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    • Mistermeaner
    • By Mistermeaner 6th Jun 19, 9:08 AM
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    Mistermeaner
    The plan and the numbers - please critique
    • #1
    • 6th Jun 19, 9:08 AM
    The plan and the numbers - please critique 6th Jun 19 at 9:08 AM
    Hi All

    Appreciate if the knowledgeable and experienced members of this forum could please check some of my calcs and assumptions stated below – this is ‘my numbers’ in planning for retirement.

    I’ve built a spreadsheet with all this stuff in and want to test if assumptions and calculations plus the plan in general passes the sniff test.


    Status:

    I am 40, male, good health etc. Working full time earning pre-tax 100K+

    My partner is 35, female, going to be stay at home mum (just finishing mat leave) so earnings ZERO (in the plan, she will likely go back to work at some point)

    Kids X 4; ages 12, 10, 2 and 1 (we pay into Sipps for all these guys)

    My take home, after pension etc. and ignoring bonuses is ~£3K per month, after bills and everything comes off we are more than comfortable on monthly outgoings + have £20K cash buffer



    Assumptions:

    I will work until im 57 and then retire (2036)
    My partner will not return to work
    Pension pot earns growth of 2% per annum, as do our LISA investments



    The pots:

    My pension currently has £250K in it
    I will pay £60K into this tax year (using carry forward from prior years)
    Thereafter I have assumed I will pay £20K per year into (prudent), until I am 50 (again being prudent)
    No further payments from 50 to 57
    When I am 57 in 2036 the pension pot will be worth circa £679K

    My partner has a pension with circa £25K in it
    We have assumed no further payments into this
    When she turns 57 in 2041 this will be worth circa £38K

    My LISA has £4K in it
    I assume payments of £3600/annum (inc bonus) into this until the age of 50
    At access time, when I am 60 in 2039 pot will be worth circa £53K

    My partners LISA has £2K in it
    We assume payments of £1500/annum (inc bonus) into this until age of 50
    At access time, when she is 60 in 2044 pot will be worth circa £35K

    Mortgage is currently £250K on 1.7% 5 year fix
    We actively overpay currently at £1200/month
    I have assumed we continue paying at £1200/month and interest rate is 2%
    At time I turn 57 in 2036 the remaining balance will be circa £53K


    In high level summary to achieve the above savings levels we need to put aside ~£21K per year (pre-bonus / tax relief etc.) for the next 10 years (at my current earnings we are doing triple this, but wanted to be ultra prudent to allow for change of job or unexpected spending increases)
    We need to sustain mortgage payments of £14400 per year for the next 17 years


    If we achieve the above the following pots (and mortgage liability) become available:


    Year My age Partner age Amount

    2036 57 52 My Pension £679K

    2036 57 52 Mortgage balance -£53K

    2039 60 55 My LISA £53K

    2041 62 57 Partner pension £38K

    2044 65 60 Partner LISA £35K

    TOTAL POT £750K

    2046 67 62 I should get full state pension

    2051 72 67 Partner should get full state pension



    On the basis of the above I feel like we will be reasonably comfortable, in that when I retire at age 57 the youngest child will be 18, we will be mortgage free and have a pot of £600K+ after paying off mortgage balance (assume £18K/annum on basis of 3% draw down)

    At various points in the following years we will get another £100K+ in lump sums from the various LISA’s prior to then (hopefully!) full state pensions kicking in for both of us (based on forecasts)

    Savings plan feels ultra prudent as assumes partner earns nothing and I only put £20K in my pension per year until I am 50 – this prudency I think covers items such as unplanned redundancy or diverting money from pension/savings to help the kids with e.g. uni, housing, cars etc.

    Assuming I am still able to work at a decent level until I am 57 (and who knows beyond) and my partner inevitably returns to work when kids are bit older the savings amount can only increase


    All thoughts and comments welcome
    Last edited by Mistermeaner; 06-06-2019 at 9:11 AM.
Page 3
    • lisyloo
    • By lisyloo 14th Jun 19, 7:46 AM
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    lisyloo
    I thought we were trying to save money ?
    Originally posted by Mistermeaner
    You can get married for very little if you want.

    This might be cheaper that the arrangements youíd otherwise need to put in place to protect each other in the event of death/incapacity etc.

    You are young but when whilst your sorting things out then LPAs would be a good idea (Iíve been through the alternative and itís arduous, slow and expensive).
    • Radiantsoul
    • By Radiantsoul 14th Jun 19, 9:55 AM
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    Radiantsoul
    The only thing I wonder is do you both have life insurance.
    Apart from that you have a very high income and very high savings rate, so you should be fine.
    • Mistermeaner
    • By Mistermeaner 16th Jun 19, 12:54 PM
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    • 3,200 Thanks
    Mistermeaner
    You can get married for very little if you want.

    This might be cheaper that the arrangements youíd otherwise need to put in place to protect each other in the event of death/incapacity etc.

