Early-retirement wannabe

ex-pat_scot

westv wrote: »

I didn't realise I was entering a personal finance exam. :rotfl:

Sorry!
I was just trying to clarify what was coming in and when, vs how big the pot is, in order to be able to comment on whether your proposed approach adds up.

westv

ex-pat_scot wrote: »

Sorry!
I was just trying to clarify what was coming in and when, vs how big the pot is, in order to be able to comment on whether your proposed approach adds up.

Well it was more of a back of the fag packet plan at the moment - to be tweaked as I get closer to "the day" in four or five years.

OldBeanz

It is your decision to what you want to put on here anonymously. Looking at your figures it would appear that you have a large pension pot and your wife has little. It may be worthwhile gaining an extra 20% uplift in your pensions by recycling your money through your wife's pension. That could start now. You may also want to consider how much either of you would have if one of you pre-deceased the other.

westv

OldBeanz wrote: »

It is your decision to what you want to put on here anonymously. Looking at your figures it would appear that you have a large pension pot and your wife has little. It may be worthwhile gaining an extra 20% uplift in your pensions by recycling your money through your wife's pension. That could start now. You may also want to consider how much either of you would have if one of you pre-deceased the other.

Current projection will give me a total pot of around £400k
Wife has two DB pensions. Around £8k at 60 (plus £24k lump sum) and about £3k at 67 (not included in my plans). Both index linked.
I also have a DB pension £5k starting when I'm 60.
Plus 2 state pensions at £8k each.

ex-pat_scot

westv wrote: »

Current projection will give me a total pot of around £400k
Wife has two DB pensions. Around £8k at 60 (plus £24k lump sum) and about £3k at 67 (not included in my plans). Both index linked.
I also have a DB pension £5k starting when I'm 60.
Plus 2 state pensions at £8k each.

Thanks for sharing. Now it makes sense to me!


I've spent a few minutes broadly summarising what I think is the situation, and then will play back my thoughts on your general approach.




1. running the numbers backwards, it seems you are approx. 54 and wife 51 (give or take).
2. On my rough calcs, your total pension income (excluding your DC pot) will deliver as follows (numbers in today's £ terms, but expected to keep pace with inflation)


2022 £5,000
then increases in 2025 to £13,000
then 2029 £21,000
then 2031 £29,000
then 2032 £32,000 and thereafter the same.



Now the killer two questions:
1. what is your "Number"? is it £30,000? (£2,500 per mth before tax).
2. when do you and wife want to retire? I hope /expect it will be before 2031/2032.




The usual approach would be to look at the annual total pension income, then use the DC pot to fill any shortfall between the "Number" and the DB/state pension income.
If your "Number" is <£32,000 then the DC pot doesn't really need to continue once all the other sources kick in, and so you can plan to run the DC pot down completely by then.
That should then give you a broad view of whether the pot is sufficient to either (a) retire at your target date or (b) show when you might be able to retire.


You also mentioned the possibility of annuitizing the remainder of the DC pot once you reach a certain age.
It will depend on your own circumstances and your view on any residual pot/legacy you want to leave.
Once all the DB and state pensions kick in, you will have a combined income in retirement of £32,000 risk free. That's pretty decent! If the DC pot is surplus to these requirements, then perhaps it might be better to consider how you could use these funds earlier rather than later: perhaps a holiday house or a motor home, or a house for your child(ren). the point is: if you know you are set with risk-free financial retirement with the £32,000 then why hold surplus funds back for that point, if you can make use of them now? You hopefully have your youth and vigour, but you won't always.

westv

I'm actually 53 now and my wife is 46 and I'm hoping to retire sometime between 57 and 58.

My reasoning for perhaps keeping some of the DC pot is to assist the surviving spouse if (when) one of us dies.

For guaranteed income I'd have:-
£8,000 SP
£5,000 DB
£1,500 50% wife's DB
£4,000 50% wife's DB
£18,500 total

My wife would have:-
£8,000 SP
£8000 DB
£3,000 DB
£2,500 50% my DB
£21,500 total

OldBeanz

Assuming your wife will retire around the same time as you, from 55, she can draw £16k pa from a pension (25% tax free and £12k allowance) from 55-60 then £5k from 60-67 (allowing for DB). Building up a pension of £100k would cost you £80k.

westv

My "number" seems to change every day butt it's currently somewhere between £2k to £2.5k a month net - which seems similar to a lot of others on the "number" thread.

jamesd

Given your wife's age you have the interesting option of taking a tax free lump sum from your defined contribution pot into a bank account in your name, gifting it to her into a bank account in her name and her then using it to make pension contributions to a DC pot of her own. Can also give her some of your taxable pension income to help to maximise the gains, provided you won't run out of cash before she reaches 55 and can get at the money.

I'm specific about account names to avoid suggestions of lump sum recycling by HMRC.

OldBeanz

I thought recycling was not possible to your wife as long as it was not reciprocal.