When You Retire ? (2 Viewers)

[Astute]

completely agree.
Again maybe the advantage of owning own companies - stressful in many ways but the freedom/opportunity to manage own time better.
In my case there is a slight fear factor of when my father sold up and retired from running his companies in his late 60s. Went downhill pretty fast when there wasn't the high level of day-to-day stimulation. sadly dementia set in pretty quickly and he's a shell of the man he used to be.
Again father-in-law was a journalist who worked on into his early 70s. Sadly again dementia set in when he stopped working and led to his death 18 months later.
A cruel disease dementia.

Have seen it myself.

The only good thing I ever took from seeing anyone suffering from dementia is that towards the final stages they didn't know what was happening. They will tell you what they have told you 5 minutes ago and 5 minutes before that. Very hard for a family to take seeing a shadow of a person before them.

 

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[Grendel]

You said 30% invested in shares was low risk and 30% to 50% was medium risk. You were right on the part of 30% invested in shares is medium risk.

Again low risk is trying to match what you would get from a cash account. Low risk is still a risk. Like company loans or government bonds.

The stock market is a risk higher than low risk. And putting about a third of your money into medium risk doesn't become low risk.

If you went to an independent financial adviser who wasn't looking at investing on your behalf he would tell you to get all of your investment out of shares at least 10 years before retirement. He would tell you to go low risk.

But I repeat some shares are hedged which makes it a lower risk as agreements are made on growth streams - so there is a degree of safety. 10% would generate nothing

The purpose of the provider is to assess the areas of investment to meet the need. Average growth in equity funds has been over 4% per annum in the last 10 years

 

[Grendel]

The other advantage of fund withdrawal is the benefit to families in the case of death

 

[Astute]

Definitely - the earlier you do it the longer the pot gets invested and the more you get to retire on. No idea how old you are or if you're employed/self-employed but if you're an employee definitely look at a works pension if for no reason than the contributions your employer will make too. Put the highest percentage you can afford in as usually the amount the employer puts in goes up the more you put in.

Don't worry about being stuck with their provider though, as you can move it or transfer it from them nearer your retirement if you want. You don't even have to take an annuity anymore with defined contribution schemes (which pretty much all schemes have been for a number of years).

Personally I wouldn't go too high risk unless you're really willing/can afford to lose the money - low to medium risk is a perfectly fine strategy as long as you're patient - much of the big increases in the pot happen in the last 10 years or so and it can feel like you're not getting much added value at the start. Don't go putting all your eggs in one basket either if you're going down a personal pension plan/SIPP - make sure you get a diversified portfolio and/or check that any financial advisor etc is registered with the FCA.

At the moment there's tons of uncertainty because of Brexit and Donald Trump keeps on saying and doing dumb things that spooks investors and the markets (though if you go medium-low risk you won't have that much put in stocks anyway - mostly likely bonds, property and cash) so there's quite a few giving negative returns on investment over the past couple of years but as I say it's more important the length of time you invest more than anything. There'll be some really good returns to even it out over the years.

*This is based on the rules now and those can of course change over time.

Only thing I could add to that is the other good reason for putting money into a pension is that it goes in before tax is paid. For every £80 You put in it is like the taxman putting in £20. And if you are a higher rate tax payer it is even better. That starts at just over 46k IIRC. So every £100 You put in really only costs you £60. So if your company only matches what you put in and you invest £300 a month you will invest £600 each month altogether for an outlay of £180 out of your pocket.

 

[Sky_Blue_Dreamer]

Always take your full tax free quota though. Even if you don't need it all at that point and the plan is to reinvest, take what you can

Yep - the amount the pension is reduced by when taking the tax free quota is neglible, and given it's tax free is effectively nothing. If you can afford to set it aside and re-invest the tax free sum it's a far better return.

 

[Astute]

But I repeat some shares are hedged which makes it a lower risk as agreements are made on growth streams - so there is a degree of safety. 10% would generate nothing

The purpose of the provider is to assess the areas of investment to meet the need. Average growth in equity funds has been over 4% per annum in the last 10 years

Some are yes.

But it still doesn't make a 30% investment in shares as low risk.

 

[Gazolba]

You guys in the UK don't know how lucky you are.
It's difficult to retire early in the US because health insurance is tied to employment.
No employer = no health insurance.
And buying private health insurance is very expensive.

