Early-retirement wannabe

Silvertabby

True_Blue_64 wrote: »

Hi Silvertabby,

I!!!8217;m as sure as I can be on the state pension forecast. I started a thread on that last year and ended up talking to the government helpline. They confirmed that I had reached the maximum although I!!!8217;m still a bit dubious.

I will expect my daughters to pay me a modest amount to cover groceries but haven!!!8217;t given this a lot of thought tbh.

One other thing to mention is that I expect I will want to use these funds for occasional bigger ticket expenses such as holidays, a new car at some point. On the other hand I will probably downsize in the next 5-10 years, although I haven!!!8217;t factored that in.

Thanks

I'd check your pension on line to be sure - you may have 35+ years of NI contributions, but the DWP (for some unfathomable reason) insist on using the word 'full' for financial years, not contracted in. If your long term plans are based on receiving the full £160 per week then you will be able to buy some post 2016 years with voluntary class 3 contributions.

Of course, you may not have a problem - but it would be unusual for your DB pension to have been contracted in. Best to find out now.

True_Blue_64

Thanks - I have now factored in car tax and car/holiday fund which takes outgoings to circa £1,700 pm initially. The fuel bills may go up a bit but I already work from home quite a lot so there should not be a big jump hopefully.

True_Blue_64

Thanks again. As far as the SP forecast is concerned, I am not sure what else I can do. It was based on my online statement last August. It has not changed since then although I think I read somewhere that there have been some issues with the reliability of these forecasts, so I may have to assume my SP will be lower at 67.

enthusiasticsaver

Presumably then initially your plan is to live off the DB pension and make up the shortfall initially from the ISAs and then move to drawdown on the DC pensions for the first twelve years until your state pension kicks in?

Your figures suggest you will need around £21k net. You will pay minimal tax on your DB pension but you will need to take the deficit each year from your ISA or drawdown from DC pension. Without massive capital expenditure the deficit will be around £9k annually.

It certainly looks doable on those figures.

enthusiasticsaver

Personally I would be inclined to leave the DB pension untouched to start with and use the TFLS on your DC pensions and ISA money to live off. You may be in the same position as me in that you may have to top up your NI class 3 contributions as you are retiring more than 10 years early. I have 42 years full contribution up to last April but still wont get full spa unless I make an extra 3 to 4 years NI contributions as my DB pension was contracted out. I retired at 58.

Triumph13

Retirement at 54 definitely looks on. I would suggest you consider deferring the DB until 60 when it should be roughly £18k pa. Add that to a full SP of £8,300 gives £26,300 gross which is £1,945 per month post tax on currently rates and allowances - a £245 per month cushion over your current spending.


To bridge the gap from 54 to 60 at this same income level comes to £140k then another £46.5k to fill in for the state pension from 60 to 67 (7 x £8,300 x 80% as your pension will already use up your PA). Add those together gives you a bridging requirement of £186.5K


Your DC Pot stands at £190k. You'll pay less than £15k in tax to get all that out (25% TFLS and 6 years worth of PA gets most of it out tax free) leaving £175k. Ignoring any investment growth you would therefore need £11.5K from your £130k savings to meet the bridging requirement.


Doing it this way gives you a guaranteed income nicely above your required level and leaves you with nearly £120k left over, so it looks like you're laughing!

enthusiasticsaver

If you left your DB pension untouched until 60 presumably it would be 20% higher? Even if you left it until 58 it would be almost 15% higher. Of course there would be more tax though so you would need to do the maths.

enthusiasticsaver

I agree with Triumph that deferring the DB pension seems sensible.

If the DC pot reaches £200k by the time you retire the TFLS will be £50k so that along with your existing savings would cover the first 3 to 4 years expenditure. Drawing up to the PA for the next 2 years and making up the difference with savings will mean you will have crystallised about £74k from the pension without paying any tax. You would need to use around £40k from your savings/investments pot. Your DB pension would be around £18k from age 60 and you can continue to withdraw from the DC pot around £6k per year for the next 7 years until your state pension kicks in.

blisteringblue

So much for being the good little worker bee and giving 5 years notice of early retirement. Pretty much being demoted, losing my team and "parked". Chancing my arm at redundancy, not hopeful but you can but try If I can force it through its a couple of years too early but may see if there is some part-time contracting I can pick up (IT Manager).

peterg1965

MallyGirl wrote: »

probably ought to be factoring in a contribution to a replacement car fund - what you have now is unlikely to last forever.
No car tax?
I would love to have fuel bills as low as yours - will they still be that low if you are home more?

This is a factor that I have considered greatly whilst sorting my retirement planning. I have decided that I am going to continue leasing my main car into retirement and have allowed a decent sum to accommodate for that.

My logic is that there are always some decent personal lease deals available provided you are not too fussy (I currently lease both mine and my wife’s car) and you know precisely what you are paying for over the two years that I generally lease for. Road tax is included, with a modest mileage there are probably no tyres to buy and the maintenance is cheap as it is likely that there will be one service required over a two year hire.

It makes the cost predictable and known and dispenses with the requirement to have a big savings pot to buy a car every 4/5 years. This won’t suit everyone, but will be right for us.