I Think I Can Retire at 57

33scott

Firstly, a thank you to you guys, I’ve been lurking on this forum for over 8 months now and have found it to be one of the best information resources available. Back in November’19 I didn’t really understand what I had in place and what my options were, now after crushing the numbers I think I can retire in 7 years at 57.

I’m currently 50, single, with an outstanding mortgage of £115k, I earn £62k a year and have savings in ISA’s and shares of £50k, I have an old index linked DB pension which pays at 60 (£14.5k pa + £42k TFLS). I’m now in a DC scheme, my pot is currently £112k and I’m contributing 25% (£1.3k a month) me 14.5% / work 10.5% through salary sacrifice and I need to do 3 more years of full time work to get full SP.

The mortgage is locked in a fixed rate for another 5 years, my plan is to overpay each year by the max allowable 5% per year and sweep the rest of my savings into my Vanguard S&S ISA, this should give me enough to clear the mortgage in 2025.

By upping my DC contribution to 27% I’m hoping to get the pot to £260k by 2027.

When I retire at 57 I will be planning to take an annual income of £28k from 57 to 65, dropping to £26k from 65 to 75 and dropping again to just whatever my DB and SP are from 75 onwards. This income will be sustained by using the TFLS’s when available and flexibly drawing down in the most tax efficient way i.e. max personal allowance where I can.

Lockdown has shown to me that I really enjoy the simpler way of life and although I like my work and I know I'm very lucky to still be employed, I just want to stop working. My challenge now is to see if I can make the numbers work for stopping at 55!

Albermarle

The plan looks OK but you have not mentioned how the DC pension ( and S&S ISA) are invested . This is important if you want to give yourself the best chance of some reasonable growth in the pots and/or protecting the pot from market downturns.

33scott

Just to give you an update I think I can now retire in 4 and a half years at 55.
I've upped my DC contribution to 35% (£1,800 per month) the pot is now £125k. I've transferred my Cash ISA (which was earning nothing) to my S&S ISA (Vanguard 80%). I've also changed the way Scottish Widows had my DC Pot invested, it was too UK focused, so I've now pushed it more into US and World Wide equities.
Fingers crossed I'm now on track and the way this year has flown by I think I'll finishing work before I know it.

Nick9967

33scott said:

Just to give you an update I think I can now retire in 4 and a half years at 55.
I've upped my DC contribution to 35% (£1,800 per month) the pot is now £125k. I've transferred my Cash ISA (which was earning nothing) to my S&S ISA (Vanguard 80%). I've also changed the way Scottish Widows had my DC Pot invested, it was too UK focused, so I've now pushed it more into US and World Wide equities.
Fingers crossed I'm now on track and the way this year has flown by I think I'll finishing work before I know it.

Good luck 33scott, I've been doing the same here for 12 months or so, I'm planning very similar

• Now 53 semi retire 58
• Downsize house take £100k cash (this is our play money!)
• 58-62 earn £12.5k pa part time is enough, do something I fancy doing!
• Wife will work at £12.5k until I'm 68 (she's 10 years younger)
• £225k in pot growing very very nicely (15%+ this year) 
• At 58 will draw down a combination of taxed and tax free between 16k and 30k (changes through the years)   the pot will run out when I'm 75 
• At which point i have another property to cash in £250k gross (i'll pay tax but that's ok) that'll see us through 
• Both due full GP at £9,141 (I think at last check)

Overall we have net £3,300 now per month of which £327 is mortgage (not much left) my calculations above equate to £3050 +/- £50 per month (£100k cash to play with as well) in my view that should be adequate.
I fancy a nice £40k motor-home to tootle round France, Spain, Cornwall etc etc in, 
It's a little like waiting for Xmas as a kid I really cannot wait!
I might even take up smoking again cos i can! haha I do miss it!

fred246

Great idea. Retire early and die early.

ElephantBoy57

fred246 said:

Great idea. Retire early and die early.

During the 18 years of the study, 12% of the healthy and 25.6% of the unhealthy group died. After taking into account factors such as the healthy group’s better education and finances, they found that healthy retirees who worked a year longer (over the age of 65) had an 11% lower ‘all-cause mortality risk”. Even the unhealthy group reduced their likelihood of dying by 9% if they delayed retirement.

