Retire at 51?

caeler

I’ve been working up a retirement plan but I’d value a sense check to see if it stacks up.  I’m 43 and single. I have 27 years NI contributions, needing 35 years to get full state pension of £11.5k pa. I’m employed. I’m mortgage free. Current DC pension pot is £275K and cash is at £160K. 

I live pretty modestly spending approx £16K a year on living costs, the rest of my earnings go into pension and savings and this tax year I’m on track to put by £40k into savings and £40k into pension (via salary sacrifice so includes tax relief and ER NI saving) Next year I’m going to shift the balance even more toward pension, maybe get close to the annual allowance. 40% of my savings are in an ISA and I’ll max out my ISA a allowance in 2025-26. Savings are getting reasonable interest right now and hopefully this will continue.  I’ve not really factored in growth from interest just focused on growth through contributions but that should give me some income assuming the BOE remains near where it is for a while?  Will this level of contribution I’m able to make continue, short term yes, long term who knows! I just mean my job is hard and stressful and I can’t see me managing it long term. 

I’m aiming to have an income of £20k pa in retirement. The first 6 years (age 51-57) at £20k pa funded with cash, then the next 11 years (age 57-68) at £20k pa funded using cash and pension and finally 17 years (age 68-85) topping up state pension by £8.5k pa funded by cash and pension. No idea how long I’ll live but that’s where I’ve guessed at. Plus a few extra quid tucked away for a rainy day (holidays, house repairs, car, etc) 

I think I need £700k. Is this plan sound? What have I missed in terms of financial planning? 

I’m not convinced I will actually retire at 51 but I think it will enable me to leave my current job and/or full time working. Maybe work part time or self employed or even volunteering. I need people and structure so I’ll need something to do. I crave less pressure and stress. 

Saver73

Hi, I'd get a forecast for your state pension via your HMRC account.  The 35 years doesn't apply and there are many posts about this subject!  I'll get a full state pension based on 33 years but I'm planning on working for between 5-7 years more.

You might find these posts worth a read too.

https://forums.moneysavingexpert.com/discussion/2146737/pensions-planning-the-number/p285

https://forums.moneysavingexpert.com/discussion/6228191/how-much-to-live-on/p1

caeler

Thanks @Saver73 I just looked at the government gateway and that’s what it said. Will look into it further. 

caeler

@Saver73 Pension forecast equates to 35 years for me. 

Dazed_and_C0nfused

caeler said:

@Saver73 Pension forecast equates to 35 years for me. 

The further we move past 2016 the more likely it is that people will need 35 years.

In your particular case 7 years will take you to £218.75 and the 8th and final year just adds the last £2.45.

Saver73

That's good news and you're on track if you work/contribute for another 8 years.

I've included a link to an old post just to explain a bit better about the 35 years

https://forums.moneysavingexpert.com/discussion/6584812/i-have-35-years-of-ni-contributions-but-they-aren-t-the-right-years?utm_source=community-search&utm_medium=organic-search&utm_term=35+years

I think your plan looks good overall, you've worked out how much income you need etc.  something I've been thinking about when I retire is increased spending on food, heating, water etc but if I'm not working may have lower travel costs, I don't buy lunches.

I think there is a balance between how much you can retire on and be comfortable/happy and how you feel about working full time.  I think I feel the same about working whether it was full or part time. I'd value the free time more.

Fink_Nottle

Saver73 said:

 I'd value the free time more.

Using money to buy free time is the best investment I've ever made.

Re the OP's plan, they seem to have what looks like a hefty proportion of assets in cash. This may be deliberate and well thought out based on their circumstances and attitude to risk, but if it's just a default position because they weren't sure where else to put it, then there is a lot of sensible stuff on this forum exploring alternative strategies.

Saver73

Fink_Nottle said:

Saver73 said:

 I'd value the free time more.

Using money to buy free time is the best investment I've ever made.

Re the OP's plan, they seem to have what looks like a hefty proportion of assets in cash. This may be deliberate and well thought out based on their circumstances and attitude to risk, but if it's just a default position because they weren't sure where else to put it, then there is a lot of sensible stuff on this forum exploring alternative strategies.

Look forward to getting to that point! 😀

I'm saving in cash and pensions because I don't want to take risks with 5-7 years to go, I'm confident of reaching my goal by the start of 2030. The OP has more time so could consider other strategies as you mention. I linked some posts for reference.

DRS1

Another way to look at it is what do I need to generate £20k pa income?  If you had savings paying 5% pa that would require £400k.  You already have that although most of it isn't available for a while (and 5% is optimistic right now).  Your planning seems to be based on running out of money by 85 but perhaps you would feel more comfortable with at least some capital which did not diminish over the period you are retired?

I may be wrong but it sounds like you are a higher rate tax payer.  I would put more emphasis on pension contributions to keep the tax bill down but if you get to basic rate level then put what you save away in an ISA.

Also if you have savings over what you can put in an ISA think about low coupon index linked gilts maturing when you think you might need the cash (eg in the 51 - 57 age range)  Search for threads and youtube videos on gilt ladders and have a look at yield gimp
Gilt Yields - Index-Linked Gilt Yields

I know a gilt ladder is not a low cost global equity tracker and won't be generating double digit returns pa but you can think about such beasts for your pension and ISA (maybe).

Marcon

caeler said:

II just mean my job is hard and stressful and I can’t see me managing it long term. 

I’m not convinced I will actually retire at 51 but I think it will enable me to leave my current job and/or full time working. Maybe work part time or self employed or even volunteering. I need people and structure so I’ll need something to do. I crave less pressure and stress. 

It seems a real shame that you are struggling so much with your current job that you might want to retire after what is likely to be little more than 30 years in the workplace, with a potential 50 years in retirement (plenty of people hitting their century!). You've got the insight to recognise that you need people and structure, and quitting so young might mean you find yourself short on both.

Instead of apparently focussing so heavily on retiring, isn't there anything you could do now to reduce both the pressure and the stress you are obviously finding difficult to cope with?

JayRitchie

Hi

A few questions if I may:

- why so much in cash? Is it held in ISAs? This is in no way meant as a criticism by the way.

- have you checked if you have any DC pensions with a protected age of 55?

- What is your gross salary before any pension deductions and what are the employer contributions? I think I'd move more towards pensions but would rather consider real numbers for this.

- which part of the country are you in and how large a labour market do you have access to for future part time work? Does your current house give you good connections for public transport?