Retirement looming
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redmalc
Posts: 1,433 Forumite
Originally Posted by redmalc View Post
Well where do I start,age 63 married and still working with things about to change in May.
Wife 63 not working now but entitled to state pension at 66, House paid for value 450k, S&S Isa,s 220k,Cash Isa,s 150k,I have two private pensions 225k and 120K, shares 85K and NS&I 20K and general Bank accounts 25k.
I need to fund three years living of approx 35k per annum to take us to the state pension age but not sure how to fund the three years,do I take the 25% from my pension now or fund it via my other investments,any advise would be appreciated.
Well where do I start,age 63 married and still working with things about to change in May.
Wife 63 not working now but entitled to state pension at 66, House paid for value 450k, S&S Isa,s 220k,Cash Isa,s 150k,I have two private pensions 225k and 120K, shares 85K and NS&I 20K and general Bank accounts 25k.
I need to fund three years living of approx 35k per annum to take us to the state pension age but not sure how to fund the three years,do I take the 25% from my pension now or fund it via my other investments,any advise would be appreciated.
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Comments
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I'm funding the gap between retirement at 60 and SP at 66 through a combination of UFPLS withdrawals below personal allowance from my DC pension and using savings for the rest (plus my wife's very small DB pension). That way I pay no tax and only use a small part of my 25% tax free amount.
Works for me, but it depends on your tax situation and longer term plans.0 -
Looming is not very positive - you are in a good financial position to enjoy the rest of your life - it happens to us all so embrace
You should at least be taking £16,666 (your personal allowance + 25% tax free) from your pension. Personally I would not be holding so much cash and would be funding the other £18.5k from that which would take you down to £100k -ish cash. This would allow a large enough buffer for cars, repairs and safety buffer if stocks dropped significantly.0 -
Whatever you do, for the years after packing in your job take out money from your pension under the personal allowance, to save the tax on it.
As you pack in your job in may that means you will have earnings in the next tax year which means you can take out less than otherwise, but you can also put all your April/May earnings into a pension to get the tax relief.
You have ample cash to tide you through the years before state pension.0 -
The first step is to work out how you are funding your retirement long term, then play about to find the most tax efficient way to get there. I had a little play with your numbers and came up with the below as one possible solution:
You can easily achieve your desired £35k income using a fairly conservative 3% withdrawal rate. You have £500k outside pensions and £345k inside. Once you take your 25% PCLS that changes to £586 outside pensions and £259k inside. I'm assuiming you shelter everything outside the pensions in ISAs etc and pay no tax on income from there.
If you allocate £200k of the pension funds and £450k of the ISA funds to your drawdown pot a 3% drawdown gives you £6k of taxable income and £13,500 tax free which should be sustainable pretty well for ever. Add in two state pensions and that comes to £36k pa post tax from 66. Drawing out the other £59k from the pensions evenly over the period 63 to 66 gives you £36k pa for those years too.
That all leaves you with £136k of spare funds outside the pension. Lamborghini?0 -
(i) Take out enough taxable income from the DC pensions each year to use your Personal Allowance against tax. Take out as much TFLS as comes with it.
(ii) Back up by using some of your unsheltered portfolio; shares or bonds or cash, as the fancy takes you.
(iii) Consider whether you or your wife might gain by deferring your State Pensions for a year or two.
(iv) Be sure to contribute £3,600 gross (per tax year) to a pension for your wife. You should consider whether to do the same for yourself.
(v) Thereafter I'd suggest that you use ISAs and unsheltered investments before you use non-TFLS money from the pensions because if you obligingly die before 75 your widow will, assuming you've done the paperwork properly, have access to the pension money tax-free. So it would be a shame to have paid 20% tax on it by taking it earlier.
(vi) Be suspicious of strategies that rely on so-called safe withdrawal rates from equity portfolios. They are probably a rather extravagant way to fund a retirement. To see why, google "The 4% Rule—At What Price?"
by Jason S. Scott , William F. Sharpe , and John G. WatsonFree the dunston one next time too.0 -
(vi) Be suspicious of strategies that rely on so-called safe withdrawal rates from equity portfolios. They are probably a rather extravagant way to fund a retirement. To see why, google "The 4% Rule—At What Price?"
by Jason S. Scott , William F. Sharpe , and John G. Watson
I didn't make it all the way through that paper before I was overcome by the desire to beat the authors round the head. Where they hell do they think you can get a risk free bond that pays a guaranteed inflation + 2% every year? That may be an historic average for the US, but that's about as valid as saying that stocks always return their long term average. There have been loads of periods where real returns on gilts have been negative - such as now!
ETA: If such assets existed then virtually no-one would be using a 4% SWR for the simple reason that a 65 year old would be able to get an index linked annuity at close on 6%! Pretty much by definition you can't get a cheaper deal by their route than by buying an annuity because annuities benefit from pooling of mortality risk. Complete load of shoemakers.0
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