How to Plan for retirement ?

Coppice10

BoGoF said:

£3k isn't much a leeway should you have an unexpected bill for example. You have ignored the comments about what happens if one of you died. Holidays £833? - one holiday a year if lucky - what do you do just now - retirement should be about doing the things you couldn't when working? What is your 'current lifestyle'

Not seeing any life insurance for you or your OH?

New car - does that include fuel/insurance/VED?

Its £3k leeway on my "guaranteed" pensions of state + DB.    I've not even added in what i might get from my DC pot, or from my partners other smaller DC pots as mentioned in my original post ( few pages back, granted) .   A quick check shows i can expect an annuity of Circa 32k from the DC pot at age 67 - cant yet figure out how to take the age down in their calculator! So i have a lot more leeway...

The life insurance bit is interesting. We pay that now to cover the mortgage and historically to provide a cushion if one of us should peg out whilst the kids were young, but I'm assuming that's going to stop in the near future. I had not considered we would need life insurance AFTER retirement - genuinely interested in why would i do this?  

And i hadn't ignored the comments about what if one of us died...but i think i don't have an answer yet. I think i need to satisfy myself from an overall perspective first and then look at it from a single point of view following one death. Very valid to suggest i do that.

The 833 is a month - so £10k for holidays pa?  That gets me more than one holiday surely?! I do Disney each year for a similar figure!

Car figure is 10k over 5 years, I'm not car mad and don't need "fuel" as I'm electric already and wont swap back. Solar panels cover my car electricity.   Prob need to consider insurance though.

Still not sure I've missed anything fundamental which would compel me to pay more in now ? I mean i probably will as it will bring forward the point at which i can actually retire...but I'm not feeling like I'm way off track with my 6%?

RNV

I think it is the first time you mentioned  this figure "i can expect an annuity of Circa 32k from the DC pot at age 67 " (apologies, haven't read the whole thread...).   If taken from 57,  the figure will be much less. 

I believe now (when you have got some idea of your expected costs)  you will need to decide your target age for retirement - this will define how much more / if any you will need to add to the pot to achieve that. 

If you can share the current value of you DC pot and the target retirement age , I'm sure the knowledgeable people here will outline for you some high level parameters to work with. 

coyrls

Coppice10 said:

coyrls said:

Your guaranteed income is gross, you will need to take tax off to see if it is sufficient for your budget.

True - thanks. Part of the plan is how to have a good std of living with minimal tax? Thats something i can research over the next few years then. 

There's not much room for tax creativity with income from the state pension and DB pensions.

af1963

RNV said:

As you stated,  " I'm 47 and want to start generating what i think could be a 10 year plan to retirement.... "  presumably you are planning to retire at ~57.   The guaranteed income of £39k will only come into play at 67/68?, so you need to fund 10 years before that 

That's the big potential gap - funding from 57 to 67 which needs to cover £36K per year plus the taxes payable when drawing it. Some of that may come from DB pension taken early ? The way I've been planning mine is in separate stages as different income sources stop and start - seeing what's likely to be left after each stage.

On your projected 11K SP and 16K DB, that's 27K total which means about 15K taxable and a tax bill of 3K.  If your partner only has SP and a small pension, possibly a little more tax due tax due.

6% plus an employer contribution of 12% is not actually too bad though. Lots of people, and especially lots of employers, contributing less than that to DC schemes.

jamesd

Coppice10 said:

Im shocked at the 10 -20% contributions you mention. I will reassess my financial outgoings and see what can be done to increase from my measly 6%!  

I was doing over 60% of gross for a decade before retiring at 55. Quite extreme but I was very committed to financial independence.

Just your choice of how much you want to take from your current self to get yourself the freedom of being retired and at what income level.

jamesd

coyrls said:

Coppice10 said:

coyrls said:

Your guaranteed income is gross, you will need to take tax off to see if it is sufficient for your budget.

True - thanks. Part of the plan is how to have a good std of living with minimal tax? Thats something i can research over the next few years then. 

There's not much room for tax creativity with income from the state pension and DB pensions.

Other than eliminating it, that is.

VCT buying works fine for those two just as it's eliminating my own income tax bill as I move my DC pot out to ISA and VCT, eventually reducing the VCT by shifting more to ISA. As long as it's suitable for the person the combination of 30% of purchase price back from HMRC and tax exempt dividends at typically 7.1% of the after HMRC net purchase price can be very interesting.

I was doing it while working too, though less comprehensively because in my circumstances salary sacrifice pension usually came first.

For me the DC pension impact is lots of 40% and 20% relief on the way in and approximately no tax on all of it on the way out.

Does need to be appropriate for the individual, though.

FIREDreamer

jamesd said:

Coppice10 said:

Im shocked at the 10 -20% contributions you mention. I will reassess my financial outgoings and see what can be done to increase from my measly 6%!  

I was doing over 60% of gross for a decade before retiring at 55. Quite extreme but I was very committed to financial independence.

Just your choice of how much you want to take from your current self to get yourself the freedom of being retired and at what income level.

Lightweight.

I have been paying 75% or more (salary sacrifice) since 2010, currently paying 82% reducing to 79% as minimum wage goes up in April.

Child tax credits for our family were helpful in this regard but they are ending now.

However the LTA charge I paid on crystallisation (shame that I had no foresight, worried charge could go up) probably repaid half the tax credits we ever received.

Saved having to pay LTA charge on the post crystallisation gain on annuitising, so that’s something.

Retiring in June when I am 60 - six months notice went in on January 2nd even though I only have to give one month.

Looking at my figures I probably could have gone at 55 based on an annuity I got in October, but annuity rates were nothing like this in 2019 so wouldn’t have had the bottle to rely on just drawdown. Annuitising approx 70% of my drawdown pot has given me the confidence to retire without running out of money.

Bring on the Summer!

sgx2000

A little tip....

I did my spreadsheet based upon costs of each of the usual costs, utilities etc, 
And arrived at a figure for my expenses....

But recently I downloaded my annual statement from Halifax as a spreadsheet....

Suddenly my annual requirements, in retirement, has jumped £2000.....
It is quite an eye opener to be able to breakdown all the additional little (or not so little) real world expenses.

Mutton_Geoff

jamesd said:

Coppice10 said:

Im shocked at the 10 -20% contributions you mention. I will reassess my financial outgoings and see what can be done to increase from my measly 6%!  

I was doing over 60% of gross for a decade before retiring at 55. Quite extreme but I was very committed to financial independence.

Just your choice of how much you want to take from your current self to get yourself the freedom of being retired and at what income level.

I did 40% for nearly 30 years and have retired with pensions equalling my final salary.

Coppice10

So thanks everyone for your advice.

As a result of all the info, I'm going to pause the savings which go into my ISA each month (its at 100k so i think thats ok)  and will redirect that to my Pension instead to gain the extra tax relief. I'm also likely to get a pay rise in the next few months so i will add the additional into my Pension too, leaving my net income the same as it is now. This will increase my contributions from 6.9% currently to 15%.

Then in 2 more years, i will take a lower spec car on my salary sacrifice scheme and pay the difference in to my Pension as well. That should also bump it up another percent or two.

Im going to continue to read everything i can on pensions generally to try and be a more intelligent customer. I dint think i need to do anything more at this point?

Thanks again!