Reality or not - Retire at 56

456elsbot

Right – here we go. First post, its close to Christmas, a time of goodwill to all men (and women), so please be kind.
I’m currently 56 and am seriously considering retirement. Looking for views on a realistic drawdown/income (if managed in an appropriate way) from my savings to date.
Rather than undertaking the normal approach of specifying what income I require, would it be possible to indicate what realistic income I am likely to achieve given my savings. In saying this, ideally, £30k pa would be luxury given that we also have Solar PV which will pay for all our energy bills (with £800 excess per year) until I’m 73. I will have a full SP at 67, but intend to ignore this from any calculation and take this as a windfall down the line. My wife also has some savings and pensions, but I have ignored these as well. I just want to concentratie on what I can contribute to our finances going forward.
3 Pension – all DC – amounts to some £820k (can take now) – not looking to take the 25% lump of the whole, but 25% off each drawdown.
Pension – DC – with phoenix – cannot access until I’m 66 or I have to pay a horrific early withdraw fee (of £9k) - £50k total
ISAs/cash/funds - £155k
Where or what my savings are currently invested in at present is irrelevant, the sums are what they are, and they got there how they did. I managed them and made my own investment decisions. Over the years I have been moderately adventurous, but will probably tone it down a little and keep 3 years in cash in instant access and 1, 2, years fixed to tide me over in the event of stock market issues.
I will probably seek some IFA as the sums are now quite large.
Any views on where my investments should lie going forward would be welcome.
Question – given the above, what could be a realistic income stream in order to provide 35 years of retirement?.

• On the basis of running the pot dry (in simplistic terms just dividing the total pot by 35 gives almost £30k so I expect £30k will be ok).
• On the basis of retaining say half the pots value after 35 years.

In reality it will probably fall between the two.
On the basis of a simple calculation of dividing the pot by 35 makes me think I can begin to draft that resignation letter.
We did do something else, (which was probably a stupid thing to do). We re-mortgaged the house in the sum of £100k to pay for some school fees - £70k now outstanding. This enabled me to continue paying into my pension over the last 4 years at the max £40k. It is also the reason why my take home has been pretty low as 70% has been going into pensions. Rightly or wrongly, I thought there was benefit in max my pension contributions at the expense of a loan (be it at a very low interest rate) particularly since I was in my early 50s. Paying into my pension also enabled us to claim child allowance for three kids.
Finally, after payments into my company’s pension scheme, and share options, I currently take home £1900. I pay a further £500 (£625 gross) into a SIPP which would stop. Thus, my current take home (amount to spend) essentially amounts to £1400 a month or £16800 a year. Hence £30k being a luxury.
Any views about my plans/stupidity.

crv1963

Any views about my plans/stupidity.

On the face of it you have nearly 1 million pounds so a generating 30k pa pre-tax seems possible. So in a good position.

I think you are naive to ignore both SP and your wife pension provision in your calculations, the SP provides a good underpin later in your retirement and would possibly enable you to have a higher draw down rate in earlier retirement.

Is it job done with regards financial support for children or is there likely to be further calls on your monies for things like University, Cars, House Deposits or Weddings?

I'm not in a position to advise on what to invest in.

Bravepants

Given all your pensions are DC, take a look at this:



https://www.charles-stanley.co.uk/group/cs-live/safe-withdrawal-rate-and-sequencing-risk-retirement

Bemma

You look in a very strong financial position, I think the above post cover what I would say…

I'd just like to comment on:

456elsbot wrote: »

We did do something else, (which was probably a stupid thing to do). We re-mortgaged the house in the sum of £100k to pay for some school fees - £70k now outstanding. This enabled me to continue paying into my pension over the last 4 years at the max £40k. It is also the reason why my take home has been pretty low as 70% has been going into pensions. Rightly or wrongly, I thought there was benefit in max my pension contributions at the expense of a loan (be it at a very low interest rate) particularly since I was in my early 50s. Paying into my pension also enabled us to claim child allowance for three kids.

You probably paid very little interest (<2% apr?) over those 4 years.
But your figures suggest you would have saved at lot in tax, a mix of 40% and 20% on your contributions. Also, saving all your child benefit. Possibly NI contributions too if on Salary Sacrifice… Nothing stupid at all.
People get very emotive on mortgages. With HR tax, HICBC and in your 50s, stuffing as much as you can in a pension at the expense of cheap debt is financially beneficial.

GSP

I think this also depends on what type of person you are.
On here, I would say most posters err on the side of caution and would have you withdraw the minimum amount.
But with the numbers you are quoting, without keeping half I would say you would be okay to withdraw between £35k-£40k per year. Go on enjoy yourselves.
Assume keeping half is for family. If it is, I am sure they would want you to enjoy yourselves and expect there would still be something to give them once you are gone.

