Early retirement plan - does it work?

canaryjim

Age 51, wife 46

Expenses target - 50k net pa, reducing to 40k @ 70, 30k @ 80

House paid for but too big (value 1m)

Two full state pensions likely

Potential fund and current values:

* Cash available now - 400k (ISA / Premium Bonds) - split with spouse 
* SIPP - 550k (from 57) - my name only, global equity 100%
* Downsize @ 60 - taking 1/5 of house cash (today’s money less costs - say 150k)

Other circumstances:

* Current job is high income but high stress and taking toll physically with little option to part time / reduce responsibilities,
* Poorly and ill parents in 70s that need more help

* only child @ private SEND school (25-30k pa) and we are assuming this is paid until 18, with a comparable spend on college from 18-21

The idea - quit current role at 52, and remote work part time - house income with wife could be 20-40k income pa - we fund the 50k expenses from cash pot and fund school / college fees from that remote / temp work till 57. At this point reduce draw on cash and draw on equities as well.

Assuming inflation of 3% and stocks at 7%, cash at 3%

Any comments appreciated

QrizB

I'd suggest you have too much cash. You should consider moving some of your ISA to a SSISA where you should be able to get a better return.

How many more years of school / college fees are you planning for? Will your child continue to be a financial dependent after that or are you expecting them to strike out on their own?

Is the help your parents need physical/admin, or is it also financial? If financial, how much are you budgeting?

canaryjim

Hello QrizB, 

I did wonder about the balance of equity / cash. We will do that I think.

We have 10 years left of school / college we think - I am thinking 25k per year plus inflation over that period. 

Its just physical and admin with the parents - one is in a wheelchair and needing help in the loo and the like and the other is very forgetful - they are quite a job both of them and its a bit much for my wife on her own.

Thank you for commenting

wjr4

What are your incomes now? Do your parents have LPAs in place?

badmemory

I will ask what I always ask.  Why do you assume that you will need less income over 70 than you did before.  Less international travel?  Less entertainment?  Those may well be true.  Downsizing can come with savings but how much.  Also what about needing more help.  Then the one I really dread, not being able to drive & needing taxis.  What about when 2 become only one.

Sorry to be depressing.

canaryjim

Hello wjr4

I am an additional rate taxpayer and my wife is 10-20k - she would continue with her work in this plan. Yes LPAs in place for them thankfully

Thank you

canaryjim

Hello badmemory

Our yearly core spend excluding the school fees is 34k and our holiday spend is 14k, but i am thinking we would probably reduce that holiday spend after 70.

Thank you for your comments and I will think about that

Albermarle

badmemory said:

I will ask what I always ask.  Why do you assume that you will need less income over 70 than you did before.  Less international travel?  Less entertainment?  Those may well be true.  Downsizing can come with savings but how much.  Also what about needing more help.  Then the one I really dread, not being able to drive & needing taxis.  What about when 2 become only one.

Sorry to be depressing.

There is a theory that spending in retirement can be U shaped.
High at the beginning due to holidays, buying new cars etc.
Then a lull
Then high at the end due to care costs, paying for private medical, help around the house.
Obviously it varies a lot from person to person though. 

canaryjim

i have heard of this retirement "smile"  

Hoenir

canaryjim said:

Assuming inflation of 3% and stocks at 7%, cash at 3%

If stocks consistantly returned 4% above the rate of inflation. There'd be no need to hold any cash. 

FIREDreamer

Hoenir said:

canaryjim said:

Assuming inflation of 3% and stocks at 7%, cash at 3%

If stocks consistantly returned 4% above the rate of inflation. There'd be no need to hold any cash. 

In the absence of stochastic modelling there isn’t much else they could do if just using a spreadsheet. Maybe write down the starting equity funds by 20% perhaps?