I know on one level this is a ridiculous question but I’m going to ask it anyway
what amount of pension savings do you think k you could live off if you were to retire at 57
Im asking because I read somewhere that people are over cautious in this regard when it comes to draw down .
Maybe a better question or asking it a different way is . If you had 840k how much might you consider drawing down a year
If you only had that money on instant access you could earn @£38,000 pa interest. Put us much away tax free in ISAs, PSBs & in the name of the lower tax payer.
If you invest you could earn a lot more. If no mortgage or rent drawing £3,000 pm is more than comfortable.
I retired at 49 and my capital has gone up in 13 years.
I know on one level this is a ridiculous question but I’m going to ask it anyway
what amount of pension savings do you think k you could live off if you were to retire at 57
Im asking because I read somewhere that people are over cautious in this regard when it comes to draw down .
Maybe a better question or asking it a different way is . If you had 840k how much might you consider drawing down a year
If you only had that money on instant access you could earn @£38,000 pa interest. Put us much away tax free in ISAs, PSBs & in the name of the lower tax payer.
If you invest you could earn a lot more. If no mortgage or rent drawing £3,000 pm is more than comfortable.
I retired at 49 and my capital has gone up in 13 years.
Although £3000 a month is a lot of money and would be enough for me without a mortgage, surely everything depends on your social life?
The £38,000 depends on interest rates being where they are now in the future, which is very unlikely. Perfectly possible they'll drop to say 2.5%, slashing your income, so investing an element elsewhere makes a lot of sense.
I know on one level this is a ridiculous question but I’m going to ask it anyway
what amount of pension savings do you think k you could live off if you were to retire at 57
Im asking because I read somewhere that people are over cautious in this regard when it comes to draw down .
Maybe a better question or asking it a different way is . If you had 840k how much might you consider drawing down a year
If you only had that money on instant access you could earn @£38,000 pa interest. Put us much away tax free in ISAs, PSBs & in the name of the lower tax payer.
If you invest you could earn a lot more. If no mortgage or rent drawing £3,000 pm is more than comfortable.
I retired at 49 and my capital has gone up in 13 years.
Although £3000 a month is a lot of money and would be enough for me without a mortgage, surely everything depends on your social life?
It depends on how good you are with money and savings and investments and how much you spend. Do you invest well, do you look for the best savings rate, do you know how to invest and save tax efficiently?
Someone could have £500K and it would be “gone” in a couple of years.
The £38,000 depends on interest rates being where they are now in the future, which is very unlikely. Perfectly possible they'll drop to say 2.5%, slashing your income, so investing an element elsewhere makes a lot of sense.
A lot depends on your risk profile - if younger then longer-term investments with an element of risk make more sense, but when you're as old as me then I'm not taking any risks! Yes interest rates will likely be as high now as they will be over the coming decade or so and will reduce, but that can be mitigated with longer-term fixes - 4.5% for a five year fix is available right now. Also roll your fixed rate bonds with one maturing most years e.g. some one year, some 2, some 3 and some 5. Max on ISAs if you are able is a no brainer of course.
But I would agree that just relying on interest for income is a risky business - you will need to draw down on capital as well. I expect my capital to reduce gradually and am not looking to just live on investment income, we intend to to spend it all!
I believe if you have more than 23grand of cash/assets you have to pay for it until you run out(or get down to 23 grand?), then government pays for it or if you don’t have any money at all the government pays for it
I believe if you have more than 23grand of cash/assets you have to pay for it until you run out(or get down to 23 grand?), then government pays for it or if you don’t have any money at all the government pays for it
So basically another form of tax
Yes, if you live your life on the streets, never earn, never pay any taxes (extreme scenario) you’d get free care in a care home. If you work bloody hard, save well, have a good pension, a paid for house, pay tax on everything then at 60 you get dementia and go into a care home then eventually you’d lose the lot.
I believe if you have more than 23grand of cash/assets you have to pay for it until you run out(or get down to 23 grand?), then government pays for it or if you don’t have any money at all the government pays for it
So basically another form of tax
Yes, if you live your life on the streets, never earn, never pay any taxes (extreme scenario) you’d get free care in a care home. If you work bloody hard, save well, have a good pension, a paid for house, pay tax on everything then at 60 you get dementia and go into a care home then eventually you’d lose the lot.
