Bold leap into retirement

HUSKYPAL

GenX0212 said:

GenX0212 said:

I started thinking seriously about retirement maybe 18months ago as I was coming towards the 55 marker. Did some maths and worked out that I could probably retire on or about the same amount of money as my current take home pay. In August last year I successfully applied for a small reduction in working hours from 37 to 34 per week and a reduction from 5 days to 4. That meant that as well as having more free time the dial on matching my current take home pay actually became slightly closer.

'Planning' on retiring next year at 57 but although I'm convinced it's what I want do, no longer really enjoying work, it still feels more of a conceptual than a physical aim and the time seems to be flying by so soon it will become a very real decision 

My current take home pay after significant payments into my pension pot is £3.8k per month. I will have a (reduced) DB income of £15k with currently £630k accumulated in DC pots which I am hoping will be closer to £700k by retirement (expecting to add ~£50k from salary, AVC and bonus sacrifice in the next 12 months).
My better half takes home about £1400 per month but for the last year or two a hefty chunk of which has been going straight into savings and being paid into a SIPP DC pension pot. She will have a (reduced) DB pension of £4K plus a DC pot of about £40k.

Analysing our current spending, we have no mortgage, 2 decent cars, and our only real financial commitment is to see out the very last year of our youngest's university costs (about £8.5k for rent and living expenses). Putting our 3 children through university has probably cost us somewhere in the region of £60-70k across the last 7 years. Our biggest remaining outlay is undoubtedly holidays having to suffer the ridiculous school holiday price hikes due to my wife working in a school 

So the plan is to retire early spending from the DC pots up until SP age. No more university costs, cheaper (but likely more frequent ) holidays. I firmly believe our spending will reduce as we get older. By state pension age our worst case is that the DC pots run out but we will have the £15k DB (me) £4k (wife) plus 2* full state pensions (already earned). So give or take £42k guaranteed income as a couple with hopefully money still available from the DC pot. In the event of a significant market crash then we would have to tighten belts but that's true whatever the plan.

My every instinct tells me this is absolutely doable and that we can carry on with no real impact to our current standard of living but as the 57 mark comes ever closer I do find myself second guessing our plans.


Sorry, long winded post I know! 

It's time for a significant update:  

Mrs GenX has handed in her notice to retire!    meaning it now my turn   Both of us will be age 57.

So my plan is to retire in June of next year, since my previous post above the finances have changed quite a bit due to an inheritance, increasing my AVCs significantly and also my DC pot continuing to perform well.
At retirement the expected position is:

• Cash: £170k
• S&S ISA: £70k
• SIPP (Mrs GenX): £40k
• DB Pension (Mrs GenX): £4.5k RPI linked; £5k lump sum
• DC Pot (Mr GenX): £680k
• Index Linked Gilts (Mr GenX): £115k; paying approximately £14k per each year from 2027 through to 2035
• DB pension (Mr GenX): £13.5k RPI linked; £35k lump sum

• Full SP starting 2036 (Mrs GenX)
• Full SP starting 2036 (Mr GenX)

So in summary once we commence the DB's:

• Guaranteed joint pre-tax income of £32k before SP age
• Guaranteed joint pre-tax income of £43k after SP age
• £280k held outside of pension wrappers
• £720k SIPP/DC pot

The Plan:

• Between now and SP age Mrs GenX flies below basic rate tax threshold and empties her SIPP and takes full advantage of the starter rate for savings to avoid paying any tax on savings interest; after SP age she will be paying tax on her combined pension and SP.
• Between now and SP age Mr GenX withdraws the max from the SIPP combined with pension and IL Gilts maturity to fly just below higher rate tax threshold.  Any excess income is paid into S&S ISA. This is to mitigate the fiscal drag of tax thresholds being further frozen until 2031.
• Both pay £2880 into SIPP at the start of each tax year.
• Until SP age Mr GenX transfers Mrs GenX's Married persons allowance.
• SIPP remains invested in current funds 60/40 Diversified growth/Equities.
• If the SIPP performs well then I may consider moving some more over to increase the IL Gilts guaranteed income each year to SP and then possibly beyond that as well.

