Have we got our sums right?? Appraise our plan.

DairyQueen

Referring back to your original post (and apologies if you have provided any of the following info upthread):

You need '12-15k' income in 'full retirement'. Could you define 'full retirement'. At what date will this be for you and OH? 2039?

You are currently in late 40s/early 50s? but OH won't receive his DBs until 2031? Is that £12k DB a projection at his scheme/s NRD?

Have you projected your income requirement including inflation? Just asking as in 10/20 years your income requirement will be substantially higher.

Recapping your current pot:
Outside pensions wrapper = £226k
Inside pensions wrapper = 237k
Plus OH's DBs of £12k
Plus SPs, and assuming that you both qualify for the full monty.

So...
- Inflation-linking of SPs will guarantee that your income requirement is covered by the time you are both in receipt.
- OH's DB, plus his SP, may not meet your income requirement between his NRD/SPa and your SPa. In 20+ years that £12kp.a. could easily be halved (or more) in real terms. Also, watch out for actuarial reductions should inflation be relatively benign. My OH's deferred DB pension has been reduced by 10% since 2015.
- A drawdown of circa £1300p.m. on a £130k pot = a drawdown rate of 12% so will last approx 8.33 years assuming that income inflation matches investment growth net of charges. Chances of you not needing to suspend drawdown for a period (perhaps 2+ years) is unlikely. Your income requirement will increase with inflation so the £75k cash buffer may not be sufficient to last 5 years. However, it would likely last 3+.
- Why would you continue to drawdown in the event of a correction, and reinvest in ISAs, whilst depleting your cash buffer? The whole point of a cash buffer is to avoid selling when the markets are down.
- What happens if you survive OH (likely if you are female and several years younger)? Looks like your SP plus 50% widows on his DB would not meet your future income requirement. That means you will need to have a reasonable chunk of your collective pot available for drawdown in later life. OH, on the other hand, may have sufficient guaranteed income to cover expenses.

I think your strategy is missing the impact of inflation on your income. For example, you say that you will have £2250p.m. income in 2031. At 3% inflation your income requirement will then be between 17.5k and 22k. The SP percentage of OH's projected, guaranteed income will be index-linked over that 13 years but I assume the DB element will be £1000p.m.? If that's the case then that £1250p.m. figure for your OH (inc SP) looks low.

I think what you are planning is do-able if inflation and the markets work in your favour but perhaps do two things:

1) Stress test your figures assuming a worst case scenario (sequence of returns risk goes against you plus inflation at, say, increasing to 5+%), I have the impression (possibly erroneously) that you are looking optimistically at investment returns but marginalising the impact of inflation on your expenses.
2) Have a Plan B - i.e. one/both of you working full/part time until SP if necessary.

You are planning for a retirement that could last 40+ years and that leaves you more vulnerable to the whims of government policy, demographic changes and market volatility. Don't under-estimate the cost of living to a ripe (but usually not healthy) old age. Good care and domestic support is expensive and options are already limited for those who can't self-fund. It's likely that one of you will have an expensive old age (probably you)

Just my two penn'eth.

Sea_Shell

WOW, thanks for such a detailed reply...i'll try by best to answer each point (my bits in red)


You need '12-15k' income in 'full retirement'. Could you define 'full retirement'. At what date will this be for you and OH? 2039?Full Retirement is once I give up work, DH has already finished, this is most likely to be next Spring

You are currently in late 40s/early 50s? but OH won't receive his DBs until 2031? Is that £12k DB a projection at his scheme/s NRD?That £12k is based on todays prices and is inflation protected under the schemes (2 pensions)

Have you projected your income requirement including inflation? Just asking as in 10/20 years your income requirement will be substantially higher.We are maybe pinning our hopes a little on growth balancing out inflation in the long term

Recapping your current pot:
Outside pensions wrapper = £226k
Inside pensions wrapper = 237k
Plus OH's DBs of £12k In todays prices
Plus SPs, and assuming that you both qualify for the full monty.

So...
- Inflation-linking of SPs will guarantee that your income requirement is covered by the time you are both in receipt.
- OH's DB, plus his SP, may not meet your income requirement between his NRD/SPa and your SPa. In 20+ years that £12kp.a. could easily be halved (or more) in real terms. Also, watch out for actuarial reductions should inflation be relatively benign. My OH's deferred DB pension has been reduced by 10% since 2015.We'll have to spend some cash then
- A drawdown of circa £1300p.m. on a £130k pot = a drawdown rate of 12% so will last approx 8.33 years assuming that income inflation matches investment growth net of charges. Chances of you not needing to suspend drawdown for a period (perhaps 2+ years) is unlikely. Your income requirement will increase with inflation so the £75k cash buffer may not be sufficient to last 5 years. However, it would likely last 3+.How many people have the luxury of a 3 year cash buffer at all
- Why would you continue to drawdown in the event of a correction, and reinvest in ISAs, whilst depleting your cash buffer? The whole point of a cash buffer is to avoid selling when the markets are down.We'd basically be selling low (drawdown), but also buying low in ISA, maybe even into a identical fund...the idea is to keep future income tax bill as low as possible
- What happens if you survive OH (likely if you are female and several years younger)? Looks like your SP plus 50% widows on his DB would not meet your future income requirement. That means you will need to have a reasonable chunk of your collective pot available for drawdown in later life. OH, on the other hand, may have sufficient guaranteed income to cover expenses.Pretty much the whole of my drawdown pot would be moved to ISA and not spent...so our cash/ISA pots could still have over £300k in them to tide me over - I'll have the house too, so could downsize

I think your strategy is missing the impact of inflation on your income. Yes, if inflation rises to 5% and we have negative investment growth of 5% then we'll be up the preverbial creek, beans on toast all round - but hey life is to short to sweat over everything that might happenFor example, you say that you will have £2250p.m. income in 2031. At 3% inflation your income requirement will then be between 17.5k and 22k. The SP percentage of OH's projected, guaranteed income will be index-linked over that 13 years but I assume the DB element will be £1000p.m.? If that's the case then that £1250p.m. figure for your OH (inc SP) looks low.

