Strategy for withdrawing DC pot between 55-60

bluenose1

Hi all,
planning my great escape, 19 months to go before I am 55.
My intention is between 55-60 to withdraw my DC pot as tax free as possible to maximise income.
From 60 will live off my DB income.
I should have a DC pot of approx £60k plus rental profit of £5,600 per annum. Therefore based on current Personal Allowance of £12.5K I can withdraw £6,900 per year without paying tax, more if the PA increases.

My plan is to withdraw 25% tax free - £15k.
From the £45k balance, withdraw £6,900 per annum. Over 5 years = £34,500.
Therefore withdraw £49,500 tax free.
Potentially paying tax of £2,100 on the £10,500 to be taxed.
I also intend to put in £2,880 per annum to boost my pot, as if
we sell any of the rental properties will increase annual amount I can take out of my pot.

Just wondering if there is anything I have missed. I suppose my greatest concern is if the stock market crashes. I currently have my DC pot in low risk investments, but not sure if I should put more in cash.

I am embarrassed to admit how much time I have spent on working out the best way to maximise my income in retire so I can retire at 55.
Any thoughts welcome.

Dazed_and_confused

My intention is between 55-60 to withdraw my DC pot as tax free as possible to maximise income.

Those two aims contradict each other. By keeping it as tax free as possible you are, for perfectly valid reasons, minimising the income you will take from the DC pot.

plus rental profit of £5,600 per annum

If you have finance costs on the rental properties does this profit figure take account of the final change to loan interest relief?


Have you applied for Marriage Allowance?

bluenose1

Dazed_and_confused wrote: »

Those two aims contradict each other. By keeping it as tax free as possible you are, for perfectly valid reasons, minimising the income you will take from the DC pot.
Haven't explained myself vey well, but yes I will minimise withdrawals in first few years in case tax situation changes.


If you have finance costs on the rental properties does this profit figure take account of the final change to loan interest relief?
That figure is the amount we pay tax on.
Have you applied for Marriage Allowance?

No, though it is a consideration if we sell rental properties
Many thanks for your comments.

Dazed_and_confused

That figure is the amount we pay tax on.

So that will increase in the future if you have finance costs. Leaving less spare Personal Allowance.

TSCati

Hi bluenose 1, it's 19 months until I turn 55 too!

It may be worth considering the UFPLS approach and withdrawing the 25% tax free over the 5 years. If there is no growth in the remaining DC pot, then I think both approaches would give the same tax free amount over the course of the 5 years. However, if the remaining DC pot increases over this period, then I think you would be able to take more tax free using UFPLS. I guess the opposite is true though if there is a stock market crash and your DC pot decreases over the 5 years...