Redundancy at 52, retire now?

kidmugsy

HOLD ON! Dolt that I am I forgot to ask how your house will be looked after with you swanning around the Continent in your Tesla motorhome. Naturally you will have taken in a lodger. That gives you up to £7,500 tax-free, courtesy of the Rent a Room allowance. Where have we got to now?

£29k + £7.5k = £36.5k.

jamesd

Ceme3000 wrote: »

It's not wise! I know I have taken a gamble so far with equities ... A thought though! The idea of de-risking closer to retirement or "lifestyling"- was that approach not aimed at a time when you had to buy an annuity? Surely at 52 with potentially 30+ years exposure to the stock market through draw down, can you not take a more adventurous approach?

Safe withdrawal rate research in the US has shown that the way Guyton-Klinger handles the mixture is good, with not too far behind being a rising equity glidepath, analysed in Should Equity Exposure Decrease In Retirement, Or Is A Rising Equity Glidepath Actually Better?

Part of the reason that Guyton-Klinger does so well is that its withdrawing rules effectively create a rising equity glidepath, but with additional techniques included if you live through bad investing times.

It's also worth looking at Guyton's sequence of return risk taming approach. At current equity cyclically adjusted price/earnings ratios that suggests reduced equity proportions for the moment. It's why I suggest it in the first post of Drawdown: safe withdrawal rates.

However these splits relate to your whole portfolio and for you that currently includes the BTL so you might already have equities at an appropriate level.

So far as bonds go, other research showed that in a low interest, low inflation environment using Treasury bills (one year fixed term) beat Treasury notes (usual terms) because the interest rate difference on the notes wasn't high enough to compensate for the capital risk from rising interest rates. To do the same here you'd use cash, money market funds or maybe defensive bond funds with low average maturity.

jamesd

Triumph13 wrote: »

It's only worth buying an extra 5 years not 6. Each year is worth 1/35 of the total, so £4.70 a week, and costs about £750 to buy so a fantastic bargain. 5 years gets you so close to the maximum that the sixth year would only get you an extra 34p a week - so that one's not such a good deal!

For comparison at current rates deferring for a year would cost 52 * 164.01 (assuming the 34p not bought) = 8530.08 to get a 5.8% increase of 494.74. 494.74 / 8530.08 = that 5.8p/pound spent.

While 34p / say 750 * 52 weeks = 23.40 pounds a year per pound spent.

Since you can defer for part of a year that would be the better buy.

Not perfectly comparable because the 23.40 benefits from the triple lock while the 43.50 from spending the same on deferring doesn't.

jamesd

Ceme3000 wrote: »

What strategy would you use to get it all out tax free?

kidmugsy explained the basic approach.

You have so much to invest outside a tax wrapper already that I'm not sure that you'll ever be able to get it all into ISAs. Even bed and breakfasting into almost identical funds to use your CGT allowance every year you may struggle to avoid accumulating a substantial CGT liability.

On the other hand, the CGT implies taking a lot of capital for income if you take the capital instead of bed and breakfasting. So you might accumulate lots of potential CGT liability but never have to actually pay any CGT.

Bed and breakfasting into almost identical funds means say selling one brand of tracker and buying another brand which tracks the same thing. Or swapping from income to accumulation units of the same fund.

If you want to avoid tax later, with the pensions paying out, look into VCTs.

kidmugsy

jamesd wrote: »

Or swapping from income to accumulation units of the same fund.

Personally I'd avoid that (except inside an ISA or pension) because I'd hate to have to work out the tax implications.

jamesd wrote: »

You have so much to invest outside a tax wrapper already that I'm not sure that you'll ever be able to get it all into ISAs.

Aha. Let's consider the wall of money arriving from the BTL sale and the tax-free redundancy money. I suggest three destinations. (i) The aforesaid motorhome. (ii) A heap of cash e.g. £50k in Premium Bonds at ns&i, plus the best instant access cash interest rates you can find, plus (say) a 90-day notice account, plus (say) 1, 2, and 3 year term accounts to see you through to 55. (iii) Gold sovereigns. A wonderful diversification with no CGT liability. You'd store them presumably at some conveniently located safety deposit or, if you lack one perhaps at the Royal Mint, who will also obligingly sell them to you. There are other firms that will sell (and store) at keener prices but I admit that I fancy the idea of having my Jimmy O'Gobblins guarded by the SAS or whoever it is.

Triumph13

Ceme3000 wrote: »

What strategy would you use to get it all out tax free?

Kidmugsy and JamesD have already given you lots of pointers, but it should be pretty easy as everything in your current work DC can just be left to grow until 65 then taken out as TFLS leveraging the DB scheme. That just leaves your SIPP to get out and if that's at say £80k @ 55 then £20k of that is TFLS leaving you £60k to get out over the next 10 years.
Once the house is sold you should have about £310K outside pensions and ISAs, but filling your ISA allowance each year and taking living expenses from it should have that down below £200k by the time you start drawing pension. If you keep using those unprotected funds for your living expenses and stuffing your ISA allowance then the taxable income from unprotected funds will continue to fall away rapidly allowing you to take increasing amounts from the SIPP each year until it's all gone - at which point you start taking money back out of the ISAs until DB2 kicks in and you get the TFLS on that (from works DC).

jamesd

kidmugsy wrote: »

Personally I'd avoid that (except inside an ISA or pension) because I'd hate to have to work out the tax implications.

Wouldn't make sense in those because there's no increasing CGT liability to manage by trying to use the CGT allowance each year.

Income units definitely make tax accounting easier if they are going to be outside a pension or ISA.