Can i afford to retire (if pushed)

Robwales

Hi – like many on here I am looking at the future and potentially a “way out” if I jump or pushed

I fully appreciate my posittion is a very very good one...but appreciate any feedback on the validity of my numbers and potential to retire early in the next couple of years (even in 2022)  – if I “need” to due to job circumstances

• I am 50 yr old – and to date ive managed to save £850k in 2 individual DC pension pots – one via work worth £250k (I match their 4% contrib) and the other bigger one (£600k) I try and top up annually to the max total allowance.
• My other half is 47, doesn’t earn a wage – has £30k in a DC pension (ie via £2880 per yr). 
• We also have
•       £400k share ISA
•       £150k cash 
• No other assets
• No mortgage, no other debts.
• ….But we do have 3 kids aged 18, 17 and 7…with University approaching!
• On the HMRC website, it looks like we will get the full SP
•        Me in 2.5 years time,
•        Other half in 5 years time – but NI credits (child related) will just about cover that

Basic Questions:

1. If I retired before I completed my 2.5 yrs NI years….could I pay for these?

2. What kinda annual income could I expect to get from the assets we have to date…I estimate about £50k per anum before we collect the SP (if we reach that far) ….does this seem feasible?

Thank you for any immediate guidance / thoughts
Rob

Diplodicus

Thank you for any immediate guidance / thoughts

1) Some "how am I doing"? threads may appear rather daunting (and self-congratulatory) to the wider audience.

2) You may wish to rearrange the words in the title.

1980ds

Nothing like sitting on £1.5m and looking for means tested uni finance! 😂 

Robwales

1980ds said:

Nothing like sitting on £1.5m and looking for means tested uni finance! 😂 

yeah i agree - that was a bit of a !!!!!! take  / off the cuff remark to be fair - i will delete it.  I can assure you as an additional tax band payer who is salaried (ie PAYE) i have contributed a fair chunk and will continue to do so

Robwales

Diplodicus said:

Thank you for any immediate guidance / thoughts

1) Some "how am I doing"? threads may appear rather daunting (and self-congratulatory) to the wider audience.

2) You may wish to rearrange the words in the title.

understood - edited - i really am not wishing to be up myself. 

I feel like i might digging a hole here - but this post was not supposed to be a "willy waving" contest i can assure you.  i know im lucky in many respects - but also i have worked my nuts off for 30 years to get to this position, with zero financial help from anyone / inheritance etc. I am not bragging - just trying to get some feedback as work is very stressful (perhaps goes hand in hand with the £££ right) and im wondering about the med term future.

Albermarle

Basic Questions:
1. If I retired before I completed my 2.5 yrs NI years….could I pay for these? Yes  and it is very good value for money
2. What kinda annual income could I expect to get from the assets we have to date…I estimate about £50k per anum before we collect the SP (if we reach that far) ….does this seem feasible? Yes something in that area ( before tax ?) 

But we do have 3 kids aged 18, 17 and 7…with University approaching!

Many posters seem to think that sending kids through Uni , is going to be some vast expense.

However they can take a Student loan for all the fees and some of the maintenance money . In fact it is usually recommended to do this rather than pay up front.

So even for a more well off family around £6K per year per student is about what is needed, to help with accommodation costs for example. I  do not think this would seriously dent your retirement plans 

ex-pat_scot

Albermarle said:

Basic Questions:
1. If I retired before I completed my 2.5 yrs NI years….could I pay for these? Yes  and it is very good value for money
2. What kinda annual income could I expect to get from the assets we have to date…I estimate about £50k per anum before we collect the SP (if we reach that far) ….does this seem feasible? Yes something in that area ( before tax ?) 

But we do have 3 kids aged 18, 17 and 7…with University approaching!

Many posters seem to think that sending kids through Uni , is going to be some vast expense.

However they can take a Student loan for all the fees and some of the maintenance money . In fact it is usually recommended to do this rather than pay up front.

So even for a more well off family around £6K per year per student is about what is needed, to help with accommodation costs for example. I  do not think this would seriously dent your retirement plans 

Indeed.
I'd budget for £500pm per student as "contribution", on the basis of your salary. If you manage the official "income" figure down in early retirement, then they may be eligible for more of the topup loan, but I think it prudent to budget for the max support from you.
Against your assets and projected ER drawdown, I think it's a modest contribution. 
We contribute £500pm for each of our uni students (more or less, depending on location- we effectively pay the accommodation).
You will at least have a good gap between no 2 and no 3' s uni costs.

Diplodicus

You sound like a decent fellow, Robwales. 

When you say "saved", do you mean that you have all the gear for placing excess income tax-efficiently but no idea how to invest it to best grow your fortune? Because that ability is going to make a huge difference to the outcome of a decision to retire early.

DT2001

1. Yes
2. There is a current thread headed “Foolishness of the 4% rule” which will give you a few different approaches to how you can work out what is reasonable to draw and what suits your particular circumstances. jamesd (forumite) has also put together a good analysis of safe drawdown methods. £50k ballpark looks good.

We have 4 kids and thought Uni years would put a dent in our budget. Albermarle is right about the help they can get and you’ll get feedback on the varying ‘cost’ to bank of Mum and Dad depending on length of course, location and any work the children can undertake.
Our eldest ended up doing an apprenticeship, our second went to France (€170 p.a. tuition fees but after Brexit I think €3k) found accommodation in exchange for babysitting (on website geared to students), the 3rd is hoping for Oxbridge so definitely more costly! We are pumping all possible into pensions, being haphazard in the past, and then found that would help with level of maintenance loan, 4th if they go will when we’re semi retired. 

Good luck

Robwales

Thanks for all the feedback - the 4% is for Pension only right....or would inc ISA??

ex-pat_scot

Robwales said:

Thanks for all the feedback - the 4% is for Pension only right....or would inc ISA??

the "4% rule" is a convenient shorthand for sustainable asset growth over the longer term.

The equity market has returned approx 8% returns since records began in the late 1800s or so, with long run mean inflation of 3%. That means that the market has returned a net 5% above inflation, through the Wall St crash, world wars etc and the turmoil of the 20th Century.

A bond portfolio returns a slightly lower long run rate; a blended 60:40 or 50:50 portfolio has tended to return only slightly less than a pure equity portfolio, and with lesser volatility.

All of these figures are historic, but the data gives us the best chance of modelling what is likely in the future.

So how to use this insight:

1. keeping your assets invested for the long term is likely (not certain) to return you 5% net of inflation returns into the future.
2. creaming off the surplus (usually noted as 4% plus a little allowance for trading and holding costs) would give you a sustainable income from these assets, whilst they maintain their value in line with inflation.


It doesn't really matter which wrapper the assets are held in - whether SIPP, ISA or unwrapped investment account - as long as you are invested. It's only the tax treatment that differs:  4% return from your SIPP will be taxed as pension income, whereas will be tax free in the ISA.