Financial Advisor advice

Marlax

Vitor said:

The OP's household is very far from average, probably in the top 5–10% for retirement wealth in their age group. The real risk isn’t “do I have enough?” but “do I spend and structure it efficiently enough to make the most of it, without being eaten by tax, inflation, or lifestyle creep.”

A next step would be to create a rough retirement cashflow plan: when does work stop, what are expected expenses at each stage, and how do pensions, ISAs, DB income, and state pension fit together. That would clarify whether overpaying the mortgage vs investing makes sense, and how much risk to take in the pension investments.

If OP keep the mortgage to term (2039), they’d be 69 by the time it’s cleared. That’s past the age state pension kicks in. So they’d spend their entire early and mid-retirement, say 60-69, with a significant fixed outgoing hanging over them. Many retirees value having a “paid off roof”, it simplifies life and reduces risk. Carrying debt into retirement feels uncomfortable for most people.

I think you've hit the nail on the head "do I spend and structure it efficiently enough to make the most of it, without being eaten by tax, inflation, or lifestyle creep.”

I'm guessing (hoping) I will downsize the house at some point, which should pay off the mortgage. This will enable us to help the kids onto the property ladder with a little bit of cash for them?

As for "when does work stop" that's the $64m question (literally). I don't know. I remember back to my 20s and early 30s thinking I'll definitely retire at 55, but now I'm 55 I just can't see how I can do that?! One kid heading off to university this year and even with a government loan and him earning some money during the summer, we will still need to help him out. And kid 2 GCSEs this year, then A-levels, then uni for her too (by which time kid 1 back home and looking for work with every other graduate fighting AI for jobs!). So, I think it's going to be a while before I can retire comfortably.

Brie

What I found helpful was to put all the details about my pensions into a spreadsheet (I do love a spreadsheet!!) and see what the totals came to.

I added in the contact details for the pension admins, membership numbers etc so everything is nice and handy.

I knew that 1 work pension was defined benefit so that gave me some definite numbers for what I might get.  The other 2 are defined contribution so the easy thing there is to plop those numbers into an annuity calculator just to get a feel for what an annual payout might be.  Obviously all of this would need to be updated at least annually.

Then add in your state pension forecast.  

Have another page where you have all your savings listed in their various forms and maybe a countdown on your mortgage so you can consider whether you are better off paying that off or not.  

Frankly I've found IFAs a waste of space, not because they aren't good at their job but because they so far have had an incredible ability to lie to me about my financial situation and what they might be able to do.  

Marlax

Brie said:

Frankly I've found IFAs a waste of space, not because they aren't good at their job but because they so far have had an incredible ability to lie to me about my financial situation and what they might be able to do.  

This is what worries me! I'm worried they'll mislead me or put their interests above mine. But at the same time I'm worried if I do it by myself, I'll miss something or not prepare smartly which could ultimately cost me years of working when I could have retired sooner??

poseidon1

Marlax said:

Vitor said:

The OP's household is very far from average, probably in the top 5–10% for retirement wealth in their age group. The real risk isn’t “do I have enough?” but “do I spend and structure it efficiently enough to make the most of it, without being eaten by tax, inflation, or lifestyle creep.”

A next step would be to create a rough retirement cashflow plan: when does work stop, what are expected expenses at each stage, and how do pensions, ISAs, DB income, and state pension fit together. That would clarify whether overpaying the mortgage vs investing makes sense, and how much risk to take in the pension investments.

If OP keep the mortgage to term (2039), they’d be 69 by the time it’s cleared. That’s past the age state pension kicks in. So they’d spend their entire early and mid-retirement, say 60-69, with a significant fixed outgoing hanging over them. Many retirees value having a “paid off roof”, it simplifies life and reduces risk. Carrying debt into retirement feels uncomfortable for most people.

I think you've hit the nail on the head "do I spend and structure it efficiently enough to make the most of it, without being eaten by tax, inflation, or lifestyle creep.”

