Early retirement on inheritance.

innovate

gadgetmind wrote: »

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What's even better is that you get almost certainly get this extra £10k pa tax free!

I think I know the answer but I ask anyway - how?

countermon

Aaaarghhhh !

I've just penned a reply to all your questions and managed to lose the blessed lot !

I'll try again...but may not be straight away.

What a numpty !

gadgetmind

innovate wrote: »

I think I know the answer but I ask anyway - how?

Because there is no more tax on dividends for a basic rate tax payer, and then bonds and other interest generating assets can be held in wife's name. During the pre state pension years, you then keep selling unwrapped holdings and buying again within stocks and shares ISAs. As the ISAs build, you DON'T take any income from the assets in there and instead draw more heavily on unwrapped assets.

I retired couple can have an income of around £100kpa without paying any tax if they manage their asset allocations carefully! This is 2x personal allowances for pensions+interest, 2x 20% bands for dividends (no more tax to pay) and 2x capital gains allowances.

If there is ISA income on top, then this is also tax free.

With this in mind, I'm sure it's clear that £10k pa tax free is a doddle.

countermon

Second attempt at answering your questions....

£7.5 pension is index linked and payable immediately. This would be on the back of a voluntary redundancy request which would also provide a lump sum of approx £15k.

I will get state pension at 66 having paid into the system for 36 years.My wife gave up work approx 20 years ago to look after our children, having done paid work herself for 20 years before that.

Wife is a non taxpayer as our sole income has been my wage.

A part time job is not out of the question, though not with my present employer as I am past disillusioned with them.

Our teen daughter is actually frugal [ish] too. We make sure she doesn't go short but she is far from spoilt.
I have a couple of income bonds maturing at the time the question of further education will arise. These will produce around £15k, though that is also a rainy day fund for car/house maintenance. We probably also have about £15k in various savings accounts.

We are not a materialistic family and have very simple [cheap] tastes. I never buy new unless I have to [ like underpants..tee hee] and we have no plans to buy new cars or other luxuries. My current car is 22 years old, immaculate and I see no reason to change it.

Fifty six may be young to retire but that is part of the appeal. I am very healthy and love cycling. It saves a fortune in fuel and I want more time to enjoy doing that and spending time with my family....I have worked long shifts including nights for the last 18 years and feel as though I have missed out a lot as far as family life goes.

Thanks too for all the links, I'll be going through these properly when I
have more time.

Apologies if I have missed out answers to any questions so far.

gadgetmind

Get state pension forecasts for yourself and wife. She'll have more qualifying years than you expect and there are some cheap ways to get more years so you can both get the full new £144 pw state pension.

I'm also a cyclist (commuting, shopping, leisure, whatever) and also intend to retire at 55 despite my wife not working due to raising kids!

Stubod

You need to work out your annual "essential" spending requirements, and then decide what else you would like to spend. (NB Iam in a very similar position, do not have an inheritance, but a similar amount "saved", and thinking about options to pack in work).

I need approx £17k "essential" spend, but usually actually spend about £25k per annum. So I am not looking to retire until I can get £25k per year, startig this year, and growing by at least 2% per annum to cover inflation. NB Small pension kicks in around 65, + state pension, + wifes pension...so may almost be there.

NB I accept that you do not like your job, but somtimes it pays to stick with it knowing that at anytime you want you can pack it in.....can make for some fun!

kidmugsy

countermon wrote: »

... will be back shortly with a few answers to your questions.

Or, indeed, questions to your answers?

innovate

One thing people keep saying is that once you retired, you need a lot less money - no business suits, no daily commute, a lot fewer lattes and cappucinos, a lot less on lunches and dinners, etc etc. Of course some will already have the minimum costs for that, but many people will find there's a marked reduction in monthly "necessities".

Of course, the above costs can easily be replaced by travelling or hobbies.....but it will all be a lot more fun, and it will be a lot more enjoyable than work. As long as the costs are within the budget.

xylophone

Does your daughter have a JISA?
https://www.gov.uk/junior-individual-savings-accounts/overview

Worth considering the Halifax offer?
http://www.halifax.co.uk/isas/

kidmugsy

About government bonds: "Abstracting for default and convertibility risk, investors, even over a 20-year holding period, will earn real returns of close to zero. For taxpayers, after-tax returns will be firmly negative." N.B. "real" means 'above inflation'.

"the annualized return expected from cash over this same horizon is around –0.8%." And that's before you've paid tax!

" ... expected real equity return in the region of 3%–31⁄2% over 20–30 years. We are indeed living in a low-return world."

These estimates/guesses are from a Credit Suisse study
https://infocus.credit-suisse.com/data/_product_documents/_shop/382269/credit_suisse_global_investment_returns_yearbook_2013.pdf

What will be will be: all I can point out is the bleedin' obvious - use legal means to avoid tax (ISAs, personal pension for your wife, ....), don't leave more than £85k in cash in any one bank, and remember that it is no crime if you consume a bit of your capital while you are waiting for your two State Pensions to begin.