And then it would be paid for , so more you earn more you’re affectively taxed , just the way of the world we live in more you earn more you pay
I know on one level this is a ridiculous question but I’m going to ask it anyway
what amount of pension savings do you think k you could live off if you were to retire at 57
Im asking because I read somewhere that people are over cautious in this regard when it comes to draw down .
Maybe a better question or asking it a different way is . If you had 840k how much might you consider drawing down a year
If you only had that money on instant access you could earn @£38,000 pa interest. Put us much away tax free in ISAs, PSBs & in the name of the lower tax payer.
If you invest you could earn a lot more. If no mortgage or rent drawing £3,000 pm is more than comfortable.
I retired at 49 and my capital has gone up in 13 years.
Although £3000 a month is a lot of money and would be enough for me without a mortgage, surely everything depends on your social life?
It depends on how good you are with money and savings and investments and how much you spend. Do you invest well, do you look for the best savings rate, do you know how to invest and save tax efficiently?
Someone could have £500K and it would be “gone” in a couple of years.
Another person may by then have closer to £600K.
Currently we are living off tax free cash drawn down a couple of years ago (but saved in fixed term investments until required), monies from our SIPP’s of £12,570 per year each (so tax free) and we take income from that equating to £3,500 per month which we live on plus it pays for holidays etc. Think as we get older the £3,500 per month will reduce. I’ve worked out the current value of our SIPP’s will last until I’m about 77 (not allowing for increases or decreases in value). I’ve purposely not included our state pensions in my calculations so they are effectively a bonus meaning once they kick in we will take less from our SIPP’s which will give them added longevity. At some point too we will downsize so releasing capital.
The above is all well and good but I still struggle now when deciding should we spend x amount on this or that because it’s always in your mind ‘what if I don’t have enough in later life’? Then what do I do?
Lot worse ‘problems’ to have, I fully realise that and know that I’m ‘lucky’ to have worked bloody hard to be in this position but it’s still a worry to me.
I know on one level this is a ridiculous question but I’m going to ask it anyway
what amount of pension savings do you think k you could live off if you were to retire at 57
Im asking because I read somewhere that people are over cautious in this regard when it comes to draw down .
Maybe a better question or asking it a different way is . If you had 840k how much might you consider drawing down a year
If you only had that money on instant access you could earn @£38,000 pa interest. Put us much away tax free in ISAs, PSBs & in the name of the lower tax payer.
If you invest you could earn a lot more. If no mortgage or rent drawing £3,000 pm is more than comfortable.
I retired at 49 and my capital has gone up in 13 years.
Although £3000 a month is a lot of money and would be enough for me without a mortgage, surely everything depends on your social life?
It depends on how good you are with money and savings and investments and how much you spend. Do you invest well, do you look for the best savings rate, do you know how to invest and save tax efficiently?
Someone could have £500K and it would be “gone” in a couple of years.
Another person may by then have closer to £600K.
Currently we are living off tax free cash drawn down a couple of years ago (but saved in fixed term investments until required), monies from our SIPP’s of £12,570 per year each (so tax free) and we take income from that equating to £3,500 per month which we live on plus it pays for holidays etc. Think as we get older the £3,500 per month will reduce. I’ve worked out the current value of our SIPP’s will last until I’m about 77 (not allowing for increases or decreases in value). I’ve purposely not included our state pensions in my calculations so they are effectively a bonus meaning once they kick in we will take less from our SIPP’s which will give them added longevity. At some point too we will downsize so releasing capital.
The above is all well and good but I still struggle now when deciding should we spend x amount on this or that because it’s always in your mind ‘what if I don’t have enough in later life’? Then what do I do?
Lot worse ‘problems’ to have, I fully realise that and know that I’m ‘lucky’ to have worked bloody hard to be in this position but it’s still a worry to me.
The £38,000 depends on interest rates being where they are now in the future, which is very unlikely. Perfectly possible they'll drop to say 2.5%, slashing your income, so investing an element elsewhere makes a lot of sense.
A lot depends on your risk profile - if younger then longer-term investments with an element of risk make more sense, but when you're as old as me then I'm not taking any risks! Yes interest rates will likely be as high now as they will be over the coming decade or so and will reduce, but that can be mitigated with longer-term fixes - 4.5% for a five year fix is available right now. Also roll your fixed rate bonds with one maturing most years e.g. some one year, some 2, some 3 and some 5. Max on ISAs if you are able is a no brainer of course.
