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  • FIRST POST
    • frugal90
    • By frugal90 10th May 15, 6:31 AM
    • 243Posts
    • 145Thanks
    frugal90
    3,4 or 5 year journey to financial freedom
    • #1
    • 10th May 15, 6:31 AM
    3,4 or 5 year journey to financial freedom 10th May 15 at 6:31 AM
    Anyone in the same boat please share your steps. Maybe we can help motivate, share good ideas to get to our targets.

    Me and spouse will retire ( we hope) in 2018/19 or 20. I will be 56/57 or 58 and wife will be50/51 or 52. We aim to use sipps/isas/savings to cover until I am 60 when my public service pension will start. My wife will also take her public service pension when 60. I will have 36.5/37.5 or 38.5 years in an 1/80 th scheme, so will get 36.5/80 x salary currently 42k +3xpension as tax free lump. Mrs will have 26.5/80 x42k + 3x pension tax free lump.

    We have no debts and achieving financial freedom has become number one aim. We have a target of 400k for Sipps/isas and currently have about 270k mostly in equities. Our plan is to save 2.5k per month if not more into sipps/isas and once we hit 400k we,'ll bail out. We plan to be seriously frugal to achieve our aim. We don't have an expensive lifestyle, enjoy the best free things in life but need more time. We plan to cycle tour/walk/ garden etc

    If you want to join us on our journey and have similar timescales the please join us.

    Frugal
Page 5
    • atush
    • By atush 20th May 17, 11:04 AM
    • 16,877 Posts
    • 10,529 Thanks
    atush
    Sounds great.
    • k6chris
    • By k6chris 21st May 17, 7:07 PM
    • 233 Posts
    • 414 Thanks
    k6chris
    I think, as the young people say, "JFDI"...

    Good luck!
    EatingSoup
    • jerrysimon
    • By jerrysimon 22nd May 17, 8:19 AM
    • 289 Posts
    • 226 Thanks
    jerrysimon
    I think, as the young people say, "JFDI"...

    Good luck!
    Originally posted by k6chris
    That's the route I went down end of March this year aged 56

    Waiting for my second monthly pension paymemnt. Its important to look at net monthly income as much as pension annual salary. No pension or NI payments anymore. I took the hit on taking my DB pension early.

    My current feeling is thank God I did not wait!

    PS our figures are lower than yours. We are mortage/debt free with 60K of savings and a net income of 1500/month.

    Jerry.
    Last edited by jerrysimon; 22-05-2017 at 8:24 AM.
  • jamesd
    quick update ... feeling good about things at the moment and the fact I now have choice
    Originally posted by frugal90
    Worth a look at Ablrate P2P when their ISA launches in early to mid June. Around 10% after allowing a couple of percent for bad debt should be very competitive with ITs.

    80k in cash bugs me when I know it could be generating 1Ok a year of income in say MoneyThing, again after allowing for bad debt. From the cash and IT pots combined I'd be looking to get 30k of income a year at the moment. I'd also look to take the as free lump sums from the SIPPs now to use for additional income generation, potentially another 3.5-4k a year.

    Though given your future income from DB pensions quite rapid drawing to sustain your income at a high level from retiring to reaching normal pension age for those DB pensions looks like a good move.

    From the look of it you'll have around 37k in DB plus a pair of state pensions at say 8k each for a total of 53k of guaranteed income.

    P2P without capital drawing seems to have about 34k of potential a year with SIPP tax free lump sums included. That's an initial shortfall of about 19k a year but it looks as though the taxable 75% of the SIPPs can bridge that.

    So retiring now - well, end of August 2017 - on 53k+ of income looks entirely reasonable to me if you want to do it.
    Last edited by jamesd; 22-05-2017 at 8:45 AM.
    • LadyTC
    • By LadyTC 22nd May 17, 4:05 PM
    • 11 Posts
    • 16 Thanks
    LadyTC
    Hello


    I have just posted for the first time in the mortgage thread because I have been advised by a family member to increase my pension contributions rather than pay down my mortgage due to my very low mortgage rate/higher tax relief. Myself (56) and my partner (55) hope to both pack up at lest full-time work in 5 years time and like Frugal90 we want to do more travelling - particularly around the UK.


