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  • FIRST POST
    • scarter
    • By scarter 2nd Oct 17, 5:58 PM
    • 345Posts
    • 390Thanks
    scarter
    Do we have enough to retire now?
    • #1
    • 2nd Oct 17, 5:58 PM
    Do we have enough to retire now? 2nd Oct 17 at 5:58 PM
    We're thinking of retiring early - when I turn 55 next year and my husband is 51.

    Here's the situation. If you think the numbers don't add up please say!

    We're currently self employed with a software business and book sales that will keep money trickling in for years to come without us doing any work. Additionally, my husband loves photography and makes money out of that. So we would still have income but we don't want to factor that into our calculations. We want to think of it as a bonus.
    • We have savings of £155k.
    • A combined pension pot of £155k.
    • A house worth £200k - a large and fairly expensive house for our area. We could downsize when very old and release half of that.
    • I have a civil service pension that will bring in £2500 year from age 60 - index linked.
    • We both have paid enough NI for a full state pension when we eventually reach official retirement age of 67.

    We don't have expensive tastes. We currently live comfortably on around £15k per year, although things like new cars or unexpected home expenses come out of our savings.

    Our thinking is that we aren't too fussed about how we live when we're old and infirm - we may not live to see it and we have no kids to inherit our estate. We want to balance things slightly in favor of enjoying life now but not being destitute if we live to be very old.

    I've worked out that if we just draw down on our savings, taking our pension as cash (in such a way that we stay under the tax threshold and don't pay any tax on it) then we can keep our income at £21k a year until I'm about 85 years old. After which we'd have to rely soley on state pension and equity from our home. If one of us dies the other is left with just £15k a year to live on.

    Of course, this assumes that pension/savings keep abreast with inflation.

    All thoughts / advice / opinions welcome. I'm just starting to look into this and I admit to being a bit baffled by it all.
Page 1
    • inflationbuster
    • By inflationbuster 2nd Oct 17, 7:04 PM
    • 129 Posts
    • 29 Thanks
    inflationbuster
    • #2
    • 2nd Oct 17, 7:04 PM
    • #2
    • 2nd Oct 17, 7:04 PM
    One thing i don't think you're factoring in is inflation. E.g., rising cost in food, gas, electric, water, council tax, etc. Your £15K won't get you as far as you get older.

    It's something that's been on my mind as l think about retirement in future. I'd need to work out my cost of living now and then add inflation on a yearly basis to estimate what my cost of living might be in say 5, 10, 15 years time.
    Last edited by inflationbuster; 02-10-2017 at 7:07 PM.
    • Bravepants
    • By Bravepants 2nd Oct 17, 7:08 PM
    • 286 Posts
    • 332 Thanks
    Bravepants
    • #3
    • 2nd Oct 17, 7:08 PM
    • #3
    • 2nd Oct 17, 7:08 PM
    It would be good to keep drawdown of your pension to at or below 4% per annum. Google the 4% rule to find out more. Opinions are divided but that seems to be the standard drawdown rate; some poeple choose 3 or 3.5%. ANd there are more complex drawdown rules too, like CAPE.

    Now if you take your total retirement savings, that would give you £12400 per annum from now on. You can then add your £2500 per annum from age 60.

    Of course this depends on your £310,000 being invested in say an index tracker fund of equities (or preferably a mix of equities and bonds) giving a long term average return of 5% per year.

    You could drawdown more before you hit 60 to make up the difference without your CS pension, and hope that your investment returns more than the 5% average.
    • kidmugsy
    • By kidmugsy 2nd Oct 17, 7:23 PM
    • 9,900 Posts
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    kidmugsy
    • #4
    • 2nd Oct 17, 7:23 PM
    • #4
    • 2nd Oct 17, 7:23 PM
    Once you've got two State Pensions plus your Civil Service pension you're already getting more than your minimum £15k per annum. So the trick is to bridge the gap to ages 67.

