Early-retirement wannabe

bugslet

:beer:

justme111 wrote: »

but that is if one does not want to touch the capital. why would she want to keep it ?
bugslet, it looks like you live to work , not other way round. i do not see anything wrong with it per se , as long as one understands the real reasons for one's decisions. Knowing one does a geeat job , being appreciated both emotiinally and financially for it is a pillar of human life. It is up to you to decide whether you want to try to experience another life or you would be happy with this one being the only one you ever knew when the time to die comes.

Good point just me, and its true, I may as well eat into the capital. Only the dogs home will be happy with preserved capital.

Not that it affects much, but I'm also going to get the enhanced state pension of £175.00. Something to do with being or not being in SERPS.

Sorry dancing badger, meant to say Lola is a 15 month old schnauzer, she's quite bonkers!

AnotherJoe

justme111 wrote: »

but that is if one does not want to touch the capital. why would she want to keep it ?
bugslet, it looks like you live to work , not other way round. i do not see anything wrong with it per se , as long as one understands the real reasons for one's decisions. Knowing one does a geeat job , being appreciated both emotiinally and financially for it is a pillar of human life. It is up to you to decide whether you want to try to experience another life or you would be happy with this one being the only one you ever knew when the time to die comes.

It's about safety. 3.5% is by no means guaranteed to keep the capital, it depends on stock market fluctuations. . If there was a say 30% decline the year after retirement, by no means out of the ordinary, OP would need to step up to 5% to stay at the £21k as they have no buffer. If there is flat to modest growth the next year, that will start cutting into capital more, creating a vicious circle from which possibly even good growrth later on would be insufficient.

Of course, it might be enough, it probably will, but in retirement a bit of a buffer so there's no anxiety about money would seem to be prudent, since there's little you can do to recover without income from a job

Temrael

Hi all,

My wife and I are in our early 40s and hoping to retire when we are about 50. We have no mortgage, live pretty modestly and are targeting an annual income of around £23k in retirement.

We are on track in terms of pension contributions and savings. One thing I'm puzzling over is though is how to balance our cash pot/investments pot ready for the 8ish years between stopping working and pension access age. (At 58 we'll get access to our DC pots at which point we are fine).

I'm torn between trying to achieve...

a) About 9x annual outgoings in cash to entirely cover our outgoings for that period (with spare) in a fairly safe way (so long as it keeps pace with inflation fairly well).
b) About 3x outgoings in cash but a large stocks and shares ISA pot (invested fairly cautiously by that point) with a view to drawing down lump sums as needed to keep the cash topped up (and perhaps a 2% yield).

I'm just not sure how best to split our £1k per month savings at the moment. :think:

The first option is obviously safer but misses out on opportunities for growth. If there are several years of bad times then b) obviously risks me being forced to sell some units when markets are down.

I guess I could work towards b) for now and as we get closer to retirement look to move things more to a)?

I'd be really interested in people's thoughts, experiences.

madeinireland_2

Temrael wrote: »

Hi all,

My wife and I are in our early 40s and hoping to retire when we are about 50. We have no mortgage, live pretty modestly and are targeting an annual income of around £23k in retirement.

We are on track in terms of pension contributions and savings. One thing I'm puzzling over is though is how to balance our cash pot/investments pot ready for the 8ish years between stopping working and pension access age. (At 58 we'll get access to our DC pots at which point we are fine).

I'm torn between trying to achieve...

a) About 9x annual outgoings in cash to entirely cover our outgoings for that period (with spare) in a fairly safe way (so long as it keeps pace with inflation fairly well).
b) About 3x outgoings in cash but a large stocks and shares ISA pot (invested fairly cautiously by that point) with a view to drawing down lump sums as needed to keep the cash topped up (and perhaps a 2% yield).

I'm just not sure how best to split our £1k per month savings at the moment. :think:

The first option is obviously safer but misses out on opportunities for growth. If there are several years of bad times then b) obviously risks me being forced to sell some units when markets are down.

I guess I could work towards b) for now and as we get closer to retirement look to move things more to a)?

I'd be really interested in people's thoughts, experiences.

I recently retired and took option A. It's probably not the most efficient way of operating but it is risk free. Why take a risk if you don't need to? was my attitude.

Temrael

madeinireland wrote: »

I recently retired and took option A. It's probably not the most efficient way of operating but it is risk free. Why take a risk if you don't need to? was my attitude.

