Looking for advice 5 years from retirement

Albermarle

RichardS said:

JohnWinder said:

If you decide you’re up for it, Tim Hale’s book Smarter Investing is probably all you need. I think it’s in the west country libraries.

The Little Book of Common Sense Investing is another. You'll get an old edition as a free pdf, and it's worth every penny and more.

‘If You Can’ is a free pdf by W Bernstein, short and sweet.

The Bogleheads' Guide to Investing, by Larimore et al is a 7.2MB pdf. I think it's here: https://ia803405.us.archive.org/23/items/the-bogleheads-guide-to-investing/The Bogleheads' Guide to Investing.pdf

Expected Returns An Investors' Guide to Market Returns by Ilmanen is not such an easy read, but a free 23MB pdf, after you’ve read the others.

The Basics of Investing Basics  A primer for the young retirement investor by A. Dad, is a free pdf written by a father for his daughters, not published as a book I think, but good enough at 40pp.

Investment Strategies for the 21st Century by Frank Armstrong is a 160pp pdf.

The Future of Life-Cycle Saving and Investing by Bodie et al is a 200pp pdf free from the Research Foundation of the CFA Institute. Sensible, but not a first read.

Serious Money, Straight talking about retirement investing, by Richard Ferri is a free 200pp pdf

Unveiling the retirement myth, by Jim Otar is 400pp free pdf written in the clearest well-structured way as an engineer would, but there's a lot of detail for when it comes time to decide how you can live of your investments based on a lot of financial history.

I got my hands on Tim Hale’s book, it’s excellent. Thanks. I was about to buy it on Amazon and then I magically put my Money Saving hat on and ordered it from the library. I am also devouring several YouTube channels and podcasts and am learning a lot.  The overall message I am getting so far though is that I would probably be a lot better off simply investing in a passive global index tracker and choosing a platform with low fees.  I will take my time though as I’m sure there is more to learn 😀

 The overall message I am getting so far though is that I would probably be a lot better off simply investing in a passive global index tracker

Only if you are really sure that faced with a 30% drop, and the media screaming about financial Armageddon and predicting further big slides,  that you would not panic and pull out at the worst time. If you think you might then best to avoid 100% equity.

SouthCoastBoy

And what income do you want between 62 and 67. Has your wife got her own personal pension?

For 20k per annum, with withdrawal keeping in line with inflation I would want at least a 600k pot in today’s money, and to be comfortable around 800k, to draw from  unless there is some db provision, but maybe that's just me.

I notice in the projections inflation was quoted at 2.5%, I can't see it being 2.5% for a while. Personally I have projected inflation 6% this year and 4% for the next 3 years. I have also used growth after costs at 3.5% per annum, so in real terms losing money for next 4 years.

Kim1965

If i read this right the op has 250k now and is investing about 22k a year for 5 yrs. It would need some spectacular growth to get to 600k at 62.
 Are you looking to leave an inheritance out of your pension? 

JohnWinder

Albermarle said:

 The overall message I am getting so far though is that I would probably be a lot better off simply investing in a passive global index tracker

Only if you are really sure that faced with a 30% drop, and the media screaming about financial Armageddon and predicting further big slides,  that you would not panic and pull out at the worst time. If you think you might then best to avoid 100% equity.

Indeed. Get to know some history of crashes. Ferri’s book All About Asset Allocation is good, as is W Bernstein’s The Intelligent Asset Allocator (more laughs in this one too which you can sample in ‘google books’ from chapter 1).

QrizB

SouthCoastBoy said:

For 20k per annum, with withdrawal keeping in line with inflation I would want at least a 600k pot in today’s money,

Maybe you would, but you are not the OP's FA.

OP's FA is assuming an annuity rate of 6% (which seems a little bullish to me, but I'm not an FA either), at which rate £20k pa will only cost £333k.

At a more realistic (current) annuity rate of 4.5%, £20k pa will cost £444k. Three quarters of your minimum.

Kim1965 said:

If i read this right the op has 250k now and is investing about 22k a year for 5 yrs. It would need some spectacular growth to get to 600k at 62.

Getting to £333k, however, is pretty much a shoo-in.

£444k is a bit further off.

RichardS

Thanks for all these comments.  Just to be absolutely clear, my current pensions + ISA come to around £250k. Contributions into all three are currently around 20k a year (including my employee’s contribution into the workplace pension). So my projection at 62 was based on these and with contributions continuing for the next 5 years.   The reason for the original post is that I’m worried about the charges on the Discretionary Managed Pension which at £195k is the bulk of my assets and whether I would be better off transferring that into something else.  From what I have read so far I think I probably would be. The next step is to decide exactly what that alternative option might be (as I learn more I’m also coming to the conclusion that I might also look to transfer the Nutmeg ISA somewhere else too).

Very interested in the discussions around projections at 62 because that is obviously very important.  Both my FA and the Scottish Widows pension calculator project similar (on the SW site I added in transferring the personal pension and ISA in and increasing payments to SW by £800 - what I currently pay into them). This was the SW “middle growth” projection.

