few gadgets.