Seen an FA finally! This is the plan to retire early....anyone any opinions?

FIRSTTIMER

Yes, there will be a 7 year gap which he reckons I!!!8217;ll be able to buy additional pension and pay for in a lump sum (the limit keeps increasing yearly) so it!!!8217;s full to the max before I retire.

crv1963

FIRSTTIMER wrote: »

Well I do like a balanced response! Thank You.

Can someone explain to me where the cash will come from to top up my employer pension at 58 when I have a NPA of 65 with this and would mean I have 7 years underfunding that I could pay for in a lump sum before ceasing employment.

I am non the wiser if all I have is a SIPP, a LISA and 2 defined benefit schemes. I cannot recycle pension fund lump sums - it!!!8217;s illegal and taxable. Where is flexible cash if needed at 56/57 to finalise me departing employment at 58.

I think what other posters are saying is you need a plan, how much income do you need? In todays money as hopefully it will grow at or a greater rate than inflation. Once you have a target income, how will you meet that? DB+SIPP+SP and when will they all start? Then what other pots of money can you create to fill gaps- ISA, LISA etc. Once you have a target income then work back to when you can go.


EG: Mr X has a retirement income need of £20k pa. He's 39 year old wants to retire at 55- has DB of 10k at 60, 200k in a SIPP, 50k ISA, will get full SP at 68. So at 68 he has 10k+8.5k+4.5k(SIPP Drawdown at 3% after TFLS)= 23k pa.


Mr X then works backwards at 60 he'd have 10k+4.5k= 5.5k shortfall on his target but he can draw that from his ISA without running out of money.


Mr X then works out to go at 55 he needs to save enough to fund 15.5k pa as he can access his SIPP then. So Mr X reads threads, identifies he can do several things, ask questions and save across various tax wrappers as they are not mutually exclusive, he opens a LISA ties money up for his 60-68 pot, gets topped up by the taxpayer and frees him to use the ISA to part fund the 55-60years. Then he thinks if I get another 100k in the SIPP there's another 3k pa and if I put a bit more into the ISA I can access it 55-60.


Mr X can do a variety of things, he can run the SIPP down faster by taking more in his early retirement as long he has 1.5k from it post 68. He has options because he's saved across different products and wrappers, been diverse and spread risk.


Mr X saves well and when he has a heart attack at 52 he decides you know what I've lots of pots of money in different stashes and if I juggle a bit, eat healthy, exercise and so I'm calling this work thing a day, I'm off to the beach! All because his goal at 39 changed because life threw him a curved ball and he had options he'd created.


Sorry if the above sounds patronising, is not intended to be but is the easiest way I can put my point across. Don't get fixated on one or two savings vehicles, have a target and a rough date, ok 58 now but if like me you do have a heart attack out of the blue in your early 50s you need choices.

FIRSTTIMER

Thanks for This. Totally Agree.

Paul_Herring

AnotherJoe wrote: »

I had a realisation that I want to retire at the earliest age possible

Then start reading Mr Money Mustache, .....

The problem, it appears, is that they don't actually want to retire at what most people here would consider 'early,' and get all worked up when people make suggestions based on that sentence you quoted.

kidmugsy

FIRSTTIMER wrote: »

Mathematically

.......

Option 2 will always produce a better outcome.

Codswallop. "Mathematically" indeed: where's your maths?

Paul_Herring

kidmugsy wrote: »

Codswallop. "Mathematically" indeed: where's your maths?

I sense a presumption that investing money in an LISA is somehow different, and magical, to investing in the same things in a regular ISA or a pension...

GenghisKhan

AnotherJoe wrote: »

Then start reading Mr Money Mustache, The Escape Artist, and other "FIRE" blogs because I dont think that 58 qualifies as "the earliest age possible" and you could do much better.

But you'll need more radical reengineering than just investing more.

I agree. Like the OP I started on my journey to early retirement at age 35. I became financially independent and could have taken early retirement at age 43. I chose to work on a little longer but am now in my work resignation notice period and will retire to the Med just after my 46th birthday. My journey was half of that of the OP but interestingly when I started out I thought similar timescales would be needed - that was the in the days before the FIRE blogs and before I knew what I was talking about though...

