Hoping someone can check my figures (retire at 50)
Discussion
Im currently 40 years old and im over in Australia working, been over since January 2024 with wife/kids.
Due to the crazy house pricing we chatted and it looks like we realistically missed the boat on buying here(mortgage rates are massive and I would be a wage slave until 60 to get it paid off) so its likely we wont stay forever, the thought was stay 5 years, get citizenship as its something the kids might want to use when they get older if they fancy coming back on their own or with future children.
I sat and crunched the numbers on us staying 10years until im 50 and potentially retiring back in the UK, which would be a crazy thing as before this move my thought would be 60 for retirement age.
So for the 10years here I could save £350,000 due to the wages being massively better. I only have about £11,000 in a UK pension so ive discounted that currently from the equation.
At 50 I will own my UK home outright, before I left the UK my gross salary was £35,000 and I paid £9200 per annum mortgage and we lived a reasonable life, I was able to save, work on my racecar etc....being from the midlands helps!
Assuming only a 5% return on £350,000 stocks and shares it looks like I could take £40,000 from it every year until i turn 60years old
At 60years old I can take all my Australian pension out as a lump sum which combined with the money i will have left from savings would be £420,000, which again i would leave in stocks and shares and assume a 5% return
Continue to take the £40,000 per year, reduce that to £31000 at 68 when state pension kicks in and I would have enough to make it to 77years old before running out, ideally I will die in my sleep at that point as ive had a hard paper round work wise, I was hoping to make it to 75, anything after is a pure bonus so I cant imagine I will be jet setting around the world or climbing mountains.
This is making alot of assumptions of course, big one being s&s gives 5% every year, but since the average looks to be 10% long term, halving that figure I thought was fair.
I know inflation will require a larger number in the initial years I would be straight away £9000 a year better off from no mortgage and will be drip feeding £40,000 per year from the savings into ISAs s&s which will again stretch the money to hopefully offset some of the later inflation.
Since technically I was living on £19000 a year after tax/ni and mortgage yet was happy, this seems like quite a bump up already.
All these calcs were done with an online calculator.
So is there a big smoking gun im missing here, when I crunched the numbers it looked like it could possibly work but im sure im going to be missing something obvious.
Happy to elaborate on anything
Due to the crazy house pricing we chatted and it looks like we realistically missed the boat on buying here(mortgage rates are massive and I would be a wage slave until 60 to get it paid off) so its likely we wont stay forever, the thought was stay 5 years, get citizenship as its something the kids might want to use when they get older if they fancy coming back on their own or with future children.
I sat and crunched the numbers on us staying 10years until im 50 and potentially retiring back in the UK, which would be a crazy thing as before this move my thought would be 60 for retirement age.
So for the 10years here I could save £350,000 due to the wages being massively better. I only have about £11,000 in a UK pension so ive discounted that currently from the equation.
At 50 I will own my UK home outright, before I left the UK my gross salary was £35,000 and I paid £9200 per annum mortgage and we lived a reasonable life, I was able to save, work on my racecar etc....being from the midlands helps!
Assuming only a 5% return on £350,000 stocks and shares it looks like I could take £40,000 from it every year until i turn 60years old
At 60years old I can take all my Australian pension out as a lump sum which combined with the money i will have left from savings would be £420,000, which again i would leave in stocks and shares and assume a 5% return
Continue to take the £40,000 per year, reduce that to £31000 at 68 when state pension kicks in and I would have enough to make it to 77years old before running out, ideally I will die in my sleep at that point as ive had a hard paper round work wise, I was hoping to make it to 75, anything after is a pure bonus so I cant imagine I will be jet setting around the world or climbing mountains.
This is making alot of assumptions of course, big one being s&s gives 5% every year, but since the average looks to be 10% long term, halving that figure I thought was fair.
I know inflation will require a larger number in the initial years I would be straight away £9000 a year better off from no mortgage and will be drip feeding £40,000 per year from the savings into ISAs s&s which will again stretch the money to hopefully offset some of the later inflation.
Since technically I was living on £19000 a year after tax/ni and mortgage yet was happy, this seems like quite a bump up already.
All these calcs were done with an online calculator.
So is there a big smoking gun im missing here, when I crunched the numbers it looked like it could possibly work but im sure im going to be missing something obvious.
Happy to elaborate on anything
dingg said:
So is there a big smoking gun im missing here, when I crunched the numbers it looked like it could possibly work but im sure im going to be missing something obvious.
Have you taken into account taxation of your gains?
ive assumed the current income tax allowance if thats what you mean, i know im not going to simply have the full £40,000 to myself every year, I think from what I read you can claim £12500+1000+5000 per year tax free, then whatever I can get into ISAs over time.Have you taken into account taxation of your gains?
With regards to gains, im not sure how it works, if im earning 5% from s&s then I wouldnt think you have to pay tax on that, then pay tax when you transfer it to your current account would you, as thats double taxation?
