The Lemon Fool

Aged 54 would like to retire next year at 55.

Require £30k after tax to live on as a family.

DC pot of £800k but will take the full PCLS to pay off mortgage and invest in Share ISA.

DB pension of £13k revalued to today, payable from age 60.

Realise that I am at, if not slightly over, LTA.

£400k in a share ISA yielding £14k per annum.

£30k in cash savings (RPI savings certificates and premium bonbs)

I reckon it is doable, but have I got enough 'fat' in my pensions and ISA in the event of a crash?

How much income can you generate from what you have?

TJH

You don’t say what equity you have in the house or what state pension you will receive, but 1.2m will easily be able to provide the 15k you’ll need before tax long term and to bridge the 5 and 10 years to get each dB pension

Assume 3% SWR and you’d need 1.1m to get 35k pre tax, ignoring state pension. You have more than that, and the 260k value of the dB pension protects you from the market

tjh290633 wrote:How much income can you generate from what you have?

TJH

Thanks.

About 3.5% using investment trusts in both ISA and SIPP. More by number in the ISA (27 IT's) than the SIPP (19 IT's) but less in value.

All in profit, apart from ADIG (was BIST was BSET).

Hate my job, would retire at 55 next year when I can get my pension. Sadly unable to get fixed or individual protection.

JohnB wrote:You don’t say what equity you have in the house or what state pension you will receive, but 1.2m will easily be able to provide the 15k you’ll need before tax long term and to bridge the 5 and 10 years to get each dB pension

Assume 3% SWR and you’d need 1.1m to get 35k pre tax, ignoring state pension. You have more than that, and the 260k value of the dB pension protects you from the market

Thanks. House worth £280k, mortgage of £100k, another £100k of PCLS (so £200k in total) for getting rid of mortgage, home improvements and ISA investment.

Crystallising SIPP asap as growth in LTA is only CPI and my SIPP should grow faster than that and I am at LTA or thereabouts.

Should get full state pension, as will my wife (she has no other income and is a non earner).

I would say that you certainly have enough to stop doing what you hate. A couple of years working at a lower paid, lower stress job to top up your DB pension postpones the point at which you start drawing on the SIPP & ISA reserves. This makes a major difference to your margin of safety.

From your figures, looks possible to hit your £30k/year from SIPP and ISA, with the DB pension being a nice uplift when you get there.

With a target of £30k, and a non-earning spouse, the following are worth following up on:

Open a SIPP for your wife (if she doesn't already have one). Pay in £2880 (doesn't matter where the money comes from) and your SIPP provider will claim the tax relief of £720. The total £3,600 can be withdrawn as cash a month or so later. You may need to keep say, £1,000 invested in the SIPP to keep it open, and an annual charge of say, £100, but you can rinse and repeat each tax year.

On your tax returns, make sure you use the marriage allowance: https://www.gov.uk/marriage-allowance (note - this is different from the married couple's allowance which is age related). This will save you another £238 off your tax bill

Combined, that gives you an uplift of £958 (after tax) for less than an hour's admin in year one and 10 minutes thereafter.

VRD

$6 billion in cash and I'm the majority shareholder in apple. Have I got enough to retire? I spend £12k a year.
Just a light hearted fun poke.

Are you planning on buying an annuity or using flexible drawdown?

We're clear that the OP has sufficient provision at present. Their real question is what if the market tanks, say 25% this year and next and stays down for a few years? It's happened before and likely to happen again during a long retirement.

TUK020 wrote:I would say that you certainly have enough to stop doing what you hate. A couple of years working at a lower paid, lower stress job to top up your DB pension postpones the point at which you start drawing on the SIPP & ISA reserves. This makes a major difference to your margin of safety.

Aim is no job, but thanks anyway.

vrdiver wrote:From your figures, looks possible to hit your £30k/year from SIPP and ISA, with the DB pension being a nice uplift when you get there.

With a target of £30k, and a non-earning spouse, the following are worth following up on:

Open a SIPP for your wife (if she doesn't already have one). Pay in £2880 (doesn't matter where the money comes from) and your SIPP provider will claim the tax relief of £720. The total £3,600 can be withdrawn as cash a month or so later. You may need to keep say, £1,000 invested in the SIPP to keep it open, and an annual charge of say, £100, but you can rinse and repeat each tax year.