But I would agree that just relying on interest for income is a risky business - you will need to draw down on capital as well. I expect my capital to reduce gradually and am not looking to just live on investment income, we intend to to spend it all!
Spreadsheets are a wonderful thing!!
100%, there's plenty of calculators out there, or indeed simple spreadsheets.
I'm taking my 25% at 57 regardless, my wife has a couple of work final salary pensions that come out at 60 and 67. Bizarrely she'll more than double her income in retirement compared to working!
It's a balance, but I know too many people scared of spending capital and it ends up just racking up more and more, spend it!! Of course be careful with it, don't blow it all at once, but spend what you've worked hard for. You can't take it with you.
I was having this exact conversation with my father in law this morning. When he retired he had savings of around £140k (12 years ago) - he now has just over £200k as he doesn't spend it, I keep telling him to spend it, upgrade the cabin on the cruise he takes every year, new car etc etc. But he struggles with that mindset but I'm slowly getting through (he bought a new piano last year!)
The £38,000 depends on interest rates being where they are now in the future, which is very unlikely. Perfectly possible they'll drop to say 2.5%, slashing your income, so investing an element elsewhere makes a lot of sense.
A lot depends on your risk profile - if younger then longer-term investments with an element of risk make more sense, but when you're as old as me then I'm not taking any risks! Yes interest rates will likely be as high now as they will be over the coming decade or so and will reduce, but that can be mitigated with longer-term fixes - 4.5% for a five year fix is available right now. Also roll your fixed rate bonds with one maturing most years e.g. some one year, some 2, some 3 and some 5. Max on ISAs if you are able is a no brainer of course.
But I would agree that just relying on interest for income is a risky business - you will need to draw down on capital as well. I expect my capital to reduce gradually and am not looking to just live on investment income, we intend to to spend it all!
Spreadsheets are a wonderful thing!!
100%, there's plenty of calculators out there, or indeed simple spreadsheets.
I'm taking my 25% at 57 regardless, my wife has a couple of work final salary pensions that come out at 60 and 67. Bizarrely she'll more than double her income in retirement compared to working!
It's a balance, but I know too many people scared of spending capital and it ends up just racking up more and more, spend it!! Of course be careful with it, don't blow it all at once, but spend what you've worked hard for. You can't take it with you.
I was having this exact conversation with my father in law this morning. When he retired he had savings of around £140k (12 years ago) - he now has just over £200k as he doesn't spend it, I keep telling him to spend it, upgrade the cabin on the cruise he takes every year, new car etc etc. But he struggles with that mindset but I'm slowly getting through (he bought a new piano last year!)
I'm pretty sure it's a generational thing - I've got some years on you but I share your views. Maybe it's a child of the 60s (late 50s) thing - you don't have to do what your parents would do!
The £38,000 depends on interest rates being where they are now in the future, which is very unlikely. Perfectly possible they'll drop to say 2.5%, slashing your income, so investing an element elsewhere makes a lot of sense.
A lot depends on your risk profile - if younger then longer-term investments with an element of risk make more sense, but when you're as old as me then I'm not taking any risks! Yes interest rates will likely be as high now as they will be over the coming decade or so and will reduce, but that can be mitigated with longer-term fixes - 4.5% for a five year fix is available right now. Also roll your fixed rate bonds with one maturing most years e.g. some one year, some 2, some 3 and some 5. Max on ISAs if you are able is a no brainer of course.
But I would agree that just relying on interest for income is a risky business - you will need to draw down on capital as well. I expect my capital to reduce gradually and am not looking to just live on investment income, we intend to to spend it all!
Spreadsheets are a wonderful thing!!
100%, there's plenty of calculators out there, or indeed simple spreadsheets.
I'm taking my 25% at 57 regardless, my wife has a couple of work final salary pensions that come out at 60 and 67. Bizarrely she'll more than double her income in retirement compared to working!
It's a balance, but I know too many people scared of spending capital and it ends up just racking up more and more, spend it!! Of course be careful with it, don't blow it all at once, but spend what you've worked hard for. You can't take it with you.
I was having this exact conversation with my father in law this morning. When he retired he had savings of around £140k (12 years ago) - he now has just over £200k as he doesn't spend it, I keep telling him to spend it, upgrade the cabin on the cruise he takes every year, new car etc etc. But he struggles with that mindset but I'm slowly getting through (he bought a new piano last year!)
