Would you retire really early and burn down most of your DC pension assets?

LV_426

I've been doing some serious number crunching recently, well the software application I'm using has, and it's thrown up some really interesting things.
I initially wanted to see if my plan to retire at 60 (I'm 54) was feasible. Basically it is, comfortably, and the combination of DB + DC + SP plus my rather frugal lifestyle needs, means that my DC funds won't really be needed, other than bridging that gap to 65/67, and will continue to grow. This is great news for my kids of course

So I started looking at other scenarios, one of which is retiring much earlier. Like next year. The graphs, if they can be believed, show that it's possible, but at the expense of burning through most of my DC pots. I mean depleting all the capital currently in them. There would be one left by the time DB + SP income becomes available. I also have a S&S ISA which would be untouched, and continue to grow.

So what to do? Burning most of the pension assets seems scary, but then it looks like I've massively over provisioned in terms of pension schemes if they aren't used. After all, they are there to provide us with financial support in retirement.

Btw I'm getting seriously fed up with work, even though it's a job I've loved most of my career, I get somewhat jaded by the poltics and dealing with unreasonable people. That is one reason I've been looking into pensions recently.

kuratowski

Yes

(But that was 7 characters too short)

green_man

If you’ve run the numbers and it works then sure, that’s what it’s for.  I retired at 47, burned through savings and redundancy until 55, then started on DC pots supplemented by ISA income.   My asset size is higher now than when I retired (I’m using around 2.5% of current pot size per year), but obviously stock market fluctuations do impact that.

dunstonh

Funding the gap, as it is often referred to, nearly always involves the burning of investments (whether in pension or other).  It is a viable method as long as its affordable for the rest of your life (or both lives if two of you or more if you have a harem)

quirkydeptless

ajfielden said:

So what to do? Burning most of the pension assets seems scary, but then it looks like I've massively over provisioned in terms of pension schemes if they aren't used. After all, they are there to provide us with financial support in retirement.

https://www.youtube.com/watch?v=Ue3F3isiCvQ

Linton

The important thing is not how much savings/investnents you burn through before you take your pensions, but rather how much you have left afterwards.  Is it more than enough to cover any reasonable future requirements?

AlwaysLearnin

It's what I'm planning to do. 

Thrugelmir

ajfielden said:

I've been doing some serious number crunching recently, well the software application I'm using has, and it's thrown up some really interesting things.

How many scenarios have you run? 

LV_426

Thrugelmir said:

ajfielden said:

I've been doing some serious number crunching recently, well the software application I'm using has, and it's thrown up some really interesting things.

How many scenarios have you run? 

Just the extremes so far. 
My next step is to run some more scenarios at different ages, and see what the numbers/graphs look like. Fascinating stuff isn't it?

Of course retirement isn't just about money although that is important. As the Mrs said to me, what would you do with your days? And she's right, most people need some kind of structure and purpose, which a job does provide.
I mean drinking coffee and staring out the window at the world might sound great, but I think after a while you'd start to get mighty bored.

michaels

I model my pension as being the fixed bit (for us just SP for self and DW) and then I deduct from the DC pot a sum needed to get form any modelled retirement age to the SP age.  What is left I then model as providing a retirement income from retirement date for life at whatever SWR I decide is appropriate.

EG retire with DW and I 10 years to SPA needs 9.5k (SP) x 10 years x 2 = £190k.  Deduct from £690k pension pot leaves 500k, multiply by 3.5% gives an extra 17.5k pa so a 'forever' income of 9.5 + 9.5k + 17.5k = 36.5k gross.

Obviously there are other considerations like deferring SP, paying 2880 into a pension every year, best tax strategy etc etc but the point being the DC pot is there to bridge the gap until the DB/SP pension cuts in and not for any other purpose.  If the kids get a share of the house they will have more than enough inheritance and when our parents die that money may also skip a generation.

shinytop

ajfielden said:

Thrugelmir said:

ajfielden said:

I've been doing some serious number crunching recently, well the software application I'm using has, and it's thrown up some really interesting things.

How many scenarios have you run? 

Just the extremes so far. 
My next step is to run some more scenarios at different ages, and see what the numbers/graphs look like. Fascinating stuff isn't it?

Of course retirement isn't just about money although that is important. As the Mrs said to me, what would you do with your days? And she's right, most people need some kind of structure and purpose, which a job does provide.
I mean drinking coffee and staring out the window at the world might sound great, but I think after a while you'd start to get mighty bored.

It is and you don't!!

Seriously, if you're really not enjoying work and you can afford it then you should consider going.  The trouble is, once you know you can afford to do it, work somehow becomes even more irritating/stressful/boring and the lure of jacking it all in becomes stronger.