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I’ve been lucky enough to have a significant other savings as well as x 2 SIPPs, so although the savings isn’t growing, it’ll sit there as a lot to draw from in the case of a slump. So if we have a March 2020 again after I’ve retired, that years top up will come from there, while the SIPPS recover.
It’s worth remembering the SIPPs can remain open - and therefore money invested and potentially growing yoy - until the age of 75.
leave the house to the kids ( maybe via a trust to avoid inheritance tax if the sums down the line show it’s best).
Are you married?
Is the house [ going to be ] worth over a mill?
If so, and not, then don't do a trust. No point.
We wasted tens of thousands of pounds undoing a trust.
Can I make additional payments to my pension and then claim the tax relief back in my tax return? It seems so but is hard to follow and it seems it maybe capped at 20% rate? Any links to a simple explanation would be appreciated!
Yes, but only up to a max of £40 k in any one year ( averaged over a few years)
@sadexpunk wrote:
as a financial doofus, could i ask a question on drawdown please?
lets say i have a SIPP worth £100,000 now and decide to use this 4% figure for .... live).
and do you pay tax on it, so the money you actually have in your pocket is nearer £3000?
thanks
Read footflaps link above ( then my link from his link if you are keen)
It explains it perfectly.
My wife and I had a chat to IFA recently. They were against the 4% rule idea as people say above, it doesn't account for swings in the market. Their most comprehensive offer takes into account historic market data and does projects based on best and worst case. Worst case being if you retired just before one of the major economic downturns.
One thing I'd be interested to know if people have considered is large capital expense. It's one thing knowing I can live on X per month. But then there are things like new bikes, cars and then unexpected large costs that might come your way? House repairs, that type of thing?
I've been paying some money into a LISA, you can put 4K in each year and the government will top it up with another 1K. Part of a balanced portfolio but worth looking at if you are already contributing in other areas.
People retiring now, I assume you are doing income drawdown, does anyone still buy annuities?
can you buy an anuity with some of your pot? Assuming you can it probably makes sense to some people to (say), pull 25% out as tax free cash, 25% into an annuity and 50% in fairly agressive drawdown - then you have the safety blanket at the end. It might give you more cash day to day doing this (with a drawdown of, say, 5%) than doing a straight drawdown of 3% as you're worried about running out of cash.
can you buy an anuity with some of your pot?
You can, but the rates are absolutely terrible...
However, as they take on all the risk and you get a guarenteed income it's a very low risk option.
Crikey, there's so much overthinking to do when reading about dynamic spending rules, when really I want my retirement to consist of:
Coffee in the morning
A quality stiff drink in the evening
An annual Holiday
Food & Bills.
Cycling
It feels as though it should be so much easier....
Be careful not to confuse dividend with return.
Getting a 5% dividend might be a stretch, getting a 5% return on a portfolio of investments is not, (it might even be considered poor)
I’d be disappointed only getting 5% in recent years but would be happier getting it over a number of years.
Last years return was closer to 20%
Getting a 5% dividend across a broad range of equities would be a miracle right now!
5% return (inc captial growth) is easy when we're having a bull run, my pension earnt 3x my gross salary last year - but it won't always achieve that and you might have a period of 5-6 years of capital losses to contend with at some point.
If a 5% return was so easy to achieve, you wouldn't have such abysmal annuity rates - after all they are trying to solve the exact same problem, find a way of investing a lump sum and generating a guarenteed income in return come rain or shine...
@mrl, with salary sacrifice you avoid paying the NI on the amount sacrificed, so there is some advantage to just whacking up your contrib to the scheme for a bit.
Either way make sure, however, that you have enough annual allowance (including carry forward) to cover it, and check whatever rules are in place for annual allowance claw back if you have a really really good year.
However the flip side is if you just bung it in your scheme now, it's invested now - presumably if you were feeding it in via salary sacrifice you'd want to keep it in cash while it's waiting to - effectively - subsidize your drop in pay.
