Minimising tax is one objective. Another is having fun. Both should be in your planning.
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[Misc] Retirement
- Thread starter Tim Over Whelmed
- Start date
If you get it right you can really minimise income tax. I simply keep my pension drawdown total within the BRT threshold.
Snap
There are loads of resources on life expectancy (morbidity tables). But no guarantees of course.
Remember that your predicted age of death rises as you get older. So when my Dad was 90 he was expected to live to age 94 whereas as a 59 yr old at the same time, I had an expected age of 85. ... despite being someone who had a healthier/wealthier upbringing, not in a single parent family growing up with Hitler dropping bombs on me and never smoking from age 15-25 like he did.
Also (I heard this from pension professionals) people tend to under-estimate their life expectancy. They understandably think about all their mates and BiLs who die in their early 70s (sympathies to you), but don't tend to think about all those who make it to their high 80s and 90s because they don't socialise so much, so aren't on the radar so much and some are tucked away in old people's homes etc.
So when making decisions like giving up future pension increases for a higher pension now, I look at those tables to assess which way to jump, but I PLAN with the knowledge that a) I might live significantly longer or shorter and b) most people spend significantly less money the older they get (e.g. drive 600 miles a year, not 10,000, not interested in flying to hot holiday destinations, not interested in the latest gadgets etc etc).
Think this is a huge factor. We’re ‘overspending’ now, particularly on loads of expensive holidays, while we still have the will and fitness to do so knowing that this will diminish at some point (don’t really splash on anything else major). Also, with pension funds likely to end up in the IHT trap at some point soon, I’d rather give the money to the kids now so they can use it (while we have a decent chance of surviving 7 years) and spend it, rather than leave it to the government to waste instead.
Blue&WhiteSea
Well-known member
Not quite retirement but I decided I was becoming so obsessed with planning and saving for retirement that it was unhealthy and have instead decided to reduce my working hours so that I no longer work on Fridays.
Financially it doesn't make much difference immediately as the reduction in tax and childcare costs paired with reducing my pension contributions from their current excessive level means I am only £200 per month worse off.
Really looking forward to having 6 hours to myself on a Friday during term time!
Financially it doesn't make much difference immediately as the reduction in tax and childcare costs paired with reducing my pension contributions from their current excessive level means I am only £200 per month worse off.
Really looking forward to having 6 hours to myself on a Friday during term time!
Shropshire Seagull
Well-known member
Great thread this ....
Really good to hear plans and strategies from similar aged chums. I fully retired 3 years ago. Year 1 lived off savings, then activated 2 final salary pensions collectively worth about £12k p/a. Then last year, started a drawdown from my Parminion SIPP £6k p/a but only as tax free element, to minimise income tax.
I didn't know this was possible but Parminion provide me with a Wealth Management Tax Advisor (what's the difference from an IFA?) who we meet f2f to review annually in March
I'll be 67 in 13 months time when my state pension kicks in.
I agree the mindset thing. The last 20 years of my working life were as an IT contractor and I did it for work/life balance, not the money. Consequently, we learnt to live life switching from frugal to lavish. Now there is minimal income I struggle to break out of frugal mode.
My dad is 97 and mum 91 but I don't have the same health genes they do. Planning would be so much easier if I only knew when I was going to die. I want to enjoy my retirement but don't want to run out of money. How do I change my mindset?
Really good to hear plans and strategies from similar aged chums. I fully retired 3 years ago. Year 1 lived off savings, then activated 2 final salary pensions collectively worth about £12k p/a. Then last year, started a drawdown from my Parminion SIPP £6k p/a but only as tax free element, to minimise income tax.
I didn't know this was possible but Parminion provide me with a Wealth Management Tax Advisor (what's the difference from an IFA?) who we meet f2f to review annually in March
I'll be 67 in 13 months time when my state pension kicks in.
I agree the mindset thing. The last 20 years of my working life were as an IT contractor and I did it for work/life balance, not the money. Consequently, we learnt to live life switching from frugal to lavish. Now there is minimal income I struggle to break out of frugal mode.
My dad is 97 and mum 91 but I don't have the same health genes they do. Planning would be so much easier if I only knew when I was going to die. I want to enjoy my retirement but don't want to run out of money. How do I change my mindset?
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Shropshire Seagull
Well-known member
Nice to do that but NOT a good plan if you are in a defined benefit occupational pension scheme as this will adversely impact what you get when you eventually start to take it.
Ignore this message if you're not in a DB scheme.
