Topic Title: Reader Case Study - Can I comfortably retire this summer?
Life Situation: UK based, married, no dependents other than a gloriously bonkers black labrador, myself and OH are 46 years old.
Background:
Our plan has been for both myself and OH to retire in June 2022. My work has been really tough lately and it feels like the end of the road mentally. Have been there 22 years and it’s undergoing some massive changes and I’m looking for ways out. Luckily my FIRE planning has given some options. My OH is happy to continue working for another couple of years, and possibly even beyond, and is supportive of me to stop working if I choose. Thinking about stopping June 2020 and looking for some thoughts. It's weird, you read hundreds of these but when it is yourself, it's difficult to get perspective.
Gross Salary/Wages: Me £55K, OH £30K
Net Income: Me £40K, OH £25K
Current expenses: £26K per year (Comfortable, includes 2 moderate holidays per year etc.)
Expected ER expenses: £25K (some travel and dog care will no longer be required, includes voluntary NI contributions). However, we would prefer 30K when we both retire for some travel fun, at least at first.
Current Assets: Amount & description -
£380K in ISA’s/GIA’s (accessible now) allocated 45/55 equity/non-equity
£150K in Defined Contribution Pensions (accessible from 58) allocated 80/20 equity/non-equity
£15K per year (DB Pension RPI linked) for me from 60. Widows pension 66%
£9.5K per year (DB Pension CPI linked) for OH from 60. Widows pension 50%
£3.5K per year (DB Pension CPI linked) for OH from State Pension Age (likely 68) Widows pension 50%
? in State Pension from ?
Paid off house which we are both happy remaining in long term
Term life insurance for me until 55 of £100K.
Liabilities: none
New plan timeline:
Age 46-47 - live on OH’s £25K net income then OH retires too.
48-60 - ISA/GIA’s should be £400K by this summer, then defer any withdrawal for 2 years. Cautious asset allocation of 40/60 so low growth or loss potential. Once OH retires live on inflation adjusted £30K per year. This should be tax free.
60-67 - £15K + £9.5K per year + around £5K per year from DC pension (3% of £150K although will likely have grown by then) = £29.5K
68+ 29.5K + £3.5K
State Pension not included as not comfortable relying on any forecasts this far out, but likely some amount at sometime.
Renew term life insurance at 55 to 68 for DB Pension £150Kish to cover risk of me dying as widows DB pension would reduce OH income from £15K to £10K per annum. At 68 OH has additional pension kicking in. OH is the spendypants so I am less concerned about the drop in my income if the opposite happened.
Risks -
OH has to leave work early - probability low, Also, first 6 months off would be full pay and next 6 months at half pay.
Stock crash/high inflation - this mainly affects the years until 60. Mitigated by cautious asset allocation for that stash, bond tent, and income projection at 20% above needs. Plan is to use the 400K pot only for this period but in emergency the DC Pension pot should be accessible at 58 (depending on how the government feel). Firesim has success rating at 93%, and my trusty spreadsheet has the portfolio survive with annual figures from the 2000 crash onwards.
Death reduces DB pensions - risk covered by lump sum in Term Life insurance.
Specific Question(s) - Does this seem sensible ? Any risks you can see that I have not thought of ? I’ve been so focused on my original plan that it’s difficult to be objective as to whether this is sensible or if I am being rash so looking for some independent input.