Early-retirement wannabe

gadgetmind

I didn't intend to help my daughter onto the housing ladder, but I did put a few £k into some shares for her back in 2009.

They went up in value by 20x by the time the bare trust ended at age 18! We're selling them down as and when CGT allows and putting the money into cash and a few other investments, so that's the deposit taken care of.

(Oh, and the main other investment has also gone up 30%. I wish I was this good with my own investments!)

atush

I have to say, deferred gratification is a problem with the younger generation, and I have to say I am keen mine learn about it. As it seems so many others haven't and don't understand the concept.

All their friends got Mobile phones first, Iphones first. Got given presents when it wasn't their bday or xmas. Mine dont, and boy do they whine about it. If I had a penny for every time they said 'so and so's dad gave him this, so and so's mom let him do this' etc I'd be retired already.

But I have to say they are finally now learning about money and budgeting. After blowing thru the best part of 1K since they got their hands on their cash accts at 18, they have now worked out how and where they were overspending and are talking about (and taking steps) towards getting part time work. One even has a budget on a spreadsheet he works out to the penny and proudly told me he underspent by 10 quid last week.

So, there is hope for them after all lol.

I hope to help them, if they need it, with some deposit money for a house/flat eventually. But I am not going to delay our retirement to do it (unlike helping them with Uni which I consider my duty as their parent). But, I hope instead they scrimp and save themselves as well.

kidmugsy

"For every two pounds you save towards it I'll give you one": that was the line I took in late teenage years. It seemed to work.

With house deposits it may have to be one to one.

As for uni, the best policy I've ever met was that of my father. "If you find yourself in the wrong course but changing course would mean an extra year of study, change anyway and I'll meet the cost."

jimi_man

BeatTheSystem wrote: »

The last few postings resonate with my situation.

I am 45 and have 975K in pensions and about 100K in ISA's....
.

Out of interest how much income would that 975K provide a year, if taken at 55?

gadgetmind

jimi_man wrote: »

Out of interest how much income would that 975K provide a year, if taken at 55?

Assuming that 15yr gilt yields get back up to 3%, that would allow a drawdown of 4.8% * 120% = 5.76% pa.

So, £56k pa before tax, but you can also take the 25% tax free and generate fairly efficient income from that and also use it at a higher rate to bridge until state pension age.

If 15yr gilt yields recovery to close to long term average, then you could be drawing down 7%-8% pa, but this isn't sustainable over 3-4 decades.

cyclonebri1

gadgetmind wrote: »

Assuming that 15yr gilt yields get back up to 3%, that would allow a drawdown of 4.8% * 120% = 5.76% pa.


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So is a drawdown acceptable but a spenddown not, or to put it another way, what's the difference, only ask as you seemed to have difficulty with my situation but not this 1????

gadgetmind

cyclonebri1 wrote: »

So is a drawdown acceptable but a spenddown not, or to put it another way, what's the difference

Because drawdown from a sensible portfolio of equities and bonds will let you take 4% - with index linking to inflation - pretty much indefinitely with little risk of depleting capital.

If you replace that equity+bond portfolio with cash, earning interest that fails to beat inflation by much if at all, then that rich 55 year old would find themselves to be a very poor 75 year old.

Only lotus eaters should be 100% in cash.

http://en.wikipedia.org/wiki/The_Lotus_Eater

peterg1965

I would want to be slowly depleting my drawdown pot over a long period of time. I would be happy to spend more as sprightly 55 year old and have slightly less as 75 year old. State pension will assist in making up some of the shortfall and I would aim to have as close to zero at the point of my demise! (Hopefully in my 80's or 90's!)

gadgetmind

With typical gilt rates (not the last few years!) you can generally drawdown enough to slowly deplete the pot. Hopefully, you will model and/or monitor this, but the three year reviews also keep things in check.

The other advantage of drawdown is automatic 100% spouse pension and something left for relatives.

However, I do like the idea of dying with my last tenner on the bedside table!

peterg1965

For me it will be flexible drawdown, so I will have to resist the temptation to keep dipping into it, I need a plan and I need to stick to it!