Can I afford to retire

SouthCoastBoy

I would really like to retire but not sure if I can afford it. Would appreciate any thoughts.


My situation is as follows.

55 in March, wife is 52. We both have full state pensions and cannot increase any further.
I have a two DC pensions which in total currently stand at £500k
We have Stocks and Shares ISAs with £200k
Cash (mixture of ISAs and non ISAs) just over £300k
Wife has a DB of £7.5k when she is 60, going down to £6k at 65.


I have calculated our outgoings as £3k/mth until I reach 75, then down to £2.5k a mth.


My wife is planning to continue working until she reaches 60, she earns around £800/mth


House is paid for.

crv1963

I don't see why not.

You have £1m in accessable money from age 55 in March, a withdrawal rate of 3% gives 30k pa before tax. You have to work out how much you are comfortable taking as with some planning you could also save into a SIPP or pension of another kind your wife entire take home pay so building her another pot, which depending on you plans be useful to leave to children or pay for future care needs.

Why does your wife want to still work? Your withdrawal rate can drop at SPA as you will have 17k (x2 SP) + 6k (wife pension) so only needing 13k from what is left of your pot but with a 500k pot you should easily be able to manage it.

cfw1994

Probably :rotfl:

I assume when you say "your outgoings" at 3k pcm, 36k pa, you mean that is £2,200 pcm whilst Mrs SCB still works?

Some rounding here, & in todays terms: someone else will drop in to correct my maths ;-)

8 years at just under 27k (~220k),
5 at just under 20k (100k)
2 at ~22k to get you to 67 (call it 50k)
3 years at ~16k (50k)

Then 17k from State pensions leaves 19k for 5 years (you to 75) - ~100k

That has used up £520k
From 75, you think 30k is enough, with 17k in.....so 13k pa, with around 500k to fund it.

Sounds eminently doable to me :T


OF COURSE this doesn't include inflation (biggie - but clearly you might aim for the DC funds to grow above that?), market crashes (beware the 'sequence of returns' risk, but you have plenty in cash to be wary of that), potential tax depending on how you take the funds....major appliances, health problems.....but no-one knows all that lot, eh!

If you are good with spreadsheets, do message me, I have one that might help clarify things for you....but only if you promise to give me feedback

cfw1994

crv1963 wrote: »

I don't see why not.

You have £1m in accessable money from age 55 in March, a withdrawal rate of 3% gives 30k pa before tax. You have to work out how much you are comfortable taking as with some planning you could also save into a SIPP or pension of another kind your wife entire take home pay so building her another pot, which depending on you plans be useful to leave to children or pay for future care needs.

Why does your wife want to still work? Your withdrawal rate can drop at SPA as you will have 17k (x2 SP) + 6k (wife pension) so only needing 13k from what is left of your pot but with a 500k pot you should easily be able to manage it.

Posts cross, good plain affirmation there!

RE: the bold bit.....I have the full expectation that once I've retired, my wife might want to go out to work :rotfl:

NedS

cfw1994 wrote: »

RE: the bold bit.....I have the full expectation that once I've retired, my wife might want to go out to work :rotfl:

That was my initial thought on first reading. I simply can't imagine my wife being happy to work for another 8 years (until 60) when I've retired at 55. Simply not going to happen.

But still, if your wife does want to work on, it presents an excellent opportunity to massively top up her pension to the limit of her earnings for the next 8 years. I would try to get her defined benefits up to her full tax free allowance by the time she retires.

SouthCoastBoy

Thanks for the responses, all much appreciated.


My wife enjoys her job, she works with special needs children and finds it very rewarding, therefore does not want to stop just yet. As for me I can't wait to leave...never really enjoyed my job.

Albermarle

I think with this amount there is no problem to retire, as long as you do not suddenly start spending a lot more than expected . Couple of points :
1) You need to think about/research/take financial advice about how you actually use the different pots of money and in what sequence/combination to maximise return and minimise tax .
2) What are your plans for leaving an inheritance? Depending on how much your house is worth / when the last partner dies / changes in the law etc you could well find your estate is big enough to pay 40% IHT on some of it . FYI pension pots are not included for IHT purposes so see point 1) again .

Brynsam

The other possibility is to quit your current job and consider taking another job you might enjoy, with no need to consider promotion prospects, salary or any of the other things which tied you to a lifetime of doing something you've never really enjoyed. Or set up something of your own, doing whatever it is you enjoy, if it likely to be profitable and in demand where you live. You have the freedom to stop doing it whenever you wish, and somehow the ability to get out at a time of your own choosing makes most jobs a more attractive proposition.

Alice_Holt

Brynsam wrote: »

The other possibility is to quit your current job and consider taking another job you might enjoy, with no need to consider promotion prospects, salary or any of the other things which tied you to a lifetime of doing something you've never really enjoyed....

Would agree with this.
The OP seems to have attained Financial Independence, but Retiring Early need not be the only option.

https://monevator.com/debating-fire-the-believer-vs-the-sceptic-vs-the-drop-out-round-1/