Getting from 55 to 67 with a SIPP

ffacoffipawb

kinger101 wrote: »

The age pop stars die is not a good method of predicting longevity.

Indeed. Amy Winehouse and countless others are a very poor comparator.

BLB53

I retired at 55 yrs and tbh could live on £12K per year so its certainly doable.

You will need to build a SIPP of at least £250K from which you could drawdown a sustainable income of £12K per year to bridge the gap to state pension.

I recommend get hold of the 'DIY Pensions' book by Edwards which I have used to in recent years to plan my drawdown path between early retirement and state pension (in my case at 66 yrs). It has worked out OK so far.

Good luck!

Albermarle

I retired last year at 57 having known a few people who died before 60 after working hard all their lives.

We all know people like that, but for financial planning purposes , you have statistically a 50% chance of reaching 84 . Which means a 50% chance you will live longer than that , especially if you are healthy, intelligent and have money.

Ceme3000

I was made redundant at 53 just over a year ago and am giving early retirement a go! Im single, my lifestyle is also frugal and my target to live on is also 12K. My intention is to live on savings until 55, then drain my SIPP tax free from 55-61, then my DB pensions will kick in.

One thing I would say is try and put yourself in a position where your 12K lifestyle is out of choice, not necessity I.e have a savings buffer that will cover the occasional big expenses. So far I am living quite happily on 11K, which has included some UK holidays and spending Xmas in a hotel, but i have not had to replace my 13 year old car yet, or the boiler, or had any maintenance on the house yet. If 12K per annum was all I had with no reserve it would be stressful worrying about the next big bill, and who wants that in their retirement.

As for boredom, everyone ask that! And no! You find things to do that you enjoy. Do working people get bored every weekend and evening?

Good luck with your plans.

minimalising

Update:  well this lockdown has shown me that being home more isn't really a problem.  So you're right there Ceme3000.  As long as you have hobbies and all that, you should be fine.  My only issue is the weight I'm putting on with the baking I'm doing right now.

Also, I did change jobs in March and so far I like this one a lot more.  But with the caveat that I still don't really see myself having the energy for it in my 60s.  Certainly I'm less desperate to leave and this working from home thing has been great for me but I'm still planning to go at 55, even if I decide at the time to stay.  

Sadly, my best friend died a couple of months back.   He was about to turn 45.  So again, it kind of hit home that I don't really want to be living the office life for another 22 years.

I chatted to a pensions guy at work before I left that last job and he made a good point.  I could take my NHS pension early and while that'd mean I'd get less, I would get it for longer.  So I worked it out.  My maths might be sketchy but I put this all in Excel.  I'm not factoring in interest, potential changes etc.  I'm doing this as simply as I can.

I'd have two options.  1) Take the full state pension at 67 or 2) take a reduced pension at 55 (reduced by 45%).

Based on the current figures (just as an example), I'd be taking £9110.40 a year from 67 (opt 1) or £5010.72 from 55 (opt 2).

By the time you get to 67, I'd have taken 60129 from the reduced amount (opt 2).  At that point, option 1 would start paying out and here is what surprised me, the age at which opt 1's total payout overtakes option 2's is 81.  81?  I'm a bloke, I'll be amazed if I make it to 81 and when I do, what am I even going to spend money on? 

Disclaimer:  my maths may well be utter nonsense.  Also, if the government increases the number of years of NI payments from the current 35, that'll be an issue as I'll hit 35 years when I'm 53 I think.

crv1963

minimalising said:

Update:  well this lockdown has shown me that being home more isn't really a problem.  So you're right there Ceme3000.  As long as you have hobbies and all that, you should be fine.  My only issue is the weight I'm putting on with the baking I'm doing right now.

I chatted to a pensions guy at work before I left that last job and he made a good point.  I could take my NHS pension early and while that'd mean I'd get less, I would get it for longer.  So I worked it out.  My maths might be sketchy but I put this all in Excel.  I'm not factoring in interest, potential changes etc.  I'm doing this as simply as I can.

I'd have two options.  1) Take the full state pension at 67 or 2) take a reduced pension at 55 (reduced by 45%).

Based on the current figures (just as an example), I'd be taking £9110.40 a year from 67 (opt 1) or £5010.72 from 55 (opt 2).

