Hoping to retire early- My plan

Holls_dad

I am 49 this year and hoping that wife and I will retire next year once we are both 50

When we retire we would have the following 

Savings in mixture of shares/ cash / isa - £250,000 we will use some of this till we get to 55(£40k a year)
DC Pension Pots totalling- £550,000 which we would take 25% Lump Sum then drawn down until 65(£40k a year)
At 65 we have DB pensions of £14k year and then state pension at 67

Property worth £250k with no mortgage left

All figures are at today’s figures no inflation and not taking any growth in my DC pension pot which is 60% equity, what would you think would be a conservative growth figure for this including inflation?

What is the thoughts on the above and do you think £40k is enough to live on

Croeso69

Doesnt seem to be enough to support £40k pa in those assets. I have a bit more than this, would draw down less and at 57 dont feel i have enough.

Thrugelmir

In the short/medium term your investment portfolio maybe exposed to a high level of volatility. Rather than focus purely on growth. You also need to protect your capital. Your choice of investments is going to be key. 

Albermarle

You seem to be in a good enough financial position, but retiring so early gives you a lot less room for flexibility if anything unexpected where to happen . Also one of you might well still be alive in 50 years time..
If you pushed the retirement date out by even just two or three years it would give more of a cushion .

mark55man

There are a number of threads (one called the number) where people discuss what they need to live on in retirement.  Some need astonishingly little, and others core costs are eye watering.  I don't think there is much doubt that £40K for a couple would be seen to be more than adequate. 

Taking the previous posters points, - 1-2 years more work, and/or £5-10k less spend would all be very much more doable and less risky,  The main worry people have, is that some bad years early into a ambitious retirement (ie earlier date/more money) can have a lifetime impact.  This is called sequence of returns risk.  Others are worried at the moment as the stock market has been in a bull run for a while and although its been falsely called many times (and ignoring the recent pandemic slump) at some point history will revisit and your plans could be toast, unless you were very cautiously invested (which also might not  support your long term goals if inflation is added into the mix

Don't get me wrong you are in a great position.  And at 50, you could try it and then still be young enough to get back to work.  Another approach would be to do a little part time work - even if less elevated than your current roles, as nothing helps money last longer than a little side income    

Amateurretiree

So at 65 all you’re going to have is your DBs and then at 67 your SPs added in? If one of you dies is the other one ok financially?

I agree you need to know how much you actually need to live on, and whether you can flex that number down if you need to.
This year has taught us we can live on 12000 per annum if we need to, though we ‘can’ have 20000 more, which we normally spend on holidays and other luxuries.
40000 is more than enough for us( we don’t plan on spending that in a ‘normal ‘ year) but it might not be enough for others. You need to work out what YOU need.

Dazed_and_C0nfused

Have you checked both State Pension forecasts (in detail not the headline figure) to understand how much it will likely cost in voluntary contributions to get the full new State Pension?

Steve182

Holls_dad said:

I am 49 this year and hoping that wife and I will retire next year once we are both 50

When we retire we would have the following 

Savings in mixture of shares/ cash / isa - £250,000 we will use some of this till we get to 55(£40k a year)
DC Pension Pots totalling- £550,000 which we would take 25% Lump Sum then drawn down until 65(£40k a year)
At 65 we have DB pensions of £14k year and then state pension at 67

Property worth £250k with no mortgage left

All figures are at today’s figures no inflation and not taking any growth in my DC pension pot which is 60% equity, what would you think would be a conservative growth figure for this including inflation?

What is the thoughts on the above and do you think £40k is enough to live on

£40K/year is enough to live on comfortably if you comfortably live on that now, less adjustment for expenses that you will no longer have.

Remember you will have a lot more time to spend money. At 50 you will both be looking to do things that cost money I'm sure.

At 90 you may just want to watch telly and drink tea, but not at 50.

I've modified my pension spreadsheet to your situation based on 4% growth and 6% growth. Both include 2% inflation (and assume 2% SP increases). 

Based on historic returns I suggest 6% growth would not be unrealistic for 100% equities and 4% growth not unrealistic for 60% equities. However you should include a safety margin.

Unfortunately I cannot insert excel files here directly but you can use the link below to download my excel spreadsheet.

https://www.dropbox.com/scl/fi/bn4je5jntn7ew0t4zn0kt/Hols-Dad-pension.xlsx?dl=0&rlkey=kq22zuxp9ncd7l6qccrcan9ag

The main difference you will see between 4% and 6% is that at 4% your pot gradually reduces and eventually runs out, whereas at 6% it continues to grow, indefinitely. That demonstrates the benefit of keeping the bulk of your investments in equities, except for enough cash to ride out storms.

EDIT -

I've just realised that the date and amount of TFLS drawn are probably wrong on the above spreadsheet. I'd assumed age 65 and the amount calculated on 25% of 69% of your total ISA/SIPP pot at the time, 69% being the proportion in your DC pot. The year pension drawdown should probably also start from 2022 not 2021.

The revised spreadsheet below assumes 25% TFLS of £138K taken at age 50 and pension drawdown beginning next year, for both 4% and 6% scenarios. This does mean the money runs out quicker for the 4% growth scenario. 

https://www.dropbox.com/scl/fi/mo2lrm2oevtzgvvo3ax23/Hols-Dad-pension-revision-A.xlsx?dl=0&rlkey=b7vixprmg2yqytr3sj7x7ud93

blisteringblue

It's a conundrum, I am in a very similar position and I "retire" in 8 weeks aged 53.   It's the million dollar question "How much is enough?"  All my spreadsheets say I have enough.   There is a really interesting spreadsheet on the forums where you can forecast all sorts of spending.  My frivilous version said I would run out of money aged 84. I'm not planning on spending anything like that so here we go.

Personally I'm fortunate that I can pick up freelance work, so I'm giving it 6 months and will take stock.  

If your forecasts are good enough then just go for it.  After this last year I'm very much live for the now.

ewaste

It seems a very back of an envelope plan to almost exhaust your funds at a pretty high rate. If it was all in cash somehow protected from all risk e.g Inflation, investment risk or as others have mentioned sequence of returns risk which pretty much sinks it. Then I'd be wishing you a long and happy early retirement...

£40k for 15 years not including inflation or investment charges is £600k and you've £800k after a decade long bull run. You mention conservative growth of your DC Pension however it could just as easily be a decade long bear market as you go for early retirement.

Each to their own but it's beyond my risk appetite, I would probably be dropping to 3 days a week until 55 or finding a job I enjoyed. 

cfw1994

blisteringblue said:

It's a conundrum, I am in a very similar position and I "retire" in 8 weeks aged 53.   It's the million dollar question "How much is enough?"  All my spreadsheets say I have enough.   There is a really interesting spreadsheet on the forums where you can forecast all sorts of spending.  My frivilous version said I would run out of money aged 84. I'm not planning on spending anything like that so here we go.

Personally I'm fortunate that I can pick up freelance work, so I'm giving it 6 months and will take stock.  

If your forecasts are good enough then just go for it.  After this last year I'm very much live for the now.

I follow @cfiresim on Twitter......she pointed out a @MichaelKitces piece that postulates that for any given moment, a 50% success rate is all you need, so long as you re-evaluate every year and adjust.

Your numbers sound feasible (not run them through my magic spreadsheet to confirm - several here you can try)....40k, for most people in most of the UK would give a luxury retirement, according to Which? magazine.

I’d say go for it......but monitor, evaluate & adjust!