 

[Sky_Blue_Dreamer]

Only thing I could add to that is the other good reason for putting money into a pension is that it goes in before tax is paid. For every £80 You put in it is like the taxman putting in £20. And if you are a higher rate tax payer it is even better. That starts at just over 46k IIRC. So every £100 You put in really only costs you £60. So if your company only matches what you put in and you invest £300 a month you will invest £600 each month altogether for an outlay of £180 out of your pocket.

Yeah, the tax advantages are another great reason to do so. This can change but they tend to want people to invest for retirement so don't mess about too much with the tax breaks (but do from time to time just to see what they can get away with). Think Higher rate tax will be £50k as of next year

 

[Astute]

Yep - the amount the pension is reduced by when taking the tax free quota is neglible, and given it's tax free is effectively nothing. If you can afford to set it aside and re-invest the tax free sum it's a far better return.

It reduces it by 25% normally. The same as what you take out tax free.

It is all to do with if you can afford to leave the tax free in and how long you think you will live. But nearly everyone is better off taking theirs out.

I am considering leaving mine alone. My main pension gives the wife a pension for life. It would guarantee her later years if I go before her. The other pot will all be taken as cash. It will be done tax efficiently so over about 7 years. My FS pot will only be 75% taxable with not taking the tax free. I need to keep all withdrawals below £46k a year including all other incomes.

 

[Astute]

Yeah, the tax advantages are another great reason to do so. This can change but they tend to want people to invest for retirement so don't mess about too much with the tax breaks (but do from time to time just to see what they can get away with). Think Higher rate tax will be £50k as of next year

Only if Labour get in.

If anything the Tories might lower the 50% limit. But raising the higher rate over 40% would mainly hit Tory voters.

 

[rob9872]

It reduces it by 25% normally. The same as what you take out tax free.

It is all to do with if you can afford to leave the tax free in and how long you think you will live. But nearly everyone is better off taking theirs out.

I am considering leaving mine alone. My main pension gives the wife a pension for life. It would guarantee her later years if I go before her. The other pot will all be taken as cash. It will be done tax efficiently so over about 7 years. My FS pot will only be 75% taxable with not taking the tax free. I need to keep all withdrawals below £46k a year including all other incomes.

Just the £46k p/a with no mortgage and no work expenses - how will you manage?

 

[Sky_Blue_Dreamer]

You guys in the UK don't know how lucky you are.
It's difficult to retire early in the US because health insurance is tied to employment.
No employer = no health insurance.
And buying private health insurance is very expensive.

It's why, for all the faults of the NHS, I think it's a far better system than private healthcare like the USA. Effectively your right to health is linked to how rich you are, and that is just massively wrong. They can pass laws letting the air you breathe and water you drink be polluted, your food can be prepared using processes that are far from ideal, just so the rich can make higher profits, but when all that affects the public's health, tough.

 

[rob9872]

Only if Labour get in.

If anything the Tories might lower the 50% limit. But raising the higher rate over 40% would mainly hit Tory voters.

As the low level thresholds have been raised, it's the middle earners who have suffered and were effectively been squeezed.

Tbf they're only redressing the balance over the past few years getting it from £42k to £50 in chunks and was long overdue. We have lots of people in that bracket here who have cars and get hit when not earning great money - this brings a number of them back below. ​

 

[Sky_Blue_Dreamer]

Only if Labour get in.

If anything the Tories might lower the 50% limit. But raising the higher rate over 40% would mainly hit Tory voters.

I meant higher rate would start at £50k next year, taking into account personal allowance, not the tax rate. Sorry!

Even the additional rate isn't 50% at the moment, but as that for £150k+pa I'm going to assume most people aren't going to be that affected by it!

 

[Grendel]

Some are yes.

But it still doesn't make a 30% investment in shares as low risk.

Well it does but anyway

 

[Astute]

Just the £46k p/a with no mortgage and no work expenses - how will you manage?

That is money to be invested out of a pension. It isn't income.

If you have a drawdown pot you can't take full control of it in your own account until you take it out. If you take it all out in one go you get hit by the 40% tax rate at about 46k in the same tax year. This includes any income. And if there is more than what would take you over the 50% limit of £150,000 You would then lose 50% to tax.

Every penny you take out counts as income. If you have a pension pot of just 200k after taking your tax free and nothing else like a FS pension and took it out in one go it would add to all your income that year. They say the average wage these days us about 25k. So they would count your income as 225k.

First 12k tax free.
Up to 46k 20%
Up to 150k 40%
Rest 50%

12k = 12k
Next 34k @ 20% = 27.2k paid after tax.
Next 104k @ 40% = 62.4k paid after tax.
Next 75k @ 50% = 37.5k paid after tax.

