What to do??

SteveC3

Hi all. I'd really appreciate you're thoughts on whether I should retire, as I am a huge procrastinator and I seem to keep pushing out my retirement date!
I'm working for a very large telecoms company and earn just shy of 50k, but have been lucky to get annual bonuses of around 12k.
I'm 61, married (OH is 56). House worth maybe 550k. I have a Scottish widows company salary sacrifice scheme worth ~475k depending on which way the Covid wind blows!
Allocation is around 50% equities in  relatively cautious funds - I stopped lifestyling as it was very bond/cash heavy.
Apart from that a Vanguard LS 80 worth 24k, but I've just creamed 10k off that as I have no other cash reserve and was getting twitchy.
Mortgage free, but have 14k debt on interest free CC. My wife is planning retiring in 4 years. We will both get full SP. I run 2 cars and a motorcycle but don't tend to replace things until they break!
My wife's salary is (1650/mth) and my monthly income (after salary sacrifice) is £1950. I'm paying £700/mth on CC and £200/mth to VLS ISA  but will pay CC of next Feb when interest free expires.
However, I have expensive hobbies - paragliding, kayaking, travel. Most of this has been funded by the bonus that doesn't always go into pension.
So, this is the plan:
Hand in notice Now! 3 mths notice period - finish mid Oct.
I figure I need £1150/mth to live as I am, plus the occassional dip to cover hols, toys, kids and unforseen expenses.
Finish Oct and pull out 21k to cover me til next tax year and pay off debt.
Take out max tax free (16.77k) for next 4 years until retirement age plus ad hoc of say 6k/yr (total 23k).
So, 23K a year until SP age should leave me at least 400k with minimal growth. Drawdown 4% from 66 onwards plus SP = 25K a year. The extra will come in handy as wife will be retired then also.
Looks fine on paper but leaving scares me, even though I get no pleasure from my job. Also, I want to do my activities whilst still being able to. ut I just keep thinking - another month, another 2k etc, etc.
Any comments or suggestions on how to improve the finances if I do leave will be much appreaciated.
Thanks

 

Marcon

Does your wife think you can afford to retire? You don't mention her pension provision and given state pensions won't kick in for either of you for some time, that might become important.

SteveC3

Good point. She has FS schemes from teaching, universities uss, and a Lloyds insurance syndicate. We estimate a total of around 14k/year at 60, so for 7 years we may need to take a bit more from my pot.
She has been pushing me to retire for some time. I think she wants the DIY done!
My other option is to wait until next August when I should get another small bonus and push the total pot to around 500k
But that's another summer gone!

Marcon

SteveC3 said:

Good point. She has FS schemes from teaching, universities uss, and a Lloyds insurance syndicate. We estimate a total of around 14k/year at 60, so for 7 years we may need to take a bit more from my pot.
She has been pushing me to retire for some time. I think she wants the DIY done!
My other option is to wait until next August when I should get another small bonus and push the total pot to around 500k
But that's another summer gone!

So what are you waiting for?

Dox

What to do? Try listening to your wife and then doing something instead of faffing around. Life's too short.

SteveC3

"I am a huge procrastinator and I seem to keep pushing out my retirement date!"
If only it were that easy!

83705628

1. Ask wife to get quotes or estimates from teacher's pension, USS and the Lloyd's one, they all have online logins. I did this for my mum and dad, mum had a mix from her whole career, one that starts at 60, one at 65 with a reduction to 77.9% if taken at 60, one at 67 with a reduction to 73.3% if taken at 60. USS have an modelling tool on their online login which is kinda accurate-ish. If she has/will have 14k a year from 60 and then 23k a year from 67 that sounds pretty sorted.
If she's currently in the teacher's pension, is she making additional contributions? Not AVCs into the Prudential DC pot they try and sell you, but buying extra DB income. You can either buy additonal income in £250 chunks or up your accrual rate, either way uses the same actuarial calculations. Mum did the latter, it's an extra £4,123 salary sacrifice now for an extra £239 income from 67, so only £175 from 60. If you work it out in Excel it's better than commercial annuity rates. Your wife contacts her employer's payroll to arrange it and they start it in the next tax year. Wife may also have automatic or optional lump sums that could well be five figures or more. Financially, if you're going to live more than 12 years after taking an optional lump sum you'll start to lose out vs keeping it as future income, but as a personal decision it can mean enjoying it while you can/are more able to.

