I elected to take a yearly allowance rather than taking the 25% straight away that way it will (hopefully) still be making money whilst left in the drawdown pot
Can we retire please? How much money do you really need need?
- Thread starter Fragle
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My experience of friends who have retired early is that if their work was a breeze they're keen to go back part time, for some people money is a drug, but if like me their work was hard and challenging they couldn't wait to get away. I'd never go back.
One of the best things younger people can do is take advantage of their 20k per year ISA allowance (wrapper). Anything within this wrapper remains tax free for life whether it be pitiful returns from cash investments or money invested for growth on the Stock Market and in later life (pension age) money invested on the Stock Market for dividend income (5-6% possible but with little capital growth). Speaking of dividends a further 2k each can be earned in dividends tax free (used to be 5k) from money again invested for dividends but not in an ISA wrapper. As time goes on this money can be "bed and ISAd" if further savings have dried up. Keep rainy day money (20k) in a Santander Account and earn a further 1.5% tax free because of the 1k allowance each person can have in savings outside an ISA.
If and I mean if you had invested the maximum amount into a PEP/TESSA/ISA since their inception in 1999 you would have invested roughly 211k each and any income/growth (massive) would have been/is tax free.
If and I mean if you had invested the maximum amount into a PEP/TESSA/ISA since their inception in 1999 you would have invested roughly 211k each and any income/growth (massive) would have been/is tax free.
ISA - taxed income goes in. Tax free inside the wrapper and when taken out.
Pension - untaxed income goes in, or if subscribing outside of employment contributions, taxed income goes in but HMRC add 20% to your contributions. If you pay tax at higher rate, HMRC also refund the additional amount of tax which can also be contributed to the pension. Funds in the pension can be saved or invested in exactly the same way as in an ISA, it's just another "wrapper". So you also get growth on the additional funds contributed and/or refunded by HMRC. 25% can be taken tax free when withdrawn, but depending on your income, some or all of the remainder might also be able to be withdrawn tax free if income from other sources is less than your personal allowance at the time of withdrawal.
The pension has the potential to be more beneficial than the ISA, with the caveat that you cannot withdraw from it until you are 55.
So a mix of both wrappers has to be the best way forward and personal circumstances will dictate which should be prioritised
Edit: just noticed your recommendation of a Santander account. Unless you are able to set up sufficient qualifying direct debits to earn enough cashback to cover the monthly fee, the effective rate of interest after the account fee is actually 1.2% which makes an easy access account such as Marcus at 1.45% a better option.
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But they make it even more complicated by the Inheritance tax rules where there's quite a big advantage having it in a pension rather than an ISA if you have a lot saved up for retirement and unluckily pop your clogs before drawing most of it out.ISA - taxed income goes in. Tax free inside the wrapper and when taken out.
Pension - untaxed income goes in, or if subscribing outside of employment contributions, taxed income goes in but HMRC add 20% to your contributions. If you pay tax at higher rate, HMRC also refund the additional amount of tax which can also be contributed to the pension. Funds in the pension can be saved or invested in exactly the same way as in an ISA, it's just another "wrapper". So you also get growth on the additional funds contributed and/or refunded by HMRC. 25% can be taken tax free when withdrawn, but depending on your income, some or all of the remainder might also be able to be withdrawn tax free if income from other sources is less than your personal allowance at the time of withdrawal.
The pension has the potential to be more beneficial than the ISA, with the caveat that you cannot withdraw from it until you are 55.
So a mix of both wrappers has to be the best way forward and personal circumstances will dictate which should be prioritised
Edit: just noticed your recommendation of a Santander account. Unless you are able to set up sufficient qualifying direct debits to earn enough cashback to cover the monthly fee, the effective rate of interest after the account fee is actually 1.2% which makes an easy access account such as Marcus at 1.45% a better option.