Also, everyone, check charges on your pension. Most DC work schemes will let you transfer chunks out to a SIPP with lower charges.
Crikey, there’s so much overthinking to do when reading about dynamic spending rules, when really I want my retirement to consist of:
Coffee in the morning
A quality stiff drink in the evening
An annual Holiday
Food & Bills.
CyclingIt feels as though it should be so much easier….
That's where I struggle with retirement planning too.
I could live on beans on toast, never turn the heating on and scrimp my way to old age. That wouldn't cost very much at all but I'd be miserable and lonely and that's not the way I'd like to spend my final years.
Conversely, having a boat, a sports car and several 5 star cruises a year is probably not the answer either as I'd never retire because I would never have enough.
I'm currently focusing on getting my kids educated and independent while paying as much as comfortable into my pension. Who knows, the decision might be made for me with redundancy/ill health/lottery win or something else?
Crikey, there’s so much overthinking to do when reading about dynamic spending rules, when really I want my retirement to consist of:
Coffee in the morning
A quality stiff drink in the evening
An annual Holiday
Food & Bills.
CyclingIt feels as though it should be so much easier….
It is easy... that article makes it sound complex, but it's simple maths really. The article and the Yale and other formulas are more complex than most people need.
Anyone investing in the stock market needs to be comfortable with its ups and downs, if you're not, then its not for you. If you're ok with it then when times are good you can spend more, when times aren't so good you adjust your spending to accommodate.. so if times are bad instead of a new bike or expensive holiday you defer the spend until the following year (or buy a cheaper one).
Over time, it all works out anyway... spend a bit more (or save) when times are good, find economies when they're not.
Read footflaps link above ( then my link from his link if you are keen)
It explains it perfectly.
thanks, i understand it a bit better now, and the methods people use to come to a withdrawal figure each year, but still cant see any mention of it being taxed or not. would a £4,000 withdrawal each year be taxed and thus actually nearer £3,000?
cheers
would a £4,000 withdrawal each year be taxed and thus actually nearer £3,000?
you can take the first 25% tax free in a lump sum, whack it in a savings account and draw from there at the same rate as your central pot - so 25% is effectively not taxed
after that, you still have your tax free allowance (£12,500), but state pension (£9,100) eats most of that, after which you're taxed at the normal rate (20%, then 40%, then 60%, then 40%, then 45%)
so if you only have 4k a year total drawdown, it would be 100% free of tax (£1k not taxed, then all remaining 3k falls under the annual allowance), if you had a drawdown of £40k (which is pretty much the maximum, given the £1mm total limit), you'd pay £5,400 tax (10k not taxed, then tax on £27k of 20%) for a total income of £44k
it's probably also worth considering that state pension may be means tested at some point in the future.
Yields across most asset classes have reduced as everyone is chasing the same thing, hence asset prices rise and income is either flat or falling. In property for e.g. yields have halved in 10 years and still people are ploughing in.
No one s mentioned inflation yet, its looming and eats away at purchasing power.
Bet Tons not reading any of this still....
Bet Tons not reading any of this still….
it all got a bit up above my head mate. i am a simple man, who enjoys simple pleasures and wants to live a simple life.
hopefully the way i have taken my pension will enable me to do that. even if it means bread and jam for tea now and again.
enjoy fella's........... ;o)
One great thing about retirement - afternoon naps 🙂
your marginal tax on the bit you’re paying (15,900, so say a 400k pot) is £2480 or about 15.5%
That's the average or mean rate, not the marginal rate. The marginal rate is what you'd pay if you had a bit more income, so if your taxable income is between £12k and £50k it's 20%. Marginal rates are what matter if you're thinking of putting more in, unless the amount you're looking at will take you into a different band.
