Just turned 40 - want to retire at 58 - sense check

squirrelpie

Malaflame wrote: »

NEED ADVICE PLEASE FROM YOU VERY KNOWLEDGEABLE LOT! :-)

So sorry to gate crash thread but hope can get advice/Info.

So I suggest starting your own thread instead of trying to gatecrash somebody else's. No need to be 'sorry' then.

atush

Clive_Woody wrote: »

Exactly, and we are of a similar mindset in that once the mortgage is clear, then should the worst happen there is one big bill that doesn't need paying each month.

Each to their own of course, but my mortgage will be gone by the time I am 45 and I anticipate my pension pot will hit LTA before I am 60, with a mix of other savings and investments to add to the mix.

Mortgage over payment is generally frowned upon on this board, with clear logic supporting this stance, but there is a pragmatic approach and a sense of relief/achievement of getting it paid off and owning the roof over your head plus suddenly have significantly improved cash flow.

I agree some people find having the mtg gone valuable. but really that is like emotional investing. Doesnt bring the best outcome.

But guess whose husband paid off the mtg behind their back? having discussed and agreed not to? I was a little cross when i found out.

atush

Malaflame wrote: »

NEED ADVICE PLEASE FROM YOU VERY KNOWLEDGEABLE LOT! :-)

So sorry to gate crash thread but hope can get advice/Info.

My figures aren't very complicated. I will be 55 yrs old in January 2020 (Single Female)

I have a Mortgage of £87,000 on a home approx £450,000
I have about £14,000 in my bank account
I have £26,000 in my pension today
I work for private health care Agency part time mostly and earn approx £22-£25,000 per annum Gross.

I was told by my peoples pension today that i can do the "Flexible Access Drawdown"

1st amount 25% TAX FREE (approx £6,500) which i can take after my birthday in Jan 2020.
subsequent amounts at intervals of choice
She states first one after initial 25% will probably be subject to emergency tax (i.e 40%) there after she says HMRC will be able to add to my salary figures and calculate tax payable.

My free pay at the moment is around 1750 so quite high.

I want to pay the pay around £15,000 into my mortgage to reduce payment even though i know interest rates are low, My pension is not exactly working for me!. I can only pay £9,000 by the end of this year and less next year without incurring penalties on repayment. i initially only save £55 per month on the interest rate i am on until next June.

Also want a to have a little extra money coming in from pension release as not on really good money, my retirement money is in my home? Yes i could work more but having a few health issues at moment.

Should i do this or start an Isa? Sure i could put all on my savings into Isa and get better return?

Can anyone recommend a good ISA?

Any help would be very appreciated.

:-)

Best to start your own thread.

Dont take your pension while still working. instead you need to put more into your pension. If it 'isnt working for you' change the funds.

zagubov

We overpaid our pensions and had an offset mortgage.

AVCs are pricy compared with paying extra Teachers Pension, but is completely inheritable and can be taken earlier. I preferred TPS overpayments. Have a think about it.

Our offset mortgage was possibly a bit more expensive than a standard one, but the convenience of it was invaluable. Being a parent became unexpectedly more expensive and it allowed us to treat it as a loan when required.

Be aware it's a loan secured on our house so you need to pay it off at some point, and we're still paying it while being pensioners. Our choice; we retired early but still work part-time which is what we'd always planned.

Maybe your wife should check her pension. Her union can help. It wouldn't hurt to really do your homework about your future financial wants and needs, although I think you've got off to a very good start.

cloud_dog

Bemma wrote: »

£100 => £85
£100 => £25 tax free + £75 less 20% tax
£100 => £25 + (£75 * 80%) = £85

I keep seeing this sort of calculation repeated on MSE and posters really need to qualify this when posting. It is (obviously) true where you have other income which takes you above your personal allowance. It is incorrect in the OPs situation because they have stipulated that they want to retire at age 58. I can only take it that by 'retire' they mean cease earning taxable income via working.

