Can We Retire At 60?

TreeBeard

Afternoon All

My wife and I are both 52 and have a goal to retire at 60 with an income of approx 24k (@ todays prices)

We have obtained SP forecasts which suggests we will qualify for the full SP amount at SPA (67) = £17k

Latest (2018) DB pension forecasts are as follows:-
Mine - 12k p.a. payable @ 60 plus 36k lump sum (index linked CPI)
12.5k p.a. payable @ 67 (index linked CPI)

Wife - 3.5k payable @ 65 (index linked RPI)

Wife’s DB scheme was closed 31/03/17 and replaced with DC scheme.
From April 2017 she has been making monthly contributions via salary sacrifice in addition to employer contribution. Total monthly contribution is 1.1k = 13.2k p.a.

Assets are as follows:-

S&S ISAs = 132k
Cash = 73k (held in “high” interest current accounts, regular savers)
Total = 205k

We have no plans in retirement to change our lifestyle which currently includes annual European holiday and a couple of short stay breaks in the UK..

We are mortgage free and have no dependant children.

The plan is to take DB1 @ 60 and drawdown from the DC pot to bridge the gap (7years) before DB1 and SP’s become payable. As contingency in the event of a significant fall (50%) in the DC pot I would use a proportion of the cash holding.

So, is our goal achievable or unrealistic?

Kind Regards

TreeBeard

Spreadsheetman

Looks very achievable. You could also shift a good proportion of the ISA into bonds to reduce the risk of a significant fall in equities.

Ends up with circa £157k cash (assuming £48k left in the ISAs) and £32.5k DB+SP income. Plenty of headroom over £24k budget.


(I missed the 2nd £12.5k DB - you are rolling in it!)

badmemory

Have you checked out the status of the remaining partner should one of you die? May we assume that is why so much goes into your wife's pension each month? It is something which often seems to be missed from peoples thinking, but the thought of having to deal with a problem with income on top of a loss of a spouse is not a nice thought.

TreeBeard

Hi bad memory

My DB pensions are civil service so on my passing widows pensions are payable.

The thinking behind paying so much into my wife DC pot is to take advantage of the National Insurance/Tax benefits. Annual drawdown would also not exceed personal tax allowance.

Kind Regards

TreeBeard

Triumph13

On those numbers you are absolutely laughing. Your two DBs, wife's DB and two SPs will yield a little over £40k pa post tax when they are all in payment compared to your required £24k pa. To infill between 60 and 67 at that £40k pa rate would only take £190k. you already have £205k plus £36k DB lump sum plus another £100k+ planned to go into wife's DC so that will leave a spare £150k of capital on top of your £40k pa income.
You may want to think about retiring earlier!

DairyQueen

You don't mention your income requirement. Will your DB/drawdown cover the gap to SP?

I second badmemory's comment re: provision for your wife should you predecease her. The reality is that the spouse with the least pension provision is commonly the survivor.

Do you have any contingency for care fees (in home/residential)? Again, the reality is that the female spouse is commonly the most likely to be in need. The majority of those age 80+ require some kind of support/care and, absent family, relying on a cash-strapped LA isn't a good plan.

Triumph13

One further thought, are you a higher rate taxpayer? If so, and if your wife isn't, then pension contributions for you will be more efficient than doing them in your wife's name, even though she has unused personal allowance.

TreeBeard

Hi Triumph13

Thanks for your posts.

No, I’m a basic rate taxpayer.

Kind Regards

TreeBeard

kidmugsy

I'd use some of that S&S ISA money to contribute more to pensions. For you as a tax dodge if you pay HRT, as Triumph said. For your wife as a way of using the part of her income that isn't salary-sacrificed.

Your pension income is going to be heavily back-loaded with SRP x 2 and DB2 starting at 67. In your shoes I'd investigate the actuarial reduction for starting DB2 at 60. I might also investigate whether wife can increase her DB pension by deferring taking it. if you find yourselves with lots of surplus income at 67 you could likewise consider deferring wife's SRP for a couple of years.