I'm guessing (hoping) I will downsize the house at some point, which should pay off the mortgage. This will enable us to help the kids onto the property ladder with a little bit of cash for them?

As for "when does work stop" that's the $64m question (literally). I don't know. I remember back to my 20s and early 30s thinking I'll definitely retire at 55, but now I'm 55 I just can't see how I can do that?! One kid heading off to university this year and even with a government loan and him earning some money during the summer, we will still need to help him out. And kid 2 GCSEs this year, then A-levels, then uni for her too (by which time kid 1 back home and looking for work with every other graduate fighting AI for jobs!). So, I think it's going to be a while before I can retire comfortably.

For those that don't live in London and especially North London it maybe difficult to imagine that you have not already amassed sufficient resources  for a comfortable retirement at this time, let alone at state retirement age.

However, London cost of living is no doubt the highest in the UK, and depending on what constitutes your personal London 'lifestyle' what you feel you might 'need' compared to 'want' in retirement might be two entirely different things.

 In my case as a retired Londoner I do not 'need' a car given the extensive cost free public transport options I am entitled to. Nonetheless I insist on leasing a new car every three years despite being unable to exceed 5000 miles annual mileage. Therefore  in my case a relatively expensive and illogical 'want' I will not be giving up any time soon.

You mention the possibility of downsizing, but if that means a slightly smaller house rather than a flat and also remaining in your part of London, that may not release quite as much equity as you imagine and you may still find yourself servicing a mortgage into retirement.

As for the kids, friends of my age talk about downsizing if/when kids leave the nest.  In reality some 'kids' have rebounded back home due to high London cost of renting and failed relationships, others where the kids have finally left have found it psychologically difficult to pull up sticks, if that means leaving the  local social network built up over decades ( the wives are especially resistant to change). The result, inertia has set in and everyone has stayed put and now fast approaching their seventies.

Mind you if you were prepared to sell up and leave London and decamp to an area with much lower house prices, comfortable  early retirement would certainly be feasible but of course that would not be your sole decision.

Linton

Marlax said:

Brie said:

Frankly I've found IFAs a waste of space, not because they aren't good at their job but because they so far have had an incredible ability to lie to me about my financial situation and what they might be able to do.  

This is what worries me! I'm worried they'll mislead me or put their interests above mine. But at the same time I'm worried if I do it by myself, I'll miss something or not prepare smartly which could ultimately cost me years of working when I could have retired sooner??

IFAs are solely paid for providing advice or for ongoing management should you want it.  They get no personal benefit from selling you a particular product.

Ibrahim5

Phone an IFA with your details and they will be straight round to your house. In fact it will be difficult to get rid of them. Before you know it you will be set up paying loads of 'ongoing fees' which is the current scam that the IFAs are all involved with. You'll be paying thousands for them to check up on your investments annually.

Marlax

So, I'm sensing a theme here - consensus seems to be avoid IFAs and DIY it?

Dazed_and_C0nfused

Marlax said:

So, I'm sensing a theme here - consensus seems to be avoid IFAs and DIY it?

I think the consensus is to choose between DIY or an IFA.  The key is not using a FA if not going down the DIY route.

Moonwolf

If you want to learn more, as well as asking here, many of us watch Jame Shack videos on YouTube. https://www.youtube.com/@JamesShack/videos

Unlike other financial “influencers” he seems to know what he is talking about and explains why he says things, which is very helpful in deciding if you like a particular bit of advice. For example, I couldn’t bring myself to plan for a 10% reduction in income at 75. Look first at the “Can I afford to retire” video.

Edit: Also he gives you a good idea of what an IFA might be able to do for you.

Bostonerimus1

Marlax said:

So, I'm sensing a theme here - consensus seems to be avoid IFAs and DIY it?

DIY if you understand what you are doing. You need some common sense, basic maths skills, ie percent and compound interest etc and the application to read and learn a little bit. A nose for B$ is also useful as there are lots of idiots and charlatans posting on social media. IFAs are useful for those who don't want the bother of managing their own money or who have particularly complicated investment and tax situations.