One great thing about retirement – afternoon naps
I had one this afternoon, over did it on the bike yesterday and absolutely shattered today.....
it all got a bit up above my head mate. i am a simple man, who enjoys simple pleasures and wants to live a simple life.
Thats exactly how I want to be when I grow up, good on you.
Try this
https://www.tidewaywealth.co.uk/p/151/drawdown-calculator
And this for tax
https://www.tidewaywealth.co.uk/p/150/tax-on-pension-withdrawal-calculator
The discussion of drawdown rates is interesting, I haven't thought of it in those terms. I work out how much I can afford to spend each year the same way I always have, and it's decoupled from how much I draw down from my SIPP. I have a final salary pension that puts me into the 20% band, and a SIPP. I draw down a lump sum (technically an UPFLS) from the SIPP every FY calculated to just keeps my income within the 20% band, and anything I'm not spending goes into an ISA, probably into the same funds I sold in the SIPP. That's on the basis that because of my FS pension, I'll never draw down at less than 20%, and I want to avoid ever needing to pay more than 20%, even if I need more money that year.
One great thing about retirement – afternoon naps 🙂
i looked after the grand daughter this morning. took her for a long walk in the pram. 10 minutes after her mum picked her up i was asleep on the sofa.......... ;o)
Well it looks like TJ and ton have the hang of retirement already......afternoon naps! Ya luck bar stewards.
Question for the retired.
When you've retired do you worry that you haven't got enough money, or that something might happen that results in not enough money?
Or is worrying about money (keeping a job, getting a job, as it is when working etc) a thing of the past?
it’s probably also worth considering that state pension may be means tested at some point in the future.
Unlikely as pensioners and those close to retirement vote, no-one over 40 would vote for that type of change and it would scupper all the work on getting people to make additional provision
hang of retirement already……afternoon naps!
I’m going to miss this when we return to the office after lockdown.
When you’ve retired do you worry that you haven’t got enough money, or that something might happen that results in not enough money?
I've always been a money worrier. That's one of the reasons I was able to retire quite early - I'd avoided spending too much.
Yes, I still worry
When you’ve retired do you worry that you haven’t got enough money, or that something might happen that results in not enough money?
Ive never worried about money. Mrs TJ on the other hand needs to have enough to feel secure. We have to compromise over this hence we both worked a couple of years more than I wanted to and I have kept my registration so I can do part time work if needed ( it won't be)
Mortgage is paid and we simply have to live a lifestyle withing what we have. Neither of us care for material things / consumerism which helps and if it ever does get too tight we will take equity out of the flats
some of what we want to do might be difficult without taking equity tho
Having recently entered my fifties these retirement posts are increasingly relevant and really interesting with lots of great advice. I’m always a bit disappointed however that there isn’t more on what people do and will do in retirement. People say never going to be an issue filling their days but then don’t seem to expand much beyond coffee cycling and pottering. I’ll retire in my sixties and really not sure how much cycling in practice I’ll do. I def want to go holidays but will massively depend on finances. I get pottering but am scared that in practice I’ll lack motivation and just watch lots of tv. Are people confident they will fully enjoy their retirement and be great to hear more fully what people intend to do with their time.
'Worried about money...'
Up until just over 12 months ago, I wasn't worried as such, just knew that there is a finite amount month by month...enough to do pretty much what I want to do, the odd long haul holiday etc. The last 12 months has really shown me how little I need for a comfortable enough life and that whilst a nice thing to do, there are far better things for me and my mrs to do in the years to come than save for months to have a £6 or £7k fortnight somewhere exotic.
My retirement will involve 2 years sailing around Europe - complicated by the need for visas post Brexit, but still do-able.
As mentioned by others this thread is interesting to those like me who have just turned 50 and thinking about retirement.
I hope to retire fairly young while I am still able to walk, bike etc. Now paying more in to my pension each month than I take home!
