year before retirement - how did you get your ducks in a row?

mrklaw

https://forums.moneysavingexpert.com/discussion/comment/82097493#Comment_82097493

Oh yeah at minimum they will need to contribute any increased costs for food, energy and water (our water bill went up 50% when my daughter was here) so should be neutral by then

I think I have a route forwards - start test year after daughter graduates which means our rent and living costs drop off. We can cover the other increases for running work expenses alongside retirement ones. And we’ll drop travel budget on half as we can’t spend it while working anyway - the main test is the core expenses

daveyjp

https://forums.moneysavingexpert.com/discussion/comment/82096988#Comment_82096988

https://forums.moneysavingexpert.com/discussion/comment/82097351#Comment_82097351

Whilst reducing salary does potentially affect pensions, I read it as advice to get ducks in a row on knowing the leave rules and HR expectations before retirement and if possible use it to your advantage.

Cobbler_tone

I'm preparing now. Moving from a full time salary and 50% pension contributions (62% total), to a 3 day week and 10% contributions (22% total of a lower salary) was REALLY hard but it is about shifting the mindset of what stage of life you are at. It's also boosted my net pay today, which is good for now and around what I will retire on, hence not too concerned about building the DC beyond a modest amount. 'Letting go' of continuously building that pot is hard. Having said that, I have no where near some of the seven figure numbers put up on here and if I was in some people's shoes would have jacked it years ago! It also shows the true value of a decent DB backbone and makes things a lot simpler. I guess we are all different. I'm already enjoying my 3 day week (well the 4 off) and genuinely thought I would find some new energy in the workplace condensing it. It hasn't happened though, so I'll call it a day when it seems a drain to come in. My 4 days are spent pottering, walking the dog, bits around the house and garden, lovely and peaceful. I'll see if the novelty wears off but a decent balance.

redpete

»» pension applications/payouts may take some time, so how early do you start getting that lined up?

Started thinking seriously about what I needed to do maybe 2 years ahead of retiring from full-time work. I made sure I got from the pension providers their timescales for making payments. My DB had lots of options (varying the amount of an initial cash lump sum, varying how much of the monthly income would have inflation protection) so needed some thought and cash-flow modelling to make a judgement on my preferred combination. I had also decided to combine my work DC funds into the ii SIPP that I already had in place.

»» did you try and get different income sources timed to arrive fairly close together more like a salary

Nope. Looked at the fixed and best timing for all income sources (DB pension, DC pension, state pension, ongoing part-time work) and put it all into spreadsheets to work out any gaps that needed to be filled from existing savings or lump sums.

»» did you assume it would be a PITA so prepared a years income in an ISA/savings account to live off while the bumps sort themselves out?

Nope. Worked out what short- to medium-term major spending (new car, house improvements, big holidays…) I anticipated, what regular spending and income I anticipated, and put into spreadsheets (I do like a spreadsheet).

I had a consultation with Pension Wise. This basically confirmed my understanding of my options. A side benefit is that I can answer "Yes" to the question "have you taken advice?" whenever I make a withdrawal from the DC pension.

I did pay for a one-off advice from an IFA. This was to confirm my understanding of the tax implications of various options and also to get a bit more advice that Pension Wise can offer (which is none). The main benefit was that this forced us to carefully think about outgoings, regular and one-off spending. The IFA put together cash-flow forecasts with various assumptions on investment returns etc. This got more complicated as they ran separate models for each of the potential combinations for taking the DB pension, this took them more time, and of course cost us more money. In retrospect I'm not convinced the confidence this consultation gave me was worth the several thousand pounds it cost, but hindsight usually has a different view than foresight.

I soon realised that the fee they quoted did not include any substantive advice, that would have cost more money. I was already comfortable with managing investments, including pensions, during the contributing phase so decided I could continue to manage these during draw-down. This is something I will have to reconsider when my ability or desire to do this reduces, and my wife would definitely not want to take on the responsibility. The main mistake I have made was to take out a gilt-funded UFPLS withdrawal to cover 3 months spending but took it all in March - so the whole lot contributed to that tax year's income and took me into higher-rate tax bracket.

