Retirement advice please

pedro789

Hi

I’m 56 and thinking of early about retirement. I've got local gov pension worth £20,000 a year (which I can take whenever), £10,000 a year from property rental and about £200,000 in a mix of cash & S&S ISAs.

No mortgages on my own house or rental and don’t need a lot to live on - couple of holidays a year etc.

My plan is to retire Feb/Mar next year. I've got option of doing some consultancy work, but really fancy having a year off completely. Feel completely burnt out.

I realise I have to pay tax on the above but really wanted advice on £200,000. 

It's 80% S&S (Vanguard LS 60/40), 20% cash ISA.

• Does it seem reasonably balanced?

• Can I drawdown annual interrest to supplement pension/rental?

• Am I missing anything obvious?

I do plan to get independent financial advice but always found this form very helpful in explaining options for a novice like myself 🙂

Appreciate any thoughts, thanks.

k6chris

pedro789 said:

Hi

I’m 56 and thinking of early about retirement. I've got local gov pension worth £20,000 a year (which I can take whenever), £10,000 a year from property rental and about £200,000 in a mix of cash & S&S ISAs.

No mortgages on my own house or rental and don’t need a lot to live on - couple of holidays a year etc.

My plan is to retire Feb/Mar next year. I've got option of doing some consultancy work, but really fancy having a year off completely. Feel completely burnt out.

I realise I have to pay tax on the above but really wanted advice on £200,000. 

It's 80% S&S (Vanguard LS 60/40), 20% cash ISA.

• Does it seem reasonably balanced?

• Can I drawdown annual interrest to supplement pension/rental?

• Am I missing anything obvious?

I do plan to get independent financial advice but always found this form very helpful in explaining options for a novice like myself 🙂

Appreciate any thoughts, thanks.

Have you worked out how much money you need to live the retirement you want?  It's by far the most important number!

DRS1

Someone will be along soon to tell you to check your state pension - is it the full amount or do you need to pay for some more years?

Have you thought about getting rid of the rental property?

Your LGPS pension may not be £20k pa - it may depend on when you take it (being reduced if you take it early).

You ask if the ISA is balanced.  Obviously not but do you want it balanced?  Why?  Having an amount in cash is recommended and maybe £40k is the right amount for you.  Having the rest invested is also sensible (though it may not have felt like it in the last month).

Draw the income from the ISA if you must but recognise that the ISA will not grow as fast as if the income was reinvested (if it grows at all).

ali_bear

pedro789 said:

My plan is to retire Feb/Mar next year. I've got option of doing some consultancy work, but really fancy having a year off completely. Feel completely burnt out.

It depends on what you mean by this. If I was really completely burnt out I would take time off for ill health immediately, with a view to making it more permanent if things didn't change and I didn't need to be earning. Then consider going back to work if I found something that I could get along with. 

What you do have is flexibility about when you stop working, if you can stand it. You also have flexibility because of your large-ish ISA savings and rental income. These are to your advantage. 

Do you need more years of NI contributions to get the full state pension? 

pedro789

k6chris said:

pedro789 said:

Hi

I’m 56 and thinking of early about retirement. I've got local gov pension worth £20,000 a year (which I can take whenever), £10,000 a year from property rental and about £200,000 in a mix of cash & S&S ISAs.

No mortgages on my own house or rental and don’t need a lot to live on - couple of holidays a year etc.

My plan is to retire Feb/Mar next year. I've got option of doing some consultancy work, but really fancy having a year off completely. Feel completely burnt out.

I realise I have to pay tax on the above but really wanted advice on £200,000. 

It's 80% S&S (Vanguard LS 60/40), 20% cash ISA.

• Does it seem reasonably balanced?

• Can I drawdown annual interrest to supplement pension/rental?

• Am I missing anything obvious?

I do plan to get independent financial advice but always found this form very helpful in explaining options for a novice like myself 🙂

Appreciate any thoughts, thanks.

Have you worked out how much money you need to live the retirement you want?  It's by far the most important number!

Thanks. I've done retirement budget. I think £30,000 (before tax) plus some potential consultancy income would be ok. And still have back up of ISAs if needed.

pedro789

ali_bear said:

pedro789 said:

My plan is to retire Feb/Mar next year. I've got option of doing some consultancy work, but really fancy having a year off completely. Feel completely burnt out.

