plan to FIRE - how to draw down

Lu999

Linton said:

Lu999 said:

@hugheskevi This is really useful and answers most of my questions in one video for a dummy.  

@OldScientist, thanks. I know 4% is tight, but this should go down a lot once the kids leave the nest in 10 years (hopefully). 3% would be around +0.5m if my investment grows (it has grown 50% over the last 5 years). I will also see how long I can hang on to my job, or find a part-time job to add to my savings and move it to a tax-sheltered account.

Thanks, Linton and m_c_s, for suggesting an IFA or tax advisor, but if it means moving it to an offshore account, I doubt I would pursue it.  However, it seems I does need some advice, I wonder what the fees range would be for initial consultation

Why should using an IFA have anything to do with whether you use offshore accounts? Any regulated UK advisor will propose investments  and financial management strategies that meet your objectives and wishes.

As my portfolio is un-typically heavy in unsheltered accounts, I need to understand tax and do tax efficiency legally. 

I guess the only way to do that would be offshore fund structured for this purpose, which I doubt align with my objectives and wishes.  No one want to pay more tax than they need to, but I am not a millionaire daughter who use domicile either (well well, let's stop there)

For investment strategies, I am using passive index (7/3, global eq / bond).  

Unfortunately the past experience with IFA is really bad and keen to avoid that.  

Lu999

Pat38493 said:

Lu999 said:

@hugheskevi This is really useful and answers most of my questions in one video for a dummy.  

@OldScientist, thanks. I know 4% is tight, but this should go down a lot once the kids leave the nest in 10 years (hopefully). 3% would be around +0.5m if my investment grows (it has grown 50% over the last 5 years). I will also see how long I can hang on to my job, or find a part-time job to add to my savings and move it to a tax-sheltered account.

Thanks, Linton and m_c_s, for suggesting an IFA or tax advisor, but if it means moving it to an offshore account, I doubt I would pursue it.  However, it seems I does need some advice, I wonder what the fees range would be for initial consultation

Make sure you look for an IFA (certified Independent).  Don't go with any FA especially ones who are selling an approach that locks you in to exit fees (very few of them do that these days anyway).

Also - look for an IFA who will set a maximum amount on the fees they will charge, as many will want to charge a % of your pot which could be a large amount based on the size of your assets. 

Also consider whether you want to just hire an IFA for a fixed fee to give you some one off advice that you will then manage yourself, or an IFA to basically take on your portfolio and manage it (for which they will charge an ongoing  % of your pot).  Some IFA are reluctant to do the former operation but there are many that will.

If I was hiring an IFA for a one off review of my retirement plan and some recommendations, I would expect to pay £3-4K for it.

However you might have to pay a bit more when they find out that you have a lot of assets outside tax wrappers and pensions in Asia etc.

As others have said, one obvious thing is that you should be utilizing your ISA allowances every year to move your money into non taxable wrappers if you are not already doing that.  

Also if you have employment income or anything that counts as earned income, you should be maxing out your pension contributions according to available allowances as pensions are extremely tax efficient. especially if you are a higher rate taxpayer.

With that size of portfolio and a lot in taxable accounts, it looks like you might well benefit from advice as they will probably end up saving you more than the cost.

Thank you @Pat38493.  We have been filled up to max ISA and Pension after we learnt the rules.
3-4k feels like a big chunk, though a 0.03% on portfolio value.
But due to bad experience in the past, to be honest, I don't know where to find a good IFA.

It seems my optimal withdrawal strategy, if forced to fire,

Full nest stage - 60k expense , 30k on me
1) dividend and saving interest - these classed as income, so I get 12570 + 5000 + 500 = 18070, tax free
2) another ~12k would come from GIA, 10% of ~80% gain ~ 1000 tax
3) withdraw 20k + 2888 + tax from GIA to fill ISA and pension
4) consider voluntary NI contributions

Empty nest stage (access private pension) - 40k expense, 20k on me
1) taxable income dividend and saving interest - these classed as income , so I get 12570 + 5000 + 500 = 18070, tax free
2) another 20k either from 25% lumpsum pot or ISA 
3) GIA
4) let's see then, who knows 

Dazed_and_C0nfused

1) dividend and saving interest - these classed as income, so I get 12570 + 5000 + 500 = 18070, tax free

What does the 500 represent?

