Early-retirement wannabe

jamesd

madeinireland wrote: »

I have read a book my Michael McClung called “living off you money” which covered the subject really well. He would argue the amount you can safely drawdown would vary depending on many factors but at a vary basic level and looking at the performance of stocks since data was recorded you would get away with 4% so that would be a fairly crude method but would pretty much work.

Yes but:

1. that's before costs. Reduce it by 30% of costs
2. that's for US investors and investments, deduct 0.3% for UK
3. that's for the percentage of the starting pot size plus inflation increases each year
4. that's for 30 years

If you're willing to do only a little more work once a year you could use the Guyton-Klinger rules and start at 5.5% minus 30% of costs for 40 years for a UK investor.

With costs likely to be 1% they mean a 0.3 deduction so it's 3.7% vs 5.2%, 40% more initial income for the same pot size by using the more modern rules and accepting some income variation.

gfplux

One “benefit” of drawdown if you have other income is taking only your needs to minimise your income tax.
I have a number of income/pension streams that are fixed (some are inflation linked others not) These income streams come wether I need the money or not. Which I do.
My drawdown gives me the opportunity to vary my income each year matching, if I can, my expenditure. Some years I need more than others.
Doing this I attempt to minimise the income tax I pay and take only from my drawdown what I need.
I hope the above makes sense!

Thrugelmir

ex-pat_scot wrote: »

3. for the UK market, and using the last 120+ years, if you had a 60:40 equities: bonds portfolio then withdrawing 3.5% annually would result in success (ie capital maintenance) in 95% of cases

That seems more of a case of fitting the data to reinforce a view.

OldMusicGuy

gfplux wrote: »

Doing this I attempt to minimise the income tax I pay and take only from my drawdown what I need.
I hope the above makes sense!

It does to me. I found the concept of withdrawal rates very helpful in retirement planning and deciding to retire early. Running simulations through things like cFIREsim helped get me out of the "OMY" mindset. However, with retirement 5 weeks away, I am planning how to utilize the funds I have both in my SIPP and outside it using more of a bottom up approach to minimize tax in the first 15 years of retirement rather than just work on a blunt %age withdrawal rate.

But I am very detail oriented so maybe I am overcomplicating things (wouldn't be the first time....).

Liffy99

Not sure I really planned my retirement as it was largely triggered by health issues. A heart attack at 57 convinced me to pack it all in at 60 (the earliest I could access an NHS pension). Luckily my organisation restructured at this time so I hung on for a few months and managed to get a redundancy payment worth more than a year’s salary.
So now I am no longer working and living on an NHS pension of £16k. I have a modest SIPP which I intend to call upon in 2 or 3 years time and will get my state pension in another 5 years. I also have savings for big expenses and am debt free and own my own house.
However, I am not planning for a 30 year retirement - I don’t think I will live until 90! So see myself gradually running my SIPP and savings down over 20 years. My ‘protection’ is that I will have an index-linked income of approx. £24k (state plus NHS pension) in perpetuity.
One thing I really regret doing is not planning what to do in retirement and feel very much at sea (I broke my femur a week into retirement and have been on crutches for a year and now waiting for a hip) as current circumstances have severely limited my activities. Summer was OK but winter is a real bind.

Triumph13

gfplux wrote: »

One “benefit” of drawdown if you have other income is taking only your needs to minimise your income tax.
I have a number of income/pension streams that are fixed (some are inflation linked others not) These income streams come wether I need the money or not. Which I do.
My drawdown gives me the opportunity to vary my income each year matching, if I can, my expenditure. Some years I need more than others.
Doing this I attempt to minimise the income tax I pay and take only from my drawdown what I need.
I hope the above makes sense!

Doesn't entirely make sense to me as you seem to be conflating your strategy for funding your expenditure with your strategy for optimising your tax position and they really should be thought of separately. It may be that this does come out to the same answer for you, but many others will want to use S&S ISAs as a parking lot for money taken from pensions when most tax efficient to do so, but not yet needed for expenditure.

gadgetmind

I'm now on gardening leave while various lawyers do the "elephant seals on a beach" bashing against each other to work out how much money I'll get to go quietly.

It still hasn't quite sunk in!

atush

Wow, it is really happening Gadget. Let us know as things progress.

Cat_House

So, I took early retirement at the end of October 2017 at the age of 57. My husband has been unemployed for three and a half years since relocating with my job moving and unable to secure employment. We were earning round 4K a month between us. We spent money without even thinking about it. Since hubby was not working, we had to make some serious cuts. We got rid of Sky, changed energy supplier, cut the mobile phone to under £10 a month, started shopping at Aldi, cancelled the cat insurance, cancelled the magazine subscriptions, changed to a water meter, changed our house insurance etc etc etc. We have saved 3K a year in fixed expenses. I put my FS pension into drawdown and am just in the process of moving my DC pension into a SIPP. I left the job I once loved due to medical reasons. I am now totally stress free and have never felt better. I believe all the health problems were caused by Work. We can now draw more money from our investments than when I was working alone and am still cover all the household costs. The point I am making is, that you do not need as much money in retirement as you may think you do. You just need to make some adjustments, which I never thought we could. To be living work free, is the greatest feeling in the world. I would recommend it to everyone. Yes, it does take some planning, 2 years in our case. A good IFA, some savings and a paid up mortgage. I know that I have, in this short period of time, inspired other people to go down the same route, which I never thought was possible. I think that generally, people do not realise the good position that they might possibly be in. Thanks to all the posters on this board, which has had a real bearing in our decisions and now finds us in the enviable position that we are now in. I still have the odd moment of “have we done the right thing” but knowing job stress kills, this is definitely the way to go....

crv1963

Good luck gadget hope it is all sorted soon.


Cat House- everyone I know who has retired, some younger than I, most a few years older- tell me to a man (and woman) that the feeling of being freed from the work stress is priceless and why didn't they go earlier! That is the main driver for our plans but it is the nervousness of "can we really afford this now" that holds us and I suspect a lot of others back. Good luck with this next phase of your journey through life and enjoy!