Will I be able to retire in 11 years?

[newguy]

My current salary is £54,500 and there are no real promotional prospects.

I am currently saving £2700 into my pension funds and my intention is to continue doing this. I’ve been assuming a return of 4.5%

I’ve got no dependents and if I die with no assets I wouldn’t care.

Whilst the tax top up in the pension is nice, you'll only be getting basic rate relief on the bulk of it, and probably paying tax on the income when you take it out (unless it is Salary Sacrifice and you are saving NI).

As you are not worried about IHT I would put more focus on ISAs and less into pensions. One is taxed on the way out, one on the way in.

1. My plan at the moment is not to overpay the mortgage. Getting high rate tax relief on pension contributions is more of a priority.

You only paid £6k off your capital this year, compared to nearly double that previously. Did you remortgage for a longer term or something, because at this rate you'll still have debt in 11 years.The big thing for us being able to save was when the mortgage was gone, a huge psychological boost of knowing your money was yours do do what you want with, but others perfer to invest the equity elsewhere, your risk profile is higher than ours, but you need a plan to get rid of the debt at some point.

Basic steps are...
1) work out how much you will need to live on. Not "how much you spend now", the 2 figures might be quite different.
2) multiply that by 25 and save that amount from your takehome (either in ISA so income is tax free, or SIPP so tax reclaimed covers later deductions).
3) have 12 months' spend as cash.
4) (optional but very much preferable) Have no debt at retirement.

Other things as you approach the time is consider part time working, see how much the extra free time affects your spend, you might find working 2 days just to cover your needs is preferable to going cold turkey, and allows your investments to build a better buffer.

Oh, and at 44, you are just 2 years older than MrsF was when we married. A lot can change in 11 years, ask Glynn Wolfe. Joan Collins tended to marry every 11 years or so the first 4 times

I have paid in around £30,928.20 into my pot, meaning that I've lost around £16,945.20.

I am a high risk investor [...] My pension funds were selected by a professional pension chap.

Ouch. High Risk does not mean high return, especially in the sort of downturn we look to be entering. But your strategy is a topic for another board.

Paul

Thank you Paul

I salary sacrifice £2,247 per month with the rest of the pension amount made up by my employer.

If I didn't use the salary sacrifice I would have £1317.80 per month to invest in an ISA. I think getting the extra £930 a month now is the way to go. I should also say that I am based in Scotland so the tax rate is 41%. Hopefully my figures make sense?

[Adamski]

I'm retiring this year in my 50s myself, becoming more popular as Jeremy Hunt mentioned yesterday early retirees are being encouraged to go back!

you got other options if you don't have enough funds - dropping hours, part time, flexi work, short term contracts. There are other options if don't hit your target.

Were living longer. You might live until 100, that'd be 45 years to fill. Maybe a change in job might suit more, to one you like more, just food for thought.

(I run lower risk portfolio than others here, if you're happy that you'll get lower returns (you'll miss out on bull market to an extent) but advantage less up and down and sleep easier.)

[newguy]

My current salary is £54,500 and there are no real promotional prospects.

I am currently saving £2700 into my pension funds and my intention is to continue doing this. I’ve been assuming a return of 4.5%

I’ve got no dependents and if I die with no assets I wouldn’t care.

Whilst the tax top up in the pension is nice, you'll only be getting basic rate relief on the bulk of it, and probably paying tax on the income when you take it out (unless it is Salary Sacrifice and you are saving NI).

As you are not worried about IHT I would put more focus on ISAs and less into pensions. One is taxed on the way out, one on the way in.

1. My plan at the moment is not to overpay the mortgage. Getting high rate tax relief on pension contributions is more of a priority.

You only paid £6k off your capital this year, compared to nearly double that previously. Did you remortgage for a longer term or something, because at this rate you'll still have debt in 11 years.The big thing for us being able to save was when the mortgage was gone, a huge psychological boost of knowing your money was yours do do what you want with, but others perfer to invest the equity elsewhere, your risk profile is higher than ours, but you need a plan to get rid of the debt at some point.

Basic steps are...
1) work out how much you will need to live on. Not "how much you spend now", the 2 figures might be quite different.
2) multiply that by 25 and save that amount from your takehome (either in ISA so income is tax free, or SIPP so tax reclaimed covers later deductions).
3) have 12 months' spend as cash.
4) (optional but very much preferable) Have no debt at retirement.