    You are young but when whilst your sorting things out then LPAs would be a good idea (Iíve been through the alternative and itís arduous, slow and expensive).
    Originally posted by lisyloo
    Iíll put it to her this way

    No one knee job

    Simple financial facts

    How could she refuse 🤔
    • enthusiasticsaver
    • By enthusiasticsaver 16th Jun 19, 1:33 PM
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    enthusiasticsaver
    Thanks all for input

    Couple of people mentioned the pension for the partner; what is the advantage of this vs e.g. paying into her LISA? (is it just that itenables additional contributions above her LISA limit?)

    Ref the comments on increasing her LISA contributions; if we have extra disposable this will certainly be considered but thinking was as I am older we get my pots sooner (both my pension and my LISA), and also we get more tax benefits in my pension (High earner) + salary sacrifice benefits (nat ins.).... for this reason we would always prioritise contributions into my pots rather than hers

    NB: They are my pots only by name.... it's all OURS

    PS: I am working on the assumption that should I die at any point it can all be inherited by her in full (assuming we're married which is a discussion for another day )
    Originally posted by Mistermeaner
    I would say this leaves your partner very vulnerable especially if you are not married. Make sure you do a will.

    We prioritised my DHs pension as he was a 40% tax payer and I was basic (worked part time after kids) and I regret that now. We were right to maximise his contributions but I only paid the statutory 6.5% into my LGPS until I returned full time when I upped my contributions to 10% then 15%. As a consequence my DH is paying tax on his pension (DB not DC) even though he is claiming part of my tax allowance and I have £6k unused of my tax allowance until my next pension kicks in. As others have said consider tax efficiency on way out as well as way in.


    If you pay £2880 into a SIPP in your partners name the tax payment will increase this to £3600. I have done this for the last four or five years now and in the final years of my working life I put 100% of my salary into my LGPS and SIPP combined.

    I also would say that you need to allow a substantial amount for 4 children re university costs etc. We planned for our mortgage to finish just as the eldest started university and we did not retire until after they were finished at uni. You are going to possibly have two at university just as you retire. However you do have a potentially large pension pot, you will be mortgage free and no doubt your wife will return to work when the little ones are older.

    Interesting you have chosen SIPPs for your children and not for your wife and SIPPs are very illiquid and they may need money for university, property deposits etc instead. Is there a reason for that?
    Early retired in December 2017

    I'm a Board Guide on the Debt-Free Wannabe, Mortgages and Endowments, Banking and Budgeting boards. I volunteer to help get your forum questions answered and keep the forum running smoothly. Any views are mine and not the official line of moneysavingexpert.com. Pease remember, board guides don't read every post. If you spot an illegal or inappropriate post then please report it to forumteam@moneysavingexpert.com
    • Mistermeaner
    • By Mistermeaner 17th Jun 19, 12:24 PM
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    Mistermeaner

    Interesting you have chosen SIPPs for your children and not for your wife and SIPPs are very illiquid and they may need money for university, property deposits etc instead. Is there a reason for that?
    Originally posted by enthusiasticsaver
    Thanks for input; we're going to look at wills and also do some math on tax on the way out as well as way in.

    ref the Sipps for the kids; ummed and arred alot about this and concluded the following:

    - Older kids (current 10 and 12) I'll still be working at age 46-52 when they hit uni time so any funding they need will come from income at that time (mum will probably be at work then as well)

    - Additionally they each have another parent so the burden is not all ours

    - On top of this student finance is IMO a pretty good deal ; and if your degree doesn't pay for itself you shouldn't be doing it anyway

    - Younger kids will be at uni age when I am hitting 57-62 at which point I (might) be pulling from my pension / LISA which could if appropriate be used to help

    - JISA's are pretty pants generally an offer no meaningful tax advantages

    - At an appropriate point I hope to be able to sit down with each child (probably when they get their first proper job) and show them their SIPP, the payments I made, the 'free' money that was added and the compounded growth that money have enjoyed. This will hopefully be a very valid lesson in benefits of saving and pensions and investment... ideally something they will themselves continue

    - Another big advantage with a junior SIPP is that the kids cant take the money out - probably one of the worst possible times to give your kids money is age 18 . so many distractions, so little experience. Much better they are protected from themselves and can enjoy the money when they retire
    • lisyloo
    • By lisyloo 17th Jun 19, 12:30 PM
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    lisyloo
    Iíll put it to her this way