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dabhand
LIFE MEMBER
Got to be honest, work out realistically how long you think you will be able to travel etc and have a good time, Let’s say 80, way to old probably, take age now (58 x number of years to 80 ) 22 divided by total savings ? And add this to future pension incomes will give a yearly amount, just spend it! And adjust as eventualities occur. It’s not rocket science but will allow you to f off now!
Do it! You only live once. Btw having done the figures for several funsters 15k is about the bare minimum!
Do it! You only live once. Btw having done the figures for several funsters 15k is about the bare minimum!
My MIL is 89 and changed her car a couple of years ago. She drove recently from Leicester to visit a friend in Easington just north of Whitby and has a very active social life. Not so sure about the spending up by 80!!!!
i changed job last year and had a £60k pension pot (im 53) but my new job has the minimal NEST pension ,during this year i have seen several independent financial advisers and one that was recommended by a major pension company and i am still none the wiser what to do
i received advice ranging from...you will be fine leaving things as they are........to.....you must immediately open a new pension and contribute £1000 a month to it
i expected a bit of difference as the advisers might offer what they prefer rather than whats best for me but the range was huge and even the simple question of do i leave the £60k where it is or put it into another pension was met with a bewildering selection of options
I had a workplace pension for a few years. I can only assume that the Directors delegated the choice of pension provider to the Financial Controller and he got some commission or bung because every annual Statement showed my meagre workplace pension pot had shrunk AGAIN and was less than the total amount of contributions from me and the Company. In the end it was worth just a few hundred quid. How incompetent do pension fund managers have to be to get that result? Any tracker fund would have beaten it hands down.
To add insult to injury when I opted to take it out as a tiny lump sum I even had to pay tax.
haganap
LIFE MEMBER
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I have a different take on this. Personally, (sorry to those that do) but I can think of nothing worse than living in a 8m x 3m box 24/7 despite where that box lands. I can't think of nothing worse than having to do it on such a tough budget that you are in danger of missing things because you can't afford to see them. Weigh this up against leaving it too long so that your legs can't walk up the hill to see the gorgeous site of said city that you have always wanted to visit it.
Then, I get up and get ready for work each day and wish I never had to even though I enjoy what I do (sometimes)
Nikki's dad planned for a retirement and passed on 3 months after retiring. Her mum left us only a few years after. Just proving that for some it can be too late.
However, I have found myself in a very well paid executive position, I don't know how I went from a Nurse in the NHS to this role. It provides plenty of income but very little time. My plan is simply to work the next few years, ensuring everything is paid off, keep building our property portfolio and adding a little more to our pension pots and savings accounts.
Bur retire I won't. Extended Holidays is where it's going to be for us. I shall quit work, take a sum of money, say 20k and visit the places we have always wanted to visit but needed a little more time. When that money runs out, we shall return, work to build the pot back up by doing all sorts of jobs whilst using our investments to keep the top up going. Once we have 20k again, we shall go off again, we may last 3 months or 9 but as long as I am back within each 12 month period to keep my registration and do some work that will be ok.
If I was fortunate enough to have a money no object retirement, I still wouldn't have the patience to live in that little box and I expect my long term touring adventure will probably not laast more than 6 weeks at a time!!
as everyone else has said, everyones personal circumstances will be different, only you know if you have not the finacial ability to do it... but more importantly the Balls to do it.. To all those that have and it's working out,, I salute you.
Then, I get up and get ready for work each day and wish I never had to even though I enjoy what I do (sometimes)
Nikki's dad planned for a retirement and passed on 3 months after retiring. Her mum left us only a few years after. Just proving that for some it can be too late.
However, I have found myself in a very well paid executive position, I don't know how I went from a Nurse in the NHS to this role. It provides plenty of income but very little time. My plan is simply to work the next few years, ensuring everything is paid off, keep building our property portfolio and adding a little more to our pension pots and savings accounts.
Bur retire I won't. Extended Holidays is where it's going to be for us. I shall quit work, take a sum of money, say 20k and visit the places we have always wanted to visit but needed a little more time. When that money runs out, we shall return, work to build the pot back up by doing all sorts of jobs whilst using our investments to keep the top up going. Once we have 20k again, we shall go off again, we may last 3 months or 9 but as long as I am back within each 12 month period to keep my registration and do some work that will be ok.