If it's the savings nil rate band why only £500 if you aren't a higher rate payer?

If it's the dividend nil rate band what has happened to the savings nil rate band?

Bostonerimus1

Lu999 said:

Linton said:

Lu999 said:

@hugheskevi This is really useful and answers most of my questions in one video for a dummy.  

@OldScientist, thanks. I know 4% is tight, but this should go down a lot once the kids leave the nest in 10 years (hopefully). 3% would be around +0.5m if my investment grows (it has grown 50% over the last 5 years). I will also see how long I can hang on to my job, or find a part-time job to add to my savings and move it to a tax-sheltered account.

Thanks, Linton and m_c_s, for suggesting an IFA or tax advisor, but if it means moving it to an offshore account, I doubt I would pursue it.  However, it seems I does need some advice, I wonder what the fees range would be for initial consultation

Why should using an IFA have anything to do with whether you use offshore accounts? Any regulated UK advisor will propose investments  and financial management strategies that meet your objectives and wishes.

As my portfolio is un-typically heavy in unsheltered accounts, I need to understand tax and do tax efficiency legally. 

I guess the only way to do that would be offshore fund structured for this purpose, which I doubt align with my objectives and wishes.  No one want to pay more tax than they need to, but I am not a millionaire daughter who use domicile either (well well, let's stop there)

For investment strategies, I am using passive index (7/3, global eq / bond).  

Unfortunately the past experience with IFA is really bad and keen to avoid that.  

I don't see why you need to make things complicated or use offshore funds. Given your income target of ~60k and various investment accounts and pensions with tax free lump sums you should be able to stay within the basic income tax band and pay any capital gains at 10% so your tax bill will be pretty low. You should check on the status of your "Asian pension" in light of any applicable double taxation treaty.

Lu999

Dazed_and_C0nfused said:

1) dividend and saving interest - these classed as income, so I get 12570 + 5000 + 500 = 18070, tax free

What does the 500 represent?

If it's the savings nil rate band why only £500 if you aren't a higher rate payer?

If it's the dividend nil rate band what has happened to the savings nil rate band?

Hi @Dazed_and_C0nfused


This is my understanding, within basic income tax band

12570 - personal allowance
5000 - interest allowance
500 - dividend allowance

So if I get 13k dividend from stock shares in taxable a/c and 5k interests from cash savings, then it is tax free, is it?

I did not engineer my dividend,  taxable a/c portfolio mainly on VT+BND and the uk VRWL/ISF version   


Thank you
L

Lu999

Bostonerimus1 said:

Lu999 said:

Linton said:

Lu999 said:

@hugheskevi This is really useful and answers most of my questions in one video for a dummy.  

@OldScientist, thanks. I know 4% is tight, but this should go down a lot once the kids leave the nest in 10 years (hopefully). 3% would be around +0.5m if my investment grows (it has grown 50% over the last 5 years). I will also see how long I can hang on to my job, or find a part-time job to add to my savings and move it to a tax-sheltered account.

Thanks, Linton and m_c_s, for suggesting an IFA or tax advisor, but if it means moving it to an offshore account, I doubt I would pursue it.  However, it seems I does need some advice, I wonder what the fees range would be for initial consultation

Why should using an IFA have anything to do with whether you use offshore accounts? Any regulated UK advisor will propose investments  and financial management strategies that meet your objectives and wishes.

As my portfolio is un-typically heavy in unsheltered accounts, I need to understand tax and do tax efficiency legally. 

I guess the only way to do that would be offshore fund structured for this purpose, which I doubt align with my objectives and wishes.  No one want to pay more tax than they need to, but I am not a millionaire daughter who use domicile either (well well, let's stop there)

For investment strategies, I am using passive index (7/3, global eq / bond).  

Unfortunately the past experience with IFA is really bad and keen to avoid that.  

I don't see why you need to make things complicated or use offshore funds. Given your income target of ~60k and various investment accounts and pensions with tax free lump sums you should be able to stay within the basic income tax band and pay any capital gains at 10% so your tax bill will be pretty low. You should check on the status of your "Asian pension" in light of any applicable double taxation treaty.

Thanks, that's what I am thinking, simple passive index and pay the tax.

