IFA or Psychologist?

Pat_Fleming

This is a first post but I have been looking & using the site for several years.


As per the title, I don't know whether I need financial advice or mental counselling. Please don't think I'm trying to make light of the matter. I know that I am in a much better position than many (most?) I know that a lot of people would give their right arm to be in my financial situation. But that can't change the way I feel. If I knew that the future was going to be pretty much like the past, then I would have no problems at all. However, (fairly) recent events have led to me taking voluntary redundancy which has also turned into early retirement so things have happened faster than I had planned. The looming prospect of a hard Brexit coupled with the possible fallout from a trade war caused by policies of the Trump presidency leave me thinking that the financial markets may be in for a very hard time very soon.


I'll try to explain my/our current situation(s).


I took the redundancy/retirement option last year at the age of 58 after 40 years of service & paying into a Final Salary pension scheme. The fact that my place of work was closing meant that I could get the pension paid with no penalty for retiring early. My company pension is also currently paying an option which gives me a higher pension now but reduces by about £5k when I reach SP age. The scheme rules are that although there is a CPI rise each year, is is only paid on post 1997 service so about half the pension gets no rises. This year it is paying about £28300 pa which equates to about £2130 a month after tax.


My SP is forecast to be about £130 a week due to opting out of SERPs but I can make that up with voluntary NI contributions, which I will probably do.


I also have a SIPP which I am not yet claiming. This was first started for two reasons, Firstly that I had become a HR taxpayer & it made sense to take advantage of the pension tax rules. Secondly, I intended to use the SIPP to enable me to retire when I choose to without having to take a 5% reduction for each year below the scheme retirement age. The SIPP is standing at about £115k. The actual investments are about £10k in emerging matket funds (India & Asia Pacific) , £15k in actively managed UK & European funds (These & the EM are remnants from a fully actively managed portfolio which just seemed too good to give up) and £90k in trackers (VSL 60 & 80 and L&G Multi-Index 5) I have no idea of when would be the best time to access this money.


I have an equity ISA valued at about £90k split 50/50 between VSL 60 and L&G Multi-Index 5


My wife is older than myself & is already claiming State Pension. However, because she had a sporadic work record, she only has 12 years of NI contributions so her pension is only £140 a month (£1640 a year) This leaves her with plenty of unused income tax allowance so we also have a large cash balance which is mostly in her name as a non taxpayer. The result is that she has close to £200k in “cash-type” investments. These consist of the usual 5% regular savers. NS&I stuff at 2.2% Bonds & cash ISAs with various banks & building societies. I suppose it averages out at about a 2% return. I know a lot of people will tell me that's much to much cash but it helps us sleep at nights.


In addition, she has a SIPP which she is not yet drawing & we still add the £2880 a year for the tax allowance. This has a value of about £24k & has it's investments split about 50/50 between HL multi Manager fund & VSL80.


There's also about £8k in a couple of P2P companies.


Our personal situations as as follows. We have been together for almost 35 years & live in our own mortgage free home. It hasn't recently been valued but I would guess that it's probably worth around £200k. Hopefully no major repairs or other surprises looming, rewired & new roof within the last 5 years.


We have no children or dependants. No need to plan financially beyond our own lifetimes. Both currently in good health.


We run 2 cars which cost about £450 VED & £350 insurance (total, not each) I suppose maybe another £1000 in servicing & maintenance costs. Fuel costs obviously depend on usage but are currently averaging about £100 a month.


Biggest fixed household cost is just over £2k a year on council tax, closely followed by a similar amount for gas, electricity & water.


Groceries & other shopping again vary depending on whims & seasons but are probably around £100 – 150 a week.


We like to have a couple of European holidays a year & maybe the odd weekend away. Looking back at previous costs, this comes to about £5k a year but like everything else, can be more or less.


Having written all this down, in the cold light of day I know that it looks like I've got nothing to worry about. I know I am being paid a pension which is actually higher then the average wage. The problem is that after many years of accumulating & then being “forced” into a situation beyond my control, I can't help it, no matter how good it looks from the outside.


