Can I retire now? (age 40)

Keep_pedalling

Sounds very optimistic to me, after your house move you will be left with an ISA that will give you aprox £17.6k a year to live on. You have a child who is likely to be going to need support with things like university fees, possibly even a deposit for their first home in that time. 

Finances apart, do you have concrete plans on what you are going to do during your retirement? 

barnstar2077

The two biggest issues that I can see (other than a greatly reduced state pension, which to many is the backbone of their retirement) are as follows:

Buying a more expensive house, you are instantly reducing the money you have available (and lets face, there will probably be more expense involved than just the difference between the value your house and the new one.)

Even if you didn't buy a new home, you have to make £500k last 17+ years (that's a long wait when governments love to meddle with when you are allowed to access pensions etc.)

£32k would be a 6.4% withdrawal rate of £500k, which in economic down turns (markets will always go up and down) could drain your capital very quickly.

If you don't buy the new house, and if you or your partner work part time (and, or, have flexibility on how much you need to withdraw), then go for it.

Personally I would work part time and see how things work out.  Reassess your finances constantly and make changes accordingly.

itsthelittlethings

Why not just go part time?

ent_moot

So, the way I make the numbers work is that I assume I'm able to release up to 200k in equity in my house (i.e. take a mortgage out) at the point that my cash is close to drying up and before I reach private pension age.

Any reason why this wouldn't work?

Beyond private pension age, I imagine I'll be fine.  £600k compounding for 20 years is a pretty big number, even adjusting for inflation.

Robin9

I wouldn't consider it.
 
1) Ignore the value of the house - you need somewhere to live.
 
2) Your child is -  say 10 ?    If university beckons  still on your hands for another 12 years - uni cost £20k/year

3) Drawing down on the ISA -  £17.6 k as above.   That's about half of what you need to live on.

Sit down do a really detailed SOA -    that will  take you through all your costs and income.

barnstar2077

ent_moot said:

>What are your thoughts on not being eligible for a full state pension?

That's a good point - I assumed I would do the "top-up" thing, so that I can get the full state pension. IIRC, if I register as self-employed and do very minimal (cut a few neighbours hedges perhaps :P) , then I pay the top-up at class 2, which is practically a negligible cost? Not looked into this in much detail though.

We plan to have no more children.

>Without seeing what your model is based on it's impossible to say but on the face of it seems very optimistic.

Aside from the originally stated assumptions, I also assume that my pension and S&S ISA grow at 5% per year, which seems reasonably conservative.

I also assume that I may need to remortgage the house to release ~£100-200k at about age 53 , to essentially get early access to some of my private pension. I would then pay this back when I get my private pension lump sum.

I think 2.5% would be a better starting point for predicting increases to the state pension, and even then that may not be sustainable.  I use 5% for my 100% equity investments too, but returns (including losses) can vary wildly year on year.

Working three or four days a week would be a good start, get a few years of that under your belt (which will increase your state pension entitlement) and then reassess.

GunJack

The remortgage plan is flawed - you cannot get a 200k mortgage without being on probably 50k-ish salary, and most lenders will only do it up to SP age, which even if someone will go over that age will massively increase outgoings. 

MyRealNameToo

What are you planning to do during your retirement whilst living on the breadline? 

What income are you going to have to satisfy the mortgage company of your affordability of the mortgage? 

I can see the attraction of retiring in your 40s if you are a millionaire and can afford to do what you want when you want, I can see the attraction of maybe going part time in your 50s if you dont need your full income. I seem to be in a small minority of really not seeing the appeal of having 40+ years of retirement on a low income. Maybe it's influenced by most the old boys I know who've retired and are lost, half of them shortening their lifespans with excessive drinking to have something to do. 

ent_moot

>2) Your child is -  say 10 ?    If university beckons  still on your hands for another 12 years - uni cost £20k/year

True, I've not factored this in. I imagine she'll get a student loan to cover tuition fees, and then accommodation would be <10k? 

Isthisforreal99

ent_moot said:

So, the way I make the numbers work is that I assume I'm able to release up to 200k in equity in my house (i.e. take a mortgage out) at the point that my cash is close to drying up and before I reach private pension age.

Any reason why this wouldn't work?

Beyond private pension age, I imagine I'll be fine.  £600k compounding for 20 years is a pretty big number, even adjusting for inflation.

How will you get a mortgage with no employment?

And you want to borrow money to live and pay back the borrowed money?