2. In my humble amateur unqualified opinion, transfer the SW pension to either a Vanguard SIPP or a cheaper platform and buy a Vanguard target retirement fund or lifestrategy fund. You're 61 now and you want to use it imminently, and the TR2020 fund is 50% stocks 50% bonds like your SW now, but it needs to last and you sound like you can plan on above average life expectency, i.e maybe 90, so 30 years to be safe, to 2050. You could do a lot worse than picking lifestrategy 60, probably return ~3.5% this decade so 1.5% ontop of inflation. Just leave it and don't worry, even in the 2008 crash that fund would have almost fully recovered by the end of 2009. Or if you wanted a fund with a glide path go with the TR2040 fund, it will start at 80% but come down to 50:50 by 2040 and 30:70 by your life expectancy.

3. If you can be arsed with your own funds I add 3 ideas into the mix.
Firstly, the UK equity has a much higher return expectation that global for £-based investors (4.5% vs 2.5% dividend yield, £ is low, UK valuations are well below average vs a fair bit above average for global, no reason to expect significantly higher earnings growth, no currency or political risk, own a UK based asset in a UK jurisdiction, 3/4 of FTSE 100 and 1/2 of FTSE 250 earnings come from overseas anyway so why do you need global equity, only 2 crashes has the UK done much worse than the US/global markets - 1972-1974 and post-Brexit referendum). Secondly, government bond yields net of fees are basically 0, less than a cash savings account, not worth it. Thirdly, although I'm all pro-index funds, value and yield have done way worse than general equity indices this decade and tend to have a slight edge over the very long-term anyway, especially in more speculative times.

So if I was your IFA I'd do this with your SW pension after moving it to a Vanguard SIPP:
60% Stocks
40% UK stocks
24% FTSE UK All Share
16% FTSE 250
20% global stocks
10% FTSE Global All Cap
3.3% each FTSE All World High Dividend Yield, Global Value Factor Global Minimum Volatility
40% Bonds
10% money market/UK short-term investment grade/highest YTM (yield to maturity) government bond fund (NOT the emerging markets one)
10% UK Inflation-linked gilts
10% UK Investment grade
10% US Investment grade

You'll probably be fine keeping that allocation, because you already have 9+9+14=£32k joint index-linked income guaranteed anyway after SP age and even if there is volatility the great thing about owning more UK equity is say you keep your withdrawal rate at a nice safe 4%, that's just the UK's dividend, you won't even be touching the capital. Don't worry, relax, enjoy it, you've earned it. You can set up an automatic regular withdrawal for income, and if you want to rebalance it generally doesn't make a difference unless you're going to move down 5-10% i.e. from 60:40 to 555:45 or 50:50.

Happy to take questions, I'm here all week

Bravepants

Are you going to stay in your house, or downsize?

SteveC3

tcallaghan93 said:

1. Ask wife to get quotes or estimates from teacher's pension, USS and the Lloyd's one, they all have online logins. I did this for my mum and dad, mum had a mix from her whole career, one that starts at 60, one at 65 with a reduction to 77.9% if taken at 60, one at 67 with a reduction to 73.3% if taken at 60. USS have an modelling tool on their online login which is kinda accurate-ish. If she has/will have 14k a year from 60 and then 23k a year from 67 that sounds pretty sorted.
If she's currently in the teacher's pension, is she making additional contributions? Not AVCs into the Prudential DC pot they try and sell you, but buying extra DB income. You can either buy additonal income in £250 chunks or up your accrual rate, either way uses the same actuarial calculations. Mum did the latter, it's an extra £4,123 salary sacrifice now for an extra £239 income from 67, so only £175 from 60. If you work it out in Excel it's better than commercial annuity rates. Your wife contacts her employer's payroll to arrange it and they start it in the next tax year. Wife may also have automatic or optional lump sums that could well be five figures or more. Financially, if you're going to live more than 12 years after taking an optional lump sum you'll start to lose out vs keeping it as future income, but as a personal decision it can mean enjoying it while you can/are more able to.