Other things as you approach the time is consider part time working, see how much the extra free time affects your spend, you might find working 2 days just to cover your needs is preferable to going cold turkey, and allows your investments to build a better buffer.

Oh, and at 44, you are just 2 years older than MrsF was when we married. A lot can change in 11 years, ask Glynn Wolfe. Joan Collins tended to marry every 11 years or so the first 4 times

I have paid in around £30,928.20 into my pot, meaning that I've lost around £16,945.20.

I am a high risk investor [...] My pension funds were selected by a professional pension chap.

Ouch. High Risk does not mean high return, especially in the sort of downturn we look to be entering. But your strategy is a topic for another board.

Paul

To try and answer your other questions.

In previous years I had been overpaying my pension but I've taken the view that I should be able to get investment returns higher than 2.49%. If I continue at the current rate I will have the mortgage for a few years when I retire. My intention now is to downsize at some point to ensure I don't have mortgage payments in retirement. I may consider some kind of equity release scheme later on if required.

Basic steps are...
1) work out how much you will need to live on. Not "how much you spend now", the 2 figures might be quite different.

I think I can live on £25K but I would prefer to be able to go on more holidays and drive nicer cars so I want to aim for £30K. I do use YNAB so I've got a very good handle on my current expenses.

2) multiply that by 25 and save that amount from your takehome (either in ISA so income is tax free, or SIPP so tax reclaimed covers later deductions).

So I need about £750K or to be safe around £800K as per boots post above. So do I need a higher amount then this to cover the tax costs when I need to withdraw the money from the pension?

3) have 12 months' spend as cash.

I think I will need to probably have at least 3 years worth of spending to cover the 2 years between 55 and 57 and an extra 12 months spending.

4) (optional but very much preferable) Have no debt at retirement.
Fully agreed with this one. Although I would consider equity release later on if required.


I might very well consider a part time job of some kind but one that involves no stress!
Thank you

[Itsallaguess]

Basic steps are...

1) work out how much you will need to live on. Not "how much you spend now", the 2 figures might be quite different.

I think I can live on £25K but I would prefer to be able to go on more holidays and drive nicer cars so I want to aim for £30K. I do use YNAB so I've got a very good handle on my current expenses.

2) multiply that by 25 and save that amount from your take-home (either in ISA so income is tax free, or SIPP so tax reclaimed covers later deductions).

So I need about £750K or to be safe around £800K as per boots [4% SWR] post above. So do I need a higher amount then this to cover the tax costs when I need to withdraw the money from the pension?

Just to be clear though - the post from boots earlier, talking about a potential 4% safe withdrawal rate to deliver required income (25 x required-cash), is a potential plan to draw income from a pile of £800K invested capital that is hoping to stay relatively steady and untouched whilst that 4% withdrawal rate funds your ongoing yearly expenses...

But in an earlier post, you've already said -

I’ve got no dependants and if I die with no assets I wouldn’t care.

Which suggests that you'd be happy with at least some level of 'capital eating' to help reduce the otherwise-required £800K, which, with a fair wind, might otherwise leave a hefty lump of capital remaining when you eventually fall off your perch.

Those two situations seem to be at least partly contradictory at this stage, and if you really are happy to take out your last quid when the lights go out, then maintaining a capital-base of £800K throughout your whole retirement feels like an odd way to approach that plan, and that's before we then start to factor in any later additional income via a possible state pension etc...

Cheers,

Itsallaguess

[kempiejon]

Just to be clear though - the post from boots earlier, talking about a potential 4% safe withdrawal rate to deliver required income (25 x required-cash) is a potential plan to draw income from a pile of £800K invested capital that is hoping to stay relatively steady whilst that 4% withdrawal rate funds your ongoing yearly expenses...

Which suggests that you'd be happy with at least some level of 'capital eating' to help reduce the otherwise-required £800K, which, with a fair wind, might otherwise leave a hefty lump of capital remaining when you eventually fall off your perch.

Those two situations seem to be at least partly contradictory at this stage, and if you really are happy to take out your last quid when the lights go out, then maintaining a capital-base of £800K throughout your whole retirement feels like an odd way to approach that plan, and that's before we then start to factor in any later additional income via a possible state pension etc...