Thanks for that, and congratulations! :beer:

Yep that approach certainly has appeal, it would be pretty much a done deal and would remove a lot of uncertainty. I guess part of my concern is that the resultant cash pot ends up quite large (£207k). With tax on the savings (after the PSA or if it's removed) and limited bank account options that beat inflation, it increasingly becomes hard for that cash to hold its value.

I guess we could either live with that small amount of drag or perhaps (in a smaller way) put a modest amount to work in investments that offsets it a little.

Triumph13

Temrael, in your position I'd split the problem in two. a) How should you invest in now; and b) How should you change that at, or near, retirement. The key point is that, unless you are absolutely wedded to a particular retirement date, you can afford to take on more risk before you pull the plug as if the markets tank as your date approaches you can always work an extra year. Once you pull the plug, that option becomes much less feasible and so you need to think about a lower risk profile.
I will be in a very similar position myself with a 10 year gap between when I plan to pull the plug and when various DB pensions and later SP start to come on line. As I have quite a bit of slack in my budget, the approach I'm intending to take is a mixture of fixed term cash deposits and global equity trackers. I've calculated an acceptable minimum spend (which is quite a bit lower than my budgeted income level) and will balance the cash vs equities such that if equities are down 40% in a particular year then taking the planned %age of the equity pot plus the planned amount of cash will still give me my minimum income. That lets me keep the possibility of plenty of upside, but manage the downside risk to a level I'm comfortable with. Once the DBs etc come on stream they take the place of the cash.

Terron

Temrael wrote: »

Hi all,

My wife and I are in our early 40s and hoping to retire when we are about 50. We have no mortgage, live pretty modestly and are targeting an annual income of around £23k in retirement.

We are on track in terms of pension contributions and savings. One thing I'm puzzling over is though is how to balance our cash pot/investments pot ready for the 8ish years between stopping working and pension access age. (At 58 we'll get access to our DC pots at which point we are fine).

I'm torn between trying to achieve...

a) About 9x annual outgoings in cash to entirely cover our outgoings for that period (with spare) in a fairly safe way (so long as it keeps pace with inflation fairly well).
b) About 3x outgoings in cash but a large stocks and shares ISA pot (invested fairly cautiously by that point) with a view to drawing down lump sums as needed to keep the cash topped up (and perhaps a 2% yield).

I'm just not sure how best to split our £1k per month savings at the moment. :think:

The first option is obviously safer but misses out on opportunities for growth. If there are several years of bad times then b) obviously risks me being forced to sell some units when markets are down.

I guess I could work towards b) for now and as we get closer to retirement look to move things more to a)?

I'd be really interested in people's thoughts, experiences.

I lost my job rather than chosing to retire, but to cover the years before I draw my pensions (18 months to go) I went into property. It is working for me, but I had some advanatages. I grew up in an area where yields are high, and still had contacts there, particularly a builder who had been a neighbour of my parents for 20 years. I use an agent to manage my properties so they take very little of my time. I have enough properties so that even when one has a bad year it doesn't have too big an effect.

michaels

Temrael wrote: »

Thanks for that, and congratulations! :beer:

Yep that approach certainly has appeal, it would be pretty much a done deal and would remove a lot of uncertainty. I guess part of my concern is that the resultant cash pot ends up quite large (£207k). With tax on the savings (after the PSA or if it's removed) and limited bank account options that beat inflation, it increasingly becomes hard for that cash to hold its value.

I guess we could either live with that small amount of drag or perhaps (in a smaller way) put a modest amount to work in investments that offsets it a little.

I would have thought you had plenty of time to make sure that all your non-pension savings were in ISAs so tax on interest should not be a problem. (Low returns on cash is not so easily solved)

Temrael

michaels wrote: »

I would have thought you had plenty of time to make sure that all your non-pension savings were in ISAs so tax on interest should not be a problem. (Low returns on cash is not so easily solved)

I've been using my ISA allowance on Stocks and Shares but have also preserved a couple of years cash allowance in a flexible Cash ISA (I transfer money in at the end of the tax year and then back out again at the beginning of the next). I'm loathe to actually leave cash in there at the moment though because otherwise, whilst I can protect the interest from tax... there isn't any interest (or rather there is, but it's way below inflation). :rotfl:

Maybe in a few years they will be useful again though (as rates rise and Funding for Lending stops).

Marine_life

So...for various reasons we are thinking about moving back to the UK but ...

... can we get a mortgage?

So far the answer is clearly no ... but consider this ... 60% LTV ... over €2 million in assets

Where's the risk? Looking at the Debt free wannabe board it seems credit card companies are more than happy to keep upping limits ...

The financial services industry spends too much time box ticking and not enough time applying common sense.