Half of me is thinking that if we don't start getting out & enjoying life a bit more, we'll ending up dying rich & wishing we'd done more. The other half is saying be careful because if it all goes pear-shaped, we could run out of money & spend our last years in poverty. I know that seems like a remote possibility but it's still keeping me awake. I don't even know what I'm expecting in the way of answers. Ridicule at my First World problems, empathy from people in a similar situation or suggestions of what to do & when to do it? I just don't know.


Sorry for such a long first post. I hope some of you have made it to the end without writing me off as an attention seeking drama queen!.
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kidmugsy

Pat_Fleming wrote: »

The looming prospect of a hard Brexit coupled with the possible fallout from a trade war caused by policies of the Trump presidency leave me thinking that the financial markets may be in for a very hard time very soon.

Don't worry about those. The coming hard time is because (i) the last financial crisis was not dealt with intelligently, and (ii) interest rates are rising; money is tightening. This has been approaching since before the Brexit referendum and before Trump's election. Economies and financial systems are full of time-lags.

My rule of thumb is that if you choose to run two cars you are better off than we've ever been, so I'm afraid I'll have to charge for any further musings.

Dazed_and_confused

Was there actually a question?

Drp8713

If the question was should you derisk, I would say yes.

From the sounds of it the DB schemes are enough for you, with a pile of cash as a backup.

I would lose the active funds and trackers and put the SIPP in Personal Assets Trust and ISA in RIT Capital Partners then not worry about them.

ams25

If i have this right, you have safe after tax income (ie pensions) of c.27k and expenses of less than 20k. Great place to be.

You also have over 400k of investments which could easily and conservatively give you around 10k pa (ie withdrawing c.3% pa). Even greater.

Who knows what financial disasters are around the corner (answer: no one) but luckily for you you have enough secure income to ride through pretty much any scenario. Imagine if like some you only had investments to live off. Just make sure your overall equity allocation is in line with your risk appetite...with the amount of cash it probably is..but reduce if not.

Moving from accumulation to deaccumulation is a mental mind f#$& not to be underestimated for hard core savers and frugal minded folk. I am two years in and little by little getting used to it (ie spending more each year). You're absolutely not alone in having this struggle. But the reality is that the time to enjoy the fruits of your hard work is now (and certainly before health is likely to deteriorates in your 70s and your appetite/ability for travel etc will wane) so ease up the purse strings while you have your health and enjoy it. Plan a few more trips. Go long haul. Whatever you both enjoy.

Good luck.

Terry_Towelling

Dazed_and_confused wrote: »

Was there actually a question?

I think there was (in the title) and the answer is 'Psychologist'.

I could go on but, really...

Sorry, OP, that sounds rude but really I'm just incredulous. If I were being unkind I might suggest you have only come on here listing your assets in order to be boastful. Relax, you're on easy street. Enjoy the time you have because you never know when it is going to be snatched away from you.

Marcon

You can't take it with you, so...

jennyjj

Pat_Fleming wrote: »

We have no children or dependants. No need to plan financially beyond our own lifetimes. Both currently in good health.

Hi Pat,
I was drawn to your post because it relates very closely to my situation: A lifetime of building up considerable wealth and living well within your means. You obviously now know that whatever issues the future holds, poverty isn't likely to be one of them.
So, you want to never run out of money, but you don't want to leave it to some peripheral family who will not hesitate to blow it on stuff that you didn't.
It's a toughie, changing mindset so completely. The conundrum is acknowledging your own mortality without knowing how long you have left to spend what you have.

I don't have all the answers, but here's my own personal steps towards tackling the transition....
0. Don't do anything hasty with your money. Maybe best to do your homework before even considering financial advisor who WILL know what HE wants to achieve.
1. Discuss this whole psychological conundrum with the spouse. She too might struggle and you need to be on the same page.
2. Never look at the price of good food. That's just a personal view, but in a restaurant, if the food is great, the price doesn't matter.
3. Never look at the price of comfortable or comforting clothes. Damnit- you won't break the bank buying even an entire new wardrobe.
4. Ditto for furniture and home comforts. This pushes the boat out a bit, but so what. You want a new Central heating system or kitchen, now is the time.
5. Within reason, if you see value in buying yourself a treat, buy it, whether it's a weekend break or a month in Vegas, spend 15 miutes thinking about it and then JFDI.
6. When you come up with idea's 6 to 10, send a Private Message to JennyJJ on MoneySavingExpert :T:beer:

