Early-retirement wannabe

fairleads

gadgetmind wrote: »

Taking out enough to max out BR tax is a no brainer, but I guess you have that figured.

The real no brainer is to structure one's retirement finances to produce a tax free income for both the investor, their dependents, and heirs.

gadgetmind

I'm not too bothered about heirs, but it comes as partof the deal when using drawdown rather than annuitising.

As for tax free, I wish! I reckon my tax bill will be sub 10% in retirement, but no way can I achieve 0%.

nearlyretired2004

(..... at some point I must get round to changing my name to 'retired2011' ...!!.... at 55 yrs )

Can someone help me with a method of calculatiing the 'overall' value of a FS pension?

I have three, one personal - easy, thats a cash value - but I dont know how to calculate a value for the other two to compare my overall 'worth' when looking at charts etc that take pensions into account.

Thanks !!

Linton

Suggest you take the pension accrued, increase it by inflation, work out the lump sum needed to provide that pension were you at your retirement age today and then discount the lump sum back to today.

So for example:

You have accrued £10K/year to be taken in 5 years time when you are 60. At 2.5% inflation this will be 10000* 1.025^5 = £11300. An inflation linked pension of £11300 with 50% spouse benefit at 60 today would cost you say £300,000. If your average investment return is say 4%, £300000 in 5 years time is worth 300000/1.04^5 today = £247000.

That's your answer.

nearlyretired2004

Think I was just looking for a complicated answer that wasn't there!

In my case, as I'm already drawing on the pensions and have been since age 55, am I right that its even simpler? ..... and the value is just the cash-cost today of buying the pensions I'm drawing - no need for any inflation or discounting?

Linton

nearlyretired2004 wrote: »

Think I was just looking for a complicated answer that wasn't there!

In my case, as I'm already drawing on the pensions and have been since age 55, am I right that its even simpler? ..... and the value is just the cash-cost today of buying the pensions I'm drawing - no need for any compounding and un-compounding?

Seems reasonable to me as long as you put in your actual age when determining the current pension value. The alternative is to project forward the income, and discount back the investment return for each year taking into account the mortality statistics!

cyclonebri1

gadgetmind wrote: »

Thanks. When it comes to determining how to use financial assets to generate much-needed retirement income, I find those are by far the best terms to use.



I'm happy to factor in all that you have listed but completely fail to understand why anyone might adopt a financial plan that has a high certainty of not generating income over the period during which it's required.

However, each to their own.

I will end our polarised views with a simple question that might just put it into perspective for you, and please no if's, ands or buts, a or b will suffice;

Would you rather be (a) happy, or (b) rich ?

and again please don't say both.

jamesd

jamesd wrote: »

The main UK stock market has had an average return of about 5.2% plus inflation over the last hundred plus years.

ermine wrote: »

Is the FTSE all-share a reasonable match or is it the FTSE100?

Today the all share is a reasonable match. Cap-weighted because that's what the index is.

ermine wrote: »

I ask because it certainly wasn't my experience of a FTAS index ISA over the 2002-2007 period It was my experience in my AVC fund 2009 to 2012 with a 50:50 FTSE100:Global fund but then that was a rather unusual time, not only did I start when it was touch and go whether there would be a financial system but then the government went and devalued the currency by 20%-odd in the period, which presumably made at least the Global stuff increase by the same amount.

That's a time that has been fairly bad overall, though there were some great times within it. If you were investing regularly the performance of each month's investment would vary a lot.

ermine wrote: »

So there must have been some serious extended periods of racy performance that aren't within my investment experience to up the average to 5.2% real. Hope they'll show up again some time in the next couple of decades, but not in the next five years as I'm still building my ISA

One thing about equities is that they vary in results. Some good times, some bad. Much of the first part of this century hasn't been particularly good, though those doing rebalancing could have one quite well at times, out of equities at highs, back into them at lows.

I've just posted Equity Gilt Study download links and you might want to take a look at the data and analysis there. It's well worth reading at least the parts I highlight in that post.

mgdavid

cyclonebri1 wrote: »

I will end our polarised views with a simple question that might just put it into perspective for you, and please no if's, ands or buts, a or b will suffice;
Would you rather be (a) happy, or (b) rich ?
and again please don't say both.

Many people do not share the perspective of 'pi55 it up the wall' but would rather be prepared for the happy eventuality that we are among those that will live to see 100. It's very much glass half full vs. half empty. And if the west sees more straitened times ahead then again some people might think it preferable to help their heirs by passing a bit on from generation to generation. You don't need a lot of it to perceive the difference in attitude between Old money and New money. Fortunately we live in a society that allows both viewpoints.

peterg1965

gadgetmind wrote: »

I'm not too bothered about heirs, but it comes as partof the deal when using drawdown rather than annuitising.

As for tax free, I wish! I reckon my tax bill will be sub 10% in retirement, but no way can I achieve 0%.

I think tax will be an issue for me at 55, I think I will be 'lucky' to get away with staying in the BR tax band, more likely I will be over and paying 40%. Depends on the banding in 7.5 years time but i doubt it will change that much. I may be in the situation of paying extra into my Wife's SIPP to reduce the tax bill. If I carry on working in a new job after 55, which is highly likely, I will definately be paying 40%+NI on all my work based earnings. A nice position to be in I suppose.