Getting from 55 to 67 with a SIPP

minimalising

Hi there
I know there's a lot of info out there but there's so much and some of it is confusing, so I wanted to lay out my pension plan and ask a question.

I'm hoping to retire at 55. I'm quite minimalistic and not too bothered about fancy cars and fancy holidays so I think I could reasonably survive on 12k a year.

I'm 45 and have had a SIPP for a while and I pay in pretty heavily. I think I can only take that when I'm 57 (currently 55 but changes to 57 before I get to 57).

So here's my plan.

55 - 57 - survive off of money from my stocks and shares ISA.
57 - 67 - survive from my SIPP
67+ - state pension + NHS pension

My question is, what's my best option for that 57 to 67 period? If I buy an annuity that'll be until death. Well 67+ is sorted. I just want to get to 67. Is there a way I can use up all of the SIPP? I know I can take it all as a lump sum (taxed after 25%) but can I just look at the total and say I want a tenth of that each year?

SonOf

My question is, what's my best option for that 57 to 67 period?

Dont worry about it now and wait until you get closer. The options available in 12 years time will be different from today. The thing you should be focusing on is making sure you have enough.

Is there a way I can use up all of the SIPP?

yes

I know I can take it all as a lump sum (taxed after 25%) but can I just look at the total and say I want a tenth of that each year?

yes
And phased drawdown would likely be the best option if it was today.

If I buy an annuity that'll be until death.

Only if you buy a lifetime annuity. Not if you buy a fixed term annuity.

Albermarle

As you will be trying to survive on a rather low income ( £12kpa is low ,even if you have minimalist tastes) you will be vulnerable to unexpected events .
So you should at least make sure you have a good cash emergency fund available , before you retire .
Also do not to be too fixed in your planning and even if your spending will be low , it is always a good thing to have some spending power in reserve , even if it means working an extra couple of years .
55 is still rather early to voluntarily retire .

Amateurretiree

I disagree with 55 being too young to retire.
I retired almost 3 years ago at 55, OH retired at 61 9 months ago. We are living our best life; we look after our beautiful granddaughter 3 days a week, go for lovely country walks and can live life at a leisurely pace with no stress.
We had two trips to NYC last year and one to Florida, going to Canada and Florida this year.

You never know how much time you have, and my view is if you can bear to leave your job and can afford it, it’s nice to do nice things all day!
Not saying it’s for everyone but we love it!

tacpot12

My retirement plan is very similar. I retired at 53 and lived off my savings before starting to drawdown my SIPP. I expect to sell about one third of the assets from my SIPP between 55 and 67, leaving the other two thirds to carry me to through until I die. I also have a full state pension entitlement.

My assets are mostly income producing and the yield is currently about 4.0%. The amount of income this produces will fall over time as I sell assets, so I will have to sell more assets as I get closer to 67.

My portfolio value started at £360,000 and I am withdrawing about £17,000 pa. Currently about £14K is income and £3K is from selling assets, when I'm 66 it will be closer £12K income and would be £5K from selling assets, but I have two defined benefit pensions that kick in when I am 60 and 65, so I'm planning on using these to reduce the need to sell assets at these points. I also have other income from two rental properties, so I'm actually living on an income of about £22K pa.

I told my SIPP provider how much to pay me each month and now I just ask for this to be increased annually, to reflect inflation. 25% of what I take out of the SIPP each month is tax-free, and I pay income tax via PAYE on the remaining amount. The payments are Uncrystallised Funds Pension Lump Sum (UFPLS) payments.

The only things I have to do to manage my portfolio is decide which assets to sell (and when). I have four assets that have a substantial bond component, so I only have to decide which of these four assets to sell as it is my aim that by the time I am 67 my portfolio will be 80% equities and 20% bonds. (currently it is 70% Equities and 30% bonds).

Albermarle

I disagree with 55 being too young to retire

Ok let me rephrase that - Retiring at 55 suits a minority of people , especially those who have a lot of assets/income and maybe do not like their job(s)
For someone with very little assets /income, it could be a dangerous target to have, and better to retire a bit later like most people , but in a more secure financial position.

Amateurretiree

Albermarle wrote: »

Ok let me rephrase that - Retiring at 55 suits a minority of people , especially those who have a lot of assets/income and maybe do not like their job(s)
For someone with very little assets /income, it could be a dangerous target to have, and better to retire a bit later like most people , but in a more secure financial position.

I agree that it might not be for everyone, though I don’t really fit into the category of not liking my job( I was a senior nurse in the NHS with a very rewarding job) and I would say my assets were consistent with the lifestyle we want to lead, but certainly don’t run into millions, or even a million!

Not working has freed my time up to help my family during the difficult first few years of bringing up children and I get to go to playgroups and soft play etc which I enjoy immensely, it has given me a new lease of life . And it is so heartwarming to see OH building Lego etc with our granddaughter. Everyone is different and this life just suits us right now.

I realise we are lucky .

Notepad_Phil

minimalising wrote: »

I'm hoping to retire at 55. I'm quite minimalistic and not too bothered about fancy cars and fancy holidays so I think I could reasonably survive on 12k a year.

I wish you good luck with your plans but are you sure that 12k a year will be sufficient?

I'm retired in my fifties and myself and OH also live fairly minimally - but occasionally there are years where we need access to larger sums than usual to replace or repair what we've already got.

So does that 12k allow you to put money away to pay for any ad-hoc replacement bits and pieces that you may need or is it only for the good times where everything is in good working order?

Also, have you considered the threat of inflation on your plans? Presumably you'll want the 12k to keep up with any inflation. So even at just 2% per year, that would mean you'd need something like 15k per year by the time you get to 67.

Thrugelmir

Amateurretiree wrote: »

We had two trips to NYC last year and one to Florida, going to Canada and Florida this year.

On a £12k pa income perhaps such a lifestyle would be more challenging to afford.

Nullboris

have you thought about cutting down your work week? working only three days a week can give you all the benefits of retiring while still keeping your hand in at work. Extra Time and extra money, and you really do miss even the most hated job as it gives you a routine and a purpose in life.
All else is just Banal Tv shows and empty days

bioboybill

Nullboris wrote: »

have you thought about cutting down your work week? working only three days a week can give you all the benefits of retiring while still keeping your hand in at work. Extra Time and extra money, and you really do miss even the most hated job as it gives you a routine and a purpose in life.
All else is just Banal Tv shows and empty days

My wife took early retirement 2.5 years ago at the age of 56. She doesn't miss work one little bit. In fact she said she was amazed how quickly she forgot about work altogether. She also said that it wasn't until after she stopped that she became aware how stressed she was at work. She says it's the best thing she's done in years and is now so busy she doesn't know how she had time to work. She certainly doesn't waste her time watching TV. I can't wait to join her. I don't need work to give me a purpose!