So you will have paid 85.9k in tax. But only 2.6k is payable from earnings. So if you took out your 200k pot in one go you would lose 83.3k of it in tax. So you would be left with 116.7k.

But if you take it out over several years and never go over 46k a year you would lose 40k in tax. That is 160k in your pocket. Better off by 43.3k.

Hope this helps.

 

[tisza]

I hope it all works out for you. We don't know what is going to happen with Brexit and hopefully those that want to move to other EU countries can, I am sure if people are financially secure then there is no reason to stop them moving over, I can't remember what it was like before we joined the EU but we had Brits living in Spain long before we joined.

My friends owned a 10 bedroom ski lodge and built a smaller one in the back garden and sold the big one, they live on 1 side and they rent out the other side. The electricians bill was 25,000 euros per side!!

I am 57 and ready to retire but my wife who is 50 loves her job and I can see her working till she is 67. The thought of me retiring at 67 is just depressing!

As someone with a Hungarian wife and who has business interests in Hungary this Brexit messing about is a nightmare for any sort of planning in the short (and even mid-term).
Spain has basically already agreed to pretty well protect current British expats but across EU it is on a country-by-country basis and not a lot of info available. Those wanting to move to EU after 2021 could find it more difficult.

 

[Astute]

As someone with a Hungarian wife and who has business interests in Hungary this Brexit messing about is a nightmare for any sort of planning in the short (and even mid-term).
Spain has basically already agreed to pretty well protect current British expats but across EU it is on a country-by-country basis and not a lot of info available. Those wanting to move to EU after 2021 could find it more difficult.

Know the feeling but maybe not as bad as for yourself.

Brexit depended I am moving my family to France and I am staying here to work. We are going to be apart as a family for years if we do it. I will spend nearly 3 weeks every 2 months and have a few days over there sometimes. But certainly not ideal.

 

[Captain Dart]

Only thing I could add to that is the other good reason for putting money into a pension is that it goes in before tax is paid. For every £80 You put in it is like the taxman putting in £20. And if you are a higher rate tax payer it is even better. That starts at just over 46k IIRC. So every £100 You put in really only costs you £60. So if your company only matches what you put in and you invest £300 a month you will invest £600 each month altogether for an outlay of £180 out of your pocket.

Earlier I posted link to calculator on martin lewis web site. Does this calc for you based on real figures.

 

[Astute]

Earlier I posted link to calculator on martin lewis web site. Does this calc for you based on real figures.

Pension calculators are good. But they don't explain much on how it works.

Mathematics and investing are two of my favourite subjects. Pensions look very complex but once you understand the basics they are quite easy.

The hard part is how to invest. You can pay someone a percentage of your pot every year to look after it or you can make plans on how to look after it yourself. All you have to do is invest it in a similar way than would be done by a financial adviser. And he takes his cut each year on the amount that hasn't been taxed yet.

But looking after your own money is only for those that know what they are doing. There are plenty of conmen and bad investments out there. And the major point is once it has gone it is gone. No chance to build it up again.

 

[Houchens Head]

I was made redundant from Rolls Royce in 2010 aged 57. Missus was also made redundant from Civil Service (Tile Hill Job Centre, ironically!). I would like to have gone back to work somewhere, but with my health record, no-one was going to employ me over a fitter, much younger person. So we moved to the Isle of Wight and lived there for 8 years until last July.
I get my State Pension plus a tiny pension from when I was a bus driver. Missus gets her State Pension plus Civil Service Pension. We seem to be better off now than when we were both working. No mortgage any more either. Sold our house when we left Tile Hill. Now live in a very small but comfortable retirement complex. Free heating, free water and use as much hot water as we want. Cheapish to rent so we're quite happy. Would still like to move back to nearer Cov though. Might look at that in the summer.

 

[Grendel]

I’m leaving at the end of this month voluntarily and it’s causing far more personal angst than I imagined.

I haven’t quite broke it to my family that I’ll be seeking new employment very soon

 

[ovduk78]

I’m leaving at the end of this month voluntarily and it’s causing far more personal angst than I imagined.
I haven’t quite broke it to my family that I’ll be seeking new employment very soon

Have you taken the VR from JLR? Weren't you talking of retiring and moving anyway?

 

[Captain Dart]

I’m leaving at the end of this month voluntarily and it’s causing far more personal angst than I imagined.