    Move some of your savings into your pensions while you're still earning and keep contributing £3600 gross per tax year into each pension if your earnings fall below that. As you say, keep withdrawing the pension income necessary to use your Personal Allowances.
    • Alexland
    • By Alexland 2nd Oct 17, 7:27 PM
    • 787 Posts
    • 487 Thanks
    Alexland
    • #5
    • 2nd Oct 17, 7:27 PM
    • #5
    • 2nd Oct 17, 7:27 PM
    Seems a bit tight to me especially after considering the effects of inflation and continuing to draw out when markets are low. I assume you have checked your state pension forecast and have contributed enough national insurance. The capital expense of replacing cars, maintaining a house (new kitchen, bathrooms, etc) plus fixing the hole in the roof will take a toll.
    • jennyjj
    • By jennyjj 2nd Oct 17, 8:14 PM
    • 226 Posts
    • 342 Thanks
    jennyjj
    • #6
    • 2nd Oct 17, 8:14 PM
    • #6
    • 2nd Oct 17, 8:14 PM
    Seems a bit tight to me especially after considering the effects of inflation and continuing to draw out when markets are low. I assume you have checked your state pension forecast and have contributed enough national insurance. The capital expense of replacing cars, maintaining a house (new kitchen, bathrooms, etc) plus fixing the hole in the roof will take a toll.
    Originally posted by Alexland
    I agree that it does seem a bit tight. Liquid assets and future pensions seem a bit lean. That said, a frugal lifestyle has put you in good habits.
    Not to be morbid, but any inheritances on the horizon? They can really make a difference.

    Good luck.
    • atush
    • By atush 2nd Oct 17, 10:13 PM
    • 16,389 Posts
    • 10,142 Thanks
    atush
    • #7
    • 2nd Oct 17, 10:13 PM
    • #7
    • 2nd Oct 17, 10:13 PM
    I agree, feel it is too tight.
    • Thrugelmir
    • By Thrugelmir 2nd Oct 17, 11:01 PM
    • 56,257 Posts
    • 49,626 Thanks
    Thrugelmir
    • #8
    • 2nd Oct 17, 11:01 PM
    • #8
    • 2nd Oct 17, 11:01 PM
    I'd downsize while you are still working and get the released equity invested.
    “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
    ― Warren Buffett
    • Terron
    • By Terron 2nd Oct 17, 11:03 PM
    • 115 Posts
    • 124 Thanks
    Terron
    • #9
    • 2nd Oct 17, 11:03 PM
    • #9
    • 2nd Oct 17, 11:03 PM
    Moving house is one of the most stressful things to do. Planning to do it when you are "very old" does not seem like a good idea to me. Since you aren't worried about passing money on, perhaps some sort of equity release scheme would work better.

    15k plus covering unexpected expenses out of savings means you need a bit more than 15k a year. 21k a year seems reasonable. Subtract your civil service pension and you'd need to take £18,5k per year from when you are 60. The 4% rule suggests you will need a pot of £462,5k Assuming you can get £100k from you house you are about £50k short.

    The 4% rule was developed in the US with the aim of having a good chance of not running out of money for 30 years of retirement. For the UK 3.5% might be better.
    • jennyjj
    • By jennyjj 2nd Oct 17, 11:14 PM
    • 226 Posts
    • 342 Thanks
    jennyjj
    you might try https://www.retireeasy.co.uk/ they used to offer a free tier, but you could surely afford to try the basic package
    • Triumph13
    • By Triumph13 2nd Oct 17, 11:26 PM
    • 1,117 Posts
    • 1,373 Thanks
    Triumph13
    We don't have expensive tastes. We currently live comfortably on around £15k per year, although things like new cars or unexpected home expenses come out of our savings.
    Originally posted by scarter
    That's the only bit that worries me. How big are those expenses? If they can indeed be covered out of £21k vs your £15k, then I'd say the numbers stack up. You have £310,000 of savings and plenty of time to get the pensions into ISAs tax free. Even if we use Terron's very cautious 3.5% drawdown rate, then if you put £75k of those savings into a drawdown pot and draw from that at 3.5% indexing for inflation, that would mean you'd need £233k of your remaining £235k to bridge through until the second SP comes on line - assuming the bridging pot earned just enough to cover inflation. From the second SP you then have closer to £22k until first of you dies. Survivor has their own SP 50% or 100% of your DB and the £2.6k from the drawdown.
    • Thrugelmir
    • By Thrugelmir 2nd Oct 17, 11:34 PM
    • 56,257 Posts
    • 49,626 Thanks
    Thrugelmir
    Even if we use Terron's very cautious 3.5% drawdown rate
    Originally posted by Triumph13
    Nothing cautious in the current economic enviroment. Markets may have moved upwards but underlying corporate profitabilty hasn't. Prices are in part being driven by investors chasing yield. While being detached from what they are actually investing in.
    “Opportunities come infrequently. When it rains gold, put out the bucket, not the thimble”
    ― Warren Buffett
    • Alexland
    • By Alexland 3rd Oct 17, 8:09 AM
    • 787 Posts
    • 487 Thanks
    Alexland
    I agree 3.5pc is looking optimistic in our low growth stagnating global economy and especially if the OP is wanting to start very early. I am expecting to draw down at just under 3pc (1/35th) if things haven't changed by the time I get there.
    • NineDeuce
    • By NineDeuce 3rd Oct 17, 8:43 AM
    • 540 Posts
    • 481 Thanks
    NineDeuce
    No. You should keep working for another 10 years....
    • IanSt
    • By IanSt 3rd Oct 17, 9:32 AM
    • 155 Posts
    • 116 Thanks
    IanSt
    It does seem a bit tight to me, but then I am a cautious type.