On your tax returns, make sure you use the marriage allowance: https://www.gov.uk/marriage-allowance (note - this is different from the married couple's allowance which is age related). This will save you another £238 off your tax bill

Combined, that gives you an uplift of £958 (after tax) for less than an hour's admin in year one and 10 minutes thereafter.

VRD

Yes, SIPP for wife is a good idea. Already using the marriage allowance so need to stay in basic rate band. Also have 3 children 13 years and younger so get some child benefit too.

Wmnr wrote:Are you planning on buying an annuity or using flexible drawdown?

The latter, until at least age 65. Annuity rates at age 55 are not worth doing.

nmdhqbc wrote:$6 billion in cash and I'm the majority shareholder in apple. Have I got enough to retire? I spend £12k a year.
Just a light hearted fun poke.

I wish, lol.

DrBunsenHoneydew wrote:We're clear that the OP has sufficient provision at present. Their real question is what if the market tanks, say 25% this year and next and stays down for a few years? It's happened before and likely to happen again during a long retirement.

That is the concern. Brexit and Corbyn as PM would be a very toxic combination.

DrBunsenHoneydew wrote:We're clear that the OP has sufficient provision at present. Their real question is what if the market tanks, say 25% this year and next and stays down for a few years? It's happened before and likely to happen again during a long retirement.

My calculations work something like - we could guess there'd be a 50% reduction in income for 2 years until recovery to previous levels we need 1 year of income in cash. If we assume a 50% reduction in income and 5 years to recover - but increasing each year we need less than 2.5 years of income in cash. I'm hoping there would be no more than a 50% drop in income and no more than 6 years to recover so if I held 3 years of cash I'd weather that storm. I'd also like a 5/10% margin of safety for my income so if I wanted £30k I'd aim for £33k but recon with a small adjustment I could manage on £27k and still be OK on £25k, surplus income could be redeployed to bolster income more to run the cash buffer up and down as the economy does the same.

If you look back at the 2008-9 recession, while most of us suffered up to a 50% fall in both capital value and income, the major ITs suffered the capital setbacks, but sailed through without reducing their dividends, thanks to their income reserves.

If you stick to your ITs, you could be OK on the income front. Check their records and see how they weathered the storm.

TJH

tjh290633 wrote:If you look back at the 2008-9 recession, while most of us suffered up to a 50% fall in both capital value and income, the major ITs suffered the capital setbacks, but sailed through without reducing their dividends, thanks to their income reserves.

If you stick to your ITs, you could be OK on the income front. Check their records and see how they weathered the storm.

TJH

Thanks, I will post my portfolios here tomorrow. They contain the usual IT suspects I guess.

So in general I agree with invt35t - both in terms of setting up a spreadsheet to model your needs over the next 40-50 years and also that overall, it looks like your stated objective is achievable.
However, I think it might be useful to explore your needs further. You are 54 and with three pre teenage children.
A few questions (not for you to answer here necessarily but just to think about).
1. How much do you spend now? What are your aspirations for your children in terms of helping get them established as independent adults (ie help with their education costs, possible help with housing costs?)
2. Do you expect any other windfalls?
3. Are your parents and parents in law still alive and might they need help with care needs? What is your own plan for meeting care needs in later life?
4. Have you looked carefully at life expectancy calculators to see what the probability is of either you or your wife living to 100?
5. Do you and your wife have skills and interests that could be used to earn money in a way you would enjoy? Or can you develop such?

Personally, I think you and your family are quite young for you to be contemplating having no earnings at all coming into the household. That’s quite a risk, when one of your major assets (for both you and your wife assuming she is in good health) is your human capital and skills. Much can happen over 40 or 50 years and I assume that you do not want to either compromise either your children’s ability to ‘launch’ or indeed, find yourself financially dependent on them in your dotage.

I totally agree that life is too short to spend it in a job you hate, and you definitely have enough of a cushion to be able to quit that job and find something more enjoyable to do instead. That process might take a couple of years, but I am confident that if you stop work or scale back the effort you have to put into it, and spend some time seriously thinking about what else you could do, you will find renewed energy and purpose, and I would imagine that both you and your wife could find modestly paid work that you would enjoy.

