How old will you be when you can retire?

Loughton_Monkey

ruggedtoast wrote: »

Like most Gen X I will retire only after I have finished paying off the pensions of our boomer overlords, and then managed to scrape together enough for ourselves.

You're probably looking, then, at about 85 before you can retire. The annuity rates at that age look OK to me.....

Due to draw my state pension next year, I reckon that an equivalent 'cash value' is at least £200K.

Why don't you just write me out a cheque. I'll tell Gideon I'm not going to claim my pension, and then you can retire gracefully knowing that you have honoured your obligations to us boomers.

Small price to pay. After all, I paid for your education. Do you think I got good value for money?

System

Increasingly people won't have a single "retirement age". Different pensions and income streams cut in at different ages, and people will have a fluid mixture of pensions and part-time work, paid and voluntary.

chucknorris

grizzly1911 wrote: »

Not everyone has or relies solely on company pensions, if at all.

I could take the company pension now (with an actuarial adjustment) but I will wait until 66 to draw it (I might even consider deferring). But we don't need the pension to retire, so I will probably retire when my wife decides to, because we would then be free to spend the winters in Southern Spain and/or the Algarve. That could be as little as under 3 years from now, when I'm 58 years old.

Loughton_Monkey

MrRee wrote: »

Because few people will be retired fully and collecting a Company Pension at 49 or younger ...... the actuarial reduction will see to that (leaving a 65 age company Pension at 49 would mean the reduction in ones pension would be 80%!) - so, a possible Pension of say £30,000 would be paying out just £6000 a year - not possible to live on that I would suggest?

The last thing to do is take actuarial reductions on FS schemes.

Early retirement is little to do with pensions. OK, you need pensions, but it's a simple matter of calculating the overall assets required, and the cash flow. You should always have other more flexible assets that you can 'fit around' pension income. That way, your annual spending (which is the only thing that matters), index linked, can be maintained.

Retiring at 56, my strategy was quite clear:

Phase 1, chrystalise a small pension pot so as to release an annual income which [together with taxable savings interest] kept me just under the tax bracket. Otherwise, live off capital. Continue paying into private pension up to the £3,600 allowable. Continue bunging capital into ISA wrapper for tax avoidance.

Phase 2, take the biggest FS payment, RPI linked, at NRD age 60. This reduces the amount of capital used significantly.

Phase 3, take another small FS scheme, RPI linked, at its NRD of 62. Reduce capital spending even further.

Phase 4, take state pension at 65, bringing capital requirement even lower. Continue paying £3,600 into pension for tax relief purposes.

Phase 5, at around age 70, plonk remaining private pension into drawdown, even further reducing the amount by which capital is dwindling.

Phase 6, wait another 5 to 10 years and watch capital dwindle to lowish levels, but downsize to release around 50% of house value in cash.

Phase 7, if required (unlikely) take out lifetime mortgage on smaller house and use 'drawdown' facility on, say, 45% of its value to continue lifestyle.

This strategy has so far (touch wood) worked to perfection. Swings and roundabouts have operated but I have enjoyed an RPI linked spending budget - meeting all my lavish needs - and have even managed to 'salt away' an extra 6 figure sum for any future emergencies or 'recession'. This has come from overachievement of investment income plus savings on spending over the last 8 years.

I had just one 'anomaly' compared to most people. This was that my last 6 years of [high earning] work was abroad, at generally lower tax than UK. Had I earned similar in UK, I would have thrown much more into pension at higher rate relief - with a consequence that I would be paying 40% tax now. In the event, I was able to invest it in cash - boosting capital - and keeping me just under 40% tax now.

Tancred

No chance for me to retire before 64 at the very earliest. Mortgage won't be paid until I'm 64 and even then I can't see myself affording retirement. It will probably be 67.

Tancred

chucknorris wrote: »

But there isn't any law that dictates that you need to be in receipt of a pension in order to retire. I originally retired at 42 (on more than 30k) but decided to go back to work aged 52 to try something that I hadn't done before. I don't actually need the salary, but obviously it is better to have than not have it.

Yes, it depends on your circumstances. I know a guy who stands to inherit £1M as an only child, but I'm assuming that the person concerned doesn't have such circumstances.

chucknorris

Loughton_Monkey wrote: »

Continue paying into private pension up to the £3,600 allowable.

I've only recently become aware of this £3,600, I haven't read much about it, if it isn't 'earnings' can you still claim pension tax relief (at 40%)?


EDIT: Just found out that you do get tax relief at both 20% and 40%:
http://www.hmrc.gov.uk/pensionschemes/relief-source.htm

AndyGuil

I'm aiming for a £1m pension pot. I don't think it is an unreasonable target.

Tancred

AndyGuil wrote: »

I'm aiming for a £1m pension pot. I don't think it is an unreasonable target.

If you can afford it, fine - you are lucky to be able to do this. But to get £36k a year you would need to wait until you are in your 60s even with a £1M fund.

marathonic

Tancred wrote: »

If you can afford it, fine - you are lucky to be able to do this. But to get £36k a year you would need to wait until you are in your 60s even with a £1M fund.

That depends on how you use the pot on retirement.

According to http://www.firecalc.com/, a tool based on US markets I admit, a £1M fund had a 98.9% chance of success in providing a £36k income, rising at 3% p/a, for 50 years during many of the back-tested cycles (and that's through world wars, the great depression and the current crisis).

This is based on a 75% equity, 25% fixed income portfolio.

It should be relatively easy to achieve £36k primarily from dividends in a portfolio of equities, with the small remaining income being taken from capital.