Is early retirement an option?

SouthCoastBoy

My costs for uni were around 8k per year per child, basically the rent.

Simon11

In order to cover the gap between now and 60, you will need to sell the rental property or use savings to fill the gap in household income (unless your husband can fund more?).

I am confused about your rental properties, do you and your husband both own separate rental properties? In your first post, your husband earns £8k rental income and you earn £7.8k rental income too?

To reduce CGT, have you thought about retiring and in the following tax year, sell the property to minimise your CGT while not dipping into your pension or earning any income in that year? As a BTL owner, this is what I plan to do and will save me £10k on CGT and this amount may be more for you?

Sweetmelody_2

Simon11 said:

In order to cover the gap between now and 60, you will need to sell the rental property or use savings to fill the gap in household income (unless your husband can fund more?).

I am confused about your rental properties, do you and your husband both own separate rental properties? In your first post, your husband earns £8k rental income and you earn £7.8k rental income too?

To reduce CGT, have you thought about retiring and in the following tax year, sell the property to minimise your CGT while not dipping into your pension or earning any income in that year? As a BTL owner, this is what I plan to do and will save me £10k on CGT and this amount may be more for you?

Thanks for sharing your thoughts. Selling the rental property could buy me around 3 years, I guess. But there would be a £50 - £70k capital gain that would cost me dearly in higher rate CGT. My husband has considered taking the property on via the business but there are competing needs for that business cash so, although he was initially keen, I’d need to make the case.

Yes there are two separate rental properties in the same location, of similar market and rental values.

Your suggestion re saving CGT, I’m not sure that I follow? Would I/you live off savings in that first year post retirement? How does it save you CGT?

Dazed_and_C0nfused

Sweetmelody_2 said:

Simon11 said:

In order to cover the gap between now and 60, you will need to sell the rental property or use savings to fill the gap in household income (unless your husband can fund more?).

I am confused about your rental properties, do you and your husband both own separate rental properties? In your first post, your husband earns £8k rental income and you earn £7.8k rental income too?

To reduce CGT, have you thought about retiring and in the following tax year, sell the property to minimise your CGT while not dipping into your pension or earning any income in that year? As a BTL owner, this is what I plan to do and will save me £10k on CGT and this amount may be more for you?

Thanks for sharing your thoughts. Selling the rental property could buy me around 3 years, I guess. But there would be a £50 - £70k capital gain that would cost me dearly in higher rate CGT. My husband has considered taking the property on via the business but there are competing needs for that business cash so, although he was initially keen, I’d need to make the case.

Yes there are two separate rental properties in the same location, of similar market and rental values.

Your suggestion re saving CGT, I’m not sure that I follow? Would I/you live off savings in that first year post retirement? How does it save you CGT?

You could potentially have your full basic rate band left unused.

https://www.litrg.org.uk/savings-property/capital-gains-tax#:~:text=For the 2024/25 tax year, CGT is charged at,either 20% or 24%.

FIREmenow

Could you check the early retirement factors for all of your DB pensions and retire before 60 on one (or two) with the most favourable factors? This could spread your income across more tax years/personal allowances.

If you are only paying in the minimum to alpha, could you also start buying more pension or early retirement entitlement (but you've probably got enough DB!), or stuffing what you can into a SIPP to reduce your 40% tax?

Looks like you might to be turning 55 shortly before the minimum age to access DC pensions increases to 57 (6 April 2028) - no one knows yet how access will work in those limbo years.

We are mainly filling stocks and shares ISAs and investing for growth at the moment for early retirement because our pensions are DB. But if I was a higher rate tax payer I would be putting a lot more into the DC part of my pension and/or a SIPP for the tax relief.

Albermarle

Sweetmelody_2 said:

Albermarle said:

 2 children, aged 9 and 16, who will need supporting in their academic/career choices.

If we assume you are referring to Uni fees, rather than private school fees. Then also assuming they will get minimum maintenance loans, then parents usually need to cough up about £6K per year. Again assuming the tuition fees are paid via a student loan.

Have you thought about building up funds to maybe help them on the housing ladder at some point, although by then you might be both retired and getting the SP as well. 

Yes uni costs. The £6k figure is the one we heard too and thankfully should be able to fund most from  savings that have been ringfenced for this. 

Very keen to help them buy a home. We were thinking that anything I inherit from my parents, i would have liked to pass on directly for this purpose only. Parents are on board with this but they are mid 70s so timing (hopefully!) will be an issue.

 Are you suggesting we could fund this by SP income in your last sentence? Wasn’t sure what you were trying to say.

I only meant that when you both have reached SP age, you will be getting more than £20K pa in index linked income, on top of your other income. So presumably you would need less capital to fund your income needs, which could be used elsewhere,