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Retirement Income question

Including Financial Independence and Retiring Early (FIRE)
floyd3592
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Retirement Income question

#383859

Postby floyd3592 » February 5th, 2021, 2:05 pm

Have I got this a*rse about t*t?

I have a HYP consisting of a basket of 20 or so individual shares and 4 ITs wrapped in an ISA. I have a fairly significant lump sum of GBP which I’ve been intending to use to purchase a basket of ITs for a while now, to provide further income but is currently languishing in a low interest (and getting lower) savings account. I am of course using my ISA allowance each year to add to my HYP/IT portfolio.

Currently my income comes from a rental property, supplemented with the dividends paid from my ISA wrapped HYP portfolio and interest from the savings account, in which my cash is currently deposited.

Would I be better off just taking a monthly payment from the savings lump sum (interest plus capital) and re-investing the dividends currently tax protected in the ‘HYP’ ISA letting it ‘compound’ tax free, until all of my investment funds giving income to live off, are contained within?

swill453
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Re: Retirement Income question

#383861

Postby swill453 » February 5th, 2021, 2:09 pm

What I'd say is that if you're still adding money to the ISA, it doesn't seem sensible to also withdraw from it when you've got plenty cash outside the ISA.

So yes, keep the dividends in the ISA and reinvest them.

Scott.

nmdhqbc
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Re: Retirement Income question

#383863

Postby nmdhqbc » February 5th, 2021, 2:26 pm

Correct me if I'm wrong... It seems that so far you've used the £20k ISA allowance as a kind of determining factor of how much cash you hold by default. Which could be a good idea depending on how big the cash pile is. By not timing the market you get it in on the up and down years.

But if that's not what you want to do then I'd suggest you decide how much cash you want to keep. Maybe a years spends? Then invest the rest outside of the ISA. Then each year you can sell the stuff outside the ISA and buy it again inside the ISA sheltering more and more of your investments. The income you get paid inside your ISA should be kept in there. To pay it yourself you simply sell something of that worth outside the ISA and buy the same amount inside the ISA. Then pay the cash to yourself from outside the ISA. Obviously doing it exactly to the penny is not possible with shares but small amounts of cash in the ISA can wait until the next sell outside/buy inside episode.

Of course you could decide to make changes to your portfolio when you do the sell/buy. A good way of keeping the costs down. You're not making the change outside the ISA then selling and buying inside all over again.

Urbandreamer
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Re: Retirement Income question

#383870

Postby Urbandreamer » February 5th, 2021, 3:33 pm

I agree with the other posts, as far as they go.

You might also consider if you want / can have a SIPP.

I don't know your situation, but I have income that can support me and either pay into an ISA or a SIPP. I intend to start drawing my pension at 60. However I shall ensure that my taxable income is less than the personal allowance.

Hence I feel that it's worth my while making my SIPP rather than ISA a target for funds. I have even started taking some ISA dividends and investing them in my SIPP.

Is your property income over the personal allowance? If so it may not be worth the hassle of managing a pension. However I mention it as an option.

floyd3592
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Re: Retirement Income question

#384149

Postby floyd3592 » February 6th, 2021, 12:41 pm

swill453 wrote:What I'd say is that if you're still adding money to the ISA, it doesn't seem sensible to also withdraw from it when you've got plenty cash outside the ISA.

So yes, keep the dividends in the ISA and reinvest them.

Scott.


Yes this is exactly my thoughts as to what I should be doing.

floyd3592
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Re: Retirement Income question

#384155

Postby floyd3592 » February 6th, 2021, 12:52 pm

nmdhqbc wrote:Correct me if I'm wrong... It seems that so far you've used the £20k ISA allowance as a kind of determining factor of how much cash you hold by default. Which could be a good idea depending on how big the cash pile is. By not timing the market you get it in on the up and down years.

But if that's not what you want to do then I'd suggest you decide how much cash you want to keep. Maybe a years spends? Then invest the rest outside of the ISA. Then each year you can sell the stuff outside the ISA and buy it again inside the ISA sheltering more and more of your investments. The income you get paid inside your ISA should be kept in there. To pay it yourself you simply sell something of that worth outside the ISA and buy the same amount inside the ISA. Then pay the cash to yourself from outside the ISA. Obviously doing it exactly to the penny is not possible with shares but small amounts of cash in the ISA can wait until the next sell outside/buy inside episode.

Of course you could decide to make changes to your portfolio when you do the sell/buy. A good way of keeping the costs down. You're not making the change outside the ISA then selling and buying inside all over again.


Yes deciding how much 'cash to keep' is the difficult one to quantify especially since I still have a number of large spends I can forsee in the near to mid term (House improvements, camper van purchase, helping offspring in house purchases etc). My line of thinking is to do just as u say, by investing the rest outside of the ISA & buying a proportion of it again inside the sheltered ISA each April so that's clarifying my thoughts for me. Great tip about buying any changes once inside the ISA as well to keep costs down, thanks!

floyd3592
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Re: Retirement Income question

#384165

Postby floyd3592 » February 6th, 2021, 1:22 pm

Urbandreamer wrote:I agree with the other posts, as far as they go.

You might also consider if you want / can have a SIPP.

I don't know your situation, but I have income that can support me and either pay into an ISA or a SIPP. I intend to start drawing my pension at 60. However I shall ensure that my taxable income is less than the personal allowance.

Hence I feel that it's worth my while making my SIPP rather than ISA a target for funds. I have even started taking some ISA dividends and investing them in my SIPP.

Is your property income over the personal allowance? If so it may not be worth the hassle of managing a pension. However I mention it as an option.


Thanks for this, all good points!.

The SIPP route isn't one i've really considered. I have a couple of occupational pensions that will kick in, one when I'm 62 and the other when i'm 65. After that my state pension should kick in when I'm 66. So, because of this and the fact that my property income *is* below my personal allowance & I have a bit of leeway there, i just thought of it as being a bit too much of a faff-on to consider SIPP payments.

Like u, I want to ensure that my (& in my case, the missus' as well) taxable income is less than the personal allowance. But that should only be an issue when we get to age 66 (Insha'Allah) & beyond (A Labour Chancellor notwithstanding of course). A nice problem to have I guess...

Chrysalis
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Re: Retirement Income question

#385559

Postby Chrysalis » February 11th, 2021, 8:07 am

Are you already 61 or thereabouts? If you are younger, your state pension age may be later than 66....
https://www.gov.uk/government/publicati ... -timetable

1nvest
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Re: Retirement Income question

#397934

Postby 1nvest » March 22nd, 2021, 12:26 pm

There are potential means to move large sums around, such as from outside to inside ISA. Or perhaps to move from inside SIPP to outside ... and then load that back into SIPP again.

A risk factor is that if outside (taxable) makes a significant gain one year :( Click the Annual Returns tab and in 2008 for instance, the short gained +60% which if outside of ISA :( Otherwise more usually the losses are moved to the other sides gains. I've used US data for that example, in practice you'd use domestic versions of the 2x long and 2x short. The ideal is perhaps to move between SIPP and ISA, maybe then draw cash/capital from ISA to outside and load that into SIPP - collecting 20%.

Alternatively using 3x long and short ... or rather than holding 'cash' hold stock instead for broader stock gains/losses added in on top


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