sense check my plan?

mrklaw

hopefully this kind of thing is ok. I’ll try and keep it specific - any questions I’ll do my best to answer. I’m at the point where I’ve refined as much as I think is reasonable without going around in circles. Potentially willing to do a paid IFA pass but that is around 2-3k so might wait until closer to retirement date if everything else is on track.

Me: 55, wife: 56. Aiming to be able to retire April 2029 age 58/59.

Targetting DC balances of me: 285k, wife 100k.

both full state pensions at 67 (assume april 2037 for wife, april 2038 for me)

I have a DB of around 18800 gross (ish depending on CPI etc) at 60. I could take earlier but 60 works

Aiming for net income of 40k from 58, reducing to 32k at 75.

phase 1 58-66:

• I crystallise 180k of my DC. 45k tax free, 135k taxable. 50k of the taxable is earmarked for wife’s survivor fund to cover income gap, 85k can be used for gifting once we confirm we don’t need it - Not planning to use for income unless necessary. 45k tax free used to smooth drawdown in this first phase. remaining 105k uncrystallised for covering income.
• Wife takes 16760 max tax free using personal allowance. likely runs out after 6 years
• 58-59 no DB yet: wife 16760, from DC I take 7k gross, 6k net which is stable through all of this phase. 40000-6000-16760=17,240 net gap. Funded from PCLS to help keep DC drawdown rate low and consistent. total PCLS used 34k, 11k left
• from 60-65 ish my DB around 17500 net, wife DC 16760. gap 6k, draw 7k from DC
• 65 - wife’s DC runs out so I draw 7k from DC as normal and use remaining PCLS to top up
• 66 wifes state pensions kicks in.

at the end of this I estimate to have spent down around 65k of my uncrystallised fund and all the PCLS. Wifes DC spent down. remaining : 40k uncrystallised DC, 85k crystallised DC

67-75: both our state pensions in payment - £25k net. 15k gap. my DB £15040 net - covers it almost exactly (the reason I chose 60 for the DB). so for this period no DC draw is expected at all if things on track.

75+ : income remains unchanged at 40k net but our income expected to drop to 32k net. so we can either free up 8k for gifting from surplus income or spending more ourselves, or just building up in an ISA.

this is is all base on 0% real growth so anything upside should mean the 125k DC pot unused after 67 will be higher and can be used to move out to ISA to use up basic rate headroom and potential gifting.

Note: survivor fund in case its a curiousity - 50k crystallised at start of retirement, estimated to grow to 65k ish by 67. (have life insurance before that). in case of my death we lose 50% of my DB and one state pension. assuming a reduced budget for single person, the 65k would pass tax free to my wife if I die before 75 (which is why I released the PCLS from it), and if after 75 the 65k will be more than enough after tax if not used until then.

Thoughts? I’m potentially too close to this so may have missed some things but it feels ok to me.

Markdavid1962

Just a couple of thoughts in your planning between your pension start date of 58 and heading to 75+

Have you factored in large purchases like cars (add £30k every 8 years) and holidays and larger expensive holidays like Australia (£25k)

The figures depend on your lifestyle, only you will know if £40k is enough from a cost of living viewpoint and annual inflation.

I assume you track your DC growth year on year already and have an idea on living expenses. Any ISA figures to add?

I retired at 60, nearly 4 years ago and also did a breakdown like you at age 55, then benchmarked it for a few years, showing pension pots growth etc and annual spending, actually used a budget spreadsheet to track our spending, the aim was to keep the lifestyle the same in retirement.

As a comparison I draw £45k per year which is enough for us

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/81978288#Comment_81978288

I’ve not included things like cars. But our base expenses we estimate to 27k (including some local eating out/fun money) and 13k separate budget for travel explicitly - wife wants to slow travel 3 months of the year if possible. my current car is on finance ending this year, wife’s is owned outright and we plan to downsize to just that car for a while - if there is upside we’ll look at refresh then before any gifting.

the budget is based heavily on our current budget which we’ve been tracking and managing pretty tightly for 10+ years. So fairly confident on that.

Have a chunky ISA but thats now taken over the mortgage. should have around 25k spare which can be a buffer on top of the PCLS

wife’s DC is in a 2030 TDF and mine is 100% VWRP right now. pre-retirement I will consider taking the income specific portion of mine (65k-ish) and moving to money market fund or possibly fixed term annuity just to lock that bridge 100%

DT2001

If you are forecasting 0% growth and you have achieved your objective why are you 100% VWRP? If markets correct/crash will you then be forced to delay your retirement? As my OH is unsure of when she’ll retire (she can do so now) as she enjoys her work I have moved some funds to cash ISAs, ERNS and income focused investment trusts which reduces growth potential but should allow us to cope with a downturn more easily.

