Originally posted by Mehmeh
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Reply to: retirement planning for contractors...
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Previously on "retirement planning for contractors..."
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Originally posted by Mehmeh View PostIt's all about moving abroad in retirement! My folks are out of the country for the 181+ days and don't pay tax on their pensions.
If you go to some countries you are stuck with the state pension you got when you left the UK and the amount is never increased.
Originally posted by Mehmeh View PostI'm not investing anything into traditional pensions anymore (have a few grand in an old company one). My retirement will be between a few buy2lets and traditional investments, I should hopefully be retired way before company pensions allow to be payed out (it's 55 right?).
The state pension retirement age is going up to 66 then 67, 68, 69 and probably up to 72. So don't be surprised if this age goes up as well!
Originally posted by Mehmeh View PostStep 1: Retire
Step 2: Flog house and move abroad.
Step 3: Live like a king in a cheap place.
Unfortunately the value of the pound decreased and food costs around the world increased.
Originally posted by Mehmeh View PostAlternative:
All my investments F*** up and I'm sweeping the streets in east london at 70.
Could be worse!
Though those working in B&Q and Tescos looked the most miserable.
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I'm considering moving to Cyprus on retirement as mainly, I like it and have friends there and secondly, current tax on pensions is something like 5% over €3400 pa or something close to that...
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no idea. I'll find out, they were pointed to it by a couple of my dads old collegues who had been doing it for ages.
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Originally posted by Mehmeh View PostIt's all about moving abroad in retirement! My folks are out of the country for the 181+ days and don't pay tax on their pensions.
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It's all about moving abroad in retirement! My folks are out of the country for the 181+ days and don't pay tax on their pensions.
I'm not investing anything into traditional pensions anymore (have a few grand in an old company one). My retirement will be between a few buy2lets and traditional investments, I should hopefully be retired way before company pensions allow to be payed out (it's 55 right?).
Step 1: Retire
Step 2: Flog house and move abroad.
Step 3: Live like a king in a cheap place.
Alternative:
All my investments F*** up and I'm sweeping the streets in east london at 70.
Could be worse!
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I'd put property in equation also stocks can be volatile, so make sure your ISA nad SIPP have different portfolios
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anyh thoughts on the pension / ISA / direct investment mix. Mine is a 3rd for each...
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Originally posted by BlasterBates View Postadd in 3% inflation
so for the equivalent of 20 grand then you need approx 40 grand in 20 years time
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Originally posted by Pondlife View PostWhat makes you think that you will get a state pension in 20 years time if you already have provisions?
What makes you think you can live off 20K/yr in 20 years time?
the 20K per year goes up with compound interest/re-investment of dividends...
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Twenty grand is quite a lot if your retired. Your commuting, work, housing costs would all be less. As long as you can heat/elec/council tax a place your living cheaply.
Have you factored in this house you bought for £30k and are going to tell for £12million?
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add in 3% inflation
so for the equivalent of 20 grand then you need approx 40 grand in 20 years time
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What makes you think that you will get a state pension in 20 years time if you already have provisions?
What makes you think you can live off 20K/yr in 20 years time?
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retirement planning for contractors...
Below is a basic retirement plan.
It would be interesting to get any views...
The goal is for a retirement income of approx 20k (that's compared with the average of 14k today)
Income made up as follows:
[1] state pension
INCOME = 6-6.5k average
[2] Company / private pension from previous employment (many contractors have these from permie days)
INCOME = 4k - 5K.
Needs an equivalent purchase fund of approx 75-100k.
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The income above should be pretty much tax-free as it's within the and 10% band.
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[3] ISAs (Mix of cash/stocks and shares)
INCOME = 5k.
This would be a fund of 100k, generating approx 5% annual tax-free return.
Much of this money,except for the cash, might have been invested in stocks and shares / equities earlier on for growth.
[4] Direct investment / Self Invested Personal Pension (SIPP)
INCOME = 5k (shares or equity unit trusts/Investment Trusts/ETF's/Bonds/Property etc etc).
Once again 100K producing approx 5K return per annum
(Dividend income is free of additional tax and any top up is covered by the CGT tax free allowance.)
************************************************** ******************
So, in a nutshell you need 3 pots of approx 100K returning 5K per year
and your state pension to make about 20K per year
************************************************** ******************
(This 20k income will be below the threshold at which you are deemed well-off and start losing your age allowance, assuming age allowance is around by the time we retire!)
Ofcourse everyones circumstances will be different. If you don't have the Company / private pension from previous employment
Then you can start a SIPP (in [2] above) and use Direct Investment for [4] (or double up on the ISAs [3]
which would take about 20 years of max contributions).
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Points to be aware of:
1 - Taxable income in retirement above £20,100 increases your tax burden.
For every £2 above £20,100, your age allowance is reduced by £1.
*** Income from ISAs does not count towards your taxable income.
(savings account interest goes towards the £20,100 so dont be too heavy in cash).
2 - age allowances increase annually. So this £10k target could well be £15k in 10 years time and age allowance reduction £25k. Work in real terms (with inflation taken into account) to keep yourself on track.
3 - pension tax relief at 22% is valuable in this case as you get 22% going in but pay nothing or just 10% coming out.
- You also get 25% tax free lump sum on retirement
- And ... you reduce your corporation tax liability without affecting the tax/ni contributions
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