I noticed that contradiction/misunderstanding too, I'm not too fussed about a legacy either. My plan doesn't rule out drawing down some of my capital the trouble is I'm not sure when I'll die and of course the better handle I get on when it'll be, probably the less fun I can have with the capital. I started looking at scenarios to run down my capital by say 80, 85,90 but the exercise seemed pointless and I might fall off at 65 or make it to 100. So I thought about whether an annuity might be appropriate, the older one is the more income capital could be worth. I gave up on the idea of planning it at this time.

[newguy]

Just to be clear though - the post from boots earlier, talking about a potential 4% safe withdrawal rate to deliver required income (25 x required-cash) is a potential plan to draw income from a pile of £800K invested capital that is hoping to stay relatively steady whilst that 4% withdrawal rate funds your ongoing yearly expenses...

Which suggests that you'd be happy with at least some level of 'capital eating' to help reduce the otherwise-required £800K, which, with a fair wind, might otherwise leave a hefty lump of capital remaining when you eventually fall off your perch.

Those two situations seem to be at least partly contradictory at this stage, and if you really are happy to take out your last quid when the lights go out, then maintaining a capital-base of £800K throughout your whole retirement feels like an odd way to approach that plan, and that's before we then start to factor in any later additional income via a possible state pension etc...

I noticed that contradiction/misunderstanding too, I'm not too fussed about a legacy either. My plan doesn't rule out drawing down some of my capital the trouble is I'm not sure when I'll die and of course the better handle I get on when it'll be, probably the less fun I can have with the capital. I started looking at scenarios to run down my capital by say 80, 85,90 but the exercise seemed pointless and I might fall off at 65 or make it to 100. So I thought about whether an annuity might be appropriate, the older one is the more income capital could be worth. I gave up on the idea of planning it at this time.

Thanks Kempiejon and Itsallaguess

You are absolutely right I am not thinking this one through at all. I need to crunch the numbers.

So to make things a bit easier. Lets assume that inflation doesn't exist.

If my pot was only £500K at 85 years old I would only have £96K left.

Code: Select all

Age | Contributions | Spending    | Inv return | Investment gains | State Pension | Add / withdraw | Portfolio Value
 54 |               |             |            |                  |               |                |        £500,000
 55 |               | -£32,000.00 |      4.00% |       £20,000.00 |               |       -£12,000 |        £500,000
 56 |               | -£32,000.00 |      4.00% |       £20,000.00 |               |       -£12,000 |        £488,000
 57 |               | -£32,000.00 |      4.00% |       £19,520.00 |               |       -£12,480 |        £476,000
 58 |               | -£32,000.00 |      4.00% |       £19,040.00 |               |       -£12,960 |        £463,520
 59 |               | -£32,000.00 |      4.00% |       £18,540.80 |               |       -£13,459 |        £450,560
 60 |               | -£32,000.00 |      4.00% |       £18,022.40 |               |       -£13,978 |        £437,101
 61 |               | -£32,000.00 |      4.00% |       £17,484.03 |               |       -£14,516 |        £423,123
 62 |               | -£32,000.00 |      4.00% |       £16,924.93 |               |       -£15,075 |        £408,607
 63 |               | -£32,000.00 |      4.00% |       £16,344.29 |               |       -£15,656 |        £393,532
 64 |               | -£32,000.00 |      4.00% |       £15,741.29 |               |       -£16,259 |        £377,876
 65 |               | -£32,000.00 |      4.00% |       £15,115.06 |               |       -£16,885 |        £361,618
 66 |               | -£32,000.00 |      4.00% |       £14,464.71 |               |       -£17,535 |        £344,733
 67 |               | -£32,000.00 |      4.00% |       £13,789.31 |               |       -£18,211 |        £327,198
 68 |               | -£32,000.00 |      4.00% |       £13,087.90 |    £10,183.25 |        -£8,729 |        £308,987
 69 |               | -£32,000.00 |      4.00% |       £12,359.47 |    £10,183.25 |        -£9,457 |        £300,258
 70 |               | -£32,000.00 |      4.00% |       £12,010.32 |    £10,183.25 |        -£9,806 |        £290,801
 71 |               | -£32,000.00 |      4.00% |       £11,632.03 |    £10,183.25 |       -£10,185 |        £280,994
 72 |               | -£32,000.00 |      4.00% |       £11,239.77 |    £10,183.25 |       -£10,577 |        £270,810
 73 |               | -£32,000.00 |      4.00% |       £10,832.38 |    £10,183.25 |       -£10,984 |        £260,233
 74 |               | -£32,000.00 |      4.00% |       £10,409.30 |    £10,183.25 |       -£11,407 |        £249,248
 75 |               | -£32,000.00 |      4.00% |        £9,969.93 |    £10,183.25 |       -£11,847 |        £237,841
 76 |               | -£32,000.00 |      4.00% |        £9,513.63 |    £10,183.25 |       -£12,303 |        £225,994
 77 |               | -£32,000.00 |      4.00% |        £9,039.76 |    £10,183.25 |       -£12,777 |        £213,691
 78 |               | -£32,000.00 |      4.00% |        £8,547.63 |    £10,183.25 |       -£13,269 |        £200,914
 79 |               | -£32,000.00 |      4.00% |        £8,036.55 |    £10,183.25 |       -£13,780 |        £187,645
 80 |               | -£32,000.00 |      4.00% |        £7,505.79 |    £10,183.25 |       -£14,311 |        £173,864
 81 |               | -£32,000.00 |      4.00% |        £6,954.58 |    £10,183.25 |       -£14,862 |        £159,554
 82 |               | -£32,000.00 |      4.00% |        £6,382.14 |    £10,183.25 |       -£15,435 |        £144,691
 83 |               | -£32,000.00 |      4.00% |        £5,787.65 |    £10,183.25 |       -£16,029 |        £129,257
 84 |               | -£32,000.00 |      4.00% |        £5,170.27 |    £10,183.25 |       -£16,646 |        £113,228
 85 |               | -£32,000.00 |      4.00% |        £4,529.11 |    £10,183.25 |       -£17,288 |         £96,581
   


