Is this good enough?

sgx2000

Hi All

Laying my finances bare….  

I am after suggestions, or ideas, or comments, as to whether I am being wildly Irrational

I am potentially 2.5 years from retirement… 

But, I would like to retire either now, or within the next year

I am 63

My wife is 46

Son is 18 and off to university

I own my home

I am Currently working earning £40,000

Company pays into a non-contributory pension £3,200 /yr  (Aviva - Managed fund)

Currently £78,200 in pot

I have a Defined Benefit Pension (old superannuation pension) (paid since I was 60)  £7,400 before tax RPI linked

I have savings of £55k  (currently mostly in premium bonds but probably going to move to ISA )…

Fairly obviously, I will retire substantially earlier than my wife.

If I dropped dead tomorrow her income, and later pension, would easily enable her to live comfortably.

I have worked out my current total annual net expenditure to £17,000

This is the amount to cover my half of all our household bills etc

At 66

State Pension  £10,600

DB Pension     £7,400 (RPI)

Total              £18,000                 Net  £16264

So I am almost covered for my normal expenditure…

Additional Pension - (I am seriously thinking of taking an annuity now (while they are so high)

Aviva Pot £78,200

H.L. recent quotes,  Either…

£5974  Single life, 10 year guarantee,              £4799 Net

Or

£3807  Single life 10 year guarantee, RPI linked         £3045 Net

MX5huggy

Children at University are hideously expensive have you worked this through? 

You should be looking to make the biggest pension contribution you can this tax year using the Premium Bond money. The limit on this will be your gross salary. 

If you put £15000 in a SIPP 25% would be added as tax relief. Then you wait till new tax year as you won’t be using all your tax allowances till you get state pension you could probably get it all out without paying any tax over 3 tax years. But 25% is tax free, even if you paid 20% on the rest it’s a benefit of 6.25%. 

Simon11

You also need to really consider your wife's finances too- your post above only really focuses on your position such as "I own my home" and halfing living costs. When you pass away, are you really sure your wife will be able to pay 100% of all the bills and everything? At the age of 46, there are still lots of unknowns.

Also, once you retire and enjoy life, you and her views may change on her retirement. What do you have planned for your free time?

sgx2000

Simon11 said:

You also need to really consider your wife's finances too- your post above only really focuses on your position such as "I own my home" and halfing living costs. When you pass away, are you really sure your wife will be able to pay 100% of all the bills and everything? At the age of 46, there are still lots of unknowns.

Also, once you retire and enjoy life, you and her views may change on her retirement. What do you have planned for your free time?

Thanks for the reply

I am confident that my wife could live comfortably on either her pay or later on her pension.
At 46 she currently has about £85K in her pension
Also my £7400 pension would pay her £3200 a year RPI'ed
Also our home is currently worth £320K 

My Idea is that I will basically become a house husband....
Do everything that is needed to allow my wife a much easier life.
And potter...
I'm an electrician so pretty handy at all the DIY etc

I would love her to retire early, but this seems unlikely given the 17 year age difference.

sgx2000

MX5huggy said:

Children at University are hideously expensive have you worked this through? 

You should be looking to make the biggest pension contribution you can this tax year using the Premium Bond money. The limit on this will be your gross salary. 

If you put £15000 in a SIPP 25% would be added as tax relief. Then you wait till new tax year as you won’t be using all your tax allowances till you get state pension you could probably get it all out without paying any tax over 3 tax years. But 25% is tax free, even if you paid 20% on the rest it’s a benefit of 6.25%. 

University is covered.  
I have put money away for the last 10 years...
He will get a weekly allowance, starting today
And has an inheritance from his grandfather if he need more.... so covered..

The extra pension contribution sounds good, but I will have to work it out...
Although....  I would hate to lose the £50k emergency fund lol

sgx2000

If I put £30k into my pension now....
Including my workplace payment.. keeps this year pension contribution below the £40k allowance

What would happen if I retire one month after putting this money in???
Withdrawing the money the same year it went in?

MX5huggy

You wouldn’t lose access to the £50k, it’s only about £15 ish and put it in the pension in March 2024 and could take the whole lot back out in April with at least the 6.25% uplift if circumstances required it.

MX5huggy

sgx2000 said:

If I put £30k into my pension now....
Including my workplace payment.. keeps this year pension contribution below the £40k allowance

What would happen if I retire one month after putting this money in???
Withdrawing the money the same year it went in?

The former £40k allowance (its £60k now) is not relevant the tax relief limit of your gross earnings in the tax year is the limit that will apply i was thinking you would be stopping about now so earning about £20k this tax year. You don’t want to withdraw significant pension this year because after the 25% tax free you will be charge tax at your marginal rate 20% up to £52k and 40% on money over that this tax year whereas you’re looking at pay no tax on £5000 ish of withdrawals in coming tax years until state pension. 

sgx2000

MX5huggy said:

You wouldn’t lose access to the £50k, it’s only about £15 ish and put it in the pension in March 2024 and could take the whole lot back out in April with at least the 6.25% uplift if circumstances required it.

This is exactly the reason I posted.
An idea I hadn't considered....

The issue probably is 
That I was looking to take the annuity now while the rates are at a 14 year high....

It is anyone's guess what the annuity rates would be next April...
And my reason for considering this now is. 
I can see the rates coming down with inflation (yes I know too simple)
but I really cant see them rising much more.

Dazed_and_C0nfused

sgx2000 said:

MX5huggy said:

You wouldn’t lose access to the £50k, it’s only about £15 ish and put it in the pension in March 2024 and could take the whole lot back out in April with at least the 6.25% uplift if circumstances required it.

This is exactly the reason I posted.
An idea I hadn't considered....

The issue probably is 
That I was looking to take the annuity now while the rates are at a 14 year high....

It is anyone's guess what the annuity rates would be next April...
And my reason for considering this now is. 
I can see the rates coming down with inflation (yes I know too simple)
but I really cant see them rising much more.

If you opted for the RPI linked annuity you would be paying basic rate tax on it in this tax year then, from what you've posted, none until you start to receive the State Pension.

And from next April you would almost certainly stop paying tax on DB pension currently in payment.

You may also be able to apply for Marriage Allowance and reduce your wife's tax liability.  Depending on the inflation increases to the DB pension and annuity this might tip you into paying a little bit of tax but less than the saving your wife would make.

Kim1965

If you are a tradesman is itvpossible to work a couple if days a week to get you through to spa? Most sparks earn £200+ a day. 
 At spa your retirement would be so much better in financial terms.