I think what you are planning is do-able if inflation and the markets work in your favour but perhaps do two things:

1) Stress test your figures assuming a worst case scenario (sequence of returns risk goes against you plus inflation at, say, increasing to 5+%), I have the impression (possibly erroneously) that you are looking optimistically at investment returns but marginalising the impact of inflation on your expenses. Blimey, if we did that then we'd never retire, and where's the fun in that!!! - if inflation ran at 5% with 0 Growth, then we'd run out of money in 21 years, add in negative growth and we'd be shafted, basically
2) Have a Plan B - i.e. one/both of you working full/part time until SP if necessary.If we found we really were "on our uppers" then we might consider that

You are planning for a retirement that could last 40+ years and that leaves you more vulnerable to the whims of government policy, demographic changes and market volatility. Don't under-estimate the cost of living to a ripe (but usually not healthy) old age. Good care and domestic support is expensive and options are already limited for those who can't self-fund. It's likely that one of you will have an expensive old age (probably you)

We realise that we have more than the general population could ever dream of, so i'm not going to worry unduly about the wheels falling off. I'd rather start from here, with a joint net worth of £850k+, than have to work to 68, whilst still having to pay rent, with only the State pension to look forward to.

Just my two penn'eth.

DairyQueen

Sea_Shell wrote: »

...than have to work to 68, whilst still having to pay rent, with only the State pension to look forward to.

I'm an early riser too

Yep, everyones' circumstances are different and we too are aiming to meet our specific needs and goals rather than amassing dosh for its own sake. Having said that, our 50s have been an expensive decade courtesy of unforeseen events. I've had to throw away the retirement script and ad-lib for the last few years so am now wary about the next unexpected call on our cash.

If your OH's DB is £12k (index-linked) at today's value then you have your income covered from his SP and your SP will be bunce. Nice problem to have.

That just leaves bridging the gap. The amount of cash you hold as insurance against a market crash (and unforeseen events - see above) is a product of attitude to risk. If 3 years is good for you then you are good to go.

Now understand your point re: drawdown up to your personal allowances and transfer to ISA.

Happy retirement:beer:

Suffolk_lass

Ooh Sea Shell, I have only just found your thread and read through (and subscribed). Y

our planning is much more thorough than mine. I am working on the removal of debt freeing up extra cash to pay more earlier and as you know, I stop in January.

With the drop in tax, removal of NI contributions, commuting costs, work lunches (packed) and work clothes I am virtually back to what my pension monthly total will be.

We are considering what happens when DH stops re cars (maybe change his 1300cc petrol commuting car for a low emissions £0 tax electric or hybrid as a run-around, that will drop insurance too. Hopefully no more accidents (he has written off two cars in 15 years, both his "fault" - err I drive when we are together).

Anyway, very interested in following your updates

Sea_Shell

Ooh, a subscriber!! Welcome.

DT2001

You seem to have thought everything through and are basing your full retirement timing on sound assumptions. I have done a cash-flow forecast for the next 15 years to OH’s SPA. It is not as detailed as yours but I’m happy to base my decisions on it, so I think you’re very well prepared for any unexpected events.

Having read most of the posts on this thread I wondered if your concern was getting from now to your SPA when your expected ongoing expenditure will be covered by your 2 SP alone. Do your OHs DB Pensions give you the option to draw early or transfer. I was fortunate to have the option of taking mine between 50 and 60. The reduced benefit at 50 was about 60% of the figure at NRD, 60. If your OH had that option it would cover over 50% of your income requirement. The reduced WP would be offset by the, hopefully, much larger and more flexible ISA pot.
Is there a GMP element in the DB pension as that might affect ability to take early.

atush

Sea_Shell wrote: »

We've always been like this. We used to watch Alvin when he had his show, and I love the Eat well for less and Shop well for less type programmes. We throw our head in our hands at some of the spending on there!!!! OMG!!!

You'd do well to spot a branded product in our house, or any items of designer wear, handbags or shoes. My laptop is 6 years old (and perfectly adequate for me) and we have no "tech-gadgets".

I agree I am shocked at what some on that program spend, esp those who are just midde earners. We are higher earners and spend less than most on groceries re that program. But e have 2 at home still, who will mosve out int he next year so not really sure what our spend will be like then.

DairyQueen

atush wrote: »

But e have 2 at home still, who will mosve out int he next year so not really sure what our spend will be like then.

Vastly reduced! (don't forget to change the locks ).

Sea_Shell

On that note, we've not had to make any "withdrawals" from the Bank of Mum & Dad.....Yet!!!!

gallygirl

DairyQueen wrote: »

Vastly reduced! (don't forget to change the locks ).

Or move and forget to send a forwarding address :rotfl:. Or move overseas, which was my preferred option . The 'good biscuits' have never lasted so long (as long as OH doesn't find out where they are )