It depends on what you mean by this. If I was really completely burnt out I would take time off for ill health immediately, with a view to making it more permanent if things didn't change and I didn't need to be earning. Then consider going back to work if I found something that I could get along with. 

What you do have is flexibility about when you stop working, if you can stand it. You also have flexibility because of your large-ish ISA savings and rental income. These are to your advantage. 

Do you need more years of NI contributions to get the full state pension? 

Thanks. All NI paid up, so ok on that front.

pedro789

DRS1 said:

Someone will be along soon to tell you to check your state pension - is it the full amount or do you need to pay for some more years?

Have you thought about getting rid of the rental property?

Your LGPS pension may not be £20k pa - it may depend on when you take it (being reduced if you take it early).

You ask if the ISA is balanced.  Obviously not but do you want it balanced?  Why?  Having an amount in cash is recommended and maybe £40k is the right amount for you.  Having the rest invested is also sensible (though it may not have felt like it in the last month).

Draw the income from the ISA if you must but recognise that the ISA will not grow as fast as if the income was reinvested (if it grows at all).

Thanks. Yes £20,000 LGPS does include reduction for taking it early.

ali_bear

Can you cut down your working week? Go to 4 days and then 3 days per week, ease into retirement gradually. 

SarahB16

An observation I have is that you don't appear to have made any voluntary LGPS AVC contributions.  Tax and NIC savings going in and tax free on drawdown (subject to HMRC limits which you will not hit given how soon you intend to retire).

I'm also making the assumption that you are currently a higher rate tax payer and you also appear to be incurring tax at 40% as I don't read of any additional pension contributions you are making?  Therefore that is tax savings at 40% that could be made from the LGPS AVC contributions.  

I know you wish to retire soon but you still have time in this tax year to make the contributions and in your shoes I would as you will draw the AVC pot down very soon.  The AVC can be 'invested' in cash given the short timeline you have ahead of retiring.

Albermarle

It's 80% S&S (Vanguard LS 60/40), 20% cash ISA.

• Does it seem reasonably balanced?

• Can I drawdown annual interrest to supplement pension/rental?

• Am I missing anything obvious?

Time scale is important. If you plan to take most of these monies between now and state pension age, then that 40/50% equity is probably about right. If you want it to last longer then probably best to stick with the LS60 only. 
To be pedantic , Vanguard LS does not pay interest. It will pay a dividend and vary in value. 
So some years the return will be negative and some years positive (and hopefully more of the latter than the former )

RogerPensionGuy

pedro789 said:

k6chris said:

pedro789 said:

Hi

I’m 56 and thinking of early about retirement. I've got local gov pension worth £20,000 a year (which I can take whenever), £10,000 a year from property rental and about £200,000 in a mix of cash & S&S ISAs.

No mortgages on my own house or rental and don’t need a lot to live on - couple of holidays a year etc.

My plan is to retire Feb/Mar next year. I've got option of doing some consultancy work, but really fancy having a year off completely. Feel completely burnt out.

I realise I have to pay tax on the above but really wanted advice on £200,000. 

It's 80% S&S (Vanguard LS 60/40), 20% cash ISA.

• Does it seem reasonably balanced?

• Can I drawdown annual interrest to supplement pension/rental?

• Am I missing anything obvious?

I do plan to get independent financial advice but always found this form very helpful in explaining options for a novice like myself 🙂

Appreciate any thoughts, thanks.

Have you worked out how much money you need to live the retirement you want?  It's by far the most important number!

Thanks. I've done retirement budget. I think £30,000 (before tax) plus some potential consultancy income would be ok. And still have back up of ISAs if needed.

I always try working out what cash I flows I need or want after tax. 

Tax is a moving feast and looks like it will be increasing the next few decades, so it's hard to plan for. 

My rule of thumb is that I will pay 20% more tax going forwards, ie, if I plan to pay say 10K tax PA, it will unfortunately be 12K PA and also increase with inflation.

***

This point reminds me of them outfits that suggest how much income PA needed for a 1/simple lifestyle, 2/adequate lifestyle or 3/good lifestyle.

I think the figures ofter put out are net income and no rent, mortgages or debts. 

I think these outfits need to include more better information as many people I know really don't look at the simple details.

***

The link below does actually say way down the text that this information assumes no mortgages or rents, I dread to think how the UK wealth devide will just keep getting bigger and bigger, more unfair. 

***

https://www.retirementlivingstandards.org.uk/details