    If you are seriously considering this, then although I don't wish to be morbid, you definitely must consider what will happen on the death of you or your partner and how much money the surviving partner will need in their new solo life. It's likely to be a lot more than half of that required for the two of you, and so you'll need to make sure their are enough savings at that point and not have used them up already.
    • Wizard of Id
    • By Wizard of Id 3rd Oct 17, 9:43 AM
    • 2,473 Posts
    • 9,764 Thanks
    Wizard of Id
    I retired at 55 on a lot less than you have in your overall pot and only the state pension to come when I get to 67.
    People tend to over estimate just how much they will need when they retire. The only big change that I have done is to get a dog instead of having a holiday abroad each year.
    I have no mortgage to pay and bought what I plan to be my last car earlier this year and I also got good news from my pension advisor saying that my pot had gone up by more than I had taken out as an income.
    Every man is innocent until proven broke.
    Cryin won't help you, prayin won't do you no good.

    Walk 2000 3000 miles in 2017 - 3264.1
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    • Alexland
    • By Alexland 3rd Oct 17, 10:23 AM
    • 787 Posts
    • 487 Thanks
    Alexland
    Well it would likely have gone up by more than you have withdrawn as we have just had some excellent years for uk investors. Thats not to say the investment landscape will stay persistantly excellent for the duration of your retirement.
    • michaels
    • By michaels 3rd Oct 17, 11:01 AM
    • 19,955 Posts
    • 91,550 Thanks
    michaels
    cfiresim can probably model a safe draw down annual amount based on your current situation although it is quite complicated for first time users - perhaps ask JamesD for help?
    Cool heads and compromise
    • ams25
    • By ams25 3rd Oct 17, 11:11 AM
    • 102 Posts
    • 89 Thanks
    ams25
    OP... How is the 300k invested? Would say needs to be at least 50% equities to provide some inflation proofing growth.

    4% withdrawal is in my view optimistic. Personally working on around 3% drawdown basis (but I prefer to be cautious).

    I echo the thoughts of most others here...it looks tight. I think some cash flow modelling allowing for anticipated and unanticpated capital expenses (house, car, dental, pets etc etc) is needed to see how viable it is.

    I would suggest the self employed earnings mentioned could make a material difference so worth re calculating but this time assuming these earnings continue for at least another 5 years to support the plan and provide a bit more comfort.
    • enthusiasticsaver
    • By enthusiasticsaver 3rd Oct 17, 11:52 AM
    • 4,865 Posts
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    enthusiasticsaver
    It looks tight to me as I think £15k is quite a low amount to live off but I guess if you are used to it then this may work. I would work on 3% drawdown rather than 4% but then I am cautious.

    Your husband has 17 years to bridge though and no DB pension. Are you sure you will both qualify for full state pension or will you have years to make up? I thought the quote assumes you will continue working until spa and if you have been self employed does this affect the eventual final figure?

    There are positives though in that you may have additional income and that you can downsize to release £100k and you are not worried about leaving inheritance. If you have modelled the withdrawals and are confident re your required income then go for it.
    3 days to go until early retirement. Debt free and mortgage free.

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