So if I roughly use 10% ~6k as tax for estimates (who know how they would change the tax ) then I need to have withdrawal of 66k

66k / 3% as suggested by @OldScientist, I should aim for  1.65m - 2.2m
 

Dazed_and_C0nfused

Lu999 said:

Dazed_and_C0nfused said:

1) dividend and saving interest - these classed as income, so I get 12570 + 5000 + 500 = 18070, tax free

What does the 500 represent?

If it's the savings nil rate band why only £500 if you aren't a higher rate payer?

If it's the dividend nil rate band what has happened to the savings nil rate band?

Hi @Dazed_and_C0nfused


This is my understanding, within basic income tax band

12570 - personal allowance
5000 - interest allowance
500 - dividend allowance

So if I get 13k dividend from stock shares in taxable a/c and 5k interests from cash savings, then it is tax free, is it?

I did not engineer my dividend,  taxable a/c portfolio mainly on VT+BND and the uk VRWL/ISF version   


Thank you
L

There are no separate allowances for interest and dividends.  There are three different 0% tax rates though.

Savings starter rate (upto £5,000 taxed at 0%)
Savings nil rate (upto £1,000 taxed at 0%)
Dividend nil rate (upto £500 taxed at 0%)

Income from ISA's is "tax free", other dividends and interest will be taxable income. Albeit no tax might be payable if covered by the Personal Allowance or it falls to be taxed at 0%.

If your only taxable income was £18,000 from dividends (£13k) and interest (£5k) then £5,430 of it would end up being taxed, but all at 0%.
NB.  This assumes you haven't applied for Marriage Allowance.

Providing it is the right split you could have just over £19k in (taxable) interest and dividends and still have no tax to pay (providing you haven't applied for Marriage Allowance and don't make Gift Aid donations).

Bostonerimus1

Lu999 said:

Bostonerimus1 said:

Lu999 said:

Linton said:

Lu999 said:

@hugheskevi This is really useful and answers most of my questions in one video for a dummy.  

@OldScientist, thanks. I know 4% is tight, but this should go down a lot once the kids leave the nest in 10 years (hopefully). 3% would be around +0.5m if my investment grows (it has grown 50% over the last 5 years). I will also see how long I can hang on to my job, or find a part-time job to add to my savings and move it to a tax-sheltered account.

Thanks, Linton and m_c_s, for suggesting an IFA or tax advisor, but if it means moving it to an offshore account, I doubt I would pursue it.  However, it seems I does need some advice, I wonder what the fees range would be for initial consultation

Why should using an IFA have anything to do with whether you use offshore accounts? Any regulated UK advisor will propose investments  and financial management strategies that meet your objectives and wishes.

As my portfolio is un-typically heavy in unsheltered accounts, I need to understand tax and do tax efficiency legally. 

I guess the only way to do that would be offshore fund structured for this purpose, which I doubt align with my objectives and wishes.  No one want to pay more tax than they need to, but I am not a millionaire daughter who use domicile either (well well, let's stop there)

For investment strategies, I am using passive index (7/3, global eq / bond).  

Unfortunately the past experience with IFA is really bad and keen to avoid that.  

I don't see why you need to make things complicated or use offshore funds. Given your income target of ~60k and various investment accounts and pensions with tax free lump sums you should be able to stay within the basic income tax band and pay any capital gains at 10% so your tax bill will be pretty low. You should check on the status of your "Asian pension" in light of any applicable double taxation treaty.

Thanks, that's what I am thinking, simple passive index and pay the tax.

So if I roughly use 10% ~6k as tax for estimates (who know how they would change the tax ) then I need to have withdrawal of 66k

66k / 3% as suggested by @OldScientist, I should aim for  1.65m - 2.2m
 

With allowances and tax free sources your ~10% tax (less for income tax) will be far less than 6k. Also look at whether you can qualify for some state pension from either the UK or where you worked overseas by paying catch up contributions and/or using reciprocal social security agreements.

Hoenir

Remember personal allowances are frozen and Capital Gains Tax is an area where a Labour Government could inflict much damage (without causing public discontemt).  Inflation is the silent assassin. Slowly compounds and erodes as the years pass. While investments might flounder for a period. 

sgx2000

As a mere pauper on this forum...
I would have to say that, with this amount of money involved, you really should pay for a top quality IFA.....