If I was fortunate enough to have a money no object retirement, I still wouldn't have the patience to live in that little box and I expect my long term touring adventure will probably not laast more than 6 weeks at a time!!
as everyone else has said, everyones personal circumstances will be different, only you know if you have not the finacial ability to do it... but more importantly the Balls to do it.. To all those that have and it's working out,, I salute you.
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I know several people who lost money when their pension company went bust years ago (can't remember the name now). I think with the current regulations it's a lot safer but of course if annuities are low you could save for years for very little.I had a workplace pension for a few years. I can only assume that the Directors delegated the choice of pension provider to the Financial Controller and he got some commission or bung because every annual Statement showed my meagre workplace pension pot had shrunk AGAIN and was less than the total amount of contributions from me and the Company. In the end it was worth just a few hundred quid. How incompetent do pension fund managers have to be to get that result? Any tracker fund would have beaten it hands down.
To add insult to injury when I opted to take it out as a tiny lump sum I even had to pay tax.
I can see why you feel like that. I always thought when we had the chance after only managing one 2 week holiday in 30 years having just a week so as not to leave the business too long we would go away in the MH for ages. This year we set off for almost 4 weeks and came back early as we had had enough!! Maybe it gets easier as you acclimatise!
Same with work I just do one day a week and said that I would pack in at 60 but now it's looming I'm not so sure. My work is part of my identity like it or not!. But at the same time the day at work plus half a day getting there gets in the way of things I'm finding to do at home!
I think I'm having a bit of a retirement crisis!
mikebeaches
LIFE MEMBER
When I was in my late thirties I set out a simple life plan - back of a fag packet sort of thing (even though I've never smoked! 
) - nothing particularly clever, just some general aims.
Firstly, I fancied being able to semi-retire at 55, moving from full-time employment to part-time working.
And secondly, I wanted to try to fully retire by the age of 60.
Through very good fortune, and without a great deal more planning, I was lucky enough to able to do just that.
There were a few scary moments - am I doing the right thing? Will the finances work out OK?
A decade on and I've got no regrets. Work had been fairly rewarding, but stressful at times and I knew I was ready to turn the corner and begin a new chapter in life.
Motorhoming adventures are an important part of retirement for us, but certainly not our only focus. Plenty of other interests to pursue as well...
) - nothing particularly clever, just some general aims.Firstly, I fancied being able to semi-retire at 55, moving from full-time employment to part-time working.
And secondly, I wanted to try to fully retire by the age of 60.
Through very good fortune, and without a great deal more planning, I was lucky enough to able to do just that.
There were a few scary moments - am I doing the right thing? Will the finances work out OK?
A decade on and I've got no regrets. Work had been fairly rewarding, but stressful at times and I knew I was ready to turn the corner and begin a new chapter in life.
Motorhoming adventures are an important part of retirement for us, but certainly not our only focus. Plenty of other interests to pursue as well...
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Got to be honest, work out realistically how long you think you will be able to travel etc and have a good time, Let’s say 80, way to old probably, take age now (58 x number of years to 80 ) 22 divided by total savings ? And add this to future pension incomes will give a yearly amount, just spend it! And adjust as eventualities occur. It’s not rocket science but will allow you to f off now!
Do it! You only live once. Btw having done the figures for several funsters 15k is about the bare minimum!
I hope you are bloody-well wrong. I am 78 in 3 months and am looking way beyond 80 as Basia's Mother is 98 ansd still going, so we cannot travel much yet.
And we are well catered for with income and capital. Another 5 years and I might think of taking an annuity - rates at that age could be tasty.
Geoff
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ShaKen
Free Member
Hi All
strong recommendation here for Retire Easy.