    The same family member has recommended that I sign up with Retireeasy to do some lifetime planning and it costs 3 per month which is pretty low. Has anyone on here used Retireeasy and it is any good, worth the money etc? Are there any similar tools out there - I can't find any on google.


    I'd prefer to DIY rather than have the expense of an adviser if I could find a decent online tool.


    Grateful for any help.


    Lady T
    • atush
    • By atush 22nd May 17, 8:27 PM
    • 16,877 Posts
    • 10,529 Thanks
    atush
    Hi Lady T,

    Start your own thread for the most/best replies.
  • jamesd
    The initial advice you received was good. At 55 you're both in a position where you can pay into pay into pensions, get the tax relief then soon after take out the 25% tax free lump sum, leaving the rest for later. Provided you can afford it ths gives you the potential to save the income tax on much of your pay.

    It's particularly foolish for a 55 year old or older to directly pay off a mortgage without first putting the money in a pension.

    If you can't afford to pay in your whole pay it's entirely possible that we will suggest withdrawing your past overpayments so you can undo the harm you've done to your finances by not using the pension pay in first.
    • frugal90
    • By frugal90 4th Oct 17, 4:46 PM
    • 243 Posts
    • 145 Thanks
    frugal90
    quick update again

    definetely enjoying work more this year knowing that I could pack it in anytime- going to enjoy the run in to next summer.

    My ISA 111K income generating ITs
    Spouse ISA 128K income generating ITs

    total 239K

    My SIPP (Cash) 70.5 K to be draw over 3 years until age 60 - 23 500 small tax liability as no other income

    My wife's SIPP(Cash) 84K to be drawn over 5 years


    Cash holding - atom/NSI/bank 123 86 500



    Retirement date June 30th 2018 -

    Teachers pension kicks in May 2022 - 20.5 k per year plus 61.5 K lump

    Spouse Pension Kick in July 2028 - 16.3 K per year plus 45k lump- now going to take the career average bit at 60

    Total ISAS/SIPP/Cash= 480K

    State pensions both when we hit 67 at the moment

    regards to all

    frugal
    • robin61
    • By robin61 4th Oct 17, 5:17 PM
    • 635 Posts
    • 473 Thanks
    robin61

    definetely enjoying work more this year knowing that I could pack it in anytime- going to enjoy the run in to next summer.
    Originally posted by frugal90
    Nice to see your plans are doing well. It does take a bit of the pressure off when you know that you have the choice whether to be there or not.
    Last edited by robin61; 04-10-2017 at 5:19 PM.
    • frugal90
    • By frugal90 5th Jan 18, 6:31 PM
    • 243 Posts
    • 145 Thanks
    frugal90
    Jan 2018 update, things definetely going well and summer 2018 is when we will JFDI, as a previous poster told me that young people say.

    My ISA is now 122K income generating ITs
    Spouse ISA 132K income generating ITs

    total 254K

    My SIPP (Cash) 70.5 K to be draw over 3 years until age 60 - 23 500 small tax liability as no other income

    My wife's SIPP in IT's 89200K to be drawn over 5 years


    Cash holding - atom/NSI/bank 123 90500



    Retirement date June 30th 2018 -

    Teachers pension kicks in May 2022 - 20.5 k per year plus 61.5 K lump

    Spouse Pension Kick in July 2028 - 16.3 K per year plus 45k lump- now going to take the career average bit at 60

    Total ISAS/SIPP/Cash= 505464

    State pensions both when we hit 67 at the moment

    aware that stocks are high at the moment hence the high cash holding in case of a crash

    anyone else stopping the rat race in summer 2018?

