Can I retire in a years time at 57??

dave_hendy

WillowCat wrote: »

It could be wise to put as much into your wife's pension as possible while she is still working. Then when she isn't she can make full use of her tax allowance before her other pensions kick in.

This will be a good question for the IFA as I don't know if it makes sense to use savings to pay into one of my wife's pensions (if I can pay into any other than her current one)? Plus with our plans I will probably get 2 tax years to pay in about £30K pa, increasing her pot to just over £100K. This maybe useful as she has just had an extra tax bill for getting over her £1k interest allowance?

Username999

Why is it NOT a good idea to take 25% tax free?

dave_hendy

Username999 wrote: »

Why is it NOT a good idea to take 25% tax free?

I don't know, Willowcat said it??

cfw1994

atush wrote: »

it is a good place to start- IF they are true IFAs. Many arent.
Steer well clear of places like St James Place.

Very true.......or any company with "Wealth Management" in the title....I always feel it is THEIR wealth they are effectively managing

dave_hendy wrote: »

I thought it was better to take the 25% and not touch the pension for as long as possible probably 65 in 7 years?


No I have not thought about tax yet, apart from my wife taking her small pension pots out over a few years keeping below her personal limit and me not taking too much of my pension in anyone year but to use savings instead (although this might not be the right approach).


Problems arise from my wife being 5 years younger, so I will get my SP first as well as I am the one with the private pension pot. So apart from taking part of her tax allowance, it will probably mean I will end up paying some tax as there isn't anyway round it?

This does emphasise to me that you may well benefit from using an IFA - they can explain the implications on your ability to continue to contribute to a pension fund (the MPAA) versus taking only the 25% TFLS and not touching the remaining "drawdown" pot.

Paying tax isn't a terrible thing unless you live on a teeny tiny amount!
I fully expect to in a retirement, especially as my pot will be the main pot for the two of us. I will hope to minimise it & steer clear of any 40% rates, but tax will be paid.....

dave_hendy wrote: »

If I go down the s&s ISA route in April (already done this years allowance) is this a good time to be opening one with the full £20K? How do I know?

I think you need to really appreciate that no-one has a financial crystal ball.
Not you.
Not me.
Not any IFA you meet.

So: given that fact....how can anyone tell you whether not is the right time to open any investment?!

Studies have shown that it is generally best to invest a lump sum in one single lump around 2 out of every 3 times. Of course, that also tells us that 1 in 3 times it will be the wrong decision

Thing is.....you have to make a decision! An IFA won't know the answer any more than you or me, but maybe they can give you a warm fuzzy feeling, where I would only point out that no-one knows!

My personal preference is to drip-feed money in. But that is just me, happy in the knowledge that 2 times out of 3 I am wrong to do that with a lump sum :rotfl:

dave_hendy

This does emphasise to me that you may well benefit from using an IFA - they can explain the implications on your ability to continue to contribute to a pension fund (the MPAA) versus taking only the 25% TFLS and not touching the remaining "drawdown" pot. i have to agree, I know, I know very little about all this

Paying tax isn't a terrible thing unless you live on a teeny tiny amount!
I fully expect to in a retirement, especially as my pot will be the main pot for the two of us. I will hope to minimise it & steer clear of any 40% rates, but tax will be paid.....i do expect to pay some tax, I just know my pension pot over £250k against my wife’s £44k and the fact I will get my state pension 5 years before her means this is working against me as far as tax goes and I can’t see a way around that?

dave_hendy

cfw1994 wrote: »

This does emphasise to me that you may well benefit from using an IFA - they can explain the implications on your ability to continue to contribute to a pension fund (the MPAA) versus taking only the 25% TFLS and not touching the remaining "drawdown" pot



I think you need to really appreciate that no-one has a financial crystal ball.
Not you.
Not me.
Not any IFA you meet.

So: given that fact....how can anyone tell you whether not is the right time to open any investment?!

Studies have shown that it is generally best to invest a lump sum in one single lump around 2 out of every 3 times. Of course, that also tells us that 1 in 3 times it will be the wrong decision

Thing is.....you have to make a decision! An IFA won't know the answer any more than you or me, but maybe they can give you a warm fuzzy feeling, where I would only point out that no-one knows!

My personal preference is to drip-feed money in. But that is just me, happy in the knowledge that 2 times out of 3 I am wrong to do that with a lump sum :rotfl:

I thought taking the 25% and leaving the rest as long as possible was the best option, I hadn’t really thought about paying more in was an option once we were retired.

I was watching a video this morning where they were implying shares as a whole were very high and everybody expected them to go down, so I didn’t want to jump in then if it was stupid. I understand nobody knows what will actually happen. I could obviously pay the years allowance in gradually over that tax year.

Audaxer

dave_hendy wrote: »

i do expect to pay some tax, I just know my pension pot over £250k against my wife’s £44k and the fact I will get my state pension 5 years before her means this is working against me as far as tax goes and I can’t see a way around that?

If you plan to retire a year from now, I am assuming it will be at least 9 years until you get your State Pension. So if you have no other taxable income for these 9 years, you would be able to draw from your pension up to your personal tax allowance of £12,500 plus 25% tax free amount of £4,166 each year, meaning drawing a total of £16,666 each year from your pension without paying any tax. If however you did want these investments to keep growing and instead draw the required spend from your savings meantime, you could still draw this tax free money out of your pension each year and reinvest it in an S&S ISA, so that when you did want to spend that money, any drawings from the S&S ISA would be tax free.

dave_hendy

If you plan to retire a year from now, I am assuming it will be at least 9 years until you get your State Pension. So if you have no other taxable income for these 9 years, you would be able to draw from your pension up to your personal tax allowance of £12,500 plus 25% tax free amount of £4,166 each year, meaning drawing a total of £16,666 each year from your pension without paying any tax. If however you did want these investments to keep growing and instead draw the required spend from your savings meantime, you could still draw this tax free money out of your pension each year and reinvest it in an S&S ISA, so that when you did want to spend that money, any drawings from the S&S ISA would be tax free.

You are correct it would be approx 9 years until I get my SP and 15 years for my wife.

So I take it as I would be taking more than my 3% recommended out of my pension once my SP started I would cut right back on my withdrawals? Or wouldn’t this matter if I am reinvesting it?

Audaxer

dave_hendy wrote: »

So I take it as I would be taking more than my 3% recommended out of my pension once my SP started I would cut right back on my withdrawals? Or wouldn’t this matter if I am reinvesting it?

It wouldn't matter because you wouldn't be withdrawing from your investments - all you would be doing is effectively moving part of your pension each tax year into an S&S ISA. You could reinvest it immediately in the exact same investments or at least the same risk profile with same equity percentage. You just need to then think of the S&S ISA as part of your pension, the benefit being that when you do need to drawdown some cash from your investments, you will be drawing it out tax free.

dave_hendy

Audaxer wrote: »

It wouldn't matter because you wouldn't be withdrawing from your investments - all you would be doing is effectively moving part of your pension each tax year into an S&S ISA. You could reinvest it immediately in the exact same investments or at least the same risk profile with same equity percentage. You just need to then think of the S&S ISA as part of your pension, the benefit being that when you do need to drawdown some cash from your investments, you will be drawing it out tax free.

That makes sense, thanks for taking the time to explain things!