Retired person tax options drawdown

[PositronicRay]

Hello all, I'd just like to run something passed the gurus on here.

65 y/o
State pension due in 12 months
Adequate savings
Wife has decent pension

We retired 12 yrs ago, I've been drawing down from the taxable portion of my pot, and some from the tax free bit. Therefor keeping below the personal allowance threshold and avoiding income tax.

At some point I'm going to have to pay tax anyway, should I.

A) Pay it now but keep below the 40% tax rate, leaving my tax free portion alone in case I need aa chunky sum? (I can't see myself needing a chunky sum we have ISAs and savings but you never know)?

B) Avoid paying tax for as long as I can then take it on the chin in due course?

C) Is it as long as its broad?

[Steve H]

Not my area of expertise but you did ask…….

The beauty of deferring tax for as long as possible is the opportunity to benefit from growth/interest on the full amount in the meantime rather than just on the smaller "net" amount. Assuming you are using up all your allowances I would imagine you are likely to be better off with it where it is.


For a more qualified answer you may want to try the IM pensions thread

[PositronicRay]

Ahh yes I see.

Once my state pension kicks in topping up my income from the tax free bit would make sense. Leaving the rest to (hopefully grow)

I reckon I could defer paying income tax for another 5-10 yrs.

[Kirkmoly]

I’ve modelled this every which way for my own situation. There are a number of factors but the bottom line is this: If you will, later in your planning horizon, be drawing income that will be taxed at higher rates (say 40%) and you have the option to draw that amount of income now but pay tax at 20% - you should. That bet is always a win unless the tax code changes in some weird way.