OP, to retire at "the earliest age possible" you need to think about a number of things differently and investments are only one of them. Some other areas:
- Don't underestimate the psychological elements including starting, determination, never becoming a victim, being afraid of mistakes, the power of AND, tracking progress, knowing when you have enough and the two in hindsight I know I struggled with - institutionalisation and fear.
- Earning more while holding spending is going to accelerate your journey significantly.
- Spending less by focusing on quality of life and some other tools will also make a big difference as that's not taxed. Earning more - spending less = savings. Savings are critical because compound interest won't get much of a chance to do its thing given the short number of years one has if they try and get to retirement quickly. To put that comment into perspective 58% of my wealth actually came from savings.
- Investing right is important (which you've focused on) but don't forget about expenses and taxes. 42% of my wealth has come from investing returns.

Given I was reasonably successful at it having gone from zero to ability to retire in 8 years I actually wrote a book on the topic - "From zero to financial independence in less 10 years - Tools and techniques to escape the rat race quickly". It actually ended up being pretty short in length as there aren't that many things in hindsight I needed to know but it is significantly more than investments.

I wish you good luck with it. As somebody who is at the end of the accrual phase of wealth building and so now gets to look in the rear vision mirror it was totally worth it and I'd do the same again in a heart beat.

GenghisKhan

FIRSTTIMER wrote: »

I've made my point about 58, I like working, I don't want to stop at 40, 45, 50, 55. 58 is just fine. Why do I have to justify 'earliest age possible' or do I need to put earliest age possible based on me for me in my life, before everyone jumps in with their keyboards and says you could actually retire at 45, 50 or even 36. I am not bothered about when I can retire in other peoples opinion.


I WANT TO RETIRE WHEN I WANT WHICH IS WHEN PENSIONS INVESTED IN BECOME AVAILABLE TO ME.

Just because you can retire doesn't mean you have to. That period is called financial independence and in some circles is called FU money.

At age 34 I also enjoyed my work and at age 35 I had an epiphany that I had to do something different. At age 45 I don't like my work so much and I know it's time to try something else.

atush

I became financially independent and could have taken early retirement at age 43. I chose to work on a little longer but am now in my work resignation notice period and will retire to the Med just after my 46th birthday.

Have you budgeted for post brexit complications? Such as having to pay for private health care etc?

Oliver1191

I'm a teacher on a similar income and goal, though i want to gain financial independance asap.

I'm 35 and once the mortgage is cleared would need 1k income a month in real terms to cover my living expenses (and have monthly a few hundred quid wiggle room). My teachers pension is worth apr 9400 and i have a lgps at apr 400 a year. So, in the guaranteed income sense, i'm well under way to having financial independence from 68.

Like you, i have a sipp, and contribute a small amount each month.

I have a lisa and would strongly suggest that you have one too. There are several distinct adavantages:

1. You can take everything out tax free at 60 (you face income tax when withdrawing from sipp).

2. Hargreaves lansdown have just pointed out in one of their articles that should you withdraw from a lisa early due to unforseen circumstances, yes you would be fined 25% but this would be approximately equal to the original 25% bonus.

3. It gives you a range of options in the future. No one on here knows what will happen, but it seems to me having a range of options will give you flexibility. I can access my isa whenever a want (i can use the income and growth to fund my lisa and sipp too). I can access my sipp from 55 or if it does change 58. I can access my teachers pension from 55, though it would be actuarily adjusted if i took it this early. I can take my lgps from 60. This gives a lot of flexibility - i might want to work part time or do a much easier job when i'm older.

4. At 60, you can take all your money in a lisa and put it in your sipp (thus gaining an additional 20%) if you want to. Between 50 and 60, any money you don't pay into a lisa you pay into a sipp.

I'm targeting most of my investments in my isa for now, but i am conscious that in doing so i am neglecting my lisa.

I hope that helps.