It’s an online Lifetime Cash Flow calculator - you stick in what assets, investments, pensions you have, all your outgoings, your expectation of how much money you want to draw, what increase or decrease you’d like to see as you get older (I’m planning on spending more in my earlier years and reducing over time as we get less active). You also capture major events such as big holidays, car replacements, downsizing etc.
You effectively model your financial health by answering a series of questions, and it will then do all the calcs and advise if/when you will run out of cash.
I also use an IFA, but RetireEasy really helps you model the options and gives you some confidence on whether your plans are do-able.
It costs between £3 to £7 per month with no minimum term!!
(no connection, just a happy user - an it’s recommended by Which?, the Mail on Sunday, Investors Chronicle, IFAonline etc)
strong recommendation here for Retire Easy.
It’s an online Lifetime Cash Flow calculator - you stick in what assets, investments, pensions you have, all your outgoings, your expectation of how much money you want to draw, what increase or decrease you’d like to see as you get older (I’m planning on spending more in my earlier years and reducing over time as we get less active). You also capture major events such as big holidays, car replacements, downsizing etc.
You effectively model your financial health by answering a series of questions, and it will then do all the calcs and advise if/when you will run out of cash.
I also use an IFA, but RetireEasy really helps you model the options and gives you some confidence on whether your plans are do-able.
It costs between £3 to £7 per month with no minimum term!!
(no connection, just a happy user - an it’s recommended by Which?, the Mail on Sunday, Investors Chronicle, IFAonline etc)
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Got to be honest, work out realistically how long you think you will be able to travel etc and have a good time, Let’s say 80, way to old probably, take age now (58 x number of years to 80 ) 22 divided by total savings ? And add this to future pension incomes will give a yearly amount, just spend it! And adjust as eventualities occur. It’s not rocket science but will allow you to f off now!
Do it! You only live once. Btw having done the figures for several funsters 15k is about the bare minimum!
If only we knew how long we were going to live and how it will end, planning would be simple.
It may be prudent to factor the possibility of later life care into your financial planning. Chances are about 1 in 4 that any of us might need to go into care at some point. It happened to my MIL and she got through £100K in fees in just under 3 years (£2,700 a month in 2014, with increases tending to run at around 6% a year in the south-east).
Of course, you could just say sod it and rely on the state to fund you, but if you've ever experienced the inside of a state funded care home you might think differently. MIL was placed in one as an emergency measure whilst we sorted out alternatives. Every minute that went by seemed like a lifetime to me as a visitor. God only knows how those residents that still had their marbles actually coped
dabhand
LIFE MEMBER
That’s lovely but I don’t see many 89 year olds bombing around Europe in a Motorhom.
Sounds just like the one our bloke gave us a link to I bet it's just the same thing with a different name. Luckily we had a free link to it. The software is provided by an investment company they don't really use but they were given a free link to the software as a sweetner. Might look at the one you recommend as we keep forgetting the link and having to phone for a link.
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I'll get back to you on that in 11 years time - if you can stick around that long.
You will actually reach his spent up by date a lot sooner hope you have many happy travels
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I have a detailed spreadsheet projecting my retirement funding. I'll be drawing down invested money, it's invested in a managed pension fund - and that's where it will stay.
But, I keep reading that we're due another stock market crash.
Has anybody been in a similar situation, and weathered the 2007 stock market crash? How did you get on?
But, I keep reading that we're due another stock market crash.
Has anybody been in a similar situation, and weathered the 2007 stock market crash? How did you get on?
I think the market recovered in 18 months or so others will have a better answer of course it depends on your investments so would vary from person to person. My advisor says that it's a good idea to have 3 to 4 years readily available so you don't have to take money out when the markets low.
I was still working at the time, so just invested more whilst the markets were low.
The 2000 tech-bubble crash was my learning curve. I had about £40K in the markets at the time, as a cost basis, which had taken many years to accrue. A week before the crash I could have cashed out for over £150K and completely cleared my mortgage. A week later I was left with about £20K. Took almost 10 years to recover.
Since then, I have only invested in funds. No individual shares. And diversification is key. Spread your eggs around many baskets.