    No one knee job

    Simple financial facts

    How could she refuse 🤔
    Originally posted by Mistermeaner
    I donít know your partner, but most women understand financial facts
    • AnotherJoe
    • By AnotherJoe 17th Jun 19, 1:05 PM
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    AnotherJoe
    Not a fan of SIPPs for children unless you've exhausted every other savings avenue for them, locking up money for 50 or 60 years they may not even get to use ever, and they are unlikely at age say 30 to be saying "thanks dad for building up money I cant access or use for my university costs / training course / house deposit and meaning I'll be in a crappier house or job for 30 years than I could have been"
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Mistermeaner
    • By Mistermeaner 17th Jun 19, 1:44 PM
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    • 3,200 Thanks
    Mistermeaner
    Not a fan of SIPPs for children unless you've exhausted every other savings avenue for them, locking up money for 50 or 60 years they may not even get to use ever, and they are unlikely at age say 30 to be saying "thanks dad for building up money I cant access or use for my university costs / training course / house deposit and meaning I'll be in a crappier house or job for 30 years than I could have been"
    Originally posted by AnotherJoe
    i've never really been popular in my house

    one day, long after i'm gone, some of them may have a little chuckle and think 'dad was right'

    maybe.....
    • atush
    • By atush 17th Jun 19, 8:50 PM
    • 17,980 Posts
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    atush
    JISA's are pretty pants generally an offer no meaningful tax advantages
    Not sure they are pants, not if you invest in equities over cash? income and Cap gains are tax free.
    • Thrugelmir
    • By Thrugelmir 17th Jun 19, 9:02 PM
    • 65,042 Posts
    • 57,324 Thanks
    Thrugelmir
    i've never really been popular in my house

    one day, long after i'm gone, some of them may have a little chuckle and think 'dad was right'

    maybe.....
    Originally posted by Mistermeaner
    My father was. Hopefully my son will one day think the same of me. At least at an early age he grasped the importance of an adequate pension provision.
    ďIf the financial system has a defect, it is that it reflects and magnifies what we human beings are like. Money amplifies our tendency to overreact, to swing from exuberance when things are going well to deep depression when they go wrong. Booms and busts are products, at root, of our emotional volatility.Ē
    ― Niall Ferguson
    • michaels
    • By michaels 17th Jun 19, 9:48 PM
    • 22,834 Posts
    • 104,558 Thanks
    michaels
    Thanks for input; we're going to look at wills and also do some math on tax on the way out as well as way in.

    ref the Sipps for the kids; ummed and arred alot about this and concluded the following:

    - Older kids (current 10 and 12) I'll still be working at age 46-52 when they hit uni time so any funding they need will come from income at that time (mum will probably be at work then as well)

    - Additionally they each have another parent so the burden is not all ours

    - On top of this student finance is IMO a pretty good deal ; and if your degree doesn't pay for itself you shouldn't be doing it anyway

    - Younger kids will be at uni age when I am hitting 57-62 at which point I (might) be pulling from my pension / LISA which could if appropriate be used to help

    - JISA's are pretty pants generally an offer no meaningful tax advantages

    - At an appropriate point I hope to be able to sit down with each child (probably when they get their first proper job) and show them their SIPP, the payments I made, the 'free' money that was added and the compounded growth that money have enjoyed. This will hopefully be a very valid lesson in benefits of saving and pensions and investment... ideally something they will themselves continue

    - Another big advantage with a junior SIPP is that the kids cant take the money out - probably one of the worst possible times to give your kids money is age 18 . so many distractions, so little experience. Much better they are protected from themselves and can enjoy the money when they retire
    Originally posted by Mistermeaner
    I plan to be retired and living of savings when the kids are at uni so I have no assessed income so they can get the full loan and possibly grants if they are reinstated....drawdown can then commence when they have finished.
    Cool heads and compromise
    • AnotherJoe
    • By AnotherJoe 18th Jun 19, 9:09 AM
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    AnotherJoe
    i've never really been popular in my house

    one day, long after i'm gone, some of them may have a little chuckle and think 'dad was right'

    maybe.....
    Originally posted by Mistermeaner

    There's a 1 in 12 chance (for a newborn) they wont get the ability to use that pension and know that "dad was right" and for the rest of that time they'll be thinking "dad was wrong I could be in a much better house now" or even "dad was wrong i could be in a house now"
    Please dont criticise my spelling. It's excellent. Its my typing that's bad.
    • Mistermeaner
    • By Mistermeaner 19th Jun 19, 9:24 PM
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    Mistermeaner
    There's a 1 in 12 chance (for a newborn) they wont get the ability to use that pension and know that "dad was right" and for the rest of that time they'll be thinking "dad was wrong I could be in a much better house now" or even "dad was wrong i could be in a house now"
    Originally posted by AnotherJoe
    Where does the 1 in 12 come from ?

    If it's life expectancy then are you sure 1 in 12 folk born today won't make 57 (or whatever the age is then)?

    State pension age maybe but you also need factor in their socio economic status - these kids are born advantaged and I would expect have a much higher life expectancy then average

    Also early access to sipps is possible in event of terminal illness
    • Mistermeaner
    • By Mistermeaner 19th Jun 19, 9:26 PM
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    Mistermeaner
    Add to all this that I expect (guess) sipps will be phased out in the course and replaced with isas - having a sipp open may preserve access to certain tax benefits that will be withdrawn for new entrants
    • lisyloo
    • By lisyloo 19th Jun 19, 9:38 PM
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    lisyloo
    20% for men before 65

    http://home.bt.com/lifestyle/wellbeing/did-you-know-20-of-men-die-before-retirement-age-11363985764112

    Yes you can release early if you have a terminal diagnosis but not everyone will be well enough to enjoy it.
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