Can others check out my plan please.

Trundlethwaite

I'm am planning to retire end of May at 64 with 3 years to go before I receive full state pension .

I have spent the last 2 winters in the evenings educating myself about pensions and how to make an tax efficient and workable plan .

But I have no one to run my ideas past and looking for others to give their thoughts on it and give me some confidence in it instead of just an idea in my head .

The numbers involved are very modest both income and expenditure, myself and my partner have worked in low payed jobs all our lives . My current after tax income is £16500 p/a basic rate tax payer.

I have 4 DC pension pots with a total of £134000 from age 64-67 I plan to use £9000 per year pension at 6.7% withdrawal rate, more than the often quoted 4% I know, Im happy to erode some capital and have a sRR strategy plan in case of market down turn ,also intend to have some earnings from employment in the region of £4500 so about £13500 p/a and this is a £500 over current basic household running costs and intend to keep earnings close to my personal allowance , currently £13500 but that obviously could change.

Assuming pension investments and inflation cancel each other out over the 3 years till state pension age I should have £107000 left in my total pot and withdrawal rate reduced to 4% will give £4282 plus full state pension.

We have more than 4 years cash savings and cash ISAs that I intend to use instead of pension as sRR strategy if there's a market down turn.

Partner still working and earns £10000 p/a that would be used for other expenditure.

This all seems too simple and feel I'm missing something obvious but no matter how hard I look I can't see any faults and lacking confidence in it.

I know I will have to factor in about 2.5% increase withdrawals every year for inflation but I just kept the numbers simple.

What do you all think of my plan?

Dazed_and_C0nfused

and intend to keep earnings close to my personal allowance , currently £13500 but that obviously could change.

You can't have a Personal Allowance of more than £12,570.

Are you receiving some additional tax code allowances for some reason? Would you still be eligible for those if you changed jobs?

af1963

Remember you can take 25% of your DC pension pots as tax free cash, either up front, or with 25% of each withdrawal being tax free. That could increase the amount that you can take out each year while paying no tax.

If you earned 4500 taxable, that would leave about 8k of your tax free allowance - adding the tax free cash to that, you could take out about £10.66k, of which 2.66k would be tax free and the remaining 8k would fall within your allowance.

(Even if you don't need that extra amount, it makes sense to use up all of your tax free allowance, and you can put any unspent amount into savings.)

Trundlethwaite

https://forums.moneysavingexpert.com/discussion/comment/81859092#Comment_81859092

Yes I have the marriage allowance, I forgot it's official name, were you transfer some of your partners personal allowance to your self.

Not sure going forward after retirement if this would change, but would make plans around it being lowered to the standard personal allowance.

Dazed_and_C0nfused

https://forums.moneysavingexpert.com/discussion/comment/81859172#Comment_81859172

The divorce courts would be full if you could that 😂. She has to transfer it to you.

And the only time it has to change is if either of you become higher rate payers.

Trundlethwaite

https://forums.moneysavingexpert.com/discussion/comment/81859154#Comment_81859154

Yes this something I'm considering but not yet researched fully , I want make a plan to reduce tax after state pension age and by maximising my personal allowance between 64-67 and putting the extra above my required earnings into an ISA .

Trundlethwaite

Yes your right it was a long time ago and it was my wife that transferred it to me.

Trundlethwaite

https://forums.moneysavingexpert.com/discussion/comment/81859215#Comment_81859215

Whoops that was in response to daszed and confused, sorry forgot to quote it.

hara____

It sounds like a solid plan. As the gap to state pension age is only three years, I don't see any real risks.

And I agree with af1963. Rather than taking only what you need from the DC pots, take as much as you can tax efficiently in the years before you collect the state pension. That might be the 25% tax free lump sum, plus as much taxable income as you can take while staying within the personal allowance.

If you haven't already done so, it might also be worth checking for any differences in the drawdown options for your four DC pots, and any differences in how they handle crystallisation (or maybe this is less important if you will crystallise everything, across all four pots, in one go).

Albermarle

I guess you are aware that Safe Withdrawal rates are theoretical, as nobody knows what is coming in future.

However taking them as a rule of thumb, they only apply when the pension pot is suitably invested, which usually means a medium risk portfolio with about 50% equities ( opinions vary on the exact amount).

Also that 4% rate ( or 3.5% in UK) is low enough to cope with all but the very worst case scenarios, and assuming/hoping that will not happen, then in later years you might be pleasantly surprised to see your pot maintaining its value, or even increasing, allowing for you to take some more out.

ian16527

I have done the same as you are proposing but for a longer period (10 years). My income requirements are much the same as yours, although my wife's income is far smaller

My withdrawal rate is more than the 3.5-4% recommended until I reach 67, but then reduces dramatically.

I also have a small DB pension, and I took out a small annuity to give me some secure income. So 45% comes from this and the other 55% comes from drawdown.

I have a spreadsheet which estimates how long my DC pension will last, and I only need 3.5% growth for it to last to 85.

You dont say how your DC pension will be invested but mine is about 65% stocks and 35% fixed interest /cash.

My drawdown balance has grown even with the income taken as we have had some good years.

I think you will be fine