By the time you get to 67, I'd have taken 60129 from the reduced amount (opt 2).  At that point, option 1 would start paying out and here is what surprised me, the age at which opt 1's total payout overtakes option 2's is 81.  81?  I'm a bloke, I'll be amazed if I make it to 81 and when I do, what am I even going to spend money on? 

Disclaimer:  my maths may well be utter nonsense.  Also, if the government increases the number of years of NI payments from the current 35, that'll be an issue as I'll hit 35 years when I'm 53 I think.

You also have option 3- use money from the SIPP and ISAs from 55-60 as per your original idea and take NHS Pension at 60- if the 1995 scheme it will be unreduced survive 60-67 drawing from SIPP the same amount pa as you will get for your SP (if you haven't exhausted the pot by then). That way at 67 when SP starts no drop in income- level income from retiring at 55.

That is what we are trying to achieve- me at 60  NHS Pension plus drawdown from SIPP, Mrs CRV her age 55- draw down from her SIPP and her other DC pot at 12.5k pa, then when I hit 67 I'll have NHS+SP- SIPP probably exhausted and when Mrs CRV hits 67 she'll have SP+ much smaller amount pa from whatever is left of her existing pension pots. Keeping her just under her tax allowance annually.

The other thing to consider is your wife. You may think she wants to carry on working but when the time comes she may not- Mrs CRV is certainly of the view that we should both retire or have the option to retire at the same time. I am 3 years older. Have you taken her retirement income into account in your plans? When we looked at our planning until we altered the plan we were on course to waste her personal tax allowance and so are putting much more effort into her pension pot. Trying to get the balance right while also trying to live a life can be tricky sometimes!

AnotherJoe

minimalising said:

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?

Are you sure you can live on £12k? Lst time i looked, a few years ago, thats roughly what i spend on the basics - utilities, insurance, council tax, food. Have you itemised what you currently spend to see if its within that £12k? Omitting morgage i presume assuming thats paid off by then? Or already?

As for your other question, well you can burn down aka "draw down" your SIPP at about £15k a year tax free once you include the 25% tax free element so its perfectly doable if your SIPP contains enough investments for that ten year period. Certainly its a good thing to do because the money you put in getsa 25% uplift and there's no tax payable on that (so none of it goes back to HMRC) as long as you withdraw below the personal allowance.

AnotherJoe

Nullboris said:

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

Speak for yourself. And consider why you need a job to give you a "purpose in life". That sounds desperate.

Thrugelmir

minimalising said:

I'd have two options.  1) Take the full state pension at 67 or 2) take a reduced pension at 55 (reduced by 45%).

Based on the current figures (just as an example), I'd be taking £9110.40 a year from 67 (opt 1) or £5010.72 from 55 (opt 2).

By the time you get to 67, I'd have taken 60129 from the reduced amount (opt 2).  At that point, option 1 would start paying out and here is what surprised me, the age at which opt 1's total payout overtakes option 2's is 81.  81?  I'm a bloke, I'll be amazed if I make it to 81 and when I do, what am I even going to spend money on? 

You need to factor in inflationary increases on both pensions. Compounding over the years has a material impact. 

minimalising

Thrugelmir said:

minimalising said:

I'd have two options.  1) Take the full state pension at 67 or 2) take a reduced pension at 55 (reduced by 45%).

Based on the current figures (just as an example), I'd be taking £9110.40 a year from 67 (opt 1) or £5010.72 from 55 (opt 2).

By the time you get to 67, I'd have taken 60129 from the reduced amount (opt 2).  At that point, option 1 would start paying out and here is what surprised me, the age at which opt 1's total payout overtakes option 2's is 81.  81?  I'm a bloke, I'll be amazed if I make it to 81 and when I do, what am I even going to spend money on? 

You need to factor in inflationary increases on both pensions. Compounding over the years has a material impact. 

I'm just doing a basic illustration of the numbers up there.  I'm sure compounding will have an impact but assuming that late 70s is where it might end up being level, that's still really old for a bloke.

crv1963 said:  You also have option 3- use money from the SIPP and ISAs from 55-60 as per your original idea and take NHS Pension at 60- if the 1995 scheme it will be unreduced survive 60-67 drawing from SIPP the same amount pa as you will get for your SP (if you haven't exhausted the pot by then). That way at 67 when SP starts no drop in income- level income from retiring at 55. 

I'm mostly in the 2015 scheme but yeah I could hold off for a while I guess.
I'm currently looking at switching my SIPP from Standard Life to Vanguard as the fees are a lot less.