Until recently, I had the majority of my investments in tracker funds, but I also feel that another substantial crash is overdue. Mind you, I have been of that opinion for at least 2 years so far, so what do I know?
But on the basis that trackers have to track the market they seek to replicate, whether that is up or down, I have moved a proportion of my investments to trusts that aim to protect the value of my investment against inflation, and attempt to generate a positive return, in that order of priority.
I still have some "more adventurous" investments, but with Mrs D and myself both having a fairly decent guaranteed income in the form of defined benefit pensions, I reckon we can afford to take that risk to an extent that we are comfortable with. The wealth protection funds have generated over 6% return taken together over the last 12 months, which beats anything we have in cash.
I am not a financial adviser or wizard, so this is just my opinion and what has worked for me to the extent that I sleep soundly at night
There are always risks with investing, but there are also risks with cash - not least of which is that its value erodes over time with inflation, even in the current environment. The trick is to find a balance of risk and reward that you are happy with, and that is very much an individual decision, so I can only say what works for me. Oh, and did I mention diversification?
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Phod's
Free Member
All of the comments made on this link are a mixture of sad, humorous and potentially dangerous............it's clear that some have some understanding of pensions and investments and some have none, what is really working is that many appear to genuinely believe that they absolutely understand everything and that their way is the best way, for everyone!
I must admit that in an earlier thread that totally disagreed with one comment that I used the phrase Tax Free cash but this is and has been known as PCLS (pension commencement lump sum) for many years now.
I was an IFA and retired 4/5 years ago at 54 and most of my business was with pension and investment clients, not a big firm but FUM iro £30m and I was reasonably well up to speed but I could always refer to a mate that was and still is a pension techy with a huge UK firm.
Take professional advice and take the comments on here with a pinch of salt........YOU WILL ONLY GET THIS DECISION ON YOUR PENSION/INVESTMENT WRONG ONCE!!!!!!!!!!!
One comment on here has already predicted a crash...........guess he/she read this in the financial section of the Sun.
I must admit that in an earlier thread that totally disagreed with one comment that I used the phrase Tax Free cash but this is and has been known as PCLS (pension commencement lump sum) for many years now.
I was an IFA and retired 4/5 years ago at 54 and most of my business was with pension and investment clients, not a big firm but FUM iro £30m and I was reasonably well up to speed but I could always refer to a mate that was and still is a pension techy with a huge UK firm.
Take professional advice and take the comments on here with a pinch of salt........YOU WILL ONLY GET THIS DECISION ON YOUR PENSION/INVESTMENT WRONG ONCE!!!!!!!!!!!
One comment on here has already predicted a crash...........guess he/she read this in the financial section of the Sun.
Its surprising how little you spend once you are not working, I was made redundant and then after illness got my reduced pension £12k, With savings funding the shortfall we reckon to need about £16k and we dont hold back on socialising although to be fair we dont shop much, no expensive clothes hairdoes and the like.. Everyone is different but my plan is to spend some cash now on the grounds that I will get a state pension in 7 years time and that will be enough to keep this lifestyle going.
It's an Equitable Life, Henry
No it bluddy wasn't. I lost tens of thousands. I have zero trust in the pensions industry or its regulator.
A new source of worry is the potential consequence of mis-selling equity release schemes if the Government were to make those companies pay large amounts of compensation to elderly borrowers who were victims of mis-sold unsuitable and expensive mortgage products.
My Annuity provider has diversified heavily into equity release.
My Annuity provider has diversified heavily into equity release.
And cashing in pensions - another "scandal" in the making that may yet result in compensation claims.
I have to say though that, in many cases, I have limited sympathy for customers who only see big £ signs in front of their eyes and aren't able or willing to investigate the suitability of a course of action which in all but a minority of cases is likely to leave them worse off over the medium to long term, but then claim to have been "mis-sold" to when the chickens inevitably come home to roost.
The more savvy just ended being penalised by larger costs and charges as well as less choice, to pay for bailing them out.
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