P.S. I'm still chuckling at the idea of children who are not financial dependants. There was a remark in the papers recently to the effect that people are still using the Bank of Mum and Dad into their forties.

Anonymous101

As other have said I think you're in a very strong position and wouldn't have any issues retiring at 60 if not sooner.

As Kidmugsy mentioned I think that there is real scope for moving some of the post tax investments, Cash or S&S ISA, into a pension.

You're at an age where you would be able to access the money again in a couple of years so there's no need to have such a large proportion in cash. As you don't appear to be likely to be in danger of paying higher rate income tax through retirement then you would stand to gain by backfilling your pension in this way.

DairyQueen

TreeBeard wrote: »

Afternoon All

My wife and I are both 52 and have a goal to retire at 60 with an income of approx 24k (@ todays prices)

We have obtained SP forecasts which suggests we will qualify for the full SP amount at SPA (67) = £17k

Latest (2018) DB pension forecasts are as follows:-
Mine - 12k p.a. payable @ 60 plus 36k lump sum (index linked CPI)
12.5k p.a. payable @ 67 (index linked CPI)

Wife - 3.5k payable @ 65 (index linked RPI)

Wife’s DB scheme was closed 31/03/17 and replaced with DC scheme.
From April 2017 she has been making monthly contributions via salary sacrifice in addition to employer contribution. Total monthly contribution is 1.1k = 13.2k p.a.

Assets are as follows:-

S&S ISAs = 132k
Cash = 73k (held in “high” interest current accounts, regular savers)
Total = 205k

We have no plans in retirement to change our lifestyle which currently includes annual European holiday and a couple of short stay breaks in the UK..

We are mortgage free and have no dependant children.

The plan is to take DB1 @ 60 and drawdown from the DC pot to bridge the gap (7years) before DB1 and SP’s become payable. As contingency in the event of a significant fall (50%) in the DC pot I would use a proportion of the cash holding.

So, is our goal achievable or unrealistic?

Kind Regards

TreeBeard

Just noted that you specified your retirement income requirement as £24k pa at today's value. Sorry, missed that on first reading.

As has been previously mentioned, failing to plan for the reduction in household income on first death is a common oversight. Is the widows 50% of the DBs?

Provision for care, and domestic support needs, should one/both live well beyond 80 is another common oversight. The stats suggest that only 20/25% of people currently enter residential care. However, a much larger %age receive care/domestic help at home. Very few people make it to 85+ without external help. The stats suggest that your wife is most likely to be the recipient.

Another thought:
Your DBs are values projected at their respective NRDs? Your income requirement is at today's value and will increase with inflation. I'm no expert on compounding but provisionally, and assuming inflation at 3% (no allowance made for difference between RPI and CPI):

Age 60 (8 years time):
Income required - £30,400
DB1 - £12000.
Drawdown requirement - £18,400 pa increasing at 3% until age 65.
Total required to bridge ages 60- 65 = Approx £120,000

Age 65 (13 years time):
Income required - £35,200
DB1 - £12,000 + (5 x years inflation increases) = £13,900
Wife's DB - £3,500.
Drawdown requirement - £19,700 pa increasing at 3% until age 67.
Total required to bridge ages 65-67 = Approx. £40,000

Age 67 (15 years time):
Income required - £37,300
DB1 - £12,000 + (7 x years inflation increases) = £14,700
DB2 = £12,500
Wife's DB - £3,500 + (2 x years inflation increases) = £3,700
2 x SPs - £17,000 + (15 x years inflation increases) = £26,400
Annual Income Surplus: £20,000 (plus inflation) until first death.

If your wife survives you then she will need additional income from drawdown as (current misconception) income requirement doesn't reduce in old age. Current stats mask the reality that family and the state are providing the care and domestic support required by an increasing population of those age 80+ who live at home but have made no provision for living beyond active retirement. In-home support is only cheap relative to (very expensive) residential care but is still costly, and the state has already significantly reduced its provision.