JJ

k6chris

jennyjj wrote: »

Hi Pat,
I was drawn to your post because it relates very closely to my situation: A lifetime of building up considerable wealth and living well within your means. You obviously now know that whatever issues the future holds, poverty isn't likely to be one of them.
So, you want to never run out of money, but you don't want to leave it to some peripheral family who will not hesitate to blow it on stuff that you didn't.
It's a toughie, changing mindset so completely. The conundrum is acknowledging your own mortality without knowing how long you have left to spend what you have.

I don't have all the answers, but here's my own personal steps towards tackling the transition....
0. Don't do anything hasty with your money. Maybe best to do your homework before even considering financial advisor who WILL know what HE wants to achieve.
1. Discuss this whole psychological conundrum with the spouse. She too might struggle and you need to be on the same page.
2. Never look at the price of good food. That's just a personal view, but in a restaurant, if the food is great, the price doesn't matter.
3. Never look at the price of comfortable or comforting clothes. Damnit- you won't break the bank buying even an entire new wardrobe.
4. Ditto for furniture and home comforts. This pushes the boat out a bit, but so what. You want a new Central heating system or kitchen, now is the time.
5. Within reason, if you see value in buying yourself a treat, buy it, whether it's a weekend break or a month in Vegas, spend 15 miutes thinking about it and then JFDI.
6. When you come up with idea's 6 to 10, send a Private Message to JennyJJ on MoneySavingExpert :T:beer:

JJ

Mostly agree but...


0) - Why is the FA a HE??



1) Agree


2) Spend money in propostion to how long you will use something - if food is an experience you will remember for many years, tuck in......if not...Meh.


3) Clothes last a long time - agree!


4) As per point 2 - totally agree


5) JFDI and YOLO are great warning signs you are trying to justify something, and if you need to justify it then why are you doing it in the first place??!


6) - 10) Spend some time working out what actually makes you happy - deep down really happy - then focus on that, rather than the cost of things.


Note to self - read the above, especially 6) - 10).......

bostonerimus

You just need to take a couple of breaths and realize that it takes a few months to adjust to retirement. It took me a while, but now I'm in the swing of it and have even found a little part time work, even though I don't need the money, that I do for fun.

I'm in a similar financial situation to you as I have DB pension and don't need to use my other pension savings and investments to live off. So most of them are in equities and I have a substantial cash buffer that I use for big expenses. You can afford to have a lot of cash like investments as you don't really need them to grow much and you have the aggressive investments in your SIPP and ISA. So I would enjoy life and maybe even think about some charities or more distant relatives you would like to get your money. I'm currently giving money each year to my nieces and their kids and they along with a couple of charities will divide my estate.

crv1963

You don't need an IFA or a Psychologist, but both would charge to give you some reassurance! It does as per earlier posts take time to adjust to retirement, to find that "meaningful day". Find what you want to do, don't worry about Brexit, Trump or Trade Wars you have no influence over them so you're wasting time and energy worrying.


Look at how to fill the day with what gives you pleasure- volunteering, gardening, flying lessons, whatever it is try it. How do you socialise, do you want to socialise? Holidays- do you want to be more adventurous in your destinations long haul see the world or is Europe far enough? If it is why only a couple of weeks a year why not a month at a time? Why not try to learn a new skill, or do a degree?


I think part of the problem is you were forced into retirement, when your plan had been you would go at a time you chose, hence the SIPP. Life happens, don't waste it worrying but seize the moment and make the best of it.


Accept the FS Pension as the baseline income, the investment/ savings money as your luxury money to use for the bigger things like holidays and cars.


Good luck, have a week away with a blank piece of paper, your wife and make a plan, decide how you're going to enjoy the fruits of your labour, planning the spending is harder than planning the saving! It takes the same skill set, just got to apply yourselves to it.