advice about how to get to my goal-retire at 58

frugal90

I should get a public service pension of about £17000 when I am 58 -I will also get a lump sum of 3x pension ie £51000.

My wife is 6 years younger and will be 52 when we stop -she will be able to take a pension of about £9000 when she hits 55 and a lump sum of about £27000

we have worked out that we need about £2000 per month to live comfortably, travel etc

we have £80 000 in equity ISA's

we have £2000 per month (£24000 per year) to invest and I would like to get to the point where we have ISA's of £250000

I therefore still have £170 000 to add to the £80000

can I do this in 7 years -if so what strategy-where to invest?

uk smaller cos/trackers/emerging markets/Europe/ unit trust or investment trusts?

advice gratefully received:)

kidmugsy

frugal90 wrote: »

we have £80 000 in equity ISA's

we have £2000 per month (£24000 per year) to invest and I would like to get to the point where we have ISA's of £250000

I therefore still have £170 000 to add to the £80000

can I do this in 7 years -if so what strategy-where to invest?

£24k per annum fits pretty snuggly into two Stocks and Shares ISAs per annum. 7x£24k = £168k, so there's your £170k.
It's up to you to decide whether you wish to put preservation of capital first, or growth of capital.

If preservation, you could consider the Harry Browne Permanent Portfolio (in which case you might well open one Cash ISA per annum instead of putting all your ISA allowances into S & S.) And/or you might choose to Investment Trusts that approximate that portfolio e.g. Personal Assets Trust or Ruffer Investment Company. You'd be paying investment management fees but you'd be spared the hassle of managing your investments yourself.

If you go for Harry Browne you put 25% into cash (e.g. cash ISA, Premium Bonds, ...), 25% into gold (e.g. buy sovereigns and keep them in safety deposits), 25% into long gilts, and 25% into equities; you'd rebalance your portfolio either at some arbitrary time e.g. once per annum, or when one component gets too far from 25% in value e.g. gets outside 20%-30%.

[Declaration of interest; we have a far larger proportion in cash, because we still have ISAs opened back when fixed rates were on offer that were higher than RPI inflation. This happy state is about to enter the beginning of the end.]

OldGit_2

Are your figures gross or net? I ask because £2K a month to live comfortably on doesn't seem a lot. My wife and I (both retired) live on £30k pa net, and although we don't live extravagantly (no cruises or fine dinning!) we still get through the money. We just bought a new car and had to take some out of our capital to pay for it.

Have you considered buying property?

bigadaj

You aren't going to get any advice, do your own research or pay someone. Rule of thumb is higher risk and higher reward, particularly with more volatility. Your savings pretty much match the isa limits, this will shelter around £160k over the stated time, so with some growth you should hit your target.

Drawing a yield fro, isas should be possible at 4% with inflation protection, so should give £10k per year. This added to your pensions will give a gross income of £36k with no tax on the isas. This should give you over £2k net per month as income so no great problems, this assumes average growth of investments, things could go pear shaped in the next few years of course.

kidmugsy

By the way, if either of you is paying higher rate income tax, you should probably avoid it by contributing some of your savings to a pension.

frugal90

thanks for the good advice so far

think we will use s&s Isa's as they seem to offer flexibility, will drip feed £500 per month each then will make up the difference by buying Investment trusts on the dips

will probably stick to income funds

minefield out there ?:j

atush

What kind of actuarial reduction for taking your pensions at those ages?

You kight need to work out the cost/benefit over living off the ISAs and leaving the DB pensions to be taken w/o reduction?

grey_gym_sock

your projected pensions are almost £2000 per month after tax. do you mean that your target is another £2000 on top of that?

as kidmugsy says, your planned savings will take your S&S ISAs to £250k, even assuming no growth. assuming fairly modest growth might take them to £300k, plus £78k in pension lump sums, making £378k, on which £24k income would be c. 6.3% - probably too high to be sustainable, so you need more than very modest growth.

4% is often said to be sustainable (though it may not be!). however, presumably you'll have state pensions kicking in later, which may make it OK to spend a bit more than 4% early on, knowing that they'll provide a boost.

you can go for higher risk, potentially higher return areas. e.g. there is evidence that smaller companies outperform in the long term; however, this can fail to happen for long periods of time - much longer than 7 years.

your targets are modest enough that, if you happen to hit a reasonably good period for investments, and are fairly heavy on equities, you could meet them without placing any big bets on specific areas. so i'd stay reasonably diversified.

you may have to live with investment uncertainties beyond retirement, and rely on adjusting your expenditure up or down depending on how your investments do. many ppl have bigger spending plans for early retirement. postponing retirement until finances are 100% tied up can be a mistake.

frugal90

I'll take an actuarial reduction of about 10% -but the figure should still be about £17000 which I want to take straight away -we will live off my pension and lump sum until my wife takes her pension -it will incur a reduction of 25% but should still be about £9000 per year

we will have to live off my pension and lump sum for 3 years then another £9000 will lick in and a lump sum of £27000

the target of £250000 was in addition to this as we want to try and enjoy life a bit

I will have my state pension in full as I will have 38 years nat insurance contributions and my wife will have 32/35ths full state pension

just really wanted advice on a strategy to get to the 250K in isas and how to approach the risk over this time -this money will likely be fully invested for ten years, then we will start to use it

some really good advice on this forum, much better than what I have ever received from so called IFA,s -I have now moved to Hargreaves and Lansdown and make my own investment decisions

thanks again all

seven-day-weekend

OldGit wrote: »

Are your figures gross or net? I ask because £2K a month to live comfortably on doesn't seem a lot. My wife and I (both retired) live on £30k pa net, and although we don't live extravagantly (no cruises or fine dinning!) we still get through the money. We just bought a new car and had to take some out of our capital to pay for it.

Have you considered buying property?

We live comfortably on less than £20k a year.(£1666 pcm). I think it depends very much where you live.

We also had to use our savings to buy a car, but can replenish them.