Advice on financial priorities for the next 5 years – retirement planning & mortgage

Marcon

LegacyMum said:

Subject: Advice on financial priorities for the next 5 years – retirement planning & mortgage

Hi all,

I’d really appreciate any thoughts or advice from this wise forum – thank you in advance for your time and generosity in sharing your insights.

I'm 57, single woman, and co-parent to a 14-year-old. I work full-time and earn £94k. I’d love to retire or at least go part-time in about 5 years - or less if I can.

I live in London and own a property worth around £950k, with an interest-only mortgage of £280k (6 years remaining, current rate 1.44% fixed until Feb 2027). Ideally, I’d like to stay in the house until my son is 18 – he may or may not go to university then. I did have a buy-to-let which would have more than paid the mortgage but I gave this to my ex.

I realise I may need to downsize eventually to clear the mortgage, but I’m wondering if there are any realistic alternatives (e.g. later-life/lifetime mortgages) that might allow me to stay longer.

My pension pot is around £400k, with a new workplace pension (currently at £16k) getting £940/month from me and the same from my employer. I also have £65k in savings split across a cash ISA, shares ISA and bonds.

My main question is:
Where should I focus financially over the next 5 years to improve my retirement position and give me the best chance of staying in my home for a while longer?

Should I prioritise pension contributions (to make use of tax advantages)? Or keep more flexibility with ISAs/savings? Any tips on maximising my current position? I'm seriously looking at my outgoings to now only to spend £3,600 a month from my take home salary. 

Thanks again for reading – I’m so grateful for any guidance!

Maybe invest some money in getting proper (paid for) advice from an independent financial adviser, based on a full fact find rather than a few lines of information? It could be an excellent investment and do far more to help you achieve your goals than anyone here can, not least because the adviser would have a much better informed starting point.

Triumph13

I'd second Marcon's recommendation of professional advice, but on the numbers given I'm afraid retirement in 5 years doesn't look feasible.

As a sense check, I've calculated some ball park figures.  If you were to up your total pension contributions to £50k pa, that would take your takehome down to about £3,500 a month - which is lower than what you say you are working towards even before your mortgage goes up.  Five years of that, plus your existing £400k, gets your pension to £650k.  25% of that tax free, plus your existing savings still leaves you more than £50k short of paying off the mortgage.  Using the remaining pension to buy an annuity and to bridge the 5 year gap to state pension leaves you with an income in retirement dropping to about £2,300 a month.

Something has to give.  Unless you are prepared to cut spending massively, the obvious options would seem to be working longer or moving to a much cheaper house.  

ali_bear

Would you consider moving outside of London? When the time comes your capital would buy you a very nice place in many areas of the country. You have some time to think about what you want, how you want to live. 

MSE_ForumTeam5

We've merged two threads, as we ask that duplicate threads are not created on multiple boards

Kernowshep

I'd be renewing the IO for as long as possible in Feb 2027, and throughout lumping as much as possible into the pension (ideally via salary sacrifice) until the numbers work. A bit of investment growth and you'll hit your target, if not you work a bit longer/sell up and move.