I guess the thing that this forum does, is try to make sure that people have enough retirement money, in order to remain active. I think that is the key. I never wanted to retire, but these days I want to retire in order to do more things. Really I just want a different job, but semi-retirement, I only work term-time.

https://www.theguardian.com/lifeandstyle/2016/may/02/early-earlier-retirement-retire-death-risk-data-research-jobs

fred246

I was referring to the smoking comments. I should have quoted.

barnstar2077

I second the anti smoking sentiment.  Trust me, lung cancer is a truly horrific way to go. 

barnstar2077

ElephantBoy57 said:

fred246 said:

Great idea. Retire early and die early.

During the 18 years of the study, 12% of the healthy and 25.6% of the unhealthy group died. After taking into account factors such as the healthy group’s better education and finances, they found that healthy retirees who worked a year longer (over the age of 65) had an 11% lower ‘all-cause mortality risk”. Even the unhealthy group reduced their likelihood of dying by 9% if they delayed retirement.

I guess the thing that this forum does, is try to make sure that people have enough retirement money, in order to remain active. I think that is the key. I never wanted to retire, but these days I want to retire in order to do more things. Really I just want a different job, but semi-retirement, I only work term-time.

https://www.theguardian.com/lifeandstyle/2016/may/02/early-earlier-retirement-retire-death-risk-data-research-jobs

I myself plan on being just as active in retirement as I am while working.  Even so though "I would rather die on my feet than live on my knees!"

jamesd

33scott said:

I’m currently 50, single, with an outstanding mortgage of £115k, I earn £62k a year and have savings in ISA’s and shares of £50k, I have an old index linked DB pension which pays at 60 (£14.5k pa + £42k TFLS). I’m now in a DC scheme, my pot is currently £112k and I’m contributing 25% (£1.3k a month) me 14.5% / work 10.5% through salary sacrifice...

The mortgage is locked in a fixed rate for another 5 years, my plan is to overpay each year by the max allowable 5% per year and sweep the rest of my savings into my Vanguard S&S ISA, this should give me enough to clear the mortgage in 2025.

Overpaying on the mortgage seems like throwing money away, even if you hold only cash in a pension with overpayment money.

For each 1k gross at basic rate that you sacrifice your net cost is no higher than 800 - 120 = 680. You end up with 1k in the pension. 25% out tax free at 55 without affecting pension contribution  limits then the remainder gradually drawn at basic rate gets you 250 + 600 = 850 out. That's a 25% gain, free of investment risk. Equivalent to 4.6% compounded annually. You may well also take investment risk but cash without any employer NI added is unambiguously profitable compared to mortgage overpayments.

You can get 52% relief on much of the money. NI is calculated for each pay period, tax annually. Sacrifice down to minimum wage in a month and some of the money will be saving you 2% NI but much will be in the 12% employee NI range so you save 52% instead of 42% on your higher rate income. Concentrate into as few months as possible to maximise your gain, in the rest do no more than it takes to get employer matching.

Whether you actually should repay the mortgage at 55 even when you can is an interesting question and I think the answer is no, at least not fully. Consider your cash flows:

Age 68: 9k state pension plus 14.5k DB + safe drawdown rate on DC.
Age 60: 14.5k DB  + safe drawdown rate on DC possibly plus DC top-up to replace state pension.
Age 55: safe drawdown rate on DC possibly plus DC top-up to replace state pension and DC top-up to replace DB.

For drawdown the earlier years are when you're most vulnerable to investment drops. That's also when you're likely to be drawing on the DC at your highest rate even without mortgage repaying. So perhaps consider:

1. A retirement interest only mortgage with a plan to switch from interest only to added regular overpayments from age 68-73, perhaps after some state pension deferring. RIO is a relatively new product.
2. A repayment mortgage ending at age 85, say.

What these approaches do is shift the mortgage repayment cost to a time with less risk. That's particularly true for RIO, which commonly has death as the ultimate end date. They also allow for more investment growth and greatly reduce the risk associated with committing to a very large lump sum payment at a fixed time when equities might be down.

Nick9967

fred246 said:

Great idea. Retire early and die early.

sense of humour missed that point fred246 , there was a reason I added "haha!"  at the end of the smoking point, having smoked for 40 years and now given up for 2+ years I class myself as having the right to joke about it! and yes i still miss it!
I'm full of joy , covid 19 now has an end in sight, retirement on the horizon! more hobbies than I can fit in even if retired!