Nervous Retiree

choi

i have recently decided to close down my construction business and retire very soon
I have completed all my projects, been paid in full by all clients and paid all suppliers and subcontractors
I am 67

I have around 250 k in a Pension Pot currently in an Aviva cash account
I have personal savings of £200 k
There is a sum of £300 k in the business

I have seen three separate IFA and I am currently reviewing my options

One of them is a small independent IFA who I liked the best
He has agreed to create a plan for my retirement income
[Are there any downsides to going with a small independent]

I am extremely nervous about the whole process of using my capital to provide a retirement income.

What are the best options for me to consider for a cautious investor

I am looking to obtain an income in the region of £25 to £30k pa
With a reasonable cash reserve for various ptojects and unexpected events

I realise my IFA will address this issue but I value the comments received from many posters on this forum

Notes
I have savings I am able to use for day to day living etc for the time being
I also have a state pension
My wife retires in six years time

She will have a state pension plus a teachers part pension

We own our own home outright
We also own a separate home which gives us about £700 per month rent before taxation

We are both currently in good health and my wife is still working
Our children are grown up and in well paid jobs

Albermarle

[Are there any downsides to going with a small independent]

A small local firm is usually the best option , epsecially if they come with any personal reccomendations .

As you are seeing an IFA , then not much point taking too much detailed advice from an internet forum ( although a good one !) although the following statement did stand out :

I have around 250 k in a Pension Pot currently in an Aviva cash account

This will be earning zero and in real terms it will be shrinking due to inflation . As you have very substantial cash savings out side the pension then this cash in the pension should normally be invested to try and get some consistent long term growth to help the money last . I am sure the IFA will say something similar and will probably also advise that some of the cash outside the pension be invested as well.
I guess from your post you are risk averse but you have to clear that leaving so much money in cash is also a risk due to inflation eating away at it. Especially when the cash is inside a pension as it earns so little/zero interest.

wjr4

choi wrote: »

I have around 250 k in a Pension Pot currently in an Aviva cash account

Why in cash?!?!

dunstonh

Most IFAs are small localised firms of 1-5 advisers. The larger a firm gets, the more systems and controls it has to put in place and this can lead to restrictions and limitations.

As for you using a cash account, that is risky. Every option has risks. There is not a risk free option (unless you go with an index linked annuity). Going too high risk means you have higher investment risk. Going too low risk means you have shortfall risk and inflation risk. It is about sensible and appropriate risk.

At the moment, your objectives would be suffering from shortfall risk and inflation risk with your current cash holding. You have replaced investment risk with other risks.

tacpot12

It is reasonable to be nervous at this stage, as you are moving from accumulating wealth to drawing down on this wealth. It will feel unnatural for quite a while.

But you are in a good situation; you have a state pension, and a reasonable capital sum. I retired at 53 with half what you have. That said, I also share my living expenses with my partner who has slightly more assets than I do.

Dunstonh is correct about cash not being a risk free option. If inflation goes up unexpectedly for a long period, you could find that assets held as cash are consumed much more quickly than expected. So you should take some investment risk to counter the risk that you live longer than you expect. My retirement portfolio is currently returning about 4% in dividends alone. It is composed of a mixture of Investment Trusts supplemented with a small number of other holdings that hold some money with less (but not zero) volatility, and some holdings that were specifically bought for their growth potential and which produce minimal income. Investing your capital in the same portfolio would produce an income of £30K before tax without drawing out a single penny of capital. Historically this portfolio produced around 3.2% income and capital growth of around 3.2% as well.

Your IFAs, as professionals, should be able to come up with a portfolio recommendation that will allow you to draw down 4-5% per annum while still seeing the capital growing every year (over the long term). In some years, the capital value will fall, but it would usual for the value to recover within a year or two.

Drawing down 4.6% per annum of your £750,000 would produce an income of £30,000 a year after tax.

I hope you enjoy your retirement.

atush

wjr4 wrote: »

Why in cash?!?!

I agre, this should be in equities or at least most of it. In fact, i would top up your pension with some of that spare cash.

Wenlock

Relax. You are in a strong financial position.

Even if you invested in equities & these investments crashed you would have sufficient guaranteed income from Pensions & rent to meet normal essential costs.

At your stage of life I might look to dispose of the rental property & save/invest the proceeds.

choi

wjr4 wrote: »

Why in cash?!?!

I foolishly moved my fund into cash just before my retirement date
I then decided to carry on working for a couple of years

shinytop

choi wrote: »

I foolishly moved my fund into cash just before my retirement date
I then decided to carry on working for a couple of years

I think the first decision was OK, it's maybe the second that was foolish

Albermarle

I foolishly moved my fund into cash just before my retirement date
I then decided to carry on working for a couple of years

Moving retirement funds into cash or similar soon before retiring, is only sensible if you plan to buy an annuity. If you intend to go into drawdown or maybe not even touch the money for a few years, then you should just leave the money invested .

Marine_life

choi wrote: »

There is a sum of £300 k in the business

Were you operating as a sole trader or limited company?

Is that £300k already taxed or do you have a plan to extract the money in the most tax efficient way possible?