2. In my humble amateur unqualified opinion, transfer the SW pension to either a Vanguard SIPP or a cheaper platform and buy a Vanguard target retirement fund or lifestrategy fund. You're 61 now and you want to use it imminently, and the TR2020 fund is 50% stocks 50% bonds like your SW now, but it needs to last and you sound like you can plan on above average life expectency, i.e maybe 90, so 30 years to be safe, to 2050. You could do a lot worse than picking lifestrategy 60, probably return ~3.5% this decade so 1.5% ontop of inflation. Just leave it and don't worry, even in the 2008 crash that fund would have almost fully recovered by the end of 2009. Or if you wanted a fund with a glide path go with the TR2040 fund, it will start at 80% but come down to 50:50 by 2040 and 30:70 by your life expectancy.

3. If you can be arsed with your own funds I add 3 ideas into the mix.
Firstly, the UK equity has a much higher return expectation that global for £-based investors (4.5% vs 2.5% dividend yield, £ is low, UK valuations are well below average vs a fair bit above average for global, no reason to expect significantly higher earnings growth, no currency or political risk, own a UK based asset in a UK jurisdiction, 3/4 of FTSE 100 and 1/2 of FTSE 250 earnings come from overseas anyway so why do you need global equity, only 2 crashes has the UK done much worse than the US/global markets - 1972-1974 and post-Brexit referendum). Secondly, government bond yields net of fees are basically 0, less than a cash savings account, not worth it. Thirdly, although I'm all pro-index funds, value and yield have done way worse than general equity indices this decade and tend to have a slight edge over the very long-term anyway, especially in more speculative times.

So if I was your IFA I'd do this with your SW pension after moving it to a Vanguard SIPP:
60% Stocks
40% UK stocks
24% FTSE UK All Share
16% FTSE 250
20% global stocks
10% FTSE Global All Cap
3.3% each FTSE All World High Dividend Yield, Global Value Factor Global Minimum Volatility
40% Bonds
10% money market/UK short-term investment grade/highest YTM (yield to maturity) government bond fund (NOT the emerging markets one)
10% UK Inflation-linked gilts
10% UK Investment grade
10% US Investment grade

You'll probably be fine keeping that allocation, because you already have 9+9+14=£32k joint index-linked income guaranteed anyway after SP age and even if there is volatility the great thing about owning more UK equity is say you keep your withdrawal rate at a nice safe 4%, that's just the UK's dividend, you won't even be touching the capital. Don't worry, relax, enjoy it, you've earned it. You can set up an automatic regular withdrawal for income, and if you want to rebalance it generally doesn't make a difference unless you're going to move down 5-10% i.e. from 60:40 to 555:45 or 50:50.

Happy to take questions, I'm here all week

Thanks so much for taking the time to do that. It is much appreciated. Looks like solid advice.

BritishInvestor

tcallaghan93 said:

 and even if there is volatility the great thing about owning more UK equity is say you keep your withdrawal rate at a nice safe 4%, that's just the UK's dividend, you won't even be touching the capital. 

Happy to take questions, I'm here all week

Safe withdrawal rate of 4% without touching the capital?

Notepad_Phil

SteveC3 said:

I figure I need £1150/mth to live as I am, plus the occassional dip to cover hols, toys, kids and unforseen expenses.

Does that require your OH to continue working and keep on bringing in the additional monthly £1650?

My wife wasn't actually working when I took early retirement, but I'm pretty sure if she had been then she would have wanted to retire at the same time as me - but regardless of whether she does want to retire yet or not, you should consider what is the combined income needed for you to both retire and how close are you to that.