For context, I am similar age to yourself and have two children a little older but still at home. I have more financial resources than you. Over the last few years I have been gradually extricating myself from my current career. I have been surprised what new ideas and opportunities appear, when you have the time and energy to make them happen. My life is taking directions I could never have imagined. But, I am still earning (much less than before). I personally think working 2 or 3 days in a week helps to give structure and purpose and still lots and lots of time to pursue unpaid activities and interests. And while children are at home you are tied to a certain rhythm to life anyway, you can’t just go and travel the world for months on end (I’m waiting patiently for that time to come...)

So, I’d say your problem is not ‘can I FIRE’, but more ‘what shall I do next with my life that is productive and enjoyable’....ie you need to think about what you’ll do, not just whether you have enough money. I’m also sceptical that £30,000 is enough for a youngish family of 5 to live on - realistically your kids will need support for probably 15 more years (depending on age of youngest).

Jabd2001 wrote:So in general I agree with invt35t - both in terms of setting up a spreadsheet to model your needs over the next 40-50 years and also that overall, it looks like your stated objective is achievable.
However, I think it might be useful to explore your needs further. You are 54 and with three pre teenage children.
A few questions (not for you to answer here necessarily but just to think about).
1. How much do you spend now? What are your aspirations for your children in terms of helping get them established as independent adults (ie help with their education costs, possible help with housing costs?)
2. Do you expect any other windfalls?
3. Are your parents and parents in law still alive and might they need help with care needs? What is your own plan for meeting care needs in later life?
4. Have you looked carefully at life expectancy calculators to see what the probability is of either you or your wife living to 100?
5. Do you and your wife have skills and interests that could be used to earn money in a way you would enjoy? Or can you develop such?

Personally, I think you and your family are quite young for you to be contemplating having no earnings at all coming into the household. That’s quite a risk, when one of your major assets (for both you and your wife assuming she is in good health) is your human capital and skills. Much can happen over 40 or 50 years and I assume that you do not want to either compromise either your children’s ability to ‘launch’ or indeed, find yourself financially dependent on them in your dotage.

I totally agree that life is too short to spend it in a job you hate, and you definitely have enough of a cushion to be able to quit that job and find something more enjoyable to do instead. That process might take a couple of years, but I am confident that if you stop work or scale back the effort you have to put into it, and spend some time seriously thinking about what else you could do, you will find renewed energy and purpose, and I would imagine that both you and your wife could find modestly paid work that you would enjoy.

For context, I am similar age to yourself and have two children a little older but still at home. I have more financial resources than you. Over the last few years I have been gradually extricating myself from my current career. I have been surprised what new ideas and opportunities appear, when you have the time and energy to make them happen. My life is taking directions I could never have imagined. But, I am still earning (much less than before). I personally think working 2 or 3 days in a week helps to give structure and purpose and still lots and lots of time to pursue unpaid activities and interests. And while children are at home you are tied to a certain rhythm to life anyway, you can’t just go and travel the world for months on end (I’m waiting patiently for that time to come...)

So, I’d say your problem is not ‘can I FIRE’, but more ‘what shall I do next with my life that is productive and enjoyable’....ie you need to think about what you’ll do, not just whether you have enough money. I’m also sceptical that £30,000 is enough for a youngish family of 5 to live on - realistically your kids will need support for probably 15 more years (depending on age of youngest).

Thanks for this. The ISA would last 13 years without touching the pension if i drew it all down to zero.

I could probably take 45k from the SIPP for 5 years then 32k thereafter when the DB kicks in.

This could probably be supported from a 600k SIPP Post PCLS? Longevity isnt great in the family, may make 75 if I am lucky, certainly no more than 80. If I stop work now, it would really improve my health.

May keep the mortgage as the rate is low and keep the 200k for a new kitchen and upgrades which would possbly cost 30k, drip feed the rest into an ISA (whatever doesn't get spent).

A spreadsheet is a good idea, i will try and model this.

I was going to work until 57, but the last few days made me see that this is no longer a viable option, i can no longer stand the place!!!