Retirement

[DaveH]

It's a great feeling when your mortgage free bit of a milestone

We are making pretty much double payments, so will gain a fair amount of free cash in a couple of years when it is done.

It will be tempting to put it all in a retirement fund but my wife is applying some sense. The boiler is getting old, our windows are shit, the living room needs replastering and new carpet. She is suggesting saving half the money for retirement and putting half towards getting all the home improvements sorted, then it will cut down on big expenses in retirement.

It makes sense but means we will have less in retirement savings than I hoped.

I'm just obsessed with the retirement figures going up!

 

[Nookie Bear]

It's a great feeling when your mortgage free bit of a milestone

4 days til ours is finished

 

[moanjam]

4 days til ours is finished

Nice

 

[Fletch]

one on behalf of the missus (no)..
if has a mixture of cash / s+s isa / Pension SIPP - Hoping to retire in couple months , age 58 , what is best to access first ?

 

[Matt Hopkins]

one on behalf of the missus (no)..
if has a mixture of cash / s+s isa / Pension SIPP - Hoping to retire in couple months , age 58 , what is best to access first ?

Pics or no answer from me
I would always use up the PA first so say she packed in 5th April she'll have, probably £12570 allowance. So I'd take £16760 from the SIPP which would give her £4190 tax free lump then £1047/ month, so approx £1400/month without paying a penny tax. If she wants/needs more then top up from wherever suits her.

 

[Fletch]

Pics or no answer from me
I would always use up the PA first so say she packed in 5th April she'll have, probably £12570 allowance. So I'd take £16760 from the SIPP which would give her £4190 tax free lump then £1047/ month, so approx £1400/month without paying a penny tax. If she wants/needs more then top up from wherever suits her.

I was thinking similar , and def keep the S&S ISA for when state pension kicks in , however cash doesn’t rise over the years which made me wonder use that first

 

[DrNo!]

one on behalf of the missus (no)..
if has a mixture of cash / s+s isa / Pension SIPP - Hoping to retire in couple months , age 58 , what is best to access first ?

In my opinion, you need to make sure you utilise your personal tax free allowance first so it doesn't go to waste. Going all in on ISA's first doesn't make sense. As has been said previously, take the £16760 tax free and top up with ISA and UFPLS payments as needed.

 

[kladum]

I was thinking similar , and def keep the S&S ISA for when state pension kicks in , however cash doesn’t rise over the years which made me wonder use that first

Depending how much cash there is you might want to hang on to some/all of it to use as a buffer if theres a market crash.

 

[Fletch]

Depending how much cash there is you might want to hang on to some/all of it to use as a buffer if theres a market crash.

There’s too much of it in cash (long story), cash / SIPP / S&S isa prob all similar amounts , that’s part the problem

 

[Fletch]

for those who dont have final salary pensions and just have "pots"
do you tend to reduce the exposure to equities as you approach retirement (and on retiring ) , so that less risk if markets crashed

 

[JAZZMANB]

You must be logged on to see media items

Canny info if you're just sick of work and not masses of pension

 

[Edinburgh Black Cat]

for those who dont have final salary pensions and just have "pots"
do you tend to reduce the exposure to equities as you approach retirement (and on retiring ) , so that less risk if markets crashed

My approach would be to have 1-3 years withdrawals in cash (equivalent) at any given time.

If it crashes then you're covered for your withdrawals for the upcoming year, if it really crashes then you can switch some of your year 2 or 3 cash back into equities to recover that dip.

Trim off the gains to rebuild that cash pot over time.

All comes down to attitude to risk, but bear in mind you're planning to live 20+ years so good to keep it working for you.

 

[Darlo1973]

for those who dont have final salary pensions and just have "pots"
do you tend to reduce the exposure to equities as you approach retirement (and on retiring ) , so that less risk if markets crashed

I've gone down from 100% to 80% equities in the last few years.

There has to be a balance though. If you de-risk too much then you lose out on any boom time. Worst case scenario is if there is a major crash then that would probably delay retirement for a few years.

 

[rochey]

"The boiler is getting old....."

A bit harsh mate, I'm sure she's lovely!

 

[Fletch]

I've gone down from 100% to 80% equities in the last few years.

There has to be a balance though. If you de-risk too much then you lose out on any boom time. Worst case scenario is if there is a major crash then that would probably delay retirement for a few years.

that last sentence is the worry once in mid 50s

 

[OldNewtown]

that last sentence is the worry once in mid 50s

It's swings and roundabouts and attitude to risk.

I totally disinvested / came out of the market with my AVC 12 months before retirement, Unfortunately I missed out on significant market growth. I was happy to do that, a bird in the hand being worth 2 in the Bush, but, on reflection as I also had a final salary pension I could have taken the risk an stopped in the market.
If my whole pension was in a defined contribution I most certainly would have been reducing my exposure to the market a good 3 years before retirement.
As I said at the outset it all comes down to your attitude to risk.

 

[Darlo1973]

that last sentence is the worry once in mid 50s

Indeed. I'm at that point myself.

I suppose it all depends on what targets you have and what your current pot is worth. If you already think that you have enough then de-risking makes more sense. Of course knowing what "enough" is will be the problem. A pension pot may look big but not when it might need to last another 30+ years when you have no idea what the future holds either for yourself or the economy in general.

I really should sit down with an IFA in the next couple of years.

 

[NYMackem]

for those who dont have final salary pensions and just have "pots"
do you tend to reduce the exposure to equities as you approach retirement (and on retiring ) , so that less risk if markets crashed

Historically people did this because they would buy an annuity with whatever pot they had when they pulled the pin, and they didn't want a market crash a few weeks before retirement to give them a permanent reduction in income. But now you can put pensions into flexible drawdown, you might have 40 years of of retirement where the ups and downs of the market are worth riding out in the name of higher growth.

I personally have no intention of moving away from equities as I get closer to retirement - I have some recent contributions in short dated UK gilts (essentially cash) because I believe there is a market correction coming, but bonds have been a shite bet for the majority of the time I have been investing in a SIPP.

Important disclaimer - I am a gobshite investing his own money and not a professional financial adviser.

 

[Darlo1973]

Historically people did this because they would buy an annuity with whatever pot they had when they pulled the pin, and they didn't want a market crash a few weeks before retirement to give them a permanent reduction in income. But now you can put pensions into flexible drawdown, you might have 40 years of of retirement where the ups and downs of the market are worth riding out in the name of higher growth.

I personally have no intention of moving away from equities as I get closer to retirement - I have some recent contributions in short dated UK gilts (essentially cash) because I believe there is a market correction coming, but bonds have been a shite bet for the majority of the time I have been investing in a SIPP.

Important disclaimer - I am a gobshite investing his own money and not a professional financial adviser.

Good point. With drawdown you are going to stay invested for many years to come so a dip/crash just before retirement isn't that serious though it will reduce the amount you can take tax free (though taking full 25% may not be the best idea)

 

[NYMackem]

Good point. With drawdown you are going to stay invested for many years to come so a dip/crash just before retirement isn't that serious though it will reduce the amount you can take tax free (though taking full 25% may not be the best idea)

Yeah, the tax free quandary is an interesting one. Makes sense to use it over time for tax efficiency in one regard, but at the same time there is no guarantee that it will remain tax free forever, so there's another argument that says whip it all out at once to keep HMRC's hands off it.

The poster a few posts above makes an important point too, about having a couple of years' drawdowns in cash equivalents, so you're never in a position of having to sell equities in the immediate aftermath of a crash.