I thought that of the £40000 i would draw, i would have to pay tax on £21500 of it at 20%+NI
Haven't we been all over this before on your previous post??
https://www.pistonheads.com/gassing/topic.asp?h=0&...
https://www.pistonheads.com/gassing/topic.asp?h=0&...
I think your plan looks sound. You have allowed a sufficient margin of error (contingency) to cover. You look like you are quite frugal with your spending and flexible to compromise.
It is likely that you may find you live to mid 80's rather than mid 70's but I think there is enough margin to cover for this.
My financial philosophy is similar and I am now living that out. I have retired just over a year ago with no regrets. I am slowly migrating investment savings into ISAs. I have my OH's personal allowance and ISA allowance to double up on.
I am keeping within the CGT allowance which has now been reduced to £3k. Let's say the gains you have made over a few years are 15% then you would be able to withdraw £23.5k (giving you £3.5k in £20k) before you pay any gains tax. If you spread this with your OH then that's £47k a year.
As you build up your ISA then it is easier because when you want to reduce gains tax by not withdrawing so much from an investment account, you would then be able to supplement that with withdrawing from ISA.
You would need to have 2-3 years of cash in savings account to live on at any one time. This gives you the flexibility of not withdrawing investment funds when the markets hits a recession. You would wait it out until it recovers then build up your cash savings again.
Once you've paid of your mortgage then this takes that stress out of the equation.
It is likely that you may find you live to mid 80's rather than mid 70's but I think there is enough margin to cover for this.
My financial philosophy is similar and I am now living that out. I have retired just over a year ago with no regrets. I am slowly migrating investment savings into ISAs. I have my OH's personal allowance and ISA allowance to double up on.
I am keeping within the CGT allowance which has now been reduced to £3k. Let's say the gains you have made over a few years are 15% then you would be able to withdraw £23.5k (giving you £3.5k in £20k) before you pay any gains tax. If you spread this with your OH then that's £47k a year.
As you build up your ISA then it is easier because when you want to reduce gains tax by not withdrawing so much from an investment account, you would then be able to supplement that with withdrawing from ISA.
You would need to have 2-3 years of cash in savings account to live on at any one time. This gives you the flexibility of not withdrawing investment funds when the markets hits a recession. You would wait it out until it recovers then build up your cash savings again.
Once you've paid of your mortgage then this takes that stress out of the equation.
leef44 said:
I think your plan looks sound. You have allowed a sufficient margin of error (contingency) to cover. You look like you are quite frugal with your spending and flexible to compromise.
It is likely that you may find you live to mid 80's rather than mid 70's but I think there is enough margin to cover for this.
My financial philosophy is similar and I am now living that out. I have retired just over a year ago with no regrets. I am slowly migrating investment savings into ISAs. I have my OH's personal allowance and ISA allowance to double up on.
I am keeping within the CGT allowance which has now been reduced to £3k. Let's say the gains you have made over a few years are 15% then you would be able to withdraw £23.5k (giving you £3.5k in £20k) before you pay any gains tax. If you spread this with your OH then that's £47k a year.
As you build up your ISA then it is easier because when you want to reduce gains tax by not withdrawing so much from an investment account, you would then be able to supplement that with withdrawing from ISA.
You would need to have 2-3 years of cash in savings account to live on at any one time. This gives you the flexibility of not withdrawing investment funds when the markets hits a recession. You would wait it out until it recovers then build up your cash savings again.
Once you've paid of your mortgage then this takes that stress out of the equation.
So based on this, check im understanding what you have said correctlyIt is likely that you may find you live to mid 80's rather than mid 70's but I think there is enough margin to cover for this.
My financial philosophy is similar and I am now living that out. I have retired just over a year ago with no regrets. I am slowly migrating investment savings into ISAs. I have my OH's personal allowance and ISA allowance to double up on.
I am keeping within the CGT allowance which has now been reduced to £3k. Let's say the gains you have made over a few years are 15% then you would be able to withdraw £23.5k (giving you £3.5k in £20k) before you pay any gains tax. If you spread this with your OH then that's £47k a year.
As you build up your ISA then it is easier because when you want to reduce gains tax by not withdrawing so much from an investment account, you would then be able to supplement that with withdrawing from ISA.
You would need to have 2-3 years of cash in savings account to live on at any one time. This gives you the flexibility of not withdrawing investment funds when the markets hits a recession. You would wait it out until it recovers then build up your cash savings again.
Once you've paid of your mortgage then this takes that stress out of the equation.
its 2035 and im about to come back to the UK.
Split my savings in half and sent it to mine and my wifes UK bank accounts, so at least we can use both our personal allowances.
When I arrive in the country
Should I create 2 taxable S&S accounts, one for each of us?(managed by me) to help with the £3k CGT each limitation.
Create 2 ISAs(one for me and one for the wife) start paying £20k from each account into mine and wifes ISA S&S per year
Then I start taking £40k per year split between myself and wife which means i should keep £36k of that, the hope will be as you say as the ISA accounts grow I can start taking the less from my taxable accounts over time until im just taking the personal allowance from the taxable one and then topping up with the ISA ones.
