Equity Release to support earlier retirement

Wyndham

Tax free amounts - I was talking about the annual allowance. Just as now, you get a tax free allowance each year. If you are viewing it as 'income for you as a couple', then it makes sense (if you can) to use both tax free allowances before taking taxable money.

Worth saying, that once you start to get the state pension, this takes up most of the tax free allowance. But until then, you can perhaps be more savvy and creative. But you both need to have pension pots to draw on in order to do so.

collinsca

Understood- thank you.

twopenny

You didn't acknowledge the downsizing - unless I missed it.

I watched my friends gleefully taking an early retirement with plenty of money only to find that there was less than expected come retirement age. It was quite an eyeopener for me.

While you are fit and with property in post Christmas months often throwing up properties reduced that really just want a bit of an overhaul rather than full on refurb and sell at a profit, it's a possibility to do that while having your own time to enjoy.

It would mean that you have the security of the property invested in.

I've done this but too late + pandemic. But could still, and am considering another 2 moves to make up for the excessive cost of living and put myself back on track.

collinsca

Hi

Re downsizing i had said... "it is an option certainly; one to consider closer to the time" 

Interesting perspective re your friends retiring with less than they needed. So anecdotally, we've heard it from both angles.

Property development isnt something that i have a desire to get involved in.  Lots of opportunity i'm sure; but not one for me.
Nor successive house moves as investment is something that would be something we would go for.
Thanks for the thought though.

Shadyocuk

With no dependents Equity Release is certainly a potential option , but it is better done well into retirement as you get a better percentage of the property the older you are (for a couple its the age of the youngest) .
A quick google shows at 55 27%  , 65 40% , 75 50%

My rough plan is to use DC pots from 60 to  65 then claim my DB (have you looked at what your DB would pay if you left it till 65 rather than 60??) and keep equity release as my emergency fund should I need/want extra money then.

Obviously what I actually do and wether I take a lump sum from my DB or not , will all depend on what happens over the next 5-10 years , inflation , interest rates, tax rates , allowances, rules changes, market crashes, property market crashes , my state of health , my life wants etc could all change over 10 years.

If living as a couple and you expect to still be living as the same couple in retirement , then as others have said you want to try and avoid one of you having a large income and paying 40% tax and the other having a much smaller income. In simple terms look at the possibility of paying in more of your couples income into your Wifes DC rather than yours.

I am not a fan of mortgaging to invest , owning the home you live in outright can bring a lot of piece of mind , even if you both lost your jobs the roof over you head would still be safe and not having a mortgage to pay gives you more options on early or part retirement. 





 

collinsca

Thanks for your thoughts.

I think i certainly need to look at improving the wifes pension for tax purposes.
Beyond that, i do think i need to keep myself educated, but taking on board feedback, i think it is too early for me to be thinking too much about equity release.

Cobbler_tone

Shadyocuk said:

My rough plan is to use DC pots from 60 to  65 then claim my DB (have you looked at what your DB would pay if you left it till 65 rather than 60??) and keep equity release as my emergency fund should I need/want extra money then.

you want to try and avoid one of you having a large income and paying 40% tax 

If I left my DB until 65 I would definitely be in the 40% tax bracket at 67, unless they do something drastically different with the bands. Then you have to live a fair period of time (in most instances) to claw back the years you didn't take it.
Like most things, it is never one size fits all equity release is not in plans...unless it is requested due to care needs, although the government have promised to address this by the time I get there.  (no comments)