Sources of advice / software tools re: when to retire (and on how much)

Kodadda

As I get closer to 55, I'm starting to consider when I can retire – e.g. whether I should take early retirement, or whether I should continue to invest until 60, 65 or even longer. In turn, that's likely to influence what I do for work until then (i.e. how much I need to earn!)

I'm pretty sure that my personal pension doesn't have nearly enough for early retirement (even for a modest income) but I also have a couple of other investments that I can use (e.g. an ISA) and I could also consider equity release, as I'm planning to move from London to Scotland.

However, I'm struggling to work out how much equity I'd need to release, or how much longer I'd need to work, in order to get a reasonable income. It's not the kind of thing that either Pension Wise or the Money Helper Service seem to be able to help with. And, since I might not be looking to invest, it's not necessarily a good fit for an independent financial adviser either. (I'd be happy to pay for their time, but not 1% or more of my investments for such advice!)

Are there any other sources of advice? Or decent software tools I can use to try out different scenarios?

Many thanks.

Pat38493

I guess you have come to the right forum board for these type of questions.

There are some canned spreadsheets that you can download from various places, and there are a few web based tools that can be used, like Timeline.io which is normally a paid tool used by advisers but you can get a demo version to play with.  There are also some rough rules of thumb you can use like the famous "4% rule".

However before you start plugging numbers into spreadsheets or software:

1) Have you got the full details of what pension provisions and savings you have right now - you say that "you are pretty sure" that your private pension won't be enough but the first step is to get the details of all your provisions, and to understand whether they are all DC pensions or whether you have any DB (defined benefit) pension assets available?  Feel free to post the details here if you are willing to do so and you will get some comments (lots of people do).  Also if you are planning to get funds from downsizing or moving to a lower cost area of the country, you obviously need to get the valuation of your house and the budget of the place you want to buy.

Once you have all that data, there are a few different tools that can help a bit.

2) Have you checked your state pension estimate on gov.uk to see what your state pension entitlement is or will be?  It's also important to check whether you need to top up your state pension entitlement.

dunstonh

However, I'm struggling to work out how much equity I'd need to release, or how much longer I'd need to work, in order to get a reasonable income. It's not the kind of thing that either Pension Wise or the Money Helper Service seem to be able to help with.

That is because what you are looking for is advice.  Pensionwise/moneyhelper do not provide advice.

And, since I might not be looking to invest, it's not necessarily a good fit for an independent financial adviser either. (I'd be happy to pay for their time, but not 1% or more of my investments for such advice!)

Why do you think that?  IFAs are financial planners and you can pay for advice without a financial product being bought.   Certain business models won't be interested (the type that aim to hoover up funds under management) but as a simple one-off advice transaction, that is fine.

Kodadda

Thanks for the helpful response, @Pat38493.

I've collated details of all my pensions and other investments – including a valuation of my home (and an idea of what I'd need to spend elsewhere). I have a very small DB pension (i.e. £2k-£2.5k pa) and am six years' worth of contributions short of a full state pension (with no previous years for which I can make voluntary contributions). My DC pension is just £115k (so obviously not enough for much by itself!) But I have around £250k in other investments (e.g. ISA, bond, and savings). And I could release up to £300k in equity by relocating.

If I understand correctly, the 4% rule suggests that this could generate an income of up to £26.6k – i.e. 4% * (£115k + £250k + £300k) were I to maximise my equity release and retire immediately. But obviously that ignores state and DB pensions.

I'll check out timeline.io – although I think I might have looked at it previously and found it overcomplicated for my level of knowledge. So I'd welcome any other suggestions too.

Notepad_Phil

Kodadda said:

...
If I understand correctly, the 4% rule suggests that this could generate an income of up to £26.6k – i.e. 4% * (£115k + £250k + £300k) were I to maximise my equity release and retire immediately. But obviously that ignores state and DB pensions.
...

A 4% withdrawal rate comes from US data and was meant in the worst of times to leave just enough money so that the pot hadn't run out over the typical length of retirement.

Consequently I'd reduce the 4% to 3.5% as you're in the UK and then I'd definitely consider reducing it even further as retiring immediately would mean your retiring at least 12 years before your state pension kicks in. So depending on how risk averse you are, maybe down towards 3%.

JohnWinder

The 4% rule isn’t about ‘generating income of 4%’. It’s about you taking 4% of your investments out to live on, during the first year of withdrawing, and increasing the amount each year by the inflation rate. But you’re on the right track, and it’s a useful place to start. It presupposes you have a properly invested portfolio, on which there is also plenty of good public information for free.Lots of info here: https://www.bogleheads.org/wiki/Safe_withdrawal_rates

Simon11

Kodadda said:

Thanks for the helpful response, @Pat38493.

I've collated details of all my pensions and other investments – including a valuation of my home (and an idea of what I'd need to spend elsewhere). I have a very small DB pension (i.e. £2k-£2.5k pa) and am six years' worth of contributions short of a full state pension (with no previous years for which I can make voluntary contributions). My DC pension is just £115k (so obviously not enough for much by itself!) But I have around £250k in other investments (e.g. ISA, bond, and savings). And I could release up to £300k in equity by relocating.

If I understand correctly, the 4% rule suggests that this could generate an income of up to £26.6k – i.e. 4% * (£115k + £250k + £300k) were I to maximise my equity release and retire immediately. But obviously that ignores state and DB pensions.

I'll check out timeline.io – although I think I might have looked at it previously and found it overcomplicated for my level of knowledge. So I'd welcome any other suggestions too.

Why do you have so much stored up in ISA, bonds and saving, compared to your pension? Maybe inheritance?

Reason for asking is that going forward I would suggest putting in as much as possible into your DC through work to take advantage of tax savings and if you can, for now borrow money in ISA, bonds to make up the difference.

Expotter

You could try this retirement calculator, I found it quite useful as it lets you play around with figures and you get an indication of what you need to fulfil your goals. From James Shack Youtube channel.

https://www.youtube.com/watch?v=d0DUV5noXus

Kodadda

Thanks @Notepad_Phil and @JohnWinder. Yes, I'd come across an article that suggested 3.25% to 3.5% for the UK, so used 3% to create projections that suggest I could withdraw £27k pa initially reducing this to around £15k pa as my state and DP pensions make up the difference.

Kodadda

Simon11 said:
Why do you have so much stored up in ISA, bonds and saving, compared to your pension? Maybe inheritance?

Reason for asking is that going forward I would suggest putting in as much as possible into your DC through work to take advantage of tax savings and if you can, for now borrow money in ISA, bonds to make up the difference.

Poor planning, to be honest. When I started working for myself, I kept making my ISA contributions, but didn't sort out my pension. (The bond was a gift. And the savings are mostly a payout after my pension provider messed up.) But, yes, assuming I keep working (for a little while, at least) I was planning to move some of this into my pension.

Kodadda

Thanks @Expotter. Will check that out.