How to die broke, or as close as possible?

freebo_2

We're in our 50's and am looking at when and how and where we should plan our retirement.

We have no heirs.

Most of our funds are held outside of a pension, partly because we've been working overseas for some time and we have the option of taking out our Australian pension funds in cash anytime after 60, tax free. Likely we'll draw this down over a few years as we need it. We also have a good proportion of our wealth in stocks and of course home equity.

So basically, when we move back, we can treat our pension pot and investments as a lump sum, almost all of it will be available immediately.

The remaining will need to last us until we fall off the twig, we'll also have the UK state pension which we've made sure its topped up. I don't foresee buying any sort of annuity as they seem to represent poor value.

Of course the great unknown is how long will we need, I have an idea we might downsize the house in our 70's to release more funds. 

Ideally we'd like as much spending power as possible without running out, hence the deliberately flippant question, "how can we die (almost) broke"?  Which in reality is how can we retire as early as possible and spend as much as possible? 

blues

Have you read this book:

Die with Zero: Getting All You Can from Your Money and Your Life by Bill Perkins

bostonerimus

Have you checked that once you become as UK tax resident that under the UK/Australia tax treaty your pension withdrawals will remain tax free? Will you be leaving any funds in Australia when you move back or will you be liquidating everything and investing it in the UK. This is important again for how you will be taxed.

I think you should rephrase your question as "how do we make sure we don't run out of money so we can give most of it away in old age". This end sup being a balancing act between your asset allocation, spending and lifetime, but if you have something like a very broad 60/40 mix between equities/bonds and cash there's a very high probability that you can sustain and inflation linked starting withdrawal rate of 4% for 30 years. Then you can give money to charities when your needs are few and well known.

JohnWinder

I think this is designed for that: https://www.bogleheads.org/wiki/Variable_percentage_withdrawal

freebo_2

bostonerimus said:

Have you checked that once you become as UK tax resident that under the UK/Australia tax treaty your pension withdrawals will remain tax free? Will you be leaving any funds in Australia when you move back or will you be liquidating everything and investing it in the UK. This is important again for how you will be taxed.

I think you should rephrase your question as "how do we make sure we don't run out of money so we can give most of it away in old age". This end sup being a balancing act between your asset allocation, spending and lifetime, but if you have something like a very broad 60/40 mix between equities/bonds and cash there's a very high probability that you can sustain and inflation linked starting withdrawal rate of 4% for 30 years. Then you can give money to charities when your needs are few and well known.

If I choose to I can withdraw my entire Australian pension account as cash and pay no tax on it, in Australia, at 60. Then I can put that sum in a UK bank account or any other investment and as far as I understand it the UK taxman is only interested in any income produced, rather than the capital amount.

OldMusicGuy

Spend money early in retirement then annuitise what you have left when you get older, say late 70s/80s. That way your wealth dies with you. Annuities will be better value when you are older and it also saves having to manage investments when you are in your dotage.

tacpot12

You could also leave your personal pensions to charities that you want to support or have supported in the past. 

kidmugsy

freebo_2 said:

 I don't foresee buying any sort of annuity as they seem to represent poor value.

Don't rule them out for all time.  They seem poor value at the moment but things might change.  Interest rates presumably won't stay near zero perpetually.

freebo_2

tacpot12 said:

You could also leave your personal pensions to charities that you want to support or have supported in the past. 

As I said most of our funds are outside of UK personal pensions so will draw them down over time. Whatever's left when we're gone will be going to the RSPCA or similar.

bostonerimus

freebo_2 said:

bostonerimus said:

Have you checked that once you become as UK tax resident that under the UK/Australia tax treaty your pension withdrawals will remain tax free? Will you be leaving any funds in Australia when you move back or will you be liquidating everything and investing it in the UK. This is important again for how you will be taxed.

I think you should rephrase your question as "how do we make sure we don't run out of money so we can give most of it away in old age". This end sup being a balancing act between your asset allocation, spending and lifetime, but if you have something like a very broad 60/40 mix between equities/bonds and cash there's a very high probability that you can sustain and inflation linked starting withdrawal rate of 4% for 30 years. Then you can give money to charities when your needs are few and well known.

If I choose to I can withdraw my entire Australian pension account as cash and pay no tax on it, in Australia, at 60. Then I can put that sum in a UK bank account or any other investment and as far as I understand it the UK taxman is only interested in any income produced, rather than the capital amount.

I think that's right if you do it while an Australian tax resident. If you do it when you are a UK tax resident the treaty says that your Australian pension is taxable in the UK so you'd have to check with HMRC. Check out Article 17

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785856/Synthesised_text_of_the_Multilateral_Instrument_and_the_2003_Australia-UK_Double_Taxation_Convention_-_in_force.pdf

freebo_2

bostonerimus said:

freebo_2 said:

bostonerimus said:

Have you checked that once you become as UK tax resident that under the UK/Australia tax treaty your pension withdrawals will remain tax free? Will you be leaving any funds in Australia when you move back or will you be liquidating everything and investing it in the UK. This is important again for how you will be taxed.

I think you should rephrase your question as "how do we make sure we don't run out of money so we can give most of it away in old age". This end sup being a balancing act between your asset allocation, spending and lifetime, but if you have something like a very broad 60/40 mix between equities/bonds and cash there's a very high probability that you can sustain and inflation linked starting withdrawal rate of 4% for 30 years. Then you can give money to charities when your needs are few and well known.

If I choose to I can withdraw my entire Australian pension account as cash and pay no tax on it, in Australia, at 60. Then I can put that sum in a UK bank account or any other investment and as far as I understand it the UK taxman is only interested in any income produced, rather than the capital amount.

I think that's right if you do it while an Australian tax resident. If you do it when you are a UK tax resident the treaty says that your Australian pension is taxable in the UK so you'd have to check with HMRC. Check out Article 17

https://assets.publishing.service.gov.uk/government/uploads/system/uploads/attachment_data/file/785856/Synthesised_text_of_the_Multilateral_Instrument_and_the_2003_Australia-UK_Double_Taxation_Convention_-_in_force.pdf

I will check however my understanding is its savings, not income. If I were to leave it in place and draw an income from it that would be different.

Here in Aus its known as Superannuation, and is a purely personal account, which you and your employer contribute to. There's also an Australian state penion but its means tested and I wouldn't qualify.