Rate My Retirement Plan

numptydumpty18

I think I am in good shape but would like a bit of validation that I'm good to go (or otherwise) before I hit the trigger.

I want an income of £27500 for the next 12 years, dropping to £7500 after that once state pension and a DB kick in. (It's a bit more complicated than that but close enough for this purpose).

I have a portfolio of c£880k, and want to set aside c£100k for 'fun' money at the start of the pension. So £780k for my income goal. Seems good but also feels a scary step, what are people's thoughts?

Albermarle

My thoughts are that there is a small danger if markets are not kind during the first few years, when you are withdrawing at a fast(ish ) rate ( £30K before tax and then + inflation) 
This is known as a sequence of return risk, where drops at the start of the drawdown have a much bigger effect than later drops.
Have you any other savings? Maybe you could not spend the £100K too quick, just in case. After a few years and assuming no dramas, you could take out some more then for fun money.

tacpot12

I think you are just about ok with your retirement plan. 4% is a safe withdrawl rate to plan for given your state pension and DB pension provision, so £780,000 would produce an income of about £31,200 before tax or £27,500 if you had to pay tax on all of it, which you won't as you will have some tax-free element left after taking an initial lump sum (PCLS).

I retired at 53 and have been drawing down on my DC pension at a rate of 4.5% pa since I was 55. My pension is worth about 8% more than I paid for it six years ago. That's ok considering that two years where affected by the Covid pandemic. Not great, but I'm not worried that I will run out of money. 

I also have a full State Pension entitlement, two small DB pensions that will pay about £4K a year and some income from rental properties. 

barnstar2077

Pull the trigger.  As suggested, maybe spread the £100k over a few years if you are at all concerned.  Or even live on a little bit less to start with.  Either way, retire, you won't get the time back again, but you can always adapt your finances going forward!

Westertonbilly

Be mindful that the potential of means testing the state pension has been floated

cloud_dog

Westertonbilly said:

Be mindful that the potential of means testing the state pension has been floated

Here we go again 😴

numptydumpty18

Albermarle said:

My thoughts are that there is a small danger if markets are not kind during the first few years, when you are withdrawing at a fast(ish ) rate ( £30K before tax and then + inflation) 
This is known as a sequence of return risk, where drops at the start of the drawdown have a much bigger effect than later drops.
Have you any other savings? Maybe you could not spend the £100K too quick, just in case. After a few years and assuming no dramas, you could take out some more then for fun money.

Thanks, I should be able to take the 27500 tax free for the first 12 years, with 16666 UFPLS and the rest coming out of an ISA. The £100k won't be spent in year 1 but spread over the early years of retirement so delayed spend.

numptydumpty18

Westertonbilly said:

Be mindful that the potential of means testing the state pension has been floated

Thanks, although I prefer not to base my planning on wild speculation.

https://fullfact.org/economy/state-pension-means-testing/

ukdw

Assuming all figures are in real terms, and that growth matches inflation.

If you assume 12x30k gross is enough to fund your 12 years pre SP, plus the £100k,- means you should hopefully still have at least £420k left in 12 years time.

4% of £420k is more than twice your £7.5k target - so your plan looks feasible to me.

Moonwolf

You don't say if you want to pass on any of your DC fund.

If you are happy to spend it all then it is worth comparing annuity rates with safe withdrawal rates.  There will probably be a point where it is worth sacrificing some of your pot for an annuity.  Many people on here would not do this but for me, peace of mind and knowing I won't run out trumps the benefit of dying rich.

numptydumpty18

Moonwolf said:

You don't say if you want to pass on any of your DC fund.

If you are happy to spend it all then it is worth comparing annuity rates with safe withdrawal rates.  There will probably be a point where it is worth sacrificing some of your pot for an annuity.  Many people on here would not do this but for me, peace of mind and knowing I won't run out trumps the benefit of dying rich.

Good point, I may consider that once over the line atstate pension age so everything becomes much simpler to manage.