Retirement Advice

[Sideous]

Looking for some independent advice from others as to my portfolio and my plans to retire soon. I have various models in spreadsheet, online tools such as GUIIDE.

Is it possible? Am I being overly ambitious? Am I being too cautious?

Looking for advice from the community. Financial planners say I can retire at 56. But can I? All advice welcome. Details below

Age 55, 56 in July
Looking to retire at 56
Expense plan below per annum. All net of tax
£75K 56 - 57
£65K 58 - 60
£55K 61 - 69
£50K 70 - 75
£40K 76 - 80
£32K 81 - 100

Income per annum. DB and State Pensions haven't been increased for 2024/25 to take into consideration of inflationary increases of 6.7%
DC Pension - £520K Actively managed portfolio 90% diverse global equities 10% mixed, high yield, global Bonds
DB Pension - £16,756 From 60, inflation linked
DB Pension - £3,341 From 60, inflation linked
DB Pension - £3,415 From 63, inflation linked (to maximum 5%)
DB Pension - £5,414 from 56, inflation linked
State Pension - £10,600 from 67, full state pension. Me
State Pension - £6,609 from 67. Spouse
Rental Income - £9,024 after tax from now until 58 if sell rental property below for income)
Rental Property Sale - 101,604 at 59 after capital gains tax (If stop rental income at 58 above)
DB Pension Lump Sum - £10,245 at 63

All advice / thoughts appreciated.

[xxd09]

A good guide is that a £100000 portfolio of 60/40 -equities and bonds produces a “safe” £3000+ pa income without reducing capital and before tax
Hopefully will be more income if stockmarket performs well-have you saved enough?
Have 2+ years living expenses in cash so as to avoid that nightmare of retirees-a 50% drop in equities at retirement -gives you a breathing space!
Hope this is some practical help
xxd09

[DrFfybes]

Hi,

welcome to TLF. Any 'advice' you get on here should be taken as a suggestion or information for further research, generally based on personal experience.

My first thought is to look at the DB schemes and see if you can take them early and at what reduction. Generally payback/breakeven for the reduction is circa age 84. If you can, then you have a good baseline which leaves more flexibility for your other assets. From age 60 they'll cover almost half your expenditure (especially if you keep the rental) but otherwise you'll be making a circa £250k dent in your DC scheme or other assets in the next 5 years, which is half the pot. Fine if that is your plan.

The next observation is your projected income requirements decline rapidly - is there a specific reason for that? From age 80 they won't even pay care fees should it be needed.

You Spouse's SP is very much reduced - can you buy extra years to fill gaps?

Do you have ISAs or unsheltered assets?

That 9% return after tax on the rental property seems pretty good, it might be worth hanging on to it long term.

Paul

Edit to add - from age 81 your DB schemes and SP will exceed your projected requirements.

[tjh290633]

I'm not sure on what basis your expense plan is calculated. The gradual decrease looks unrealistic to me. The increase at the end presumably is down to possible care costs.

I found that my income was subject to lower deductions, because of no more pension or NIC deductions, and my mortgage has been paid off just before. No longer having a company car did not make any difference as I had my own car already. Mileage drastically reduced, from 30k to about 6k, of course.

What did increase was the amount spent on holidays and eating out. I became a volunteer driver for our community bus, and got a little extra income from driving private hires. Driving on service was the voluntary part.

You may have worked it out on a different basis, but I would expect to see a sharp fall in expenditure on retirement, followed by a gradual rise,, and a possible big rise in later life. That latter is likely to be offset by sale of the residence if the surviving partner goes into care.

TJH

[Sideous]

A good guide is that a £100000 portfolio of 60/40 -equities and bonds produces a “safe” £3000+ pa income without reducing capital and before tax
Hopefully will be more income if stockmarket performs well-have you saved enough?
Have 2+ years living expenses in cash so as to avoid that nightmare of retirees-a 50% drop in equities at retirement -gives you a breathing space!
Hope this is some practical help
xxd09

Thanks for the advice. Thinking of taking some of the DC pension and converting to cash for the buffer. I have no problem with reducing capital as don't want to be the richest person in the graveyard. Want spouse and I to enjoy life whilst we are young. Our house can be inheritance.

A bad sequence of returns is the worst nightmare, but someone once told me no decision is the worst decision so have to retire sometime.

[Sideous]

Hi,

welcome to TLF. Any 'advice' you get on here should be taken as a suggestion or information for further research, generally based on personal experience.

My first thought is to look at the DB schemes and see if you can take them early and at what reduction. Generally payback/breakeven for the reduction is circa age 84. If you can, then you have a good baseline which leaves more flexibility for your other assets. From age 60 they'll cover almost half your expenditure (especially if you keep the rental) but otherwise you'll be making a circa £250k dent in your DC scheme or other assets in the next 5 years, which is half the pot. Fine if that is your plan.

The next observation is your projected income requirements decline rapidly - is there a specific reason for that? From age 80 they won't even pay care fees should it be needed.

