Very early, very tentative retirement plan

Pip_Boy_111

Hi all.

Although i frequent the debt free board regularly, I am still trying to plan for a comfortable early retirement. The debts are being dealt with and we are on track for debt free-ness in under 3 years. That side of things is all good :T

At the minute i contribute 15% of salary and my employer pays 13.5%. I've been using the calcs and things look good (fingers crossed).

So, quick newbie question. If I retire at 60, I am coming out with a pension of around £25k p/a to age 96 plus lump sum of circa £135k (i realise this a VERY rough illustration at this early point with approx 25 years to go). Would it be wise to live off the lump sum and leave the rest of the pot untouched until that runs out, or is it better to invest the lump sum and draw down from the pot? Or do those options lead to pretty much the same result? Obviously when the time is nearer I intend to consult an IFA for more precise, tailored advice.

Again, it's early but I'm just trying to gauge where I'm at and if my early planning is, so far, anywhere near good enough. In the future i intend to slowly increase contributions (50% of any future payrises, so 2% payrise = 1% increase). Any comments or advice welcome.

Thanks all :beer:

MEM62

Pip_Boy_111 wrote: »

So, quick newbie question. If I retire at 60, I am coming out with a pension of around £25k p/a to age 96 plus lump sum of circa £135k (i realise this a VERY rough illustration at this early point with approx 25 years to go). Would it be wise to live off the lump sum and leave the rest of the pot untouched until that runs out, or is it better to invest the lump sum and draw down from the pot? Or do those options lead to pretty much the same result? Obviously when the time is nearer I intend to consult an IFA for more precise, tailored advice.

It's good that you are thinking about it but it's way, way to early to start making those judgements. Who knows that the economic climate will be in 25 years time - interest rates, returns from the market, inflation etc etc etc. Let alone your personal circumstances - kids, steady employment thought the years, career progression, health. Keep yourself debt free and keep pumping money into your pension. About 10 years out from retirement you can start to look at things.

menziesthefish

Would it be wise to live off the lump sum and leave the rest of the pot untouched until that runs out, or is it better to invest the lump sum and draw down from the pot?

At the rate pension legislation changes, there's every chance the lump sum may not be available in 5 years' time, let alone 25 years' time. In fact, the minimum age for accessing a pension is due to increase to 57 by 2028, so by 2044 in may well be above 60.

As MEM62 says, it's great to be looking ahead and planning for your future but so much can (and will) change before you get to the point of being able to/needing to access your pension that there is little to be gained in working through scenarios now.

Focus on staying financially disciplined, clearing your debts, and squirrelling money away for your future whenever you can. That way, whatever the regulatory landscape looks like you will have given yourself the best shot of being financial self-sufficient and living the life you wish to lead.

Good luck!

Clive_Woody

You might want to also consider putting money into a S&S ISA to build up additional investments in case the pension rules change, delaying you access to your pot.

You have lots of time and seem to be showing an interest far earlier in your life than many, which are both great things.

There are many different ways of saving/investing, each with their own benefit and risk. Equally there are many different opinions about the right way" to plan for your future. The best you can do is be informed, understand what you are doing with your money...and if something sounds too good to be true, then it probably is.

MSE is a great resource and there are plenty of other sites that provide good information. The Pension and Savings and Investment boards have become my favourites on here in recent years. I'm around 15 yrs from retirement (sooner if things go well). I really only started paying attention to pensions and such-like a few years back, but fortunately my younger self had always paid into a pension to max out employer contributions so despite my ignorance I made a good start.

enthusiasticsaver

It is good that you are planning ahead and 28.5% of income into pension is a great percentage to be putting away. I would be wary of putting all your eggs in one basket and maybe stocks and shares isas could be looked at as an alternative source of income should the rules you change and the age for accessing pensions increases. Also focus on getting rid of the debt and maybe paying your mortgage down if you have one. Is it a DC pension?

Pip_Boy_111

Thanks for taking the time to reply all. Many excellent points to consider.

Yes it is a DC pension and to be honest S+S ISAs are not something I'd even considered at this stage. I take on board the comment about putting all the eggs in one basket. I hadn't even considered the pension regs changing. The debts are being blasted as we speak so they will not be a factor in any retirement planning and the mortgage is overpaid slightly at the moment (looking to increase over payments once the debts are gone in 3 years max). Once the debts are no more I will definitely look into S+S ISAs as an alternative to paying more into a pension pot. I already max out the employer contribution anyway and pay a good chunk extra from my own contributions.

Thanks all for the advice. Some good information to consider here :beer: