Retirement Planning

numpty_dumpty

Just wanted to hear some thoughts on my retirement plans and if I am way off the mark or not.

I am 44 and planning on stopping work at 50. (I have ms and want to stop work before being forced to by ill health).

Currently have a final salary pension to pay out at age 63 of £5500.
Currently have £67,000 in stakeholder pension pot.
Currently have £21,000 in ISA's
Currently have £5k in shares.
Have one endowment to pay out £18,000 in two years which is not needed to pay off house.

Planning on working full time till 50, making £16800/annum contribution to a defined contribution pension scheme. Also planning on adding £300/month to a stocks and shares ISA.

So, at 50, I have a pension pot of £167,800, plus ISA/savings of £65,600 (I am assuming growth only keeps in line with inflation)

I intend to use the ISA/Savings to provide me with an income between 50 and 55 so will give me £13,120/year, untaxed so £1093/month. I may also work part time depending on health.

Total from 50 to 55 = £13120/annum (I may work part time to boost this and my wife will also work till 55 bringing in a similar figure).

At 55 take the pension from the £167k and also the final salary pension element (I estimate I would get 60% of the final salary element so £3300). From the 167k the HL site tells me I would get £5585 at 55 (5% growth, 0% pension increase, 50% spouse), and I assume a 15% uplift for ill health so £6423, with a lump sum of £44659. I will use the lump sum up over 12 years till the state pension kicks in so £3639/annum from that (again assume growth keeps pace with inflation). Also sell house at 55 and realise 50k capital, from which I will take 2.5k/year for the 12 years till 67. (Other capital from house sale used to fund wifes retirement at 55, from where she should have approx 1k/month coming in as well, she has a final salary scheme which kicks in later)

So total from 55 to 67 = 3639+6423+3300+2500= £15862/annum

From 67 state pension kicks in and lump sum is gone so assuming I top up the state pension to get the full £7500, and inflation is eating away at the fixed pension. There is 20k left in capital so take 1k/year for 20 years (I wont last that long anyway) :-

From 67 on = 7500 (state) +3300 (final salary) + 4635 (fixed pension) +1000 = £16435.

I have generally taken a fairly simplified approach but wouldnt mind peoples opinions if this is far off the mark or seems sensible.

Also, we are aiming at 2k/month in hand as our target figure (which we would be getting if I achieve the above + 1k from wife), which I think would give us a reasonable quality of life.

All your comments welcome.

Marine_life

How does your project income match up against your current expenses?

What is driving you to want to retire at 50?

Why are ou assuming the poor health uplift in income?

nicknameless

Marine_life wrote: »

How does your project income match up against your current expenses?

What is driving you to want to retire at 50?

Why are ou assuming the poor health uplift in income?

the mention of MS I would assume

lonestarfan

In my experience you don't just get the ill health uplift. There will be criteria and it'll be about unable to do work of any kind etc. I've seen people not get ill health pension with MS. You might want to look at the regs about the criteria for ill health uplift.

tell_it_how_it_is

My initial thought concerns your wife. You don't mention her age, but it obviously sounds like she will be working for a while after you retire. Just to say if that length of time is a few years, it'll be a while 'twiddling your thumbs', so maybe contemplate retiring closer together if possible?

Other than that, as suggested above, it's usually best not to assume any enhancements for anything. Work out if you can cope off the minimum projections - then instead of it becoming a crisis when you get less than expected, anything extra becomes a Brucie bonus.

AlwaysLearnin

wrote:

How does your project income match up against your current expenses?

Building on this, given that the planned pension contributions plus monthly ISA payments will cost ~£22k gross equiv (more if planning to buy extra NI), plus presumably needing as much or more than your planned amounts (after tax) for living expenses between 44 & 50, it looks like you're in for a fair sized drop, potentially from now.

I would also ask, is the house sale your primary residence? If so, are you downsizing (considerably)? Those projected amounts would be hard hit if you needed to pay rent. Also, your other numbers presume growth in line with inflation but if house prices remain static (or drop) over the next 11 years then the capital you get (after costs of sale/moving...) won't be £1k equiv as inflation will have reduced it.

numpty_dumpty

Thanks for your replies. No-one thinks my figures are completely daft anyway so that's encouraging!

'Lonestarfan' Pity about the ill health uplift, the insurance companies are quick enough to penalise me at the moment so hoped I would get something there.

'Tell it how it is', This is really a bit of a 'Plan C - worst case scenario' calculation and I would prefer to work till 55 and myself and the wife can retire together. We are ages with each other and in reality it would be much better if we retired at the same time but I want to be sure we can cope if I stop work earlier. In reality I see me dropping to a part time role in my current work between 50 and 55.

'Always learnin'. In relation to the house, based on current market values we could release up to 180k by downsizing to a nice 2 bed bungalow in the next village. My plan above only utilises 100k of that so 80k to allow us to choose a nicer house/act as a capital buffer for major expenses/allow a higher income/house values dropping.

In relation to current income/expenses it will be a BIG drop in gross earning/net household income but in reality not such a big drop after some expenses that will be gone by then are accounted for:-

App. 4k/month household take home income currently.

Things we wont need to pay for:-
Mortgage: 300/month
Endownments: 80/month
Kids clubs/childcare/kids stuff: 420/month (this is the bits I can clearly identify!)
Commuting Petrol: 250/month (for both of us)
Reduction in bills/c.tax from downsize: 50/month
Payment into S&S ISA: 300/month
Monthly cost of refurb work on current home: 200/month

So currently have 2400/month left as living expenses and live fairly comfortably. I reckon we are looking at approx 2200/month on my plan-C above so I think we can we can live off it reasonably well. Clearly I would like more (and if leave retirement till 55 would be much better off) but as I said I'm 'worst case' scenario planning so just giving myself comfort we could manage if necessary. (I also have a very good employer income protection plan if my health goes tits up before then).

I appreciate peoples input, I want to be approaching this in a sensible/realistic manner and not get a big surprise when the time comes. So any more comments/criticisms/gaping holes anyone can see are welcome.

atush

I thought that was your best case scenario.

If it is your worst, then I think you are doing OK. Obv, the longer you work and the later you take pensions, the better.

MoneySaverLog

Similar age and I personally would not depend on the state pension, it's going to pot and probably wont be around when we come to retire. Or the age limit will increase again, they want us to pop our clogs before we get chance to claim it.

grey_gym_sock

at 44, i'd be assuming i would only get the state pension at about 69.

it's very unlikely to be abolished. it wouldn't save that much, as many could claim means-tested benefits instead. and it would be very unpopular with pensioners (and pensioners are the most likely age group to vote), both wealthier pensioners (who'd lose entitlement), and poorer 1s (as many don't like claiming means-tested benefits).

numpty_dumpty

Good point re state pension, may remodel with state pension at 69 instead, I don't think it will disappear but agree it may move back more.