Can I really retire...

WirelessWizard

Dear All,

I’ve been a reader of this forum for some time but haven’t posted until now.

I’m 50 and my wife will also be 50 in Nov 2019, both healthy and active. My wife has already retired , she left her job 18 months ago and is enjoying the freedom that this has given her. I’m still working full-time but I’m finding it increasingly difficult to maintain my motivation levels as I did when I was younger (stress, business travel, politics etc). We’ve both saved diligently through our working lives and now find ourselves in a very fortunate position in that I think I could consider joining her at some point. I think I’ve analyzed the financials to the point where I think I will be able to pull the trigger on early retirement, but I think I’m scared of giving up on the regular income. It feels like a big step even though I've been planning for this since I was in my early 20's. I’d really appreciate any advice/opinion/thoughts on whether I can *really* retire early.

We have two sons (aged 24 and 22), one working and the other in his final year of Uni.

Desired Income in retirement: £48k net

Property
House (mortgage free): £800k (plan to downsize between 60-65)
BTL flat (mortgage free): £15k pa income gross

Savings
Cash/SS ISA’s (Combined): £250k
Cash/Bonds etc (Combined): £285k

Pensions
DC (Me): £700k
DB at 65 (Me): £13k pa
DB at 60 (Wife): £7k pa
SP at 67 (Combined): £18k pa

My plan would be use the BTL income plus draw down the ISA’s and Cash first, leave the DC for as long as possible. I will need to keep any eye on LTA as this may come into play quicker than I think. I'm not currently paying into my DC pension due to concerns over LTA but my employer is providing a pension replacement payment of 14% of salary which I'm funnelling into our ISA's.

Does this all sound sensible? I’m considering taking to an IFA to validate our plans and to provide some specific advice, but I’ve never really sought any financial advice before (I probably should have done) so any opinions on the value of doing this now would also be appreciated.

All advice/comments gratefully received.

Thanks for your time.

atush

For starters, have you got up to date pension statements?

Your wife having retired around 46/47 probably doenst have full state pension esp as she was contracted out for a time. She may need to make voluntary contributions as I do.

285K+ of cash looks too toppy. What rate are you getting on the cash parts (and the bonds?)

WirelessWizard

She currently has 32 years of contributions and we're currently making voluntary contributions to get her to 35. I'm already at 35 years of contributions. Neither of us contracted out.

Agree, bonds (2.2%) and cash (1.4%). They are the product of some recent RSU retention bonuses. I need to decide how to invest this for a better return...

cobson

Has your wife got a state pension forecast ? She may not need 35 years to get full SP if she wasn't contracted out.

xylophone

You can each obtain a new state pension statement here

https://www.gov.uk/check-state-pension

ams25

These numbers look very solid to me. Once all pensions are paying you should be around £53k gross and with limited tax of c.£6k depending on how you account for the rental income, very close to to your net income target. So assuming the £15k rental income is ongoing, I calculate you need about £600k to bridge the gaps to 67 when all pensions are on stream. You have £1.2m so a very comfortable buffer to cover any capital items/major expenses, void periods on the rental, help the kids etc etc.

Alternatively, you could take a 3% withdrawal rate from your £1.2m to give you £36k + £15k - again enough. You could of course take more than 3%, but you don't need to. Which ever way you look at I think you have plenty.

On these numbers you can stop working this week if you want. I would.

As it happens, your numbers (assets and required income) are very similar to mine, albeit a slightly different mix. I stopped working about 2 years ago at 52 and the wife (she is younger) plans to stop in a year or so (lower earnings than mine, I count her income as more cash in our numbers). I had the same reservations you are expressing but have absolutely no regrets and I have got used to having no salary coming in. Big difference is my kids are primary school age and yours are both on the verge of being in the workforce and hopefully less of a cost for you.

I am not sure how much you need to consult a financial advisor but why not set a session up and see what they advise and if that sounds like value for money. When i have done so, and explained my plan, they have said pretty much there is not a lot more they would advise that will justify the fees. I think this often an issue with DIYing - you don't know everything but you know enough that the incremental advice from an IFA will not justify the fees. Maybe limited advice on a by the hour fee approach would work for you (and me!).

I certainly understand your reservations, it is a big step.. but your position is strong and you can have confidence in it. You have done the heavy lifting... you can enjoy the benefits now.

Good luck.

WirelessWizard

cobson:
Yes, I've got SP forecasts for the both of us. Her forecast did go up once we'd paid voluntary contributions for year 32. Your question has prompted me to look at this again to make sure that making further voluntary contributions will make a difference. Thanks!

WirelessWizard

Thanks for your response ams25 - much appreciated. It's definitely re-assuring to get a view from someone who speaks from experience. Good to hear you're enjoying your retirement!

fred246

The big question is do you really need £4k a month. I have just retired and my numbers roughly work out at £4k a month till SPA and then £3.2k a month onwards. Average UK life expectancy is 81 so I feel I may be winding down and spending less from 67. I would go now and economise as necessary later but only you can make that decision.

mgdavid

fred246 wrote: »

The big question is do you really need £4k a month. I have just retired and my numbers roughly work out at £4k a month till SPA and then £3.2k a month onwards. Average UK life expectancy is 81 so I feel I may be winding down and spending less from 67. I would go now and economise as necessary later but only you can make that decision.

don't you believe it!
I'm 69 next month, still in good health and active, and am spending more now than when I worked.

fred246

I was working from the Which magazine survey. £39k is a luxurious retirement according to current pensioners.