- May 5, 2024
- Posted by: legaleseblogger
- Category: Related News
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## Financial Planning for Retirement at 57
I will just jump straight in …
### Current Financial Situation
At the age of 33, I am looking forward to retiring at 57. My retirement plan includes a Defined Benefit (DB) pension forecast of £18,000 per year at the age of 57, which will increase with inflation. Additionally, I expect my Stocks and Shares (S&S) and Self-Invested Personal Pension (SIPP) combined to reach £400,000 by the time I am 57. I also aim to be mortgage-free by the age of 55, and my child will be financially independent by then.
### Retirement Income Projection
Considering the 18k DB pension and a projected £16k withdrawal annually, my expected retirement income will be £34,000 per year. My partner is likely to have a similar situation to mine, but she might have a smaller SIPP and ISA due to her cautious approach towards S&S investments.
### Retirement Lifestyle
With my retirement income secured, I plan on leisurely enjoying my retirement with maybe one holiday per year. I have no extravagant hobbies in mind and intend to spend my time relaxing.
### Additional Considerations
I anticipate receiving an inheritance at some point during my retirement, although I have not factored it into my current financial plan.
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Are you sure the £18k accounts for early retirement? If it is £18k at NPA, you’re probably looking at £9k for NPA-10.
Will you be taking a tax-free lump sum from the DB? If so, that will further reduce your annual payment.
Similarly, will you be taking the lump sum from your SIPP?
You will pay income tax (but not NI) on your pension income – that includes your DB and SIPP. Have you accounted for that?
Have you paid enough NI to get your full state pension? If so, you should add that in to your calculations.
If all your calculations are correct, your £34k will be about £30k after tax. Assuming your partner also gets the same, that’s £60k per year to live on. Which, I would hope, pays for more than one holiday and perhaps indulging in an expensive hobby.
As a 24 year old who lives at home, don’t bank on that.
The economy is tough and wages are awful. I work full time and cannot move out. Even a 15% deposit mortgage would be most of my monthly wage. I’m trying my hardest to increase my wage, but it’s tough.
A couple of things, but nothing catastrophic.
You seem to be using a 4% SWR. I don’t believe 4% is as applicable to someone in the UK, as it is based on historical data from the US for a US person earning USD, investing in USD, with costs being incurred in USD. So if you are using a simple single value drawdown rate I would suggest you utilise 3.5% to 3.75%. Remember it is always better to under promise and over deliver.
There can be way more to retirement planning, but a lot of that can probably wait until you are much closer to your retirement target; for example how you manage sequence of returns risk, what drawdown methodology will you follow?
There is this retirement income analysis which is update each year, that offers a little substance to income levels in retirement, but as someone once said *”we are all different”* …
https://www.lboro.ac.uk/media-centre/press-releases/2024/february/latestretirementlivingstandardsshowchangeofukpublicexpectations/
Investigate the terms for extra contributions to your pension. It might look quite attractive to buy extra years pension if you can do that.
Are your projections in today’s money (I.e. adjusted for inflation) or future values? 24 years of inflation would make a huge difference. I would have expected the DB pension projection to be inflation adjusted, but I’m not sure about your other funds?
May be a daft question, what do your figures look like to get your S&S and SIPP to £400k? How much are you adding each year, what return are you forecasting?
Your plan is very similar to mine. I have a higher % in the ISA than you but otherwise very similar. Things I’d check / make sure you’ve accounted for. Double check the DB is going to pay that much and you know what the growth over time is. The state pension fell badly behind the cost of living because it was linked to inflation hence why the triple lock was brought in. You’re probably basing withdrawal on 4% being safe but I think that’s optimistic now, I assume 3.5% is the upper limit. I don’t think assuming your kid will be financially independent at 24 is unreasonable but you might need to revise your plans by a year or two when the time comes. You should incorporate the state pension into you calculation, it’s a reasonable fraction of what you are looking to withdraw each year. Do some scenario planning with your wife about what happens if you find your investments doing really well / really badly. It’s better to have talked about things like that before you experience them.
Retiring at 57 with those numbers is not ambitious at all. You’ll be fine.
Hi /u/Oden908, based on your post the following pages from our wiki may be relevant:
* https://ukpersonal.finance/lump-sum/
* https://ukpersonal.finance/pensions/
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I think you’ve mixed numbers from the future with numbers form today – e.g. the £18k is going to be inflation adjusted, but the withdrawal from £400k is not, so you can add them together. You need to dial the £16k back down to what it would be worth today. I.e. £400k is not going to be worth anywhere near as much as it is today, in 27 years time.
I retired at 62 with an income similar to your projection. I can live very comfortably on this. I also have 100k in an ISA which I have earmarked for helping my two adult children get on the housing ladder, as it is unlikely that they will be able to save for a deposit and pay rent. This was funded by downsizing to a small house in a picturesque part of the country with lots of hiking activities, but it also means that my children can’t live rent free with me to save money, unless they land fully remote jobs.
Though you assume your SIM will be financially independent I would suggest helping him onto the housing ladder either by letting him live with you while working and put his “rent” into an account or by building up and earmarking savings.
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Looks like a decent enough plan! What is your current split between S&S ISAs and SIPPs? Are you continuing to contribute?
Have you opened a LISA – or looked into them?
And here’s me, who never wants to retire 😅
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Yes it’s reasonable, it’s extremely comfortable.
As someone in their 20s. Financially stable but when there’s things like Weddings/ house purchase. Help from parents is crucial.
So those years after you finished your mortgage, you could work until 60 with the secret mindset of having a lump sum for the big occasions