Tax Credits

lisyloo

once the pension pot reaches £400k

Does the Mrs have a pension pot?
Have you researched how much that would yield?

Ballpark I work on 4% for drawdown, which would be £16K which isn't loads for 2 people, but of course it depends on what she has as well.

michaels

lisyloo wrote: »

Does the Mrs have a pension pot?
Have you researched how much that would yield?

Ballpark I work on 4% for drawdown, which would be £16K which isn't loads for 2 people, but of course it depends on what she has as well.

What age would you start the 4% at or would you hope that would last for ever?

I hope the pension pot is slightly higher than MFW but not enough to make up for your final salary. I am paye so no playing about with dividends or capital allowances for me.

Retirement age, no idea but I would certainly choose more years in retirement over higher spending requirement when retired. I also have kids hopefuly going to uni to factor in. DW doesn't earn except interest and sometimes rent so we just use her minimum pension entitlement but this may need revisiting if it became a question of that or me using my higher rate income.

Can't be bothere to google, is the new state pension individual or do couples get less per head?

lisyloo

As a rough ball park 4% ballpark is the sort of figure you could draw down and hope to keep your capital intact.
Obviously you'd have to keep that under review but it gives us a ballpark of £16k per annum for a couple.

I'm not saying you can't live off that but it's not enough to have several expensive holidays, weekends away etc. So it all depends on how you want to live.

Personally I wouldn't want more years living a frugal existence. I'd rather work more years and have nice holidays, spa breaks, go diving etc. But I wouldn't criticise anyone else's choices - it's just a question of what you want.

I was just pointing out that £400k sounds like a lot, but in pension terms it really isn't (for a couple).

michaels

But isn't that 16k taxed plus 2x155 per week state pension?

lisyloo

£10,600 is the personal allowance, but yes pension income is subject to income tax.

If mfw wants to retire early then there will be no state pension at that time because they won't get it til 67.
you are making a big assumption about state pension in 20 years time.

We do often have to make assumptions when planning, but it should be recognised as that.
I personally think it will be very difficult to continue to fund at that level so I prefer to lower my expectations wrt state pension.

michaels

lisyloo wrote: »

£10,600 is the personal allowance, but yes pension income is subject to income tax.

If mfw wants to retire early then there will be no state pension at that time because they won't get it til 67.
you are making a big assumption about state pension in 20 years time.

We do often have to make assumptions when planning, but it should be recognised as that.
I personally think it will be very difficult to continue to fund at that level so I prefer to lower my expectations wrt state pension.

I've thanked you although it is not really what I want to think about Shame really cos I am thinking in terms of that size of pension pot and whilst 16k would obviously be pretty tight 36k for a couple post mortgage and kids at home doesn't sound too bad at all (all in 2015 £s)

Thrugelmir

MFW_ASAP wrote: »

I suspect that, as usual, a lot of the 'moral highground' talk is coming from a background of envy at your £60k salary,

For many joint households that's not a high income.

If you intend going into drawdown, £400k isn't a huge sum. Much of the return comes from income reinvestment. Once you start drawing growth may not give you an inflation linking return.

lisyloo

Yes, massive difference between £16k and £36k. There is a point where all your bills are covered and after that point everything is disposable.
So let's say your living costs are £16k, then £18k is 100% better than £17k.

My point essentially was that £400k is not a lot for a couple given it might have to last you til 112 years old. of course if spouse has a pension too then it changes things.

michaels

Thrugelmir wrote: »

For many joint households that's not a high income.

If you intend going into drawdown, £400k isn't a huge sum. Much of the return comes from income reinvestment. Once you start drawing growth may not give you an inflation linking return.

According to link below 60k is surprisingly 93rd centile for incomes, you wouldn't have thought that if you looked at dd's school friends at state school in SE where I auspect it is far below the median!

lisyloo

you wouldn't have thought that if you looked at dd's school friends at state school in SE

Just goes to demonstrate how people's limited social circles (compared to the entire nation) can be entirely unrepresentative.
If you're well-off then you're likely to live in a well-off area and mix with well-off like minded people.