If we do what boots suggested, the 4% covers my expenses and I end up leaving the dog and cat place a nice tidy sum!

Code: Select all

Age | Contributions | Spending    | Inv return | Investment gains | State Pension | Add / withdraw | Portfolio Value
 54 |               |             |            |                  |               |                |        £800,000
 55 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 56 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 57 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 58 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 59 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 60 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 61 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 62 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 63 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 64 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 65 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 66 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 67 |               | -£32,000.00 |      4.00% |       £32,000.00 |               |             £0 |        £800,000
 68 |               | -£32,000.00 |      4.00% |       £32,000.00 |    £10,183.25 |        £10,183 |        £800,000
 69 |               | -£32,000.00 |      4.00% |       £32,000.00 |    £10,183.25 |        £10,183 |        £810,183
 70 |               | -£32,000.00 |      4.00% |       £32,407.33 |    £10,183.25 |        £10,591 |        £820,367
 71 |               | -£32,000.00 |      4.00% |       £32,814.66 |    £10,183.25 |        £10,998 |        £830,957
 72 |               | -£32,000.00 |      4.00% |       £33,238.28 |    £10,183.25 |        £11,422 |        £841,955
 73 |               | -£32,000.00 |      4.00% |       £33,678.20 |    £10,183.25 |        £11,861 |        £853,377
 74 |               | -£32,000.00 |      4.00% |       £34,135.06 |    £10,183.25 |        £12,318 |        £865,238
 75 |               | -£32,000.00 |      4.00% |       £34,609.52 |    £10,183.25 |        £12,793 |        £877,556
 76 |               | -£32,000.00 |      4.00% |       £35,102.25 |    £10,183.25 |        £13,286 |        £890,349
 77 |               | -£32,000.00 |      4.00% |       £35,613.96 |    £10,183.25 |        £13,797 |        £903,635
 78 |               | -£32,000.00 |      4.00% |       £36,145.38 |    £10,183.25 |        £14,329 |        £917,432
 79 |               | -£32,000.00 |      4.00% |       £36,697.27 |    £10,183.25 |        £14,881 |        £931,760
 80 |               | -£32,000.00 |      4.00% |       £37,270.42 |    £10,183.25 |        £15,454 |        £946,641
 81 |               | -£32,000.00 |      4.00% |       £37,865.64 |    £10,183.25 |        £16,049 |        £962,095
 82 |               | -£32,000.00 |      4.00% |       £38,483.78 |    £10,183.25 |        £16,667 |        £978,143
 83 |               | -£32,000.00 |      4.00% |       £39,125.74 |    £10,183.25 |        £17,309 |        £994,811
 84 |               | -£32,000.00 |      4.00% |       £39,792.42 |    £10,183.25 |        £17,976 |      £1,012,119
 85 |               | -£32,000.00 |      4.00% |       £40,484.78 |    £10,183.25 |        £18,668 |      £1,030,095
   


Obviously during potentially 30 years we will have high levels of inflation and my portfolio will fall in value etc.

