Wanting to go part time next year - does this pass the “sanity test”?

[Greylocks]

Good evening,

I’m looking at pointers and input from colleagues and to determine if it passes the “sanity test”.
I wish to go part-time next for next Spring/Summer.

Age 60
In receipt of an 1995 NHS pension of £16448 pa gross - CPI linked.
Full state pension payable at 67.
Single, no dependents.
Current salary £65k
Current spending about £35k pa
Projected part time salary from next May £20k pa
No outstanding debts or mortgages.

Assets:

Hargreaves Lansdown ISAs
3IN £53k
JGGI £76k
Law Debenture £40k
SAIN £77k
VanEck Morningstar ETF TDGB 23k

Hargreaves Lansdown SIPP
ATST £15k
JGGI £5k
PNL £70k
SAIN 9k

Hargreaves Lansdown Fund and Share Account
ATST £54k
JGGI £5k
Law Debenture £10k

Interactive Investor ISAs
JGGI £31k
Law Debenture £32k

Interactive Investor Trading Account
SAIN £5k

Fidelity ISAs
L&G Global 100 OEIC 60k
VanEck Morningstar ETF TDGB £18k
Fidelity Global Quality Dividends ETF £22k

Fidelity General Investment Account
Fidelity Global Quality Dividends ETF FGQD £56k

Standard Life Pension
SL BNY Mellon Multi-Asset Growth £30k

Savings and cash:
Halifax savings account £12k
Shawbrook savings account £28k
Premium bonds £47k


As most will see I have aimed to invest in mostly large global investments with a nod to income. I don’t think there is anything too risky apart from possibly L&G Global 100. The £87k in cash or cash equivalents when combined with the NHS pension should give me 4 years of spending (£35k per annum) should Armageddon hit the markets. Then there is £70k in Personal Assets Trust to fall back on.

Long term I would like £40k net of tax to fully retire. I suspect I can already achieve this and can retire right now. But going part-time achieves some income and also maintains a purpose and structure in life. The big issue is voluntarily giving up a decent(ish) salary after a lifetime of earning and working 50 hours a week.

Many thanks in advance for any input or thoughts.

G.

[TUK020]

Going to part time makes a lot of sense, particularly as a transitional strategy.

Earning enough to not draw on your savings/investments allows them to keep compounding.
The tax system works in your favour - your take home drops by a lot less that your pretax earnings.
Staying working at a certain level keeps your employability up if you decide for whatever reason to change course.
Going part time also helps you find other stuff to do to keep yourself busy, without going cold turkey.

At 59 I moved down to 4 days a week and then retired at 61 (It would have made financial sense for me to work at 2 days a week, but this was incompatible with the role).
I dabbled in a couple of different things (lecturing at local tech college, etc) and then have taken a completely unpredicted change of course (now in local politics) and having fun

[88V8]

I wish to go part-time next for next Spring/Summer.

Age 60
In receipt of an 1995 NHS pension of £16448 pa gross - CPI linked.
Full state pension payable at 67.
Projected part time salary from next May £20k pa
No outstanding debts or mortgages.

Assets:
....
Long term I would like £40k net of tax to fully retire. I suspect I can already achieve this and can retire right now. But going part-time achieves some income and also maintains a purpose and structure in life. The big issue is voluntarily giving up a decent(ish) salary after a lifetime of earning and working 50 hours a week.

On a quick eyeball you have about £750k, of which £500k is sheltered. That could be invested to make an easy 5%, or if you went for Preference Shares for instance or ITs such as NCYF or SMIF, more than 7% is currently on offer.
So add in your pension which I take it is already in payment, and with your state pension you should be comfortably on target.

That assumes the next govt will not stage a tax raid on sheltered accounts. I do however expect that dividend tax will be raised to the same level as income tax or perhaps even higher given that Labour used to regard investment income as 'unearned'.

How your spending will go... some say one spends more in retirement, some say less.

But overall I would say that you will be OK. I retired at 57 and never missed work one jot.