The most useful information and advice came from two sources, this forum and the book "Living off your Money" by McClung. The latter is a somewhat technical analysis that compares several of the most common approaches to investing and drawing down on investments for their long-term 'safety', including assessing how each would have performed historically. With the book you get spreadsheets that follow his recommended method and tells you what the safe withdrawal rate is initially and ongoing as you build in the experienced investment performance and inflation figures. The analyses and background is US-biased but you can make allowances for this.

I then manage my investments and cash savings to recommended proportions. This includes a bond ladder (UK gilts) providing known income for a rolling 5 years, a proportion of gilt funds and similarly less volatile investments, and equity funds (plus some more speculative investments that I can afford to lose).

butterflymum

https://forums.moneysavingexpert.com/discussion/comment/82097735#Comment_82097735

Indeed….those ducks do like to be in a row 🦆🦆🦆🦆🦆.

dont_use_vistaprint

if you have a DB like LGGPS or similar it's worth requesting the form well in advance because there is information I didn't expect to be asked even though I've done a lot of research, saying that they were easy to get of on the phone.

These kinds of pensions have an uplift in April but depending on when you take it they will recalculate. It was higher than I expected because they apply a bunch of other rules to do with some legal cases that aren't factored into your annual statement.

Private pension I would highly recommend shifting it to something like interactive investor well before you plan on accessing it. They are just straightforward like drawing out of a bank account, pension companies are often archaic with paper-based & waiting weeks.

other than that, there's not really anything to do your money just sits there like it does now to access as you wish , the only difference is you don't have to go to work and you can't put much in a year.. the challenge is having different parts of money in savings ISA pensions figuring out how much you need, I plan 1/4 in advance, making sure everything is earning the maximum for you

dont_use_vistaprint

https://forums.moneysavingexpert.com/discussion/comment/82091768#Comment_82091768

that's a detailed plan.

agree, re consolidation. I shifted Aegon to my larger Aviva about two years before retirement and then moved everything to interactive investor about one year before. In retrospect, I probably should've just moved everything to interactive investor years before, but I didn't understand pensions

I chose not to change my investments portfolios in retirement, it's still a long-term horizon 30-40 years and there is enough money to cope with the ups and downs.

I did review how much income I would need in retirement. I did many different budgets and none of them were accurate. What you don't realise is in retirement. You have the time to save money and you don't spend on the things you do when you are working, everything changes. Rather than budgeting monthly or annually I budget quarterly and I place large projects like new cars DIY projects house moves into a long-term planning horizon because the money for those is irregular. But still plans change constantly, the planning is a useful exercise but it's not a plan I stick to. I plan to spend a huge amount on a new car and then decided now I'm gonna carry on running an old car and let that money grow instead. I plan to downsize my property in about eight years and I'm looking at doing it now instead because I found something that is perfect.

I don't take regular withdrawals from my SIPP, I live on a combination of LGGPS, interest and will take SIPP when I need it for large purchases

i'm only 55 so not really thinking about the state pension yet! I retired three years ago and I've been very surprised how day-to-day spending has reduced, when you can fly any time you get the best deals, when the officers are in the and the shelf life is long by six months worth of it. You don't need to shop weekly or monthly you can shop every couple of days if you want gaining a huge amount of time means you can do so many things yourself that you used to pay others for so you might end up buying quite a few new tools…..

daveyjp

And please sort out a will, even more so if you have a complicated family structure.

By not doing so you may be inadvertently allocating any assets to solicitors mortgages and school fees.

mrklaw

we definitely need to revisit ours. We spent time getting things lined up for our kids but having guardianship etc with their aunts - now they’re both old enough I think we can simplify

LHW99

And LPAs too….