[newguy]

So realistically £800K would be two high for me but £500K would almost certainly be two low.

There are something that this is not taking into account. As I get older I am likely to spend less money as I will probably chose to go on less holidays and might give up driving.

It doesn't take into account potential nursing home costs etc as well.

[Itsallaguess]

So realistically £800K would be two high for me but £500K would almost certainly be two low.

Now try running some numbers again for the £500K capital-spending scenario, but where you might maintain a number of years past 55 only working in a part-time capacity...

A potential scenario might be where you look to cut your working hours in half around that age (2.5 days instead of 5, perhaps..), but where you're still left with a monthly working wage that covers all running-expenses, even if there is little left after that for additional saving or investment, but where the key thing then would be to maintain your already accrued capital without having to draw anything down, and also allow it to continue growing by being fully invested as normal.

There an awful lot of middle ground in all of this, with plenty of potential scope for playing financial tunes with your cash and your human capital, and some hours spent scenario-planning with a spreadsheet can help to expose these types of possibilities.

Whilst a position of full retirement might well be a worthwhile goal, there might also be lots of personal and financial benefits to considering some years of part-time work before you might reach that point, as a potential trade off for you at some stage...

Cheers,

Itsallaguess

[newguy]

So realistically £800K would be two high for me but £500K would almost certainly be two low.

Now try running some numbers again for the £500K capital-spending scenario, but where you might maintain a number of years past 55 only working in a part-time capacity...

A potential scenario might be where you look to cut your working hours in half around that age (2.5 days instead of 5, perhaps..), but where you're still left with a monthly working wage that covers all running-expenses, even if there is little left after that for additional saving or investment, but where the key thing then would be to maintain your already accrued capital without having to draw anything down, and also allow it to continue growing by being fully invested as normal.

There an awful lot of middle ground in all of this, with plenty of potential scope for playing financial tunes with your cash and your human capital, and some hours spent scenario-planning with a spreadsheet can help to expose these types of possibilities.

Whilst a position of full retirement might well be a worthwhile goal, there might also be lots of personal and financial benefits to considering some years of part-time work before you might reach that point, as a potential trade off for you at some stage...

Cheers,

Itsallaguess

Thanks Itsallaguess you are absolutely right. I might well just chose to do a bit of part time work. Also over the course of the next 11 years anything could happen. I could be made redundant, we could have major inflation for a lot longer than expected, etc.

Realistically my goal should be to save as much as I can and hope for the best!

The big question I now need to consider is my growth over everything else really the best plan at the moment. I can't time the market and I am not Warren Buffett but as we have seen in the last year its not been that profitability for me. However, that's not to say that next year turns out very successfully.

Thanks to everybody for your comments its been very helpful indeed.

[nmdhqbc]

Just to be clear though - the post from boots earlier, talking about a potential 4% safe withdrawal rate to deliver required income (25 x required-cash) is a potential plan to draw income from a pile of £800K invested capital that is hoping to stay relatively steady whilst that 4% withdrawal rate funds your ongoing yearly expenses...

Which suggests that you'd be happy with at least some level of 'capital eating' to help reduce the otherwise-required £800K, which, with a fair wind, might otherwise leave a hefty lump of capital remaining when you eventually fall off your perch.

Those two situations seem to be at least partly contradictory at this stage, and if you really are happy to take out your last quid when the lights go out, then maintaining a capital-base of £800K throughout your whole retirement feels like an odd way to approach that plan, and that's before we then start to factor in any later additional income via a possible state pension etc...

I noticed that contradiction/misunderstanding too, I'm not too fussed about a legacy either. My plan doesn't rule out drawing down some of my capital the trouble is I'm not sure when I'll die and of course the better handle I get on when it'll be, probably the less fun I can have with the capital. I started looking at scenarios to run down my capital by say 80, 85,90 but the exercise seemed pointless and I might fall off at 65 or make it to 100. So I thought about whether an annuity might be appropriate, the older one is the more income capital could be worth. I gave up on the idea of planning it at this time.

