I want to retire early - how can I plan for it?

Thrugelmir

Have a plan to clear your debts prior to retirement. Don't rely on markets to provide you with an easy solution. 

GunJack

Sell cars and pay off all debt and rest off main mortgage, remortgage for long term fix, then do the live off Isa and ram pension conts. This will help by not servicing debt and probably reducing mortgage stress. It's easier to stop work and live off pension income if outgoings are minimal

LHW99

Start by paying off / getting rid of the highest interest debt (credit card?) then work on the next.

You could always look at offset mortgages, and see if you can use some of your savings to in effect reduce the interest being paid on the mortgage

Terron

Flat worth £100k bringing in £500pm net - after the mortgage payement I assume. So a 10% return on £60k of equity. That's pretty good.

That plus the state pension would meet your lower target (£20k) after state pension age. £8k a year on top of the rent would do it - for 25 years that would be £200k. If it weren't for your debts your would already have enough.

You could take £10k a year drawdown on your pension from 55 putting you up to your higher target of £30k. Another £150k would cover the 15 years before then. But you have savings of over £350k. Again only your debts are stopping you. As the song should go "I owe, I owe, so it is off to work I go".

The mortgage on the flat does not matter. That is being covered. The interest rates on your car loan and credit card are probably high. Pay them off. Hopefully the mortgage on your home has a low interest rate, less than your investments are earning. So paying that off should wait.

10% net return on a property is good. Relying on a single property for a large part of your income is not. If you can get another similar property the risk would be much less. But only if you enjoy being a landlord or have an agent you can trust.

Gaberdeen

I thought I'd come back and update this as I'm now at another cross roads.

I carried on with the offshore job, got a pay-rise and upped my pension contributions significantly - I also paid off my flats mortgage and paid off the car loan

Good Bits:

~£580,000 in a stocks and shares ISA which is yielding around £50,000 a year in dividends (8-9%) these are reinvested as they accumulate.
 ~£312,000 in my workplace pension scheme (with increased contributions and no LTA it has a £1.3m projection at 57),
~ Flat now valued at £85,000 but conversely pulling in £650 net a month in rent
~Sold one of the cars (Bye Bye BNR34) and after paying off the flat mortgage with the proceeds have £100,000 in cash of which £80k is locked up earning 5% until November)
~Remaining car worth around £50,000 - no finance, owned outright.
Take-home pay is around £2900 a month after increasing pension contributions.
Partner is taking home ~£1500 a month net

Bad bits:

~£4000 credit card on 0% due November
~£200,000 mortgage on current home property (3.62% until Jan, best fix after Jan is 3.81% currently)

I've been surprised by how lucky I've continued to be on the stock market - as a de-risking strategy I've focused on value & income investments hence why there's a largish income of ISA money that gets reinvested as it accumulates.

The car was costing an arm and a leg to insure and maintain so I'm relieved I got it sold, the new owner is delighted so money well spent / earned.

Our mortgage is due in January and I'm cogitating on paying off the entirety of it - but how I go about it is a conundrum.

Using ISA money will deplete the tax-free income and moreover would take 10 years to replace (at current £20k per year limit on ISA contributions)

The flat is yielding a decent return even though it's fallen in value - the tenants are happy enough I think but if they decided to leave before January I'd be amenable to selling up as the income is unavoidably subject to tax unlike the ISA - how long that would take to sell is anyone's guess, though.

I am erring towards putting the £100k cash against the mortgage, knocking it down to £100k outstanding but maintaining the level of payments so as to over-pay?

I was hoping that I could do this using a mortgage off-set account so that it eat's away at the interest payable on the principle more and more over time. This offset account could always receive the potential sale proceeds of the flat (if it happened) and that would probably completely eliminate interest payments.

Am I missing anything super obvious, here? I agree with previous commentators that paying off the remaining debt would the last hurdle in (at least one of us!) retiring.

Any feedback duly welcome.

Albermarle

The level of interest payable on the mortgage ( now or in the future) is a missing bit of info .

hugheskevi

Something you could consider is to get a no-fee offset mortgage such as this one, and transfer sufficient funds from your ISA to a flexible ISA, and then withdraw those flexible funds and fully offset the mortgage. 

Withdraw funds from offset account and redeposit funds in ISA just before the end of financial year, then withdraw from ISA and put in offset account again at the start of the next tax year to fully offset again.

As more funds come in, whether from wages or one off events, they can go into the ISA. Interest costs would be small and there might be some transaction costs, but you get a lot of flexibility.

FIREDreamer

What do you have in your ISA yielding 8% to 9% per annum?

Gaberdeen

FIREDreamer said:

What do you have in your ISA yielding 8% to 9% per annum?

I have a mixture of about 80 different trusts, funds and blue chip equities (UK and US), as well as bonds and ETFs. The aggregate yield across the whole portfolio comes in at around 8\9%

Some are as high as 20% a year (aircraft leasing trusts) or as low as 4% (private equity)

Gaberdeen

hugheskevi said:

Something you could consider is to get a no-fee offset mortgage such as this one, and transfer sufficient funds from your ISA to a flexible ISA, and then withdraw those flexible funds and fully offset the mortgage. 

Withdraw funds from offset account and redeposit funds in ISA just before the end of financial year, then withdraw from ISA and put in offset account again at the start of the next tax year to fully offset again.

As more funds come in, whether from wages or one off events, they can go into the ISA. Interest costs would be small and there might be some transaction costs, but you get a lot of flexibility.

I like the idea of this, I will definitely take a look at this in more detail.