I haven’t quite broke it to my family that I’ll be seeking new employment very soon

Took me a while to properly make the decision, it is a big lifestyle change but glad I did it now. Right one more cup of coffee and I'm off fell walking this morning.

 

[tisza]

I’m leaving at the end of this month voluntarily and it’s causing far more personal angst than I imagined.

I haven’t quite broke it to my family that I’ll be seeking new employment very soon

Difficult situation. I wish you good luck.

 

[tisza]

we're worried about our pensions & retirement poor old Zuckerberg lost 9bn last year - down to his last 60bn. It's rough out there

 

[workdad]

My brother(68), and pretty fit, eat well, exercised regularly had a stroke in November.OK , but lost his sight in one eye. This has made me seriously consider my plans. I am 58 soon, and we are going to try Spain for 3 months later this year. I am lucky that I can have an unpaid break from work. We are renting a two bed house. Don't think we would move permanently, but if all goes well, I will retire end of next year and rent in Spain for the winter and spring months.Suppose we were the lucky generation regarding company pension and property prices.

 

[skybluesam66]

Pension recycling is also a way to boost your pension

there are rules around it so it is restricted, but you can put up to 30% of your lump sum, back into your pension scheme to take additional tax relief

If you are a 40% tax payer, and take the money back out the following year @ a 20% tax rate, you can turn a 25k lump sum on a 100k pension pot, into £28k+

it is also legal

 

[bezzer]

Pension recycling is also a way to boost your pension

there are rules around it so it is restricted, but you can put up to 30% of your lump sum, back into your pension scheme to take additional tax relief

If you are a 40% tax payer, and take the money back out the following year @ a 20% tax rate, you can turn a 25k lump sum on a 100k pension pot, into £28k+

it is also legal

Be very, very careful with Pension recycling. You could be hit with a very large tax bill if you don't meet all the criteria.

 

[Astute]

Pension recycling is also a way to boost your pension

there are rules around it so it is restricted, but you can put up to 30% of your lump sum, back into your pension scheme to take additional tax relief

If you are a 40% tax payer, and take the money back out the following year @ a 20% tax rate, you can turn a 25k lump sum on a 100k pension pot, into £28k+

it is also legal

I think you have got your wires crossed. Recycling isn't legal if certain things happen. And I don't think the amount you mention would be legal if other conditions were also met. You could end up with a massive tax bill. I think one of the conditions is premeditated. As in if you took your lump sum with the plan of putting it back into a pension for tax reasons.

 

[Grendel]

Have you taken the VR from JLR? Weren't you talking of retiring and moving anyway?

Correct on both counts - the deal made no sense to stay. I have taken the DBS out as really if you want to retire early the penalties imposed due to the calculation make no sense to leave it in.

I'm buying cars for the first time in 25 years

Still I can't give it up I'm afraid - already applied for one job in a rival manufacturer

 

[Mild-Mannered Janitor]

I was lucky enough to join when an apprentice, always thought it’s free money from the company.
Best thing I ever did, even though I have worked at a few companies, have always joined and taken the money from them and then consolidate into one scheme if I move, any loss on transfer has always been less than the value the company contributed.

Another thing if affordable and it’s not easy but when I used to get a raise at work by 1-3% then I tried to increase my pension by at least 1% as it was money I didn’t have before.
At 49, working from 16 then I am very lucky to have a good sum, I am hoping to finish at 55 and this is along with having had good holidays with the kids, season tickets and some fun along the way, it can be done.

 

[skybluesam66]

pension recycling has a limit of 30% of the withdrawal in effect
so there are limits - didnt want to go into them here - but you can get the uplift i mention
(if there were no limits, the uplift could be significant)

 

[skybluetony176]

My brother(68), and pretty fit, eat well, exercised regularly had a stroke in November.OK , but lost his sight in one eye. This has made me seriously consider my plans. I am 58 soon, and we are going to try Spain for 3 months later this year. I am lucky that I can have an unpaid break from work. We are renting a two bed house. Don't think we would move permanently, but if all goes well, I will retire end of next year and rent in Spain for the winter and spring months.Suppose we were the lucky generation regarding company pension and property prices.

Whereabouts in Spain?

PS sorry to hear about your brother.

 

[Mr Panda]

I'm a long way off retirement but have always got one eye on the future and giving myself the best chances later on in life. Been paying into a local government pension pot since about the age of 19. I'm not sure how good it is anymore or what I can really expect later on.

Specifically you guys who are coming to the end of your careers now, if you were suddenly in your mid twenties again would you do anything different to make retirement that bit more comfortable?