u/Smart_Fee_8759

I would love a sanity check please. I think I can afford to retire tomorrow, but please could I ask for a helpful soul from the reddit to challenge me?

I currently have

• DC pension pot of 530k
• Savings (mainly S&S ISA) 206k
• Zero mortgage

Assumptions:

• I need £31k per annum (based on average actual spend over the last six years)
• For simplicity of the calculations: Everything is in current money; i.e., inflation is covered by investment growth, but I haven't modelled any higher-than-inflation growth.
• I don't need a tax free lump sum when I start taking my pension.
• I will be able to withdraw the DC pension flexibly and so that I can minimise tax.
• I qualify for full state pension which is £12,500 from the age of 67 (checked online)
• Annual tax-free amount is £12,500.
• I am currently 58. For simplicity I am assuming that I will take the full 31k this year as well.
• My parents died at 84 and 91 respectively. I would like there to be money enough to support me for 30 years till I'm 88. After that I'm happy to live on state pension only.
• I am married, but we have separate economies. My wife is 60. She has a DB pension of ~30k p.a. and 400k of savings. She qualifies for full state pension from the age of 67. So she is always going to have more money than me, and therefore for the purpose of this model I am ignoring her.

Calculations

• For the 8 years from age 58 to 66, I will each year take
  • £16,667 from the DC pot (25% tax free = £4,167 and 75% taxable 12,500). Over the 8 hears this reduces the DC pot from £530k to £397k.
  • £14,333 from the savings, reducing the savings over the 8 years from 206k to 91k
  • zero tax payable
• For the 18 years from age 66 to 84, I will each year take
  • £12,500 state pension. Assume the tax free allowance keeps up with this, so zero tax on this and zero allowance after SP.
  • 21,765 from the DC pot (25% tax free = £5,441, remaining £16,324 taxable at 20% tax = £3,625, total after tax = £18,500) , reducing it over the 18 years from 397k to 5k
  • 0 from the savings, meaning that I still have the 91k for any unforeseen major expenses
• For the 6 years from 85 to 89
  • £12,500 state pension
  • £0 from the depleted DC pot (except for the first of these years where I will of course take the 5k that was left)
  • £18,500 from the savings, reducing them to 3k
• From age 90 onwards
  • Only state pension

Question: Does this stack up? Any major flaws in my assumptions or calculations?

The budget of 31k is based on my wife and I both contributing. It costs less per person in a two-person household to live than it does for a single person. I do expect our marriage to continue, but I have thought about what would happen if we, for whatever reason, decide to call it quits.

For this contingency, I have assumed

• My living costs will go up by 25% (i.e., to 38,750) per year as a result of being single
• The assumption from the first calculation that investment growth keeps up with inflation but no more is very pessimistic. Let's instead assume that investment returns inflation + 2% each year
• Worst-case scenario is that the increase kicks in on the day I retire so there is less time to build up a saving of investment growth. In this worst-case scenario, the accumulating growth will be able to fund 10 years of the full 25%. After that, the savings are depleted and the extras I can get from modelling investment growth is reducing year on year by about £400.

Question: Does that sound reasonable? Are there any major flaws in this "contingency" model?