Bold leap into retirement

Smudgeismydog

Morning all, I hope you have managed to find some time for yourself in what can be a busy period. We have enjoyed spending time with family over the last 3 days, it’s a quiet one today, then off to visit more family tomorrow.
I’m not planning anything wild for NYE, but have been really starting to think about what I want 2024 to be like for me.

I turned 50 in September, and whilst there are aspects of my job I really enjoy, I’ve been feeling exhausted and burned out (peri-menopause is probably partly to blame).
I have 2 teenagers (DS is 18, and DD is 16), and was widowed in 2010 when they were 2 and 4. I have worked hard and juggled everything and I’m really proud of how far we have come.

I have an outstanding financial commitment which is due to finish in July, I have paid off my mortgage, do not have any debts, and have saved hard into my ISA and pension. I am also in receipt of a dependents pension, which is enough for me to pay my household bills.

I have made the decision to hand in my notice in the new year, to leave work at the end of June, so that my last pay check in July will cover the last financial payment. I plan to top up my income from drawing from savings, (ISA until 57, and then I can access my SIPP post 57). I have checked and double checked my figures, stress tested and asked a trusted friend to check my thought process and analysis. 

It all looks like it will stack up, I suppose I am just cautious as I have felt such a huge financial responsibility for the kids. I am very aware I could take on a consultancy/part-time/contract position, but I want that to be on my terms, if it’s something that interests me. I don’t want it to be finances driving it.
For me, this is why I have worked so hard, to have now achieved financial independence, which allows me to make this decision, it just feels like a bold leap.

I will share my figures and intend to post regularly with updates on how my finances are holding up.  I would love it if you want to join me on my journey.
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Lifematters

Congratulations, that’s pretty impressive, retiring so early after bringing up two children. I would love to know how you achieved this and how you organise your finance to manage it.  It must a great feeling to know you don't have to work much longer.  I would love 2024 to be my last year of work! 

Smudgeismydog

Thank you Lifematters, these are my current figures;

Cash £40,000
ISA £137,000
SIPP £715,000

After I paid off the mortgage, I increased my salary sacrifice to stay under higher rate tax, and to reinstate child benefit. This has also meant for the last year I have been living on reduced income in readiness for retirement. 

My partner and I have just opened a joint account and we are both paying in £1,000 pm. This account will cover all household bills, house maintenance, coffee shop trips, etc. and each month there should be enough for us to have a day out or go out for dinner. My dependents pension can cover this outlay.

After saving hard for what seems like forever, I know it will be a huge mindshift to decumulate assets, and so once I’ve left work, I am going to take a regular withdrawal to effectively act as a replacement salary.

xylophone

 My dependents pension can cover this outlay.

It seems likely that your late spouse was a member of a DB Scheme - such schemes often provide a pension for dependent children - did you check this out in respect of your children?

Smudgeismydog

Yes, thanks Xylophone. It was a DB scheme, and they also both have a dependent’s pension until 21, if they remain in full-time education 
Assuming they go to University they can use this to help fund themselves, this also means I won’t need to.

Albermarle

After saving hard for what seems like forever, I know it will be a huge mindshift to decumulate assets, and so once I’ve left work,

There are regular discussions on the forums about this issue. For example.

,Has saving affected your mental health. — MoneySavingExpert Forum

MetaPhysical

I am in a similar position, slightly older at 56, but a man left a widower with two young children after my wife died of cancer.  Are you in receipt of teacher's pension???  I also have paid in the maximum of £40k per year and this year £60k into my DC pension.  I also have a DB pension from an earlier employer.

Your plan is sound.  Congratulations at finding yourself in this position after much planning, hard work and sacrifice.

leosayer

Thanks for posting it sounds like you have things well under control but I look forward to future updates because I'm planning to retire in early 2025.

Just one question - have you asked your employer if they can make any adjustments to your role to reduce the negative aspects?  If your role could be made part-time then maybe this could soften the impact of the 'bold leap'.

Bostonerimus1

What percentage do you plan withdrawal annually from your SIPP? and how much do you intend to keep as cash for emergencies and cash flow? But your numbers look good for most retirements and you will have state pension to factor in too....well done.

Smudgeismydog

Thank you for your comments.

Albermarle, I previously read that thread with interest. I know this will be a huge physiological shift for me, and it was due to this that I felt I should take a monthly withdrawal, and give myself ‘permission’ to spend it. I honestly think if I drew a lump sum, I would feel the need to preserve it.

Bostonerimus1, I want to keep circa £20,000 cash, and expect to withdraw between £500pm to £1,000 pm. I won’t be able to withdraw anything from my SIPP until age 57, so will utilise cash reserves first, then ISA. The £12,000 pa withdrawal equates to less than 1.5% from total assets. 

I appreciate the 4% rate is often referred to, although I understand this is based on fairly old data from the States, and a lower rate would now be more realistic in the UK. However, my understanding is that this concept refers to preserving the value of your capital. With my dependents pension already paying @£15,000pa, plus State pension due at age 67, which would cover my expenditure, I’m questioning why I need to preserve it? (I have put some money into ISAs for the kids, and expect to help them towards a deposit when they are older).

Leosayer, there would be scope to go part-time, but my concern is that this would end up being full-time work being squeezed into reduced days, as this is what has happened to colleagues who have done this. Have to be honest, my heart is no longer in it, there are too many aspects which frustrate me, and wouldn’t change if I went part-time. However, I think it’s likely I will take on something, perhaps volunteering, or a local part-time role to keep the grey matter ticking over, help to give me a purpose to my day, and also from a social aspect.

MetaPhysical, I’m sorry to hear about your wife, my husband passed away 3 months after a stomach cancer diagnosis. 

No, it’s not a Teachers Pension, I’m fortunate that his employer still ran a DB scheme, this has provided such a huge amount of security for me and the kids.
Yes, it’s taken years of planning and sacrifices to get to this position, I feel I have now achieved financial independence and this means I have choice. I will admit, I feel empowered with it.

Albermarle

I appreciate the 4% rate is often referred to, although I understand this is based on fairly old data from the States, and a lower rate would now be more realistic in the UK. However, my understanding is that this concept refers to preserving the value of your capital

The 4% is normally referred to as a Safe Withdrawal rate. It means that based on historical statistics you can withdraw 4% of the initial pot each year rising with inflation, and this should reduce your chance of not running out after 30 years to a small %. So it is not directly about preserving capital but more about not running out, even in a relatively worse scenario case ( such as a prolonged and unexpectedly bad run in the markets )

In reality you could take 4% and find yourself dying with more than you started with, but the real reason behind it is to give an idea of what you can withdraw without running out too soon, even if markets are unkind. 

Also in reality it is unlikely that someone would follow the 4% religiously over a long period so it is really just a rule of thumb.

Yes and 3.5% is often quoted in the UK to give an extra bit of safety.