Have you considered taking more income from your SIPP and putting into ISAs? It just allows more flexibility IMO.

Finally are you going to add £3,600 p.a. to your OHs SIPP as that would help use the personal allowance in the pre SP phase if there isn’t any growth.

mrklaw

I’m already pushing everything below my HRT threshold to my wifes SIPP - I get salary sacrifice so there is a cost to that, but net benefit in wifes SIPP is worth it. We’re a little limited by her earnings but hope to contributed 20k a year into her SIPP from next year. there is still a gap where her 16760 runs out but it helps delay the draw on my DC.

I do expect at some point to draw more from the SIPP - possibly start to build that PCLS earlier before retirement starts. And we want to draw excess into ISAs at some point once the bridge looks solid

good point on the VWRP I think I’m just going for growth while we can, and although drawdown works at 0% growth the accumulation phase assumes 3% real. I already have enough in my DC to cover what I anticipate is needed for the income portion so I could move that to something more stable. whats the highest return with close to no risk - just increase bonds? MMF? Gilt ladder or index linked gilts? locking in that portion of the income and leaving the rest to grow (or not, doesn’t matter) could be valuable for peace of mind. We also have the option to delay retirement a year or two, we were planning on 60 until we properly checked the numbers

DT2001

I crystallised my SIPP last October and put the 25% TFLS into cash ISAs (I had flexible unfilled ISAs otherwise would have had to utilise ISA allowance for both of us over 2 years) as we have a potential property project. I didn’t want a market correction to jeopardise my ability to withdraw a specific TFLS. Maybe worth considering as the £45k is important to the start of your retirement.

I do not know about the 2030 TDF in terms of correlation to the market volatility.

Overall your plan looks good and has a good margin of error but I think you can protect it whilst leaving the funds not needed in the short term to hopefully grow well.

NormalNorman

We put all our retirement income on a stacked column chart to visualise what is paid when and for how long. Just in todays prices. The first column is our current income for comparison. You can also superimpose current/predicted spending if likely to be lower to see just how far you money will go. Helps on where to direct funds to fill gaps, plan tax and spending requirements.

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/81978566#Comment_81978566

ok you got me to get the spreadsheet out again. this is interesting

right now I’m at around 150k saved in my pot.

• 40k tax free cash was planned to smooth out income during the bridge. that needs too much DC to be crystallised but a good alternative would be reserve 50k of my DC gross now as equivalent net income. plan to eventually replace that with PCLS for efficiency just before retirement but can lock that now into eg MMF
• 65k in DC gross needed for the rest of my income gap - round it up to 70k - I can lock that away too. maybe in MMF, maybe gilts or index linked gilts as that will be needed until 67 so a little bit of inflation hedge migth be useful

as long as both of those cover inflation should be ok. leave the rest in equities to grow as its less essential at the start. survivor fund not needed until 67 so time to address that later

that still leaves approx 45k in VWRP and 45k a year contributions into the same so it’ll build up towards 60/40 by retirement I think.

wife is at 36k so still needs another 64k to her target. potential by next april (2 years out) both our DCs will be able to cover that gap too so we could reinforce her SIPP with my funds

DT2001

https://forums.moneysavingexpert.com/discussion/comment/81978755#Comment_81978755

seems like a good plan and if the bears are correct and there is a market correction in the next year you’ll be buying in at lower prices whilst having ring fenced funds for the gap to SPA.

Good luck

mrklaw

some tweaks recently:
- considering moving 100k of my pot (currently 160k) into lower risk - something like lifestrategy 60 or TDF 2035. This part of the fund would have the job of covering the bridge to state pension so lower volatility in return for lower returns is potentially worth it.

-remaining contributions this year continue into VWRP.

-next year divert 20k contributions into MMF, rest into VWRP. Same in 2028. total 40k set aside for the first two years additional drawdown

-crystallise 32k per year releasing 8k tax free which goes to my wifes SIPP. total contributions 24k per year to her SIPP to help support her drawdown. move her pot to TDF 2035

for drawdown

-first two years I draw 7500 from my DC (the TDF or LS fund); top up with 20k from the cash

-years 3-9 I continue to draw 7500 from DC; plus DB 17000 net

-wife SIPP 16760 gross/net

(DB plus 10k is enough for essentials so between my DC and wifes SIPP risk is spread and both pots are in medium risk only so that feels a reasonable balance of risk vs return)

once we get to 67, both our DC/SIPP should no longer need drawdown for income as before. so I’ll likely switch mine back to VWRP