Retirement plan and life change

jeannot18

To recap some of the replies, yes the rental idea was that we don't know Devon or Cornwall that well, we know that going on holiday somewhere does not pain the true picture. We are just thinking that the lifestyle there would suits us. Plus we don't want to rush to one part of the county to only find out that we made a mistake and we could have pick up something else (but this will imply additional cost of storing our stuff maybe).

Re retirement i am paying the maximum i can in work pension with my company matching the contributions i make. If i had started 10 years earlier doing that i would have been obviously in a better position (main pension pot worth just under £200K as we speak).

Yes i realise that trying to achieve 6% return will involve taking some risk (unless the interest rates decide to start going up)

all_over_it

You say your pension isn't the greatest, but start with how much, starting when, each of you can expect in pensions. Including State Pension, for which you can check your record, if you don't know it.

If you can live off about £12k excluding any rent/mortgage, then you may well have enough pensions to live off — when they start paying out.

If that's the case, then you could use cash from selling your current home for 2 purposes: buying a cheaper home in Devon/Cornwall, and bridging the gap in income until your pensions start. It will probably feel wrong to spend some capital to bridge the gap, instead of just spending income, but it can make perfect sense when you have a plan and know when your pensions will kick in. (More sense than pushing for a 6% return, which it's difficult to achieve.)

As others have said, renting initially after moving to a new area may make sense. But few retired people find private renting attractive in the longer term.

jacksmith93

studies show3.2% per year is a realistic and sustainable amount to withdraw from an investment over the long term. However that presumes you want the capital to be sustained. However you may not want to, in that case I would definitely recommend seeking professional advice. You may be able to take a larger withdrawal amount assuming you and your partner have full state pension as it takes the pressure off of private pensions/investments in terms of withdrawals. Your plan re renting a property is sensible, we brits love to own property and I get why it causes controversy but from a financial perspective it can be savvy. Provided you can live with someone else controlling how long you live in a property (to a degree). If you’re still in work pension contributions will increase your savings pot with the tax reliefs. Seek a local IFA (not part of a large firm) expect to pay about £1k for one off advice, it’ll be well worth it, this is a big life decision. I personally know people that have done something similar but you need to make sure you can afford to do this. Good luck!  

Albermarle

Seek a local IFA (not part of a large firm) expect to pay about £1k for one off advice, it’ll be well worth it, this is a big life decision.

As your finances are going to be a bit tight, then you have to make sure they are optimised , so the above advice would seem the best route forward.

all_over_it

Albermarle said:

As your finances are going to be a bit tight

Hold up ... We're all getting a bit distracted by the high target return of about 6% ... We don't have enough info to go on yet, but it sounds like there is no such need for a 6% return at all.

jeannot18 said:

(main pension pot worth just under £200K as we speak)

You're too modest! Most people don't have that large a pension pot

More practically, if you stopped work now, and switched £108K of that pension into cash or similarly stable investments, then you could draw £12K income from that for the next 9 years (until approximately when you reach State Pension age), covering your spending requirements (excluding rent/mortgage).

After 9 years, you'd get State Pension (what does your State Pension forecast say?), probably covering a large part of the £12K from that point onwards. And you'd also have the other £90K-ish in your pension pot, which would have been kept in longer-term investments over the 9 years, so hopefully have grown. Plus whatever pension (State and otherwise) your other half has coming.

So you are quite likely well covered for income, even without downsizing to Cornwall to free up equity from your property. You said the mortgage is nearly paid off. Of course, if you'd prefer Cornwall anyway, as a lifestyle choice, after stopping work, then go for it!

It sounds much more like you are very well placed, not that things are tight, nor that there's any need to chase risky 6% returns. But do give us more figures about your State Pension forecast, your other half's age and pension position, and any other assets floating around that you haven't mentioned; then we could comment more sensibly.

jeannot18

My state pension as today will be £8,797.31 a year (£168.60/week)

all_over_it

jeannot18 said:

My state pension as today will be £8,797.31 a year (£168.60/week)

Great: so that's already at the maximum for the new state pension. I.e. it won't go up if you keep working longer. It does go up with inflation, etc.

So, if you wanted to stop working now, and have £12,000 a year to spend, then the part of that that your state pension doesn't cover is:

- £12,000 a year for the first 9 years (approximately).

- £3,200 a year after that.

You can reasonably expect to cover both the above with your pension pot of almost £200K, by:

- spending down £108K of the pot over the first 9 years, by drawing an income of £12,000 a year.

- leaving the other c. £90K of the pot invested for 9 years, after which it would probably have grown a bit, and could be used to produce an income of £3,200 a year. Perhaps by using the remaining pot to buy an index-linked annuity at that point. Though you could consider other options, too.

These calculations ignore various things. The only negative thing they ignore is the need to pay off your outstanding mortgage. The positive things they ignore include the possibility of freeing up more money by moving to a part of the country where properties are significantly cheaper (which would surely be more than enough to pay off your outstanding mortgage, so I don't see why you need to keep working until it's paid off — unless you want to), and any pensions your other half will receive.

Feel free to give us more info about your other half's pensions, or any other info. But it sounds like you are well-placed, regardless, if you use your existing pension pot appropriately.

LHW99

I would suggest though - try staying in your preferred location for around a month in mid-winter, preferably when there's a good storm / plenty of snow. Hire a cottage, rather than going to a comfy hotel, and see how you find it. That sort of life is great in the summer, but can be a shock when there are few people around and travelling to shops etc gets difficult.

jeannot18

LHW99 said:

I would suggest though - try staying in your preferred location for around a month in mid-winter, preferably when there's a good storm / plenty of snow. Hire a cottage, rather than going to a comfy hotel, and see how you find it. That sort of life is great in the summer, but can be a shock when there are few people around and travelling to shops etc gets difficult.

That's we want to do, experimenting the chosen area at different time of the year, we realise that it is a major move for us after more than 20 years in the same area. A little bit scary, but both my wife and i are keen to move somewhere a bit more rural and experience the outdoors more too. we will have to change some of our living habits (shopping, hobbies etc) but we may be able to get rid of one car, which economically will be good.