Earlier than planned retirement at 54.

Walking_the_dogs

Over the last 12 months in particular I've been struggling with my current job of 18 years, which is both stressful and physically demanding.
Last week I finally hit burnout and for my own sanity and health, handed in my resignation.

I may look for part time work but for now I'm trying to get my head around the finances and the best way to draw on them.

I'm married with 2 adult sons still living at home.
One is working and contributes a small amount towards household bills. The other is still at university.
We are mortgage free, having paid this off a couple of years ago.

My wife also 54 is still currently working part time with a gross salary of just over £20k
I have dc pension pots of £150k
Investment ISAs of £95k and £10k in cash ISA.
My wife has £400k in a mixture of cash ISAs, max of Premium Bonds and taxable savings accounts (mostly from inheritance).
My wife has an index linked DB pension that currently is valued at £13.5k per year from the age of 65 but can be taken earlier.
She also has a small local government pension that currently pays out at state pension age of around £6k but she is still contributing to this.
We are both entitled to full SP at 67.

So that gives us £505k in savings to draw from until the various pensions come into play.
This is where I'm having trouble working out the best plan of action.
I've looked at lots of scenarios and watched more YouTube videos on the subject than is healthy.
I'm under the assumption it would be best to draw from the taxable savings at first and obviously continue to utilise our ISA allowances each tax year by moving the funds.
I intend to use my maximum pension allowance for this one last tax year while I'm still working.
Would it be worth my wife starting her own SIPP?
How do we make the best use of our pot?
Thanks for taking the time to read this rather long post.

barnstar2077

How much money do you require each year please?  Is your wife planning on continuing to work to SP age?  I'm sure if you can provide that information that someone cleverer than I will be right along to do some maths for you! 

cfw1994

Sorry to hear things have been rough for you.

You don’t say what money you need to live on.  That is pretty important.
I would also see if there are things you can reduce: monthly phone bills, tv/broadband.  We just chopped ours down from £10pcm each to £7 & £8 - every little helps!

If you take pensions early there will almost certainly be a reduction, so you should investigate how yours work.
You won’t be able to get at those before 55 (or possibly later - check your details).

Then you can start work on a spreadsheet to see what to take when 👍
You can also try popping details into https://www.guiide.co.uk, or use the one at https://whatapalaver.co.uk/retirement-planning-couples to model things.

In general, you should try to take at least your tax-free amount from taxable income if you can.

You should BOTH login to the Government pension site to check if your state pension is ‘full’ - see ‘check your state pension’ at https://www.moneysavingexpert.com/savings/state-pensions.   

As explained here, you have a limited window to “buy up” some years ending in April, so treat this as a priority, there may be r/s you can buy to fill it up if needed - https://www.moneysavingexpert.com/news/2024/10/state-pension-boosting-deadline/

Finally, there is a lot of info out there.  I find James Shack very clear on YouTube - here is his take on the state pension deadline, if it helps - https://youtu.be/Al8G7_jf-k4?si=lnC82cZwsbEq1gZh

Oh, & do something every day to help your health, even if it is just a walk round the block….maybe one side hustle could be dog walking, given your name 👍

Marcon

Walking_the_dogs said:

Over the last 12 months in particular I've been struggling with my current job of 18 years, which is both stressful and physically demanding.
Last week I finally hit burnout and for my own sanity and health, handed in my resignation.

Good decision, and the right one for you and all your family by the sound of it. Give yourself a breathing space for at least a few weeks - the cash will take care of itself for a little while. 

Walking_the_dogs said:

I'm married with 2 adult sons still living at home.
One is working and contributes a small amount towards household bills. The other is still at university.
We are mortgage free, having paid this off a couple of years ago.

My wife also 54 is still currently working part time with a gross salary of just over £20k
I have dc pension pots of £150k
Investment ISAs of £95k and £10k in cash ISA.
My wife has £400k in a mixture of cash ISAs, max of Premium Bonds and taxable savings accounts (mostly from inheritance).
1. My wife has an index linked DB pension that currently is valued at £13.5k per year from the age of 65 but can be taken earlier.
She also has a small local government pension that currently pays out at state pension age of around £6k but she is still contributing to this.
We are both entitled to full SP at 67.

So that gives us £505k in savings to draw from until the various pensions come into play.
This is where I'm having trouble working out the best plan of action.
I've looked at lots of scenarios and watched more YouTube videos on the subject than is healthy.
I'm under the assumption it would be best to draw from the taxable savings at first and obviously continue to utilise our ISA allowances each tax year by moving the funds.
2. I intend to use my maximum pension allowance for this one last tax year while I'm still working.
3. Would it be worth my wife starting her own SIPP?
How do we make the best use of our pot?
Thanks for taking the time to read this rather long post.