The target each year is £55-60k per year after tax, flexible depending upon market performance.

I need to give a minimum 3 months notice but intending to let my boss know earlier as they have been good with me.
Feeling very nervous now tell me my plan is solid? Is there anything I have missed or should be considering?

Above all sounds great, similar to my numbers overall. One thing I would suggest is looking to put as much as possible into your wife's SIPP before she retires (you can backdate any unused allowance over the last 4 years). it makes sense to try to max out her SIPP from a tax point of view i.e. if she has 9-10 years to fund till SP, with a £4.5kDB pension, this leaves approx £8k/annum tax free allowance - be a shame to not stash away enough to allow that to be fully utilised?
Otherwise, it seems all good to me. 
I can feel the nerves at the decision, standing on the edge and trying to jump is not easy, going to be in the same boat in 12-18 months.

HUSKYPAL

@Smudgeismydog - Have to say, this is the most helpful and useful forum I've found anywhere on the web for real world numbers and information. Very refreshing to have a community of like minded people with a simple objective to help each other navigate what can be a tricky decision, and to see what's likely on the other side. Thanks for starting it. I'd love to see some more updates from earlier posters as to how their plans/finances have panned out over time. My end date keeps creeping forward, now looking at June 27, but could be sooner, work motivation sinking below basement level...

GenX0212

HUSKYPAL said:

GenX0212 

Above all sounds great, similar to my numbers overall. One thing I would suggest is looking to put as much as possible into your wife's SIPP before she retires (you can backdate any unused allowance over the last 4 years). it makes sense to try to max out her SIPP from a tax point of view i.e. if she has 9-10 years to fund till SP, with a £4.5kDB pension, this leaves approx £8k/annum tax free allowance - be a shame to not stash away enough to allow that to be fully utilised?
Otherwise, it seems all good to me. 
I can feel the nerves at the decision, standing on the edge and trying to jump is not easy, going to be in the same boat in 12-18 months.

Thanks. She will be paying in all of this years earnings (less contributions already made). Unused allowance can only be used however if the current years allowance (£60k) has been used in full and there are sufficient earnings (>£60k); so she doesn't qualify. It's a common misconception that everyone can use past years allowances, you have to have enough earnings to do so.
I am actually doing that with my own earnings via AVCs and currently taking minumum wages which is a bit disconcerting looking at the monthly wage slip but is astonishing when you see how much gets added to the pension pot instead.

GenX0212

HUSKYPAL said:

@Smudgeismydog - Have to say, this is the most helpful and useful forum I've found anywhere on the web for real world numbers and information. Very refreshing to have a community of like minded people with a simple objective to help each other navigate what can be a tricky decision, and to see what's likely on the other side. Thanks for starting it. I'd love to see some more updates from earlier posters as to how their plans/finances have panned out over time. My end date keeps creeping forward, now looking at June 27, but could be sooner, work motivation sinking below basement level...

I will second that!

Smudgeismydog

HUSKYPAL said:

@Smudgeismydog - Have to say, this is the most helpful and useful forum I've found anywhere on the web for real world numbers and information. Very refreshing to have a community of like minded people with a simple objective to help each other navigate what can be a tricky decision, and to see what's likely on the other side. Thanks for starting it. I'd love to see some more updates from earlier posters as to how their plans/finances have panned out over time. My end date keeps creeping forward, now looking at June 27, but could be sooner, work motivation sinking below basement level...

Thank you

Why June 27?

Smudgeismydog

HUSKYPAL said:

@Smudgeismydog - Have to say, this is the most helpful and useful forum I've found anywhere on the web for real world numbers and information. Very refreshing to have a community of like minded people with a simple objective to help each other navigate what can be a tricky decision, and to see what's likely on the other side. Thanks for starting it. I'd love to see some more updates from earlier posters as to how their plans/finances have panned out over time. My end date keeps creeping forward, now looking at June 27, but could be sooner, work motivation sinking below basement level...

Hello early posters;

@leosayer, @MetaPhysical, @savingmore, @Daffodil1234, @handful, @squashtraveller , @AliBee16, @cloud_dog

Do you fancy letting us know how you are getting on?