It was my understanding that the "4% rule" was devised such that using historic US data (inflation and returns) and a certain portfolio allocation the worst case scenario would still work out ok over 30 years. that worst case scenario would have had lot of capital drawn down. so i'm not so sure there is a contradiction here. it's planning for the worst. you are happy to spend the capital down in the worst case scenario but in all likelihood you will not end up doing so. if you wanted the worst case scenario to be a certain level of value left over for descendants then the starting % withdrawal would need to be lower. but someone happy to spend down the capital 4% makes sense. Of course everything i say here assume you believe in the methodology and are happy to use US data when you don't live there. in reality even though i would be happy to spend all my capital i would for sure end up spending less when things seem to be going against me. even if i decided to not do that i know i would not be able to stop myself from cutting back.

[Itsallaguess]

Realistically my goal should be to save as much as I can and hope for the best!

I still think going beyond that, and doing some of the types of scenario-testing that you're doing, is also a very worthwhile process.

Even if you end up with just a couple of ball-park scenarios that can be updated over the years as things hopefully progress for you, I think having some level of long-term process-focus does tend to help on the motivational side of things, and where these types of plans tend to play out over the very long term, I definitely think we should look for all the personal motivation benefits that we can along the way, and it's certainly been the case for me that over a long working life with similar goals to you, it's worked wonders for me in terms of being able to stay the course, and especially during the inevitably difficult periods that tend to come along now and again...

One more thing I would add though, is just to urge some sense of caution on the 'save as much as you can' bit, because don't forget that saving everything for tomorrow only really works if we ever actually get there, so do force yourself to hedge your bets a little, and make sure that you enjoy some financial benefits during this stage of your life too...

Cheers,

Itsallaguess

[monabri]

Realistically my goal should be to save as much as I can and hope for the best!

One more thing I would add though, is just to urge some sense of caution on the 'save as much as you can' bit, because don't forget that saving everything for tomorrow only really works if we ever actually get there, so do force yourself to hedge your bets a little, and make sure that you enjoy some financial benefits during this stage of your life too...

Cheers,

Itsallaguess

44 to 55 goes pretty darn quick...anyone want to disagree?

[BullDog]

It looks pretty good to me. I think the 4% rule is pretty sound for a natural yield drawdown. I might look to see if there's any scope to increase contributions to take maximum advantage of the current 40% tax relief the OP appears to be getting on his salary.

One final thing, worth saying that yields in excess of 4% may not be a great idea for long term drawdown since capital erosion could become a problem.

[DrFfybes]

Now try running some numbers again for the £500K capital-spending scenario, but where you might maintain a number of years past 55 only working in a part-time capacity...

A potential scenario might be where you look to cut your working hours in half around that age (2.5 days instead of 5, perhaps..), but where you're still left with a monthly working wage that covers all running-expenses, even if there is little left after that for additional saving or investment, but where the key thing then would be to maintain your already accrued capital without having to draw anything down, and also allow it to continue growing by being fully invested as normal.

Itsallaguess

MrsF aimed to go at 55 (5 years early) which became 12 years early, and in the end 'retired' at 59 on a reduced DB pension. I went from Part Time to No time about the same time.

MrsF then went back 2 days as agreed before she left. The 2 days became 3 as Covid put extra demands, and her salary pretty much covers our needs. The 2 people brought in to replace her next month are both pregnant, so she'll be back 2 days until the end of Summer, by when she'll probably want to keep working to fill the winter days. I have a 'drawdown' system set up with unsheltered assets, which combined with MrsF's DB Pension more than covers our needs, which has meant the new windows, sheds, vehicles, and small building works we'd half planned on but thought would come out of capital have been covered from her salary, and so our portfolio is untouched.

Once the OP clears the mortgage, ignoring inflation they are living on circa £1200/month, so about £20k pre-tax. That's the equivalent of working 2 days at their current salary.

Same standard of living, 2.5 times as much free time, no concern about asset drawdown.

Paul

[ursaminortaur]

Realistically my goal should be to save as much as I can and hope for the best!

One more thing I would add though, is just to urge some sense of caution on the 'save as much as you can' bit, because don't forget that saving everything for tomorrow only really works if we ever actually get there, so do force yourself to hedge your bets a little, and make sure that you enjoy some financial benefits during this stage of your life too...