1. Remember that if a DB pension is taken before the scheme's normal retirement age, the starting level is normally reduced to reflect the fact that it is being paid sooner than expected, and will be paid for more years than expected.

2. Don't forget the contributions need to be made before the end of the tax year. If you don't anticipate having any earnings in the following (25/26) tax year, you won't be able to use carry forward and will be limited to a gross contribution of £3,600 (£2,880 net).

3. With what objective? Does she need the flexibility, given she seems to have plenty of accessible cash? Might be better to look at paying more to the LGPS unless she's already done that/decided against it.

Albermarle

Your wife is very cash rich. She should look at investing more of her money, if it is likely that some/a lot of it would not be needed for many years.
One tax efficient way to do this would be via a personal pension/SIPP.
Just something to keep in mind along with the other suggestions made.

MetaPhysical

Good luck to you.  You did the right thing under the circumstances and regrettably more and more people are thinking the same as you in today's toxic and stressful workplaces - myself included.  The demand and expectation on you goes forever upwards and yet the resources available to meet that expectation go down.  I think many workplaces are hitting the crunch point leading to many of the mental health issues we see in society.  You get to your mid fifties (I am 57) and you just think enough is enough.  Kudos to you for having the b***s to do it.  I will be doing likewise in a few months after I have been paid a bonus I am due.

The pieces will fall into place for you even if it doesn't seem that way now.

tacpot12

Yes, using money from the taxable savings pots first is the sensible strategy. 

They draw on your DC Pension pot. Your wife taking her DB pension early should be the last option. You should not need to do this as between you, you have enough money to last until she is 65. I guess this assumes that she is happy to carry on working until she is 65. 

I found it useful to map out using a spreadsheet when each income 'stream' would be used. If you do this and include her income in it, you can play around to see when she could retire.

You might also factor in any savings that might be made when your wife stops working, e.g. transport costs, work clothes, and any extra cost of meals if she has to buy food from retail vendors.  

I would assume that she would want to retire fairly soon, as it can be quite hard to stay motivated when your other half doesn't have to get up to go to work. However, she may know that she wants to work for a long time. 

BTW: I retired at 53 because my partner was retiring then, and my job was also very stressful. 

ali_bear

I don't know why you are ruling out the possibility of continuing to work. Even if you are earning minimum wage this will keep you afloat, prevent you from draining your savings, allow you to save a bit towards retirement and more importantly will keep you active and engaged. There could be many more productive years in you. Someone out there needs your skills and experience, even if it may not be easy getting matched with them. Leaving a job because of a toxic work environment is nothing to be ashamed of, as long as you can explain yourself to a prospective new employer, and if they don't get it perhaps they are not the employer for you. 

af1963

Assuming you do both have full state pensions that gives about £24k from state pension age, plus your wife's approx £20k in DB pensions, so the later years are probably fairly well covered. Depends what your spending requirements are. 

She'll get less from the DBs if she takes them early though, which may well happen, especially if you're stopping work in mid 50s.

If you think she may want to stop work early, that provides her an opportunity to get a tax-relief boost on some of her savings by paying in to a SIPP - she can make a total contribution ( including the "pension input" amount already being contributed to the final salary scheme) of up to 100% of her earned income, and then choose to withdraw enough in the "pre-pension" years to use up her tax allowance ( just under £17k per year including the associated tax free cash), before the state pension starts to use up the allowance.

It's still worth doing if she keeps working ( so the SIPP payments end up being taxed), because of the tax free cash, but it's not such a good deal.

You can be doing the same with your own pension savings, taking it out gradually before state pension kicks in, free of tax, and keeping the (already-taxed) ISA savings to use later.

michaels

If the partner is LGPS it is possible that any avcs she makes to the LGPS scheme may be able to be withdrawn tax free as in that scheme the pot size for the TFLS calculation includes the DB (time about 20 I think).  This would mean maxing such payments while living off the capital (especially outside the ISA wrappers) is a no brainer.

Also as suggested above
1) moving as much into ISA/pension wrapper per year makes sense
2) making sure all personal allowances are used every year, even if it means drawing more than spending and moving the excess into ISAs also makes sense.

Walking_the_dogs

Thanks for all the comments. Plenty to think about there.

I had composed a lengthy reply but it has disappeared into the ether!
I have already completed a thorough breakdown of expenditure over the last 12 months.
While my wife is still working drawing a net income of £25k would enable our current lifestyle.
An annual target of £40k would be the ideal as a couple once my wife stops work.

We are both eligible for full state pensions.

I may still look for part time work until my wife decides to retire.