3,4 or 5 year journey to financial freedom

robin61

frugal90 wrote: »

Jan

anyone else stopping the rat race in summer 2018?

frugal

Maybe. I've just turned 57 which I said was my ideal age for retiring.
At the moment working isn't too pressurised and is bearable. Although I'm finding I have less enthusiasm and am less tolerant of the corporate BS nowadays. As long as it's ticking along ok I am planning to stay until there is a voluntary redundancy deal. I have no control over this there may be one this year and there may not be. If there is something offered this year I will try to get it.

However if things get more stressful I've got a plan B where I have enough in my DC scheme to live off untill i take my DB scheme at 60.

2018 might be an interesting year. I'm hoping I don't need to buy a new diary for work in 2019.

frugal90

April 2018 update, still planning to stop this summer. 4 pay cheques left!

My ISA is now £120K income generating ITs
Spouse ISA £127K income generating ITs

total £247K

dropped back a bit since high point in Jan

My SIPP (Cash) now up to 80 K, will take 25% tax free then drawdown the rest monthly once that has run out. Aiming for April 2019 then I will be drawing 60K over 36 months until DB kicks in. 20K per year, tax at 20% -assuming tax free £12k from April 19 means 1.6K tax so £18.4K per year or £1533 per month. We are planning to use cash to allow us a budget of £2.5K per month. Actually don't think we'll use that, our tracking tells us it will be more like £2K- we shall see!

My wife's SIPP in IT's £85.2K to be drawn over 5 years, starting from summer 2023- still invested.


Cash holding - atom/NSI/bank 123 £92500- this will be up to £100K by FIRE day.

Also have renewable heat incentive payment every three months of £478 until Dec 2021 and a feed in tarrif for solar PV worth about £1K per year for another 17 years- useful income and pays for fuel and elec etc.
Didn#t know if this was going to be a good investment, but it has proved to be great.

Retirement date June 30th 2018 -

Teachers pension kicks in May 2022 - £20.5 k per year plus £61.5 K lump

Spouse Pension Kick in July 2028 - £16.3 K per year plus £45k lump- now going to take the career average bit at 60 instead of leaving it to state pension age.

Total ISAS/SIPP/Cash at the moment= £504 500

State pensions both when we hit 67 at the moment, we plan to buy extra years to get th £8.5K. We'll do that either from ISA income or lump sums when they come in.

Getting excited now, can almost sense the freedom

Will update week before we FIRE not as early as some but finally almost there

any others on the same journey!!

frugal

chiefie

Great position to be in i!!!8217;d say well done and good luck to you.

AnotherJoe

Frugal90, don't forget once you've stopped working to start putting £2880 each into a SIPP for you and wife. That will return £720 each year until pensions kick in and then I think £120.

Actually upon reflection you can start doing that now unless you are already putting the max into your pension, indeed you could put a fair old chunk in this year, yiu have the cash to do it, find out how much you are allowed to and do it since you can effectively get a 20% boost on that as you'll have a few years before you are paying tax, My last year of earning I put my whole salary in.

frugal90

we have tried to build the sipps to cover the gap until db schemes kick in- drawing them down to zero in quite a short period of time.

if I contribute more to the sipps, then I will be paying 20 % tax on the drawdown above the tax threshold, so yes uplift on the way in but taken back on the way out. Where would the benefit be?

maybe there is one that I am missing?

frugal

AnotherJoe

frugal90 wrote: »

we have tried to build the sipps to cover the gap until db schemes kick in- drawing them down to zero in quite a short period of time.

if I contribute more to the sipps, then I will be paying 20 % tax on the drawdown above the tax threshold, so yes uplift on the way in but taken back on the way out. Where would the benefit be?

maybe there is one that I am missing?

frugal

There are two things you are missing I think, the 25% TFLS, and timing.

25% TFLS.
Say you put £16k in from your £100k savings this year whilst you still earn. So, that gets bumped up to £20k. Take out £5k tax free 25%), even if you pay tax (see below) on the £15k @ 20% (£3k) that is a total return of £17k for an outlay of £15k. That is £2k profit zero risk. No-brainer. (this works for the £2880 as well once you are not earning, just much less obviously but still free money).
You'd have to work out what the actual amount is you can put in. Maybe its a bit less, maybe a bit more.

Timing.
Your plan is to "burn down" your SIPPs over 3 years.
However, if you burn down the SIPPs slower, so they are below the tax threshhold, and top up needed money with the cash you have, then for the three years until you start paying tax (when your DB pensions kick in) you avoid paying tax on the money above the tax threshold.

I am in a similar sitation I have 4 years until a DB pension kicks in. During that time i am living on the 25% TFLS plus drawing about £12k (whatever the allowance is each year) out of the SIPP to avoid paying tax on that element of the otherwise taxable SIPP, because once SP and DB are running in 4 years everything i take out of the SIPP will be taxable.

In your case you'd have three years, so thats three years of £12k SIPP and £8k savings, so you could avoid paying tax on the difference between the £20k you planned to drawdown and the annual allowance of £12k or so (keeping the maths simple) , so £8k x 3 = £24k @ 20% = nearly £5k saved.

okydoky

May have been mentioned earlier in the thread but extending the life of your Sipps may make deferring State Pensions quite attractive with the healthy (not as good as before admittedly, but still decent) uplift available?

jamesd

frugal90 wrote: »

if I contribute more to the sipps, then I will be paying 20 % tax on the drawdown above the tax threshold, so yes uplift on the way in but taken back on the way out. Where would the benefit be?

VCT buying is another option. 30% income tax relief in the year of purchase, capped at tax payable that year. Have to hold for five years or repay it.

So why not use your full basic rate band in years one and two, covering the tax with VCT buying, then sell in years six and seven?

Beyond that perhaps plan to use VCT buying for the rest of your life so you never again pay much income tax, just use capital to finance deferring some income for five years?

frugal90

Finally finished, we are now free!
I will post our FIRE numbers in the next few days.

I have to say that after so many years at the chalkface, it feels great!

Yippeeeeeeee



Frugal

robin61

Nice to see you've reached the finish line.