V8

[xxd09]

£100000 of investments in a 60/40 portfolio give you a safe £3000 pa of income without reducing capital -hopefully more
£750000 should give you a safe £22500 pa
You know your expenses figure so you can workout if your retirement plan is feasible
You need 2-3 years of your yearly expenses in cash or equivalents as you retire-a stockmarket drop at this time is always possible and you must have assets in place to ride it out
It all looks possible
xxd09

[thebarns]

Greylocks,

Does your post pass the “Sanity Test” ?

Absolutely, go for it.

[DrFfybes]

Can you do it - "yes".

How should you do it, slightly different question

First thing I'd do is shuffle your assets around a bit to see if you can reduce costs - you have 4 Platforms and really only need 2. Personally I put my SIPP with one (HL) and ISA and GIA with another (ii). Saves a bit of fees, but also makes things simpler. Wait until they have a "Transfer to us and get £xxx" offer.

I try to avoid holding the same stock with different brokers as well, erm, except I don't quite do that as I've moved a lot of our stuff to Vanguard trackers so they exist in SIPP, ISA, and unsheltered, but that is down to contribution limits as I can't shelter everything.

Second obvious point, spend your unsheltered assets first. No point taking 3%/£12k a year out of an ISA as dividends when your unsheltered £130k will take 7 years to put back in. So move your unsheltered assets into one platform and either sell a fixed value each month (ii have a free trade each month which covers costs) or sell down the dividend income from the ISAs and reinvest the ISA divis.

Also you might want to think about Salary Sacrifice or putting more into a SIPP and spend your unsheltered assets instead of your part time salary - depends on how much you want to put into a SIPP.

And enjoy the free time.

Paul

[Gilgongo]

So move your unsheltered assets into one platform and either sell a fixed value each month (ii have a free trade each month which covers costs) or sell down the dividend income from the ISAs and reinvest the ISA divis.

Not sure I follow - can you explain that a bit more? And what do you mean by "sell down the dividend income from the ISAs and reinvest the ISA divis"?

[DrFfybes]

So move your unsheltered assets into one platform and either sell a fixed value each month (ii have a free trade each month which covers costs) or sell down the dividend income from the ISAs and reinvest the ISA divis.

Not sure I follow - can you explain that a bit more? And what do you mean by "sell down the dividend income from the ISAs and reinvest the ISA divis"?

I didn't phrase it very clearly. Instead of taking divis from stocks held in an ISA, sell an equivalent cash amount of an unsheltered holding and use the ISA divdends to repurchase the holding you just sold within the ISA.

Paul

[SoBo65]

I went from full time to three days a week in May this year and have absolutely no regrets. Occasionally I get concerned that I am no longer accumulating, but that passes quickly. Main thing is that your intended lifestyle/spending is sustainable over the long term.

[Gilgongo]

sell an equivalent cash amount of an unsheltered holding and use the ISA divdends to repurchase the holding you just sold within the ISA.l

I see. So that way you end up with zero unsheltered and can then take it all from the (larger) ISA after that? Presumably the "equivalent dividends" you sell in your unsheltered need to be mindful of the CGT allowance though.

I ask because I was planning to take income from both an ISA and a SIPP. But was wondering about the tax implications of the SIPP income, which would take me into a tax bracket once the state pension comes in. But if I can sell down the SIPP sufficiently by then it might not matter.

[DrFfybes]

sell an equivalent cash amount of an unsheltered holding and use the ISA divdends to repurchase the holding you just sold within the ISA.l

I see. So that way you end up with zero unsheltered and can then take it all from the (larger) ISA after that? Presumably the "equivalent dividends" you sell in your unsheltered need to be mindful of the CGT allowance though.

I ask because I was planning to take income from both an ISA and a SIPP. But was wondering about the tax implications of the SIPP income, which would take me into a tax bracket once the state pension comes in. But if I can sell down the SIPP sufficiently by then it might not matter.

Certainly need to be mindful of CGT going forwards, something that hasn't been an issue with this approach previously. Depends on the size of your ISA dividends I don't know how well it would work with selling SIPP holdings though - not something I've given any thought to as with our SIPPs we will take the 25% tax free at some point but probably leave the rest in the hope they remain an IHT loophole.

