Rate My Retirement Plan

leosayer

It looks like a safe plan but you are entirely dependent on your portfolio for income in the first 12 years. Without some details about how you are invested, it's hard to say what risks you are running.

Have you considered taking your DB early? 

michaels

I would say you can do 20k x 12 years for £240k of your pot using indexed linked gilts ladder

880 - 100 - 240 = 540k to give an income for life.

Using a conservative SWR of 3% gives £16k for life so I would say you could actually spend £36k for life rather than the target 27.5k and still have basically zero risk of any issues - as mentioned 3% for SWR could probably also buy you an annuity instead for 100% certainty but no inheritance pot.

OldScientist

numptydumpty18 said:

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?

A quick 'back of the envelope' calculation (neglecting tax).

If you want the £27.5k to be inflation linked then
1) Assuming a real return of 0%*, then the first 12 years would cost roughly 27.5*12=£330k
2) This would leave £450k for your long term portfolio. 7.5k/450k gives an inflation adjusted withdrawal rate of 1.7% which has been well below the 'maximum safe withdrawal rate' in a UK historical context for withdrawals over periods of 30 years or so (3% to 3.5%).

An alternative would to to buy a lifetime RPI annuity now to provide the long term 7.5k (payout rate for joint life with 100% beneficiary payout is currently around 2.9% at 55yo, so a cost of 7.5/0.029=£260k, while single life annuity would be somewhat cheaper at about £220k). You would then need £20k per year from the first 12 years, costing roughly £240k. Your remaining portfolio (780-260-240=£280k) can then be used for ad-hoc spending, legacy, or to cover any income shortfall in the first 12 years.

Either way, you appear to be in a good position, so good luck!

* ps if you are willing to take a more complex approach, an inflation linked gilt ladder covering the first 12 years would also currently cost about £330k (see https://lategenxer.streamlit.app/Gilt_Ladder ) and would provide inflation protected income.

numptydumpty18

Thanks @michaels @OldScientist, sounds like I'm in a good place, but need to consider the options for the way my income will be generated.

Triumph13

Michaels solution is pretty much bang on what I was going to say.  Your real issues are a) how to bridge the £20k pa for 12 years until other income is on line and b) how to get an income of at least £7.5k pa from day one with what's left.

Gilt ladder  / fixed term savings handles a).  For b) I would say that 3% is too low, simply because you can afford to drop your income massively in a bad sequence of investment returns.  Say you did 3.5% of variable portfolio value, you'd still be getting your £7.5 k even if your portfolio went down by 60%.

Have fun!