FIRE - have I got enough?

starving_artist

cfw1994 said:

starving_artist said:

I've been reading all the incredible threads on this board and wondering if what I am contemplating is doable.  I could really do with the wisdom of those more experienced and knowledgeable in assessing if it's realistic.

I will be 60 later this year and qualify for full state pension from 67.  I would like to retire immediately or as soon as possible.  I've looked at my spending and reckon I need an absolute minimum of £13,000 net annual income but would ideally like £20,000. 

I have £30,000 in cash and short term fixed rate savings accounts, £105,000 in stocks and shares ISAs and £185,000 in various DC pensions.

Seems like the way to do it would be to make TFLS withdrawals from the pensions up to basic tax allowance and use cash from savings accounts to top up income until I reach the TFLS limit then use mix of drawdown and ISAs.  Obviously the years until SPA will use up a lot more of my funds.  

One concern (ironically) is that I've always enjoyed excellent health and I come from a family with long life spans (well in to the 90s)!

I think Sea_Shell’s thread proves your numbers are entirely doable for a happy life!

Take (numbers rounded down for easier reading!) £16k from your DC pot, with 25% (£4K) tax-free, keeping the ‘earnings’ under the 20% tax threshold.
Known as ‘Uncrystallised Funds Pension Lump Sum’ (UFPLS).
Then you would only need perhaps £4K from your cash or savings to get to £20k pa.

Read more at https://www.moneyhelper.org.uk/en/pensions-and-retirement/taking-your-pension/your-options-for-using-your-defined-contribution-pension-pot, & I would strongly suggest contacting Pensionwise for a free hour long discussion about pensions.  

Note that they will NOT give advice, but will hopefully clarify what options you have.  The more information you can round up prior to that meeting, the better informed you will become.

No idea what your work situation is, or whether there are any offspring/inheritance things to be considered (DC pensions are outside of an estate for tax purposes.

My suggestion is that spring is always a nice time to retire - a summer ahead of you instead of dark cold winter nights - so perhaps plan for finishing after April.  I went into May, but as a high rate taxpayer, part of that was to then get a nice tax refund by not taking any pension earnings out for my first year.
My other suggestion is to write lists.  Things you would like to dove over the next 5-10 years.  Mine included holiday ideas, but also craft/DIY/family things.  When you aren’t working, you might be able to do some of those ‘out of season’ to keep costs down!   


Good luck!

Thanks so much for this!  I have read (part of) Sea shell’s thread which as you say gives me hope. Obviously I know with my parameters I have to be careful but that’s a trade off for the stress of work I don’t enjoy that I am willing to make.
You are also right - I definitely need to plan  the right mix of UFPLS and cash/ savings so that link is super helpful.

Hoenir

Equities is a broad generalisation. Holding the wrong market can result in extended periods of underperformance. Diversification of portfolio's is key.  Though understandably in more recent years why would anybody bother to do so. When there was an endless bounty of free money (at least on screen ). 

Triumph13

Assuming (big assumption!) that your numbers haven't taken a pounding in the Trump crash and that it hasn't changed annuity rates, I think your plans might be doable.  I'm also assuming you are single.

HL are quoting in their best buy table an annuity rate of roughly 4,5% for a single life, RPI index linked annuity at age 60.  Your DC, less the TFLS would be £139k so that would give £6.2k pa.  Add £12k pa for state pension gives £18.2k gross, £17.1k net.

ISAs + TFLS + Cash totals £181k.  From that you need to bridge the 7 year gap until state pension, which costs 7 x (17.1-6.2) = £76k.  That leaves £105k left over to get generate the remaining £2.9k of income to get you to £20k as requested which should be doable.  You might sleep better though leaving your cash out of it to cover emergencies.  That takes you down to £75k invested.  3% drawdown on that would be a bit over £2k pa bringing you up to about £19.3k total.

starving_artist

Hoenir said:

Equities is a broad generalisation. Holding the wrong market can result in extended periods of underperformance. Diversification of portfolio's is key.  Though understandably in more recent years why would anybody bother to do so. When there was an endless bounty of free money (at least on screen ). 

I was definitely tilted to the US market and tech stocks before.  I am better diversifed now.

starving_artist

Triumph13 said:

Assuming (big assumption!) that your numbers haven't taken a pounding in the Trump crash and that it hasn't changed annuity rates, I think your plans might be doable.  I'm also assuming you are single.

HL are quoting in their best buy table an annuity rate of roughly 4,5% for a single life, RPI index linked annuity at age 60.  Your DC, less the TFLS would be £139k so that would give £6.2k pa.  Add £12k pa for state pension gives £18.2k gross, £17.1k net.

ISAs + TFLS + Cash totals £181k.  From that you need to bridge the 7 year gap until state pension, which costs 7 x (17.1-6.2) = £76k.  That leaves £105k left over to get generate the remaining £2.9k of income to get you to £20k as requested which should be doable.  You might sleep better though leaving your cash out of it to cover emergencies.  That takes you down to £75k invested.  3% drawdown on that would be a bit over £2k pa bringing you up to about £19.3k total.

Thanks so much for these calculations!  Incredibly helpful - seems like there is hope. My portfolio did do really well since my original post.  It has lost a lot of ground of course but I still have chunk more than before (see my post "on verge of retiring - rebalancing portfolio in volatile times).

Peter_F

There is always a tendency towards doing one more year of work. But one thing is for sure, every year you work is one less year of freedom.
I would retire now but recognise that if things don't pan out as you expect or inflation is higher than expected etc, you may need to do a bit of part time work now and again to boost your funds. Retirement does not have to be all or nothing. There are so many opportunities to earn some money nowadays without the need to go back to full time employment.