If that is the case it would almost feel like a payrise each year as I pay less to the taxman.
In all this I havent added my wifes pensions(UK and OZ) and her state pension into the situation as im trying to plan around things I directly control, those items are purely a bonus ontop
PoorCarCollector said:
Haven't we been all over this before on your previous post??
https://www.pistonheads.com/gassing/topic.asp?h=0&...
Crikey!https://www.pistonheads.com/gassing/topic.asp?h=0&...
Feels to me like OP is overthinking things massively!
Live life. Make friends - you’ve only been there 8 months, if you can’t make friends then give up and come home.
I had a very good pal spend time in Oz some years back with young family. They ended up coming home, mainly because they missed friends and family too much. I can’t remember how long they were there: maybe a year or so.
I have several other old work pals who emigrated quit a few years back, and who are all fully integrated to Aussie (& NZ in one case) lifestyle. If/when we do a Grand World Tour, they will be folk we will visit and perhaps stay with.
Live a life. Raise a happy family. Keep saving along the way. Come back after you’ve been there in 5 years.
An internet forum can’t help with these pie in the sky thoughts with lots of variables over 10/15/20 years.
People should just perform a detailed review of their circumstances every few years and if they believe retirement is within a few years that’s when an internet forum can really help to provide solid advice.
People should just perform a detailed review of their circumstances every few years and if they believe retirement is within a few years that’s when an internet forum can really help to provide solid advice.
I can’t see any smoking guns in your thinking as such but would just make the following knee jerk observations.
You are making an assumption that your share portfolio grows every year ( not disputing the 5% figure ) and no allowance or contingency is made for a crash per se ?
Who knows what the UK state pension will be like in 28 years time - the age of first collecting may have increased , the quantum may be means tested and it may not even exist !
I stress the may aspect of those as it could just as easily be unchanged from now but somehow I doubt it.
Your getting to 77 seems low - what happens if you make the average of 84 ?
No doubt your expenditure will be lower but equally supposing you live longer than average ?
On your plan should you return ti the UK and then sadly die sooner than planned will your wife have enough money etc to manage ?
I’m all for a financial plan and had one when I retired” early “as such but I can’t help thinking that at 40 the variables etc as already mentioned are just too well variable.
Best of luck in your ( very advanced ) planning.
You are making an assumption that your share portfolio grows every year ( not disputing the 5% figure ) and no allowance or contingency is made for a crash per se ?
Who knows what the UK state pension will be like in 28 years time - the age of first collecting may have increased , the quantum may be means tested and it may not even exist !
I stress the may aspect of those as it could just as easily be unchanged from now but somehow I doubt it.
Your getting to 77 seems low - what happens if you make the average of 84 ?
No doubt your expenditure will be lower but equally supposing you live longer than average ?
On your plan should you return ti the UK and then sadly die sooner than planned will your wife have enough money etc to manage ?
I’m all for a financial plan and had one when I retired” early “as such but I can’t help thinking that at 40 the variables etc as already mentioned are just too well variable.
Best of luck in your ( very advanced ) planning.
turbotoaster said:
In all this I havent added my wifes pensions(UK and OZ) and her state pension into the situation as im trying to plan around things I directly control, those items are purely a bonus ontop
Ahh, you didn't mention this bit before or at least I missed it. This kind of scuppers the plan a bit. My wife has no pension and only partial state pension eventually. I've bought N.I. credits to top up her pension. My plan was not just to split the assets for tax purposes but to ensure I had a contingency plan for her if I was to suddenly pass away. Everything is going to pass to her anyway but it's less stress for her if she already has half.This means that she has not used any of her annual personal allowance or savings allowance (for interest income and dividend income). So that's a tax efficiency (cash, bond and income stocks are mainly in her assets). In your case, it looks like your wife will be using up her allowance from her own income so there is not so much to gain.
However, for the investment accounts and ISA it still makes sense so that you make use of both your gains allowance.
Not sure it's necessary to ensure half assets are transferred to your wife before you move to the UK. Husband to wife transfer in the UK is free from tax anyway so that's up to you which way you do it.
Also to get into the detail, I've taken the more conservative forecast of only assuming 4% instead of 5% growth to allow myself more margin of safety. Last few years have seen over 10% annual growth so that gives me a bigger contingency fund for the unknown.
There are many variables as others have pointed out e.g. Labour government is likely to increase tax take from capital gains (lower the £3k allowance or increase tax rate), they may also increase on dividend tax and reduce savings allowance. Inflation in the future is unknown but I would be flexible to pull back on spending if required. State pension age could be further increased or number of years work increased for full pension.
My health is not that great which limits the things I do which then limits my spending. If you are a very active person who does not like to sit still or get bored easily then your spending might even increase when you find yourself not working. So lots of things to consider.
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