Blue&WhiteSea
Well-known member
Wish I was in a DB scheme still but no such luck!
These days most DB schemes are average salary anyway rather than final salary so not so much of an impact on benefits accrued to date with this sort of change
Blue&WhiteSea
Well-known member
Why are you only taking the tax free element? Surely it would be better to leave that for when you have a higher income later in retirement due to the state pension kicking in? Or are you confident that you will not ever go over the higher rate threshold?
Im only just starting to properly save for my pension (41). I have been contributing to a SIPP for 11 years (was on workplace pension before hand) but at a low level as we had house to pay for and mouths to feed.
I plan on sticking as much in as possible over the next few years, keeping it reasonably frugal and letting compound interest do the rest.
Hope to be able to semi retire early 60s and downsize the house - using the work element of my life to fund the fun stuff and the pensiony bit to pay the bills.
I plan on sticking as much in as possible over the next few years, keeping it reasonably frugal and letting compound interest do the rest.
Hope to be able to semi retire early 60s and downsize the house - using the work element of my life to fund the fun stuff and the pensiony bit to pay the bills.
happypig
Staring at the rude boys
Went out with Mrs H for a bit of tea and a beer last night and we were discussing what we wanted now to what we wanted when we first retired in 2020.
When we first "jumped" we thought we would want a new-ish car every 2-3 years and made a list of places we wanted to go.
We changed the car a couple of years ago and both agreed there's no reason to change it any time soon as it suits our needs.
Same for holidays, obviously Covid threw plans into disarray for a while but it made us focus on where we want to go; if funds were unlimited we'd go to India, China, Thailand, maybe USA (when the orange arsehole is gone) but we both agreed we're happy going to sunny spots in Europe and mooching round archeological sites and breathing in the history. We're happy enough staying a cheap hotel/apartment and getting a few more weeks away rather than go to an all-inclusive 5 star once.
So far this year (my health permitting) we've got a week in Fuerteventura in March, Naples in May (Pompeii/Herculaneum), possibly Cornwall for The Eden Project and Helligan lost gardens and we'll book somewhere like Cyprus or Crete in September.
When we first "jumped" we thought we would want a new-ish car every 2-3 years and made a list of places we wanted to go.
We changed the car a couple of years ago and both agreed there's no reason to change it any time soon as it suits our needs.
Same for holidays, obviously Covid threw plans into disarray for a while but it made us focus on where we want to go; if funds were unlimited we'd go to India, China, Thailand, maybe USA (when the orange arsehole is gone) but we both agreed we're happy going to sunny spots in Europe and mooching round archeological sites and breathing in the history. We're happy enough staying a cheap hotel/apartment and getting a few more weeks away rather than go to an all-inclusive 5 star once.
So far this year (my health permitting) we've got a week in Fuerteventura in March, Naples in May (Pompeii/Herculaneum), possibly Cornwall for The Eden Project and Helligan lost gardens and we'll book somewhere like Cyprus or Crete in September.
BrightonCottager
Well-known member
Any views on deferring state pension for a few years? You get more if you do, but presumably have to live longer to justify it?
Daddies_Sauce
Falmer WSL, not a JCL
- Jun 27, 2008
- 899
Why would you? deferring provides a % increase depending on how long you defer currently. However if the grim reaper pops long you have wasted collecting that income stream as it does not (I believe) get paid out to your beneficiaries.
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It’s a simple life expectancy punt I guess - similar in a way to paying up to complete missing years (we did this for Mrs D). I’ll be taking it from day one. If we don’t need the income we’ll pass it on to the kids which can legitimately be done to help avoid IHT.
My sister did one 2 years ago and it was the only time she caught Covid even though she works in a hospital. It was the proverbial floating Petri dish, apparently!
But I’m sure it’s all fine now!
Papa Lazarou
Living in a De Zerbi wonderland
Get in quick before the US ban all vaccines.... it'll become an even greater vector once that takes effect.
LamieRobertson
Not awoke
My decision was no…by coincidence my first payment is due a month today …I requested weekly payments…downside I’ll be an OAP
LamieRobertson
Not awoke
Can you adopt me
Shropshire Seagull
Well-known member
The reason for deferring is often due to existing income. Especially for those (fools?) who carry on working beyond normal retirement age. They don't **need** the state pension income (as they're still working) and if they took it along with their pay, might have PAYE implications like putting their marginal rate into a higher bracket.
Like most, I'll take it from day-1 eligibility (Mar-26 for me), but there are some who love their job / work so much they'd rather keep working ....
Oh, if only we had a crystal ball!