Assuming this is correct then the calculation is misleading as tax will only apply above the personal allowance of £12500 (19/20 FY).

If the OP and their partner had available DC pots of money they could withdraw £33,333.33 pa tax free (using UFPLS; £16666.66 each).

This is my plan. I am in a similar position to the OP re SS and being a HRT payer but we still make additional contributions in to my wife's SIPP so as to obtain the 25% increase on the contribution and to maximise the tax-free withdrawal benefit in the early pre-DB/CARE and SP environment.

Having said this, the OP should investigate the options of paying more in to the TPS or available schemes to see if taking this pension earlier would work out to be better value.

Triumph13

cloud_dog wrote: »

I keep seeing this sort of calculation repeated on MSE and posters really need to qualify this when posting. It is (obviously) true where you have other income which takes you above your personal allowance. It is incorrect in the OPs situation because they have stipulated that they want to retire at age 58. I can only take it that by 'retire' they mean cease earning taxable income via working.

Assuming this is correct then the calculation is misleading as tax will only apply above the personal allowance of £12500 (19/20 FY).

If the OP and their partner had available DC pots of money they could withdraw £33,333.33 pa tax free (using UFPLS; £16666.66 each).

This is my plan. I am in a similar position to the OP re SS and being a HRT payer but we still make additional contributions in to my wife's SIPP so as to obtain the 25% increase on the contribution and to maximise the tax-free withdrawal benefit in the early pre-DB/CARE and SP environment.

Having said this, the OP should investigate the options of paying more in to the TPS or available schemes to see if taking this pension earlier would work out to be better value.

The calculation is entirely correct, relevant and appropriate in this case because any decision is driven by their MARGINAL tax rate. From what the OP has already said about their pension savings and the level of joint income they are aiming for it is clear that they will have sufficient pension funds to fully utilise their own personal allowance after their early retirement, whilst their wife will not. His marginal tax rate on any additional pension withdrawals will therefore be 15%. His wife's will be zero as long as she stays within her PA.

cloud_dog

Agreed, the context is important.

Happier_Me

Only you can decide whether to favour mortgage over pension payments as it isn't just a financial decision. I crashed into my 40's and started focusing on pensions at that point, fortunately a DB pension and steady contributions to pensions over the years has seen us right. We're aiming for a similar retirement income to you at 55.

We were overpaying the mortgage when we turned 40 and decided to continue for several reasons: we are both basic rate taxpayers, no salary sacrifice so we didn't have the big tax incentives to entice us away from overpayment. We were just a couple of years away from mortgage freedom too, so there was a very big light at the end of that particular tunnel.

18 months after mortgage freedom, there is a fairly big risk that I will face redundancy next year. But without a mortgage, we can afford to drop to one salary without it affecting our lifestyle. It will just affect how much we can save until I'm back in work. And that's a nice position to be in.

rawhammered

OP here - thanks again all for comments.

I think the best thing to do will be to not overpay mortgage and increase wife's TPS. Just need to work out best way: AVCs or Additional Pension by briefly looking at their website this morning.

As stated before she's PT (0.6 FTE) and with current FTE salary of £39k and looking at her paperwork last night* she's accrued 9 yrs as at March 2014...
So guessing that's more like ( additional 0.6 x 5yrs) = 12 yrs reckonable teaching service now.
Projected to NPA 60 to be (additional 0.6 x 20 yrs) = 24 yrs service at 60.

Not sure how that translates into annual pension and TFLS, but assuming this will be below her PA.
Can anyone shed light on to the pros/cons of AVCs or additional pension options into TPS?

Many thanks

*sheesh she's bad at paperwork: last statement we could find was from 2014....under her maiden name despite us being married since 2006.....we need to get access to her online account but obviously all her details are wrong and cant get access at the moment until she phones them up to reset emails/passwords etc.

rawhammered

Amusingly just checking my own DC pot this morning and note that it's value dropped by £5k overnight xD