Plugging the gaps in early retirement

enthusiasticsaver

I am heavily into retirement planning at the moment as we are aiming for October 2018 when my husband is 60. As I only work part time I may continue until 60 in February 2020 as I only work 3 days a week and can do 1 of those at home and my pension is a lot less than my husband's and it is a lovely job and very flexible.


My question is how are people who are retiring planning to fill the gap between retirement and collecting state pension and what proportion of total retirement income does your state pension cover?


We do not collect our state pensions until we are 66 so have 6-7 years but my husband's private pension is on target to provide 65% of his income at 60 so he will be fine and will have his lump sum to cover the gap. My pension however is a lot less due to part time working leading to less career opportunities over my working life. I however have saved significantly more than my husband in cash isas, current accounts, national savings and stocks and shares. I collect 2 private pensions in 2020 - 1 a gmp pension from Barclays and a final salary state pension which I am still paying into.


We plan to use my husbands and my company pensions first but if we end up having to dip into cash and investments which should we withdraw from first? Presumably the cash accounts - ie current accounts, national savings and cash isas or is it better to sell the investments bit by bit or change them to income funds?


We won't need to do this hopefully at all but we like to help our daughters as my mum did with us and we plan lots of big trips in our early 60s. By our 70s we may look into selling my share of a 2nd home (£80k value now) or downsizing from our 4 bed detached home although this would be the last thing we want to do.


As an interesting aside I wondered what proportion of retirement income people are counting on the state for when the state pension eventually kicks in? OH state pension will be about 20% of his total income in retirement (lucky thing although he promises me he won't let me starve):rotfl: and my state pension will make up about 40% of my pension ignoring investments as at the moment they are in Acc funds so not sure how much income they will provide when the time comes.

kidmugsy

enthusiasticsaver wrote: »

we are aiming for October 2018 ... I only work part time I may continue until 60 in February 2020

We do not collect our state pensions until we are 66 ... I collect 2 private pensions in 2020 - 1 a gmp pension from Barclays and a final salary state pension which I am still paying into.

Is there a realistic chance that you will have income below the Personal Allowance (for income tax) during the next few years? If so, consider paying your earnings (less current pension contributions) into a personal pension of some sort. Then you will be able to draw the usual 25% tax-free, plus enough extra to fully use your Personal Allowance.

You should also be looking to ensure that your stocks and shares are tax-sheltered, e.g. in ISAs or pensions.

Depending on your other income, you could work out whether you are going to gain from the new £5000p.a. (2015-16) 0% tax band on interest on savings for those with low income. The government has started running adverts in the papers about it.

atush

i agree, I would look to fill the gap with personal pension savings.

AS these will boost your pot value by tax relief and you can use them when you are no longer working and take the income tax free under your PA.

You can put in as much as you earn this year, less any other pension contribs. Using savings or cashing investments to do so if you like.