Planning for retirement

[SimonMac]

Not sure if this is the right place, but I want to start to plan to retire / semi-retire youngish so that I can enjoy whatever I want to do i.e. within the next 5 to 10 years.

I have been contributing very little to various pensions, not huge amounts almost negligible really due to having a lot of family commitments / raising a family, but now its all easier, I also have 2 properties, one I live in the other is let but has almost 50% mortgage on it outstanding.

What steps can I do to prepare for a financially secure retirement within 10 years max?
I have a SIPP with standard life, but as above been contributing very little into it like £150 a month for the last 10 years, reason is other commitment also I have very little faith in pensions due to collapses of pension schemes I witnessed in the last couple of decades !!

It depends on your age, retiring anything before 55 (soon to be 57) and none of the "official" pension plans will be open to you so none of the advantages paying from the company bank account will be available.

It also depends on how much money you can start to put away, but at this stage it will have to be quite hefty contributions, max out your ISA's each year and tie them away for 5 years and just keep reinvesting?!

[ASB]

An index-linked annuity would pay about 3% p.a at age 60, so I would suggest you think of saving approx. £1,500,000 if you plan to retire then, or considerably more if you want to give up work earlier. You can of course reduce this sum if your income received from property is significant.

That gives a decent indication of the sort of value of all assets required, however they are made up. It is also possibly relevant to factor in the state pension at the point that is received.

But there is a big gap between that and 43k.

[electronicfur]

43K is £3500 a month, I think that is a reasonable figure to aim for.

So assuming a conservative 5% investment yield, you would need investments of £860k.

A high yield investment portfolio of £860k should do it. See TMF: FAQs / High Yield - Share Strategies for details of such a HYP strategy.

It's one of the strategies I use for my investments, and it doesn't require too much time to run.

[SandyD]

It depends on your age, retiring anything before 55 (soon to be 57) and none of the "official" pension plans will be open to you so none of the advantages paying from the company bank account will be available.

It also depends on how much money you can start to put away, but at this stage it will have to be quite hefty contributions, max out your ISA's each year and tie them away for 5 years and just keep reinvesting?!

Can the ISAs be paid directly from company or does it have to be from my own money withdrawn from the company? If the latter I am assuming if I withdraw extra (i.e. instead of the 43K I withdraw extra to max the ISA - then would that be taxed?)

[ASB]

So assuming a conservative 5% investment yield, you would need investments of £860k.

A high yield investment portfolio of £860k should do it. See TMF: FAQs / High Yield - Share Strategies for details of such a HYP strategy.

It's one of the strategies I use for my investments, and it doesn't require too much time to run.

If 5% is available and secure then that is partly true. The only problem is that it is being eroded by the depreciating value of money. Over 25 years this is substantial. This can be compensated for in some respects by being prepared to gently erode the capital.

[d000hg]

Ultimately it's going to boil down to how much money you've got (and can save in the next 10 years) rather than whether you put it in ISAs, SIPP, etc. Contributing to a pension doesn't magically make free money

Have you worked out how much you need to sustain the lifestyle you want, and how much you have/will have in 10 years?

[SandyD]

Ultimately it's going to boil down to how much money you've got (and can save in the next 10 years) rather than whether you put it in ISAs, SIPP, etc. Contributing to a pension doesn't magically make free money

Have you worked out how much you need to sustain the lifestyle you want, and how much you have/will have in 10 years?

As previously said, am aiming for 43K pa.

Focusing on paying off the mortgage on the let property which will generate most of of my required 43K (but I know with let properties there maybe some nasty maintenance surprises or government reg crap) so am looking for a pension or other method to generate the rest - e.g. an extra 10k pa.

[electronicfur]

If 5% is available and secure then that is partly true. The only problem is that it is being eroded by the depreciating value of money. Over 25 years this is substantial. This can be compensated for in some respects by being prepared to gently erode the capital.

No, that is not the case, this is the beauty of a HYP portfolio. It's aim is to provide an income that grows in line with or above inflation, long term. This is because on average the companies in the portfolio will increase their dividends in line with or above inflation.

[Retro]

No, that is not the case, this is the beauty of a HYP portfolio. It's aim is to provide an income that grows in line with or above inflation, long term. This is because on average the companies in the portfolio will increase their dividends in line with or above inflation.

That may be correct 'on average', but you only get one life and you may have some 'below average' years (e.g. Chinese slowdown, commodity price falls) that could end up costing you dearly. But I do agree that you should try to achieve inflation-beating returns by the best means possible to yourself, taking into account the risks that you are prepared to take to achieve those returns.

[ASB]

No, that is not the case, this is the beauty of a HYP portfolio. It's aim is to provide an income that grows in line with or above inflation, long term. This is because on average the companies in the portfolio will increase their dividends in line with or above inflation.

I am aware of the theory. But dividend can and does change. Dividend cover is very important and a lot of high yielders are not that well covered. Slowdown in the underlying business can cause significant issues.

The yield I get on my TSCO isn't looking too clever. And neither is the capital value.

Of course spreading in a basket will help to alleviate some of the risks.

But, I agree, yield on the capital is important to try and provide a decent income stream.