I went from full time to three days a week in May this year and have absolutely no regrets. Occasionally I get concerned that I am no longer accumulating, but that passes quickly

This was exactly our hardest part. Changing the mindset from "saving" to "spending" or "neutral" with part time work. We took DB pensions early which cover our essentials (bills, food, etc) and as MrsF went back part time until she finally retires (for the third time) next Spring we are still accumulating, although that will change next week when the builder arrives. Strange how it now takes 4 days to do what you used to manage in a weekend though

[Itsallaguess]

Current spending about £35k pa

....

The £87k in cash or cash equivalents when combined with the NHS pension should give me 4 years of spending (£35k per annum) should Armageddon hit the markets.

Then there is £70k in Personal Assets Trust to fall back on.

Armageddon-planning is an important part of this, but if your 'fair-weather spending expectation' is around the £35k per year mark, then I'd perhaps have another think about what you *really* think your spending-behaviour is likely to be if economic conditions ever force you to blow the dust off those plans...

I've given this some thought regarding my own post-work plans, and I've come to the very firm conclusion that I would really struggle to justify maintaining 'fair-weather spending' under any conditions where I'm forced to dip into any emergency funds, and as such, I've concluded that I can incorporate a lower per-year funding level for such an occasion.

I mention this because such an approach provides two potential benefits - either the same level of funding is then likely to last longer than originally planned for, or a lower-level of initial capital might be sectioned off into the 'Armageddon fund' to provide the same length of support, but at a slightly lower spending level, but importantly, the potential paring back of those Armageddon-funding plans might well then provide a useful capital margin that's perhaps able to be incorporated into other areas of any potential part-time or post-work plans, which might provide some additional confidence for them...

Cheers,

Itsallaguess

[kempiejon]

I’m looking at pointers and input from colleagues and to determine if it passes the “sanity test”.
I wish to go part-time next for next Spring/Summer.

Long term I would like £40k net of tax to fully retire. I suspect I can already achieve this and can retire right now. But going part-time achieves some income and also maintains a purpose and structure in life. The big issue is voluntarily giving up a decent(ish) salary after a lifetime of earning and working 50 hours a week.

Your finances look fine, part-time as other have said is a way to phase out the employment. Is it with the current employer and is it something you're confident they will go for? How long were you thinking about staying at the reduced level.
Having previously dismissed part time as a way into retirement I began to think along similar lines at the beginning of this year. I was hoping to drop down to initially 3 days and potentially 2 days before jacking it in, I had begun to work out a 2 year exit plan. I agreed it with my line manager but he had to refer it upwards. Unfortunately it was not to be. Statutorily they have to have the chat but they do not have to agree to the request.

If you think you need part time work to maintain a structure and purpose and you've been working 50 hour weeks you need to check your work life balance. So yeah part time does sound a very good idea, fill the other 30 hours with hobbies, family, friends, extra curricular. I have woodworking and instrument practice, 2 shelves of books bought but not read and I want to spend more time enjoying cooking rather than delivering meals. I had a period without full time employment 10 years ago I filled my time with volunteering, gardening, meat curing, I canoed as a kid so took that up paddling on the local canal. Never had a problem filling my time outside of employment only you know how you'll survive without the time habit that work becomes. Think about what you're going to do not just what you're not going to do.

[Greylocks]

Thank you everyone who has replied - I very much appreciate the time and thought it has taken to do so.

Very interesting from Itsallaguess - desirable target vs minimum budget. I guess if Armageddon hits the markets for 3-4 years then the target would go down to £30k net per annum as I can’t see anyone continue spending in the face of adversity, and £30k annual spending is still not bad. I was also looking at employing a guardrail type of rule such as Vanguard’s offering which will help the budgeting.
If my target went down to £30k spending per annum then I already have 6 years in cash or cash equivalents and then largely be rescued by a full state pension at 67.

Many thanks,
G

[Blagdon]

Another way of looking at it is which would you prefer...
1. Say 3 years full-time then retire completely
2. Say 7 years part-time then retire completely

Based on personal experience I would say option 2. part-time. I stopped full-time work at 52 and have been doing 3 days/week for the last 8 years. No regrets - I would never want to go back to full-time.