People say never going to be an issue filling their days but then don’t seem to expand much beyond coffee cycling and pottering
I've been retired since the end of October. I do some meditation, stretching and strength exercises every weekday morning. I ride three days a week and try to walk a decent distance on the other days, listening to a podcast or two if I'm on my own. I've done a fair few DIY jobs around the house. I haven't really watched much TV. When lockdown ends I hope to do some of the adventures I had planned - walking the GR5 from Geneva to Nice, C2C, Welsh C2C, that sort of thing. And I'll go back to the volunteering with the local wildlife trust that I had just started before it became impossible. I've also got a Moto Guzzi Le Mans II that needs a bit of work to get it back on the road. So I'm definitely one of those who wonders how they had time to work - not that I ever worked very hard, as people seem very keen to point out to me.
Are people confident they will fully enjoy their retirement and be great to hear more fully what people intend to do with their time.
my 2 main aims when i decided to finish were to spend time with my grandkids whilst healthy enough to do things. and to spend more time pottering on my bike with my wife.
my 1st day of retirement was tuesday. and my week as been,
tuesday, short bike ride and long walk with my wife
wednesday, 70 mile bike ride
thursday, long walk with 2 grandkids in strollers
friday, short bike ride and long walk with my wife.
so to me this is gonna go just as i planned.
Sounds like you're loving it Ton.
I've been off work for almost a year now.( furloughed and now unemployed)
I have no burning desire to go back, though I'll have to at some point.
Its not difficult to fill your time without spending much money as far as I'm concerned.
We have a garage full of bikes/spares and no mortgage.
That does us fine.
I think the nice thing about the last year as mentioned above is how little you can get by on. As long as friends and family are around I don’t reckon I’ll need much.
I feel I’ve done quite a lot of the travelling I’d would like to. For me it is becoming financially free as soon as possible. Therefore, I’m putting as much as I can away now until the scales tip in my favour and then I’m gone.
When lockdown is lifted my aim is to not allow my spending to creep up to pre-COVID levels. See how it goes without living like a hermit of course.
As mentioned previously some have taken a risk of not spending much now for an earlier retirement. Hopefully I can strike a balance.
Here in Spain I have seen so many newly retired people, pre brexit I have to stress, arrive, buy a nice house, car, throw a load of money at house renovation, garden etc, then 2 years later sell up losing any extra they ve spent. A 250k house is always a 250k house even if you spend 100k on it.
There s a house near me that must be blighted as it must have had about 5 owners, each one does exactly the above.
The ones who stay are actually quite predictable, they typically have enough money to keep their old life ticking on in their home country, keep a smaller house there, spending maybe summers back in uk.
Any new arrival who says they are living the dream and couldn't wait to get out of their home country, I d give them 2 years they will be back.
I'm retiring either late this year or early next. Here's what I'm planning to do:
- Go for walks with my wife & dog in the countryside
- Drink coffee with my wife/visit Cafe's and just talk
- Continue to be a loving, supportive Dad to my 3 kids
- Ride my bike regularly - with friends
- Spend a season or two (probably in a CamperVan) following the Pro road cycling season: starting with Flanders/Paris Roubaix, then onto the Giro, le Tour, la Vuelta and culminating at the Giro di Lombardia (not slavishly following every stage of every tour, but coming and going as we please, to the stages/places that interest us)
- Spend 1-2 months each summer hiking around the Alps/Pyrenees with a knapsack on my back
- Ski more, until such time as we're unable to
- Laugh more
- Contribute more to our local Community (my wife has run the Cubs/Scouts for the past 12 years, I've volunteered at camps, village fetes etc... but I want to have more of an impact. I want to make a bigger contribution).
- Do more Yoga. I love it and always feel better.
- Vitality/Health/Fitness/Mobility/Wellbeing: walk, run, yoga, cycle, maybe take up some calisthenics, reading.