Cheers,

Itsallaguess

44 to 55 goes pretty darn quick...anyone want to disagree?

Not I'd suggest if you are stuck in a job you detest with a boss you hate just counting the days until you are in a position to retire early.

[Itsallaguess]

Once the OP clears the mortgage, ignoring inflation they are living on circa £1200/month, so about £20k pre-tax. That's the equivalent of working 2 days at their current salary.

Same standard of living, 2.5 times as much free time, no concern about asset drawdown.

Yes, and it's those types of very worthwhile calculations around human capital that should be considered alongside these types of financial scenario-planning sessions, and which can often offer up some great 'middle ground options' when more ideal 'pure-finance' scenarios might not quite get people over the line, and for those of us who have only ever really known 5-day working weeks, then any regular reduction in that working drum-beat can often feel like a welcome level of semi-retirement in itself...

Cheers,

Itsallaguess

[thebarns]

I live in Scotland as well…..and it is generating some most unusual publicity worldwide just now for things I’d better not get into….

But yes, higher rate tax is 41%, increasing to 42% from April.

A sweeping generalisation I know but for anyone wishing to retire early, in mid to late fifties, unable to access state pension till 67/68, but still able to access a private pension at 55/57, then a pension will smash an ISA.

You make an instant 72.4% - it will cost a net £58 for a £100 uplift in pension - uplift the minute you make the pension contribution.

At age 55 or 57, assuming you have no other taxable income, then you can use your personal allowance to take out say 4% a tax free.

Let’s be modest and say personal allowance is only £14,000 in 11 or 13 years time.

So you have a pension pot of £350,00 that can be drawn down income tax free. Let’s assume you have withdrawn the 25% lump sum, also tax free. So you can build a pension pot of around £466k and withdraw 25% in a lump sum tax free and withdraw a further tax free income of £14,000 a year, using your personal allowance.

So virtually everyone in normal modest higher rate circumstances, the pension route is better than the Isa route.

In your circumstances I’d also consider a modest drawdown on the capital within the pension as you do not intend to leave it to anyone and again a modest equity release scheme may be appropriate for your final property.

I wouldn’t bother worrying about nursing fees when calculating what you need - you’ll never make a comfortable sum and it is more than likely you will not make it to a nursing home.

Fees in the main city in Scotland are running at £1,500 to £2,000 per week for nursing home fees now so utterly pointless attempting to save for this - your property and pension at the time would get you into a decent one at the beginning and then it is down to luck as to what happens re longevity.

[Adamski]

@thebarns, off topic but to correct your post. The higher rate tax relief relief on a DC scheme is automatic if a net pay scheme. If relief at source, more common, then the uplift by the pension provider is x5/4 (20% tax), and you claim the higher rate tax relief via your tax return.

[Adamski]

@newguy, let us know how you get on, you might want to post your portfolio changes on portfolio management thread.

[Snakey]

Remaining in work (whether part-time or by taking an unrelated minimum wage job) to pay the bills and keep you occupied is a real Marmite suggestion. It all depends on what your motivations are for wanting to leave in the first place. To my mind it seems like the worst of both worlds - you're still not free, and now you get less money. But if your gut reaction is the opposite, it might be the perfect solution. Once the mortgage is paid off you don't need that much to keep things ticking over.

44 to 55 goes pretty darn quick...anyone want to disagree?

I'm coming up to 51 and I don't think the last nearly-seven years have gone quickly at all (imagine - we hadn't even had the Brexit vote)! Certainly a lot's been packed into that time, one way or another. I suspect it's a misconception one develops as the years in question recede into the mists. When you still have to live each and every day of it in real time, it's a long way (four and a bit years before I can get my hands on my pension money...). If I were to jump into my time machine to January 1984 and tell Young Snakey not to worry about failing to thrive (shall we say) at secondary school because it'll be July 1988 before you know it, I'd get told where to go using the finest insults then available before being ignored in favour of Manic Miner. I doubt I'd even get the chance to deliver the follow-on lecture about the importance of exams in not restricting one's future options (although in fact all my GCSEs ever did for me was to get me on to my A Level course - and 4 C's were enough for that, in those days. I don't think anybody since then has even asked about them).

(Edited because I can't count/read.)