Retirement Plan

scotslad

I have a pot of around £600000 at moment in pru fund. I am 55 in 3 months time.
My plan is to take 25% tax free (£150000) and draw £1000 a month from it and drawdown the maximum yearly tax free (£13600) amount from my remaining pot.
That would give me a monthly income of roughly £2100 a month tax free.
The £1000 I am drawing from tax free money would stop when i reach state pension age
Am i missing something or is it really that easy to call it at day at 55 ?
Advice welcome

Dazed_and_C0nfused

Why are taking the £150k out straight away?

Are you using some of the £150k to make up the £2,100?

Where are you getting the £13,600 figure from?

Have you checked your State Pension forecast (reading past the headline figure)?

scotslad

My mistake its £12500 tax allowance this year. Yes I would withdraw the the tax free £150000 and take £1000 a month from it and add it to my  drawdown amount of £12500 annually from remaining pot
That would give me approx £2000 a month without paying tax.
Am I missing something else ?

Albermarle

You could leave it in the pension and draw out a mixture of tax free and taxable income each month . Not all providers can manage this so you might have to transfer it .
If you did take out £150K where are you going to put it ? 

scotslad

Albermarle said:

You could leave it in the pension and draw out a mixture of tax free and taxable income each month . Not all providers can manage this so you might have to transfer it .
If you did take out £150K where are you going to put it ? 

Would spread the £150k over 3 bank accounts and withdraw £1000 month

mark55man

So a big cash balance is an important protection against the risk of market falls.  But equally cash balances will lose real value as interest is less than inflation.  So if you don't all of need it I would say keep like £36000 in cash (3 years at £1K) and leave the rest invested, possibly taken a chunk every year.  What are you going to invest the 75% in - to make sure you have enough for the long term.  Generally an after  inflation return of 3-4% is regarded as possible with cautious investments. A rule of 4% (whilst challenged) is not a bad estmate for long term sustainment so if you have £450,000 left in your fund you should expect to be able to draw £18000 or £1500 a month without depleting the pot.  This might change your view about the lump sum - you don;t have to take all 25% at once.

Finally - yest it is that simple to retire at 55, so long as you have done the work to get a pot of £600K and you are happy to live on £2K a month  

scotslad

mark88man said:

So a big cash balance is an important protection against the risk of market falls.  But equally cash balances will lose real value as interest is less than inflation.  So if you don't all of need it I would say keep like £36000 in cash (3 years at £1K) and leave the rest invested, possibly taken a chunk every year.  What are you going to invest the 75% in - to make sure you have enough for the long term.  Generally an after  inflation return of 3-4% is regarded as possible with cautious investments. A rule of 4% (whilst challenged) is not a bad estmate for long term sustainment so if you have £450,000 left in your fund you should expect to be able to draw £18000 or £1500 a month without depleting the pot.  This might change your view about the lump sum - you don;t have to take all 25% at once.

Finally - yest it is that simple to retire at 55, so long as you have done the work to get a pot of £600K and you are happy to live on £2K a month  

Thanks for the reply. I am currently in pru fund getting around 3.5% after fees. So will just leave the pot there. 

Thats a sensible suggestion about just taking 3 years money out at a time

Thanks for the input