Retirement planning, shortfall between 60 and 67

Audio68

Me and my wife both have full workplace pensions that payout at age 60 and if possible we would like to retire then. Our state pension is payable at age 67. The two combined are sufficient for us to enjoy a good retirement. We also own our own home without mortgage but plan to sell and move to rented or seriously downsize at around 67. We have no dependants.  We also will have lump sums and savings but are there any suggestions for funding a £50k shortfall between 60 and 67?

AlanP_2

I guess you would use your lump sums and savings?

You haven't said how old you are so we have no idea whether you need to save up for the 50k shortfall over 12 months or 12 years so it is difficult to provide useful comments.

What do you mean by "full workplace pensions" - Are they DB or DC and is there an upper limit on how much they can be worth?

Dazed_and_C0nfused

Have you checked your State Pension forecast on gov.uk and read past the likely headline of £175.20 to see what you have actually accrued to date (usually shown to 5 April 2020 at the moment).

Anonymous101

Difficult to say when we don't know your age, income, savings rates etc etc As a quick post the initial things that come to mind would be:

Saving an additional £50k prior to 60. Downsizing sooner. Get a lodger.
Working part time for the 7 years... £50k isn't much between two of you over 7 years, only £3,500 p.a. each.

Audio68

Ok so further info. We’re both 52. We’ll get full new state pensions (forecasts done). Our workplace pensions are final salary civil service with 40 years contributions. We are also saving and have been for 10 years. At age 60 we will use most of our lump sums and all of our savings to pay ourselves the state pension amounts every year as a top up. We’ll be around £50k short but will be selling a £300k house at age 67 and move to rented. I don’t want to save any more each month as that would effect our standard of living. We already save £500/month

Dazed_and_C0nfused

Rented forever or temporary before new (to you) house purchase?

Audio68

Yes forever probably, small chance we would downsize but that would generate about £150k savings

AlanP_2

Audio68 said:

Yes forever

That is a brave move for retirees I would suggest. What do you see as the possible advantages of paying rent for 30-50 years out of your pensions compared to living in your paid for house which will increase in value over 30-50 years?

Audio68

Have no dependants so no one to leave anything to. We plan to travel for extended periods and a rented retirement flat (already costed) would be affordable and worry free. A move to rented at 67 is not significantly young IMO, but I hope to pay rent for 20-25 years (age 87-92). After that I won’t care

Anonymous101

Audio68 said:

Ok so further info. We’re both 52. We’ll get full new state pensions (forecasts done). Our workplace pensions are final salary civil service with 40 years contributions. We are also saving and have been for 10 years. At age 60 we will use most of our lump sums and all of our savings to pay ourselves the state pension amounts every year as a top up. We’ll be around £50k short but will be selling a £300k house at age 67 and move to rented. I don’t want to save any more each month as that would effect our standard of living. We already save £500/month

Where are you saving? In a post tax account?
I'd suggest if you're not doing so that you could use a SIPP to save and benefit from the tax savings, depending on your income that could easily be over £50k between the two of you over the 8 years until you're 60.
Using this route you could also drip feed your current savings into the SIPP and benefit from the tax relief on that.
Also when you come to retire there may be benefit from not drawing a lump sum but spreading the 25% Tax free element over the drawdown. This might also result in increased monthly payments by not taking the TFLS on your DB pension.

Thrugelmir

Audio68 said:

 I don’t want to save any more each month as that would effect our standard of living. We already save £500/month

That's the choice we all face. No possible to have ones cake and eat it.  Either up the £500 per month to a more realistic level or be prepared to continue to work for a while longer , albeit part time.