One big question for me is around the NI and Tax savings around my Workplace Pension. It seems an obvious thing to me to increase my contributions into the Workplace pension if I can as with every £1 I contribute I would make these savings. The plan itself however may not be as good a plan as my personal pension (or something I might switch to like a Vanguard Lifestyle SIPP or whatever) so I wondered about making transfers out of the Workplace Pension and into something else i.e keeping a small amount in there but using it just for salary sacrifice benefits. I can’t see any option on the SW page allowing that so I have now emailed my HR department to see if that’s possible.

Assuming I am not allowed to do this - I suspect I can’t - how much weight can I put on tax and national insurance savings as opposed to the performance of the plan itself. In other words it is almost CERTAIN that a putting an extra £300 a month into my workplace SW pension is a better option than putting that extra £300 into a personal pension?  I ask this because I may have an extra £300 to play with in a couple of months. 

Thanks again for all the comments. I’m enjoying learning about all this stuff and although I’m not generally one for having regrets in life I do wish this is something I’d taken more of an interest in a lot earlier. 

SouthCoastBoy

QrizB said:

SouthCoastBoy said:

For 20k per annum, with withdrawal keeping in line with inflation I would want at least a 600k pot in today’s money,

Maybe you would, but you are not the OP's FA.

OP's FA is assuming an annuity rate of 6% (which seems a little bullish to me, but I'm not an FA either), at which rate £20k pa will only cost £333k.

At a more realistic (current) annuity rate of 4.5%, £20k pa will cost £444k. Three quarters of your minimum.

Kim1965 said:

If i read this right the op has 250k now and is investing about 22k a year for 5 yrs. It would need some spectacular growth to get to 600k at 62.

Getting to £333k, however, is pretty much a shoo-in.

£444k is a bit further off.

But this is 20k today? The op wants 20k in today's money in 5 or 10 years time?

QrizB

SouthCoastBoy said:

QrizB said:

SouthCoastBoy said:

For 20k per annum, with withdrawal keeping in line with inflation I would want at least a 600k pot in today’s money,

Maybe you would, but you are not the OP's FA.

OP's FA is assuming an annuity rate of 6% (which seems a little bullish to me, but I'm not an FA either), at which rate £20k pa will only cost £333k.

At a more realistic (current) annuity rate of 4.5%, £20k pa will cost £444k. Three quarters of your minimum.

Kim1965 said:

If i read this right the op has 250k now and is investing about 22k a year for 5 yrs. It would need some spectacular growth to get to 600k at 62.

Getting to £333k, however, is pretty much a shoo-in.

£444k is a bit further off.

But this is 20k today? The op wants 20k in today's money in 5 or 10 years time?

In broad terms, you can either work in today's money (and assume investment returns keep up with inflation) or in future money (and make assumptions about inflation rates, fund growth and annuity costs). It doesn't really matter which.

I chose the former.

MallyGirl

It is great that you are enjoying learning about this stuff - that means you can can get to a comfortable place and if you move away from the FA it will be from a position of understanding.

A projection based on 2.5% inflation is certainly not something to rely on in the near future.

salary sacrifice will gain you (assuming not Scotland, figures rounded for ease)
40% tax relief and 2% NI for the contributions from salary above £50k
20% tax relief and 12% NI for contributions from under the £50k

A low cost passive multi asset fund (not a tracker which would be 100% equity) with the proportion of equity to other being chosen to align with your risk tolerance and goals. Vanguard has life strategy ones but there are also HSBC Global Strategy ones and Blackrock ones often talked about.

cfw1994

Clearly you are asking for financial “advice”, & plenty of suggestions here.  Note that none of them constitute “advice”, just ramblings from strangers on a forum 😉

I won’t repeat the wise words many have dropped in above….…..yes, you absolutely need to know what you want to live on (see the long-running The Number thread for ideas), where it may come from.  Do go online and actually check you and your wife’s State Pension situation to be sure you have that covered.  If you can manage things yourself, every 1-2% you can reduce in ‘fees’ is money in your pocket…..

….but also: think about TheFutureYou™ 👀


How will you spend your time?  

Hobbies/Clubs? Sport? Diet? 

If you aren’t especially fit (many aren’t !), make an effort now to get fit:  it’s good to stay healthy for retirement, all sorts of things fail as we age 😱

Maybe aim to make some changes in those areas now, building up for when you will have more time for them.
Choose hobbies that get you out and about meeting people, interacting.  Choose some you can share with your wife.

Your home.  Get any BigJobs™ sorted 💪
Are there things you can sort whilst working to reduce future capital costs (replacements) and/or operating costs (bills)?  

During the 10 years before I stepped away, we replaced windows, doors, completed a ‘lifestyle’ extension, had solar & home battery, some ‘big’ landscaping work, also swapped a car for an electric one.  

All major expenses, but spread over those earning years.  

Smaller things for future fun: we like films, so have a projector & big screen.  A nice potting shed & a new bike.  


I always hated the annual work 1:1 where I had to consider where I saw myself in 5 years time….but running up to retirement, I found it far more interesting 🤣
Think 5/10/15 years ahead.  Make changes.