    frugal
    • justme111
    • By justme111 5th Jan 18, 9:49 PM
    • 3,018 Posts
    • 2,914 Thanks
    justme111
    my partner quits regular employment that summer ( I oosted on here asking for feedback on his position Hopefully would do self employed bits and bobs but if not he could live of his savings and investments or take the pension early.
    • robin61
    • By robin61 6th Jan 18, 12:56 PM
    • 635 Posts
    • 473 Thanks
    robin61
    Jan

    anyone else stopping the rat race in summer 2018?

    frugal
    Originally posted by frugal90
    Maybe. I've just turned 57 which I said was my ideal age for retiring.
    At the moment working isn't too pressurised and is bearable. Although I'm finding I have less enthusiasm and am less tolerant of the corporate BS nowadays. As long as it's ticking along ok I am planning to stay until there is a voluntary redundancy deal. I have no control over this there may be one this year and there may not be. If there is something offered this year I will try to get it.

    However if things get more stressful I've got a plan B where I have enough in my DC scheme to live off untill i take my DB scheme at 60.

    2018 might be an interesting year. I'm hoping I don't need to buy a new diary for work in 2019.
    • frugal90
    • By frugal90 20th Apr 18, 6:25 AM
    • 243 Posts
    • 145 Thanks
    frugal90
    April 2018 update, still planning to stop this summer. 4 pay cheques left!

    My ISA is now 120K income generating ITs
    Spouse ISA 127K income generating ITs

    total 247K

    dropped back a bit since high point in Jan

    My SIPP (Cash) now up to 80 K, will take 25% tax free then drawdown the rest monthly once that has run out. Aiming for April 2019 then I will be drawing 60K over 36 months until DB kicks in. 20K per year, tax at 20% -assuming tax free 12k from April 19 means 1.6K tax so 18.4K per year or 1533 per month. We are planning to use cash to allow us a budget of 2.5K per month. Actually don't think we'll use that, our tracking tells us it will be more like 2K- we shall see!

    My wife's SIPP in IT's 85.2K to be drawn over 5 years, starting from summer 2023- still invested.


    Cash holding - atom/NSI/bank 123 92500- this will be up to 100K by FIRE day.

    Also have renewable heat incentive payment every three months of 478 until Dec 2021 and a feed in tarrif for solar PV worth about 1K per year for another 17 years- useful income and pays for fuel and elec etc.
    Didn#t know if this was going to be a good investment, but it has proved to be great.

    Retirement date June 30th 2018 -

    Teachers pension kicks in May 2022 - 20.5 k per year plus 61.5 K lump

    Spouse Pension Kick in July 2028 - 16.3 K per year plus 45k lump- now going to take the career average bit at 60 instead of leaving it to state pension age.

    Total ISAS/SIPP/Cash at the moment= 504 500

    State pensions both when we hit 67 at the moment, we plan to buy extra years to get th 8.5K. We'll do that either from ISA income or lump sums when they come in.

    Getting excited now, can almost sense the freedom

    Will update week before we FIRE not as early as some but finally almost there

    any others on the same journey!!

    frugal
    Last edited by frugal90; 20-04-2018 at 9:54 AM. Reason: oops spelling mistake
    • chiefie
    • By chiefie 20th Apr 18, 9:28 AM
    • 334 Posts
    • 340 Thanks
    chiefie
    Great position to be in i!!!8217;d say well done and good luck to you.
    • AnotherJoe
    • By AnotherJoe 20th Apr 18, 9:46 AM
    • 9,847 Posts
    • 10,991 Thanks
    AnotherJoe
    Frugal90, don't forget once you've stopped working to start putting 2880 each into a SIPP for you and wife. That will return 720 each year until pensions kick in and then I think 120.