You Spouse's SP is very much reduced - can you buy extra years to fill gaps?

Do you have ISAs or unsheltered assets?

That 9% return after tax on the rental property seems pretty good, it might be worth hanging on to it long term.

Paul

Edit to add - from age 81 your DB schemes and SP will exceed your projected requirements.

Thanks Paul for the feedback. Really appreciated.
- Will look at the DB schemes to take them earlier and what the reduction is. Good idea as you have noticed from 81 DB Schemes and SP will exceed my projected requirements. So if can take DB earlier and and that + SP is around my projected requirements from 81 earlier it could reduce the pull on the DC scheme

- Projected income requirements decline rapidly as mortgage is paid off at 59 (only got £38K left on mortgage) and to cover University rent for daughters until 60. After that £55K after tax I have estimated will be adequate (I am a bit of a data geek and have our monthly expenses broken down across 30 categories since 2015)

- For care home fees I have our property. My mother has severe dementia and is a nursing home. Had to sell her house to cover it.

- Will look to buy some extra years to fill some gaps

- Got some unsheltered assets offshore around £90K

- I have no issues making a dent into the DC scheme as don't want to be the richest people in the graveyard. We want to enjoy life whilst we can and are healthy. Hence looking at retiring at 56 whilst we are both healthy & to get off the corporate treadmill

[Sideous]

I'm not sure on what basis your expense plan is calculated. The gradual decrease looks unrealistic to me. The increase at the end presumably is down to possible care costs.

I found that my income was subject to lower deductions, because of no more pension or NIC deductions, and my mortgage has been paid off just before. No longer having a company car did not make any difference as I had my own car already. Mileage drastically reduced, from 30k to about 6k, of course.

What did increase was the amount spent on holidays and eating out. I became a volunteer driver for our community bus, and got a little extra income from driving private hires. Driving on service was the voluntary part.

You may have worked it out on a different basis, but I would expect to see a sharp fall in expenditure on retirement, followed by a gradual rise,, and a possible big rise in later life. That latter is likely to be offset by sale of the residence if the surviving partner goes into care.

TJH

TJH thanks for the feedback
- I have our expenses categorised over 30 categories each month since 2015. Using this to try and estimate expenses when retired. Until 60 still got to pay off mortgage (only £38K left) and to cover rent for daughters at University. Trying to workout what expenses will be when retired and over the next 30 years seems like an art rather than a science. I don't know what I am doing next month never mind in 30 years Any help appreciated. Once mortgage has gone and kids left University estimate £55K (net) per annum is what is needed. Hence why seeing a gradual decrease rather than a sudden one.

- I am considering some part-time work that is less stressful than the corporate treadmill I am on at the moment. To keep me busy

[DrFfybes]

- Projected income requirements decline rapidly as mortgage is paid off at 59 (only got £38K left on mortgage) and to cover University rent for daughters until 60.
[...]
- Got some unsheltered assets offshore around £90K

Generally it is best to spend unsheltered assets first, mainly for reducing tax on the income they generate. However with the slashing of CGT allowances then this might need to be spun out.

So it might be better to use some unsheltered assets to clear the mortgage/pay uni costs, although you might perfer to ISA them instead.

Paul

[International]

Like others I was worried about the declining income at time goes on. I know you are using a tool, so is it baking in the effects of inflation? For my own modelling I have taken the PLSA recommendations (https://www.retirementlivingstandards.org.uk/) as a framework. The £59000 they recommend for a comfortable couple would need to be ~£149000 for same purchasing power after 36 years have elapsed.

Also, re not being the richest people in the graveyard, how can you predict that at this range? Over a 20 to 30 year retirement the range of outcomes from one's investment vary wildly based on market conditions and sequence, from going broke to growing millions, at least in the tool I am using. For me it feels like one needs to be closer to the end to predict the ability to not leave money behind/not go broke.

Disclaimer: I am not retired so this is theory for me at this stage. The posters who are retired have the real experience.

[tjh290633]

Like others I was worried about the declining income at time goes on. I know you are using a tool, so is it baking in the effects of inflation? For my own modelling I have taken the PLSA recommendations (https://www.retirementlivingstandards.org.uk/) as a framework. The £59000 they recommend for a comfortable couple would need to be ~£149000 for same purchasing power after 36 years have elapsed.

Also, re not being the richest people in the graveyard, how can you predict that at this range? Over a 20 to 30 year retirement the range of outcomes from one's investment vary wildly based on market conditions and sequence, from going broke to growing millions, at least in the tool I am using. For me it feels like one needs to be closer to the end to predict the ability to not leave money behind/not go broke.

Disclaimer: I am not retired so this is theory for me at this stage. The posters who are retired have the real experience.

Which is a very good argument for investing in shares, the dividends from which at least keep pace with inflation. Ideally they beat inflation. It can be done, although there may be periods when they lag inflation for a while. Have a look at the HYP-Practical forum for some ideas.

TJH