Retirement income

Wrighty69

Married man age 54 planning on retiring at 55. Disabled older wife on state pension only. Mortgage paid off. Is a retirement pot of £750,000 enough and the investment question is should I take out the 25% tax free lump sum and invest it somewhere. My pot is not doing too good at the moment.

eskbanker

Too many unknowns there, but the most obvious missing piece is how much annual income will you need after retiring?

Wrighty69

I am not sure how much I will require, my current household income is £65k, I don't buy flash cars or have expensive tastes but myself and my wife do like holidays. We have probably spent over £20k on holiday in the last 18 months.

Notepad_Phil

Wrighty69 said:

... the investment question is should I take out the 25% tax free lump sum and invest it somewhere. My pot is not doing too good at the moment.

There are a multitude of investment options out there, and most of the sensible ones can be done from within a pension. So why not look at how you are invested and if necessary change how it is allocated rather than just take the money out. Assets within a pension are sheltered from many of the taxes that you would otherwise face, so taking 25% out would not be my first choice unless there were good reasons to do so.

eskbanker

Wrighty69 said:

I am not sure how much I will require, my current household income is £65k, I don't buy flash cars or have expensive tastes but myself and my wife do like holidays. We have probably spent over £20k on holiday in the last 18 months.

I'd strongly suggest modelling your income and expenditure, and coming up with a plan that covers both for each year, which ought to factor in inflation and investment growth.  If your current household income is £65K, how much of that is spent?

In isolation, £750K sounds like a lot of money, but if it's expected to fund a post-retirement period of potentially 35+ years (any health issues that might compromise life expectancy?), then it would be spread relatively thinly, so you might expect to draw down something like £20-25K annually from that.

Albermarle

I am not sure how much I will require, my current household income is £65k

Your current income is not the issue. You need to work out how much you currently spend per year, and if this is likely to change when you stop working /get older.

You need to include all day to day spending ( food, energy, insurance, travel costs etc etc) and then some for one off items . Like buying new cars, holidays, new white goods, major house maintenance etc .

For the one off items you cam estimate an annual expenditure spread over many years.

redpete

What income do you want to cover annual spending (including 'normal' holidays)? What lump sum purchases do you want to cover (car, big holiday...)? Why would 25% taken out and invested grow more than if you left it in? Do you want certainty in income? 
Then what might be an advisable set of investments to keep it going for as long as you want to rely on it.
I used McClung's "Living off your Money" to help answer the last question once I'd worked out how much income I would be happy with.
For me (with a reasonable fixed benefit pension and retiring at 65) £750k would probably be enough, but that doesn't really answer the question for you.

Bostonerimus1

Do a budget and then take off any guaranteed income sources you'll have ie state pensions, annuities etc.  FYI your pension is already invested so you should understand how it is invested and whether it will produce the level of income/returns you need.

Linton

Wrighty69 said:

I am not sure how much I will require, my current household income is £65k, I don't buy flash cars or have expensive tastes but myself and my wife do like holidays. We have probably spent over £20k on holiday in the last 18 months.

How much you are spending now minus anything you wont need in retirement is probably a good starting estimate   After all you probably have had decades getting used to living on that.

I personally would not base an estimate on a bottom-up budget.  Those tend to reflect what you think you are spending on essentials more than what would give you a satisfying existance for the final 1/3 of your life.

dunstonh

should I take out the 25% tax free lump sum and invest it somewhere.

What objective would that achieve?

My pot is not doing too good at the moment.

Seeing as pensions can invest in the same places as ISAs or unwrapped, then its not to do with it being in a pension.      Also, you say not doing too good at the moment.  The last 6 months have been good.

LHW99

Have you checked your own state pension position? What about if you, unfortunately, died first, could your wife manage?