I’m always a bit disappointed however that there isn’t more on what people do and will do in retirement
My plans ( a bit ****ed by covid)
this year may - july - a long trek in Scotland wild camping
sept - jan - south america to do some trekking including the aim ( 50 /50 chance) of summitting a 20 000" mountain
Next year summer - long bike tour in europe ( 4-5 months), winter antipodes ( 6 - 9 months)
Other traveling things to do in future years - another long european bike tour, Indian subcontinent including going to a big cricket match, Canada to go to the Yukon with a vague idea of canoeing the Yukon river
also lots and lots of shorter trips in Scotland - more canoeing and walking and cycling. thinking about doing some work with the rights of way society
We don't really have enough money for this so it will have to be backpackers hostels and camping not 5 star hotels and hope to raise money for the next years adventuring by holiday letting our flat
Then sell up and move to the country south of Edinburgh whicgh will free a big chunk of capital, take up gardening, I am considering local politics or doing some campaigning on topics of interest like dignity in dying and better provision for people living with dementia
that lot should keep me going for a few years
Similar position to Kryton, 49 and really starting to think seriously about retirement for the first time.
Mortgage will be paid off and youngest finished uni when I'm 55. Downside is I will only have been paying into a pension for 1 years at that stage. I think my wife will retire at that stage as she has been paying into her pension since her early 20s.
I think 60 would be the earliest I could go. I do ponder on how I would fill the days.
I’m always a bit disappointed however that there isn’t more on what people do and will do in retirement
I'm retiring in September age 60.
I was going to finish in June but Covid spannered my traveling plans.
My retirement plans are;
Late June / early July go on 4 - 6 week motorcycle tour up to the Nordkapp.
Annual trip to the Isle of Man for the Classic TT for a couple of weeks
6 weeks back in Nepal & do the Annapurna circuit trek Oct/Nov.
Spectate at Paris Roubaix.
Spectate at a few stages of TDF
Ride Alpe D'houez,ride Ventoux
Go on a motorcycle trip to Cape Wrath & North Scotland.
Everything apart from the motorcycle trip to Scotland has been postponed until 2022.
I have plenty of stuff going on to keep me occupied all week.Cycling,walking,gardening, messing about with old motorcycles,DIY,photography,just calling around friends & family for a social visit.Last year I bought a GO PRO,mainly to use as a dashcam on the motorbike but now I've got into making video's.It takes me all day to do a video edit.
I'm a big Rugby League fan,as well as watching my team St Helens,I also watch the Australian games,but I can't find the time to watch them all due to having to go to work..
How's this for a perfect retirement? This is what I'm gonna do. If I ever get there 🙂
It's good to have plans for how you would fill your time but leisure pursuits are often in response to work. When you retire you're likely to get stuck into flowy flanneur activities you hadn't thought of and less need for other events you might have planned. That walking stick is likely to open the door to all sorts of possibilities.
When you’ve retired do you worry that you haven’t got enough money, or that something might happen that results in not enough money?
A bit, but more worrying about general civilization downfall type of thing, post-soviet pensioners living off €5 a week etc and NO I don't think this is at all a rational or likely concern, but .... same sort of thing as worrying about the better half being killed in a RTC while popping out to get dog food. The same part of the brain which made us save, and enabled us to retire, is still beavering away trying to get all possibilities covered!
I have started walking a national trail in chunks and do lots of local exploring on the bike or with the OH & dog. But it is also nice being able to chill and read (or nap!) if that's how you feel;)
I am semi-retired and have been working on and off for a few years.
I find I need external structure after a while so if I'm not doing paid work, I do voluntary stuff, not a huge amount - 2 or 3 half days a week.
I finished my most recent, paid, contract at end of 2020, but really struggled for motivation under lockdown. I think it's an extrovert thing - taking energy from other people group activities. Things picking up again now with bigger groups mountain biking and climbing.
Normally I split time MTB, climbing, surfing, painting (pictures not walls!), learning guitar, learning German - and sitting around in cafes drinking coffee and eating cake.