Bridging the gap between retirement and pension
Discussion
OK - so I'm trying to model the best case scenario, which is I retire in about 10 years - this would be at 50.
The obvious issue is that pensions are not accessible until 55 and more than that, by retiring at 50, I stop paying in and simply rely on fund growth which will be extremely conservative at that point, having set 55 at the target to access the pension.
So, two issues to balance - creating a fund on which I can draw between 50 and 55 while still maximising the overall pension pot.
Currently the plan is thus:
Continue to pay heavily into my pension (currently 22%+employer at 6%)
Remortage later this year for 12 years, which will see our mortgage payment reduce, lock us in to a low cost deal for the remaining life of the mortgage and free up some cash.
Invest said cash monthly, plus a lump sum of £30k into an S&S ISA (Vanguard, so low % fees).
Sweep my current account monthly down to a set minimum and funnel that ad-hoc amount into the ISA too. We're not talking megabucks here, so I'm not going to be approaching my ISA limits each year.
Have I missed any obvious steps? All opinions gratefully received. Cheers.
The obvious issue is that pensions are not accessible until 55 and more than that, by retiring at 50, I stop paying in and simply rely on fund growth which will be extremely conservative at that point, having set 55 at the target to access the pension.
So, two issues to balance - creating a fund on which I can draw between 50 and 55 while still maximising the overall pension pot.
Currently the plan is thus:
Continue to pay heavily into my pension (currently 22%+employer at 6%)
Remortage later this year for 12 years, which will see our mortgage payment reduce, lock us in to a low cost deal for the remaining life of the mortgage and free up some cash.
Invest said cash monthly, plus a lump sum of £30k into an S&S ISA (Vanguard, so low % fees).
Sweep my current account monthly down to a set minimum and funnel that ad-hoc amount into the ISA too. We're not talking megabucks here, so I'm not going to be approaching my ISA limits each year.
Have I missed any obvious steps? All opinions gratefully received. Cheers.
If 40 this year you’ve got life time isa (4K pa), + isa allowance (remaining16k), perhaps 2x if your coupled.
You’ve got to look at that 22% + 6% (in real cash terms), to make that work from 50 to draw down (55/57+), lifetime isa (4k + 25% bonus) should be the route here.
You’ve got to look at that 22% + 6% (in real cash terms), to make that work from 50 to draw down (55/57+), lifetime isa (4k + 25% bonus) should be the route here.
- get some advise*
Smitters said:
Remortage later this year for 12 years, which will see our mortgage payment reduce, lock us in to a low cost deal for the remaining life of the mortgage and free up some cash.
Invest said cash monthly
Isn't this essentially gambling on your ISA return exceeding your mortgage interest rate? Not sure myself I would be extending my mortgage as one of the first steps in planning an early retirement but perhaps I am just risk averse.Invest said cash monthly
xeny said:
Smitters said:
xeny said:
If you're 40 now, isn't minimum pension age going to be 57?
Probably, so a couple more years to account for, though the main premise of bridging the gap still stands.Shnozz said:
Isn't this essentially gambling on your ISA return exceeding your mortgage interest rate? Not sure myself I would be extending my mortgage as one of the first steps in planning an early retirement but perhaps I am just risk averse.
Over 12 years the odds are pretty good, but I'd agree it isn't a decision if you dislike risk.xeny said:
Shnozz said:
Isn't this essentially gambling on your ISA return exceeding your mortgage interest rate? Not sure myself I would be extending my mortgage as one of the first steps in planning an early retirement but perhaps I am just risk averse.
Over 12 years the odds are pretty good, but I'd agree it isn't a decision if you dislike risk.Cheers for the views so far. Sounds like I haven't missed anything wildly obvious.
Smitters said:
Henners said:
General election or two over that timespan.
Marginal chance of McDonnell getting into No11, might be worth putting into the ‘cons’ column and considering.
Sorry for being dim. Cons for which part of the plan?Marginal chance of McDonnell getting into No11, might be worth putting into the ‘cons’ column and considering.
I would expect certain things to change / be less generous in the event he got his hands on the kitty.
The chance is low, but to be considered.
Mezger_lover said:
An easy mistake to make! Life expectancy continues to improve, the rate of improvement is expected to reduce!
https://www.theguardian.com/society/2019/mar/07/li...Henners said:
As you’re not living in a bin you’re part of the evil rich remember. The target of a certain McDonnell.
I would expect certain things to change / be less generous in the event he got his hands on the kitty.
The chance is low, but to be considered.
Cheers. I think the greatest risk to the plan is I lose my job, but I can only plan for and control so much. The Gov't could kick the pension access age to 67 in line with State Pension and I'd be forced to work 10 more years. Can't control it, so hope for the best, plan for the realistic worst.I would expect certain things to change / be less generous in the event he got his hands on the kitty.
The chance is low, but to be considered.
Anyone have any suggestions for additional options or alternatives?
AllyM said:
Mezger_lover said:
An easy mistake to make! Life expectancy continues to improve, the rate of improvement is expected to reduce!
https://www.theguardian.com/society/2019/mar/07/li...Do you dislike your job that much?
Why not find something you do enjoy, then work fewer days a week.
Being retired means much more spending time each week. You will probably find yourself having to economise.
Retiring at 50 could see you living off your pension for 40 years. There is no guarantee that the government will be paying a state pension in 50 years time. It has only been doing so for the last 95 years and it is becoming increasingly unaffordable. We have had a growing population (almost doubled in the 95 years) but that can’t continue, so tax take will not continue to grow to offset current and expected increase in average life length.
You are also assuming the private pension company will be able to continue paying out at the rate you are expecting. It may not be so for the reasons I have given above. During that 50 years we will probably have at least 2 major world recessions.
What I am trying to get across is that it is better to work for longer, but a reduced number of days a week, to ensure a reasonable standard of living over the 40 years of semi retirement/ retirement. The last thing you want to do is HAVE to go to work again at 70+.
Why not find something you do enjoy, then work fewer days a week.
Being retired means much more spending time each week. You will probably find yourself having to economise.
Retiring at 50 could see you living off your pension for 40 years. There is no guarantee that the government will be paying a state pension in 50 years time. It has only been doing so for the last 95 years and it is becoming increasingly unaffordable. We have had a growing population (almost doubled in the 95 years) but that can’t continue, so tax take will not continue to grow to offset current and expected increase in average life length.
You are also assuming the private pension company will be able to continue paying out at the rate you are expecting. It may not be so for the reasons I have given above. During that 50 years we will probably have at least 2 major world recessions.
What I am trying to get across is that it is better to work for longer, but a reduced number of days a week, to ensure a reasonable standard of living over the 40 years of semi retirement/ retirement. The last thing you want to do is HAVE to go to work again at 70+.
Storer said:
Do you dislike your job that much?
Why not find something you do enjoy, then work fewer days a week.
I completely agree. I've actually been terming it a soft retirement. Step off the corporate merrigoround and into something more gently paced. I didn't say it to avoid muddying the water.Why not find something you do enjoy, then work fewer days a week.
Essentially the viable income streams I see pre pension are work, isa investment returns and x, x being the thing I've missed and hoped could be pointed out. Maximising isa returns and x generates great freedom in my pick of jobs and hours. In turn, it'll give me more family time.
You make good points on timeframes. I'll ponder on that
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