PaulCooper

I retired at 59, had a bit less than you have in pension pots. I'm taking the maximum I can whilst paying 20% tax. Calcs say that the money runs out when I'm about 80. Already taken the 25% tax free, that funded a camper van (now sold). We're having a ball, it might seem rather short sighted seeing the money run out at 80, but we've got other assets & now is the time we want to and are able to) spend.
No option in your position

---

RETIRE
Best of luck
Paul

tacpot12

By my calculations, you can drawdown about £27K pa after tax if you want half of the fund (£410,000) left after 35 years, and about £33.5K pa after tax if you want nothing left after 35 years.

I have not ignored the substantial contribution made by your full state pension, and have assumed an average investment growth per annum of 4% and inflation of 2.5% pa. The assumption on average investment growth is ambitious at 4% pa, and we don't know what the world will look like in 20 years time, let alone 35, so it's not easy to say whether this is a safe assumption.

For long term investing, only equities outpace inflation, so you should look to invest in a broad range of equities, while keeping some cash and less volatile investments to ensure you do not have to sell equities during immediately after a crash. I've not seen a market be depressed for more than a couple of years, so having a buffer covering three years seems ideal.

BLB53

Your pensions and ISAs are likely to return a minimum of £50K p.a. average so your drawdown requirements are modest.

As to the practicalities, suggest get hold of Edwards book 'DIY Pensions' which I personally found very useful when I moved to drawdown some years back. It could even save you a lot of money in IFA fees!

cfw1994

456elsbot wrote: »

Right – here we go. First post, its close to Christmas, a time of goodwill to all men (and women), so please be kind.
I’m currently 56 and am seriously considering retirement. Looking for views on a realistic drawdown/income (if managed in an appropriate way) from my savings to date.
Rather than undertaking the normal approach of specifying what income I require, would it be possible to indicate what realistic income I am likely to achieve given my savings. In saying this, ideally, £30k pa would be luxury given that we also have Solar PV which will pay for all our energy bills (with £800 excess per year) until I’m 73. I will have a full SP at 67, but intend to ignore this from any calculation and take this as a windfall down the line. My wife also has some savings and pensions, but I have ignored these as well. I just want to concentratie on what I can contribute to our finances going forward.
3 Pension – all DC – amounts to some £820k (can take now) – not looking to take the 25% lump of the whole, but 25% off each drawdown.
Pension – DC – with phoenix – cannot access until I’m 66 or I have to pay a horrific early withdraw fee (of £9k) - £50k total
ISAs/cash/funds - £155k
Where or what my savings are currently invested in at present is irrelevant, the sums are what they are, and they got there how they did. I managed them and made my own investment decisions. Over the years I have been moderately adventurous, but will probably tone it down a little and keep 3 years in cash in instant access and 1, 2, years fixed to tide me over in the event of stock market issues.
I will probably seek some IFA as the sums are now quite large.
Any views on where my investments should lie going forward would be welcome.
Question – given the above, what could be a realistic income stream in order to provide 35 years of retirement?.

• On the basis of running the pot dry (in simplistic terms just dividing the total pot by 35 gives almost £30k so I expect £30k will be ok).
• On the basis of retaining say half the pots value after 35 years.

In reality it will probably fall between the two.
On the basis of a simple calculation of dividing the pot by 35 makes me think I can begin to draft that resignation letter.
We did do something else, (which was probably a stupid thing to do). We re-mortgaged the house in the sum of £100k to pay for some school fees - £70k now outstanding. This enabled me to continue paying into my pension over the last 4 years at the max £40k. It is also the reason why my take home has been pretty low as 70% has been going into pensions. Rightly or wrongly, I thought there was benefit in max my pension contributions at the expense of a loan (be it at a very low interest rate) particularly since I was in my early 50s. Paying into my pension also enabled us to claim child allowance for three kids.
Finally, after payments into my company’s pension scheme, and share options, I currently take home £1900. I pay a further £500 (£625 gross) into a SIPP which would stop. Thus, my current take home (amount to spend) essentially amounts to £1400 a month or £16800 a year. Hence £30k being a luxury.
Any views about my plans/stupidity.

Feel free to have a play with this spreaddie...let me know if it helps!!
& any comments for suggested changes!

TBC15

cfw1994 wrote: »

Feel free to have a play with this spreaddie...let me know if it helps!!
& any comments for suggested changes!

I get a virus warning with this link, anyone else?

Apodemus

TBC15 wrote: »

I get a virus warning with this link, anyone else?

I didn’t get a virus warning, but the spreadsheet wouldn’t do anything.