Early retirement plan - does it work?

AlanP_2

Just an observation that may not be relevant as it just wasn't mentioned.


No mention of a pension in your wife's name but I think I saw a reference to her earning money.

Is there a reason for this as it seems like an easy option to get a 6.25% minimum returns boost that could be as high as 20% depending on any other income she has when withdrawn and personal allowances.  

wjr4

AlanP_2 said:

Just an observation that may not be relevant as it just wasn't mentioned.


No mention of a pension in your wife's name but I think I saw a reference to her earning money.

Is there a reason for this as it seems like an easy option to get a 6.25% minimum returns boost that could be as high as 20% depending on any other income she has when withdrawn and personal allowances.  

I was just about to mention this. It makes no sense not making the most of her pension annual allowance. 

Also, OP, how much are you contributing into your pension? 

ouraggie

Have  your parents enough difficulty to get Attendance Allowance? This is not means tested.
Could your wife claim Carer’s Allowance? She would need to have an income below £196 wk.

canaryjim

OldScientist said:

canaryjim said:

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

You may already have done so, but it is very useful to generate a spreadsheet with annual anticipated expenses, non-portfolio income sources (e.g., part time work and state pensions) to then see what the withdrawals would be.

If I've put your data in correctly, you appear to have the first 6 years where 20k per year is required (I've assumed PT work brings in 30k), the next 9 years where 50k is required, followed by 3 years of 38k, two years of 28k, 8 years of 16k and then 6k per year thereafter. All values are real (i.e., inflation adjusted).

I was then curious as to how much it would cost to build an inflation linked gilt ladder that would provide that income (until you are 100yo) using the advanced tab at https://lategenxer.streamlit.app/Gilt_Ladder

Anyway, FWIW the total amount required to build the ladder comes out at £740k. In other words, you could fund your anticipated expenditure this way and still have £200k in your pot for unexpected expenditure (or legacy) as well as the potential amount to be gained from downsizing. The largest risk would be UK government debt default.

Thank you Old Scientist, i have done that expenses spreadsheet, and it was interesting. It gets complicated trying to factor in tax although i have had access to some UK software that i think factored that in when giving the sustainability % (ie. the monte carlo / historical data analysis).

The gilt ladder is also interesting - i do also need to cover the school and college costs over that period but its interesting to see how the remaining expenses could be dealt with. I dont think enough about fixed income and i need to fix that.

I'm very grateful for you looking at that. Funding my pre-sipp income purely from cash accounts of 450-500k does seem really inefficient. It works ok from a tax point of view - my wife would get the starting savings allowance etc. I am looking to at least have two GIAs perhaps and move some into S&SISAs - i should have just had them in the past, rather than cash ISAs.

canaryjim

ouraggie said:

Have  your parents enough difficulty to get Attendance Allowance? This is not means tested.
Could your wife claim Carer’s Allowance? She would need to have an income below £196 wk.

Thank you Ouraggie

We have got the AA for mum but we should think about the carers allowance - i think she must be below £196 wk i think. 

canaryjim

wjr4 said:

AlanP_2 said:

Just an observation that may not be relevant as it just wasn't mentioned.


No mention of a pension in your wife's name but I think I saw a reference to her earning money.

Is there a reason for this as it seems like an easy option to get a 6.25% minimum returns boost that could be as high as 20% depending on any other income she has when withdrawn and personal allowances.  

I was just about to mention this. It makes no sense not making the most of her pension annual allowance. 

Also, OP, how much are you contributing into your pension? 

Hello wjr4 and AlanP_2

My wife does have a 60k SIPP thats in my SIPP number. We are adding the maximum to that each year but shes earns 10-15k so that is limited a bit. I've maxed my own contributions when I can and have no carry forward allowance left now.

Thank you for your comments

QrizB

Picking up on something that others have mentioned - getting some of your cash into a pension in your wife's name could be advantageous.

If for example you can get £12k pa net (£15k after tax relief) into her pension for ten years, she'll have £150k (plus any growth) that she can then draw as "state pension replacement" for a decade from age 57/58, potentially avoiding any income tax liability on it. That's a £25% uplift simply from the tax relief.

Edit - I think you posted on the same topic while I was typing!

canaryjim

QrizB said:

Picking up on something that others have mentioned - getting some of your cash into a pension in your wife's name could be advantageous.

If for example you can get £12k pa net (£15k after tax relief) into her pension for ten years, she'll have £150k (plus any growth) that she can then draw as "state pension replacement" for a decade from age 57/58, potentially avoiding any income tax liability on it. That's a £25% uplift simply from the tax relief.

Edit - I think you posted on the same topic while I was typing!

Thank you QrizB - that is interesting - and it does flag that I haven’t thought properly about what the cash balance does between now and when my SIPP opens. At the moment 70 is in my cash ISA and 50 in my PB’s and 20 in her cash iSA and 20 in her PB’s but that does leave a substantial balance to do something with. I had planned to leave this in her NSI - the growth would be non taxable due to her starting rate for savings and savings allowance. If I do keep maxing her SIPP then I will get that tax relief (subject to the Halloween budget) but I just need to make sure the accessible cash does not run too low.

I had also also thought about two GIAs with 10k each with a company stock paying 5% dividends - to use the dividend allowance, but that would be less impactful than what you are talking about.

I may return to the spreadsheet this evening.