    Actually upon reflection you can start doing that now unless you are already putting the max into your pension, indeed you could put a fair old chunk in this year, yiu have the cash to do it, find out how much you are allowed to and do it since you can effectively get a 20% boost on that as you'll have a few years before you are paying tax, My last year of earning I put my whole salary in.
    Last edited by AnotherJoe; 20-04-2018 at 9:49 AM.
    • frugal90
    • By frugal90 20th Apr 18, 10:01 AM
    • 243 Posts
    • 145 Thanks
    frugal90
    we have tried to build the sipps to cover the gap until db schemes kick in- drawing them down to zero in quite a short period of time.

    if I contribute more to the sipps, then I will be paying 20 % tax on the drawdown above the tax threshold, so yes uplift on the way in but taken back on the way out. Where would the benefit be?

    maybe there is one that I am missing?

    frugal
    • AnotherJoe
    • By AnotherJoe 20th Apr 18, 10:53 AM
    • 9,847 Posts
    • 10,991 Thanks
    AnotherJoe
    we have tried to build the sipps to cover the gap until db schemes kick in- drawing them down to zero in quite a short period of time.

    if I contribute more to the sipps, then I will be paying 20 % tax on the drawdown above the tax threshold, so yes uplift on the way in but taken back on the way out. Where would the benefit be?

    maybe there is one that I am missing?

    frugal
    Originally posted by frugal90
    There are two things you are missing I think, the 25% TFLS, and timing.

    25% TFLS.
    Say you put 16k in from your 100k savings this year whilst you still earn. So, that gets bumped up to 20k. Take out 5k tax free 25%), even if you pay tax (see below) on the 15k @ 20% (3k) that is a total return of 17k for an outlay of 15k. That is 2k profit zero risk. No-brainer. (this works for the 2880 as well once you are not earning, just much less obviously but still free money).
    You'd have to work out what the actual amount is you can put in. Maybe its a bit less, maybe a bit more.

    Timing.

    Your plan is to "burn down" your SIPPs over 3 years.
    However, if you burn down the SIPPs slower, so they are below the tax threshhold, and top up needed money with the cash you have, then for the three years until you start paying tax (when your DB pensions kick in) you avoid paying tax on the money above the tax threshold.

    I am in a similar sitation I have 4 years until a DB pension kicks in. During that time i am living on the 25% TFLS plus drawing about 12k (whatever the allowance is each year) out of the SIPP to avoid paying tax on that element of the otherwise taxable SIPP, because once SP and DB are running in 4 years everything i take out of the SIPP will be taxable.

    In your case you'd have three years, so thats three years of 12k SIPP and 8k savings, so you could avoid paying tax on the difference between the 20k you planned to drawdown and the annual allowance of 12k or so (keeping the maths simple) , so 8k x 3 = 24k @ 20% = nearly 5k saved.
    • okydoky
    • By okydoky 20th Apr 18, 11:04 AM
    • 233 Posts
    • 21 Thanks
    okydoky
    May have been mentioned earlier in the thread but extending the life of your Sipps may make deferring State Pensions quite attractive with the healthy (not as good as before admittedly, but still decent) uplift available?
  • jamesd
    if I contribute more to the sipps, then I will be paying 20 % tax on the drawdown above the tax threshold, so yes uplift on the way in but taken back on the way out. Where would the benefit be?
    Originally posted by frugal90
    VCT buying is another option. 30% income tax relief in the year of purchase, capped at tax payable that year. Have to hold for five years or repay it.

    So why not use your full basic rate band in years one and two, covering the tax with VCT buying, then sell in years six and seven?

    Beyond that perhaps plan to use VCT buying for the rest of your life so you never again pay much income tax, just use capital to finance deferring some income for five years?
    Last edited by jamesd; 28-04-2018 at 4:17 AM.
    • frugal90
    • By frugal90 3rd Jul 18, 6:56 PM
    • 243 Posts
    • 145 Thanks
    frugal90
    Finally finished, we are now free!
    I will post our FIRE numbers in the next few days.

    I have to say that after so many years at the chalkface, it feels great!

    Yippeeeeeeee



    Frugal
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