How to make retirement possible

kimwp

yellow123fox said:

Thanks for the help again everyone, at least I get that our position is better than I thought it was.

As for after state pension age, the idea was that relatively small amounts would be drawn down as discretionary spending for holidays and so on. The issue is more about making early retirement possible in a way thats safe for potential future scenarios a couple of decades away.

Most of the rainy day fund is in cash ISAs i think paying about 5%, maybe £150k or so across the two of us. The rest is kind of hard to keep track of.

Key questions I think the answers are needed to understand whether you can retire are -
- what is your desired spend in retirement 
- what is the desired spend for one person in retirement 
- what is the essential spends for one person in retirement 
-  What are the future scenarios that you are worried about?

Triumph13

You might find it easier to get your head around if you divide the pension amount between a 'bridging' pot to be spent over the next 7 years until the state pensions start, and a drawdown pot to give you an income forever.

Say for example you wanted to be able to spend about £23k per year (the amount of two state pensions) and you were comfortable with a 3.5% drawdown rate.  If you split your £405k of pension funds into a £320k drawdown fund (= £11.2k pa at 3.5%) and £85k of bridging funds (85 / 7 = 12.1k  pa until 67) that gives you £23.3k pa.  You can get all of that and more out tax free in the period to 67 between the 25% TFLS and personal allowances.  If one of you gets hit by a bus, the other has their SP plus the £11.2k above.  If they don't, then you have about £32 or £33k pa between you post 67.  I would probably just use the interest on your cash ISAs to get you up to that kind of spending level even before SP age and just retire tomorrow.

LHW99

The rest is kind of hard to keep track of.

Make a list (Excel, Word, Paper & pencil). That can have eg Bank name, amount, interest rate, end of fix (if relevant) and update once / twice a year. Useful for you, and very helpful for spouse / executors if that bus happens to get you.

You might even end up as a spreadsheet nerd (like too many of us here )

yellow123fox

kimwp said:

yellow123fox said:

Thanks for the help again everyone, at least I get that our position is better than I thought it was.

As for after state pension age, the idea was that relatively small amounts would be drawn down as discretionary spending for holidays and so on. The issue is more about making early retirement possible in a way thats safe for potential future scenarios a couple of decades away.

Most of the rainy day fund is in cash ISAs i think paying about 5%, maybe £150k or so across the two of us. The rest is kind of hard to keep track of.

Key questions I think the answers are needed to understand whether you can retire are -
- what is your desired spend in retirement 
- what is the desired spend for one person in retirement 
- what is the essential spends for one person in retirement 
-  What are the future scenarios that you are worried about?

To try and answer these questions:

1) probably £25-27k/year

2) once person would presumably reduce costs a bit - say £20-23k/year

3) this would be lower - maybe £15k/year

4) primarily overspending in retirement pre-state pension age making it impossible to replicate (roughly) a state pension amount if one of us were to pass relatively young. Alternatively, making sure there is enough left for potential care costs, but also making sure that we make the best use of the funds available (we would want a safety net, but would like to start spending if possible). Its basically trying to work out how to get the most 'value' from the pensions (eg if it was possible to stop working before state pension age, you can in effect withdraw more than 25% tax free due to the personal allowance).

Peterrr

As others have suggested OP, your savings are considerably higher than the vast majority of folk at retirement, and are actually very similar in every respect to my own (projected) numbers when I hope to call it a day (at a similar age).
I'm going to assume you have some property wealth (based on your low living expenses in retirement), and note your desire to have "enough for care costs" should they arise. Your home equity can be used to pay for any care costs should such a need arise: even if the required care is in your own home rather than in a care facility, then it is easy these days to release equity via a 'lifetime mortgage'. This is certainly our plan, and remember the fact that - even if we reach the age of 85 - our chances of requiring residential care is only 15%. So don't delay retiring to the best life you have yet to live, just to save for end of life care you will most likely not need.