I'm pretty sure it's a generational thing - I've got some years on you but I share your views. Maybe it's a child of the 60s (late 50s) thing - you don't have to do what your parents would do!
For my father in law I think it stems from financial hardship. Life was very tough financially from top and tailing all his childhood, joining the merchant navy at 16. When my mother in law died in 1998 (he was 51) he didn't have enough money for the funeral in savings, although he did have a house almost mortgage free (valued then at about £100k, mortgage about £20k). He a year later moved to a smaller house for about £80k, I paid off his mortgage for him so that he had some savings behind him for a rainy day.
He then became a bus driver, still lived very frugally, but managed to save up a reasonable pension and some savings. But he'll still spend weeks fixing something when £200 would fix it/replace it straight away. I lost it last month when he was messing around with the soldering iron on his oven (from a safety perspective!) so marched him to Curry's where he bought........ the cheapest oven they sell! But at least he bought one rather than blowing the house up!
I agree it's generational, but many from that generation had very tough financial times and it's hard to change that frugality.
I believe if you have more than 23grand of cash/assets you have to pay for it until you run out(or get down to 23 grand?), then government pays for it or if you don’t have any money at all the government pays for it
So basically another form of tax
Yes, if you live your life on the streets, never earn, never pay any taxes (extreme scenario) you’d get free care in a care home. If you work bloody hard, save well, have a good pension, a paid for house, pay tax on everything then at 60 you get dementia and go into a care home then eventually you’d lose the lot.
And then it would be paid for , so more you earn more you’re affectively taxed , just the way of the world we live in more you earn more you pay
Apologies I am going this conversation late I thought they were going to put in a limit on how much a person would have to pay. With a cap of around £89,500 or am I imagining this?
I believe if you have more than 23grand of cash/assets you have to pay for it until you run out(or get down to 23 grand?), then government pays for it or if you don’t have any money at all the government pays for it
So basically another form of tax
Yes, if you live your life on the streets, never earn, never pay any taxes (extreme scenario) you’d get free care in a care home. If you work bloody hard, save well, have a good pension, a paid for house, pay tax on everything then at 60 you get dementia and go into a care home then eventually you’d lose the lot.
And then it would be paid for , so more you earn more you’re affectively taxed , just the way of the world we live in more you earn more you pay
Apologies I am going this conversation late I thought they were going to put in a limit on how much a person would have to pay. With a cap of around £89,500 or am I imagining this?
Is this not the case?
They were, I think at the time the cap was going to be £86K. Seemed like a decent compromise to me. But then they kicked it down the road, and then decided it was unaffordable.
I believe if you have more than 23grand of cash/assets you have to pay for it until you run out(or get down to 23 grand?), then government pays for it or if you don’t have any money at all the government pays for it
So basically another form of tax
Yes, if you live your life on the streets, never earn, never pay any taxes (extreme scenario) you’d get free care in a care home. If you work bloody hard, save well, have a good pension, a paid for house, pay tax on everything then at 60 you get dementia and go into a care home then eventually you’d lose the lot.
And then it would be paid for , so more you earn more you’re affectively taxed , just the way of the world we live in more you earn more you pay
Apologies I am going this conversation late I thought they were going to put in a limit on how much a person would have to pay. With a cap of around £89,500 or am I imagining this?
Is this not the case?
They were, I think at the time the cap was going to be £86K. Seemed like a decent compromise to me. But then they kicked it down the road, and then decided it was unaffordable.
Plus it was only ever going to be for the care part, not for accommodation etc. From memory when I looked at it my dad was paying circa £4K a month of which 2/3rds was accommodation, food etc. so would have took a long time to get to £86k. Longer than he lived for anyway (about 4 years in the home).
The £38,000 depends on interest rates being where they are now in the future, which is very unlikely. Perfectly possible they'll drop to say 2.5%, slashing your income, so investing an element elsewhere makes a lot of sense.
A lot depends on your risk profile - if younger then longer-term investments with an element of risk make more sense, but when you're as old as me then I'm not taking any risks! Yes interest rates will likely be as high now as they will be over the coming decade or so and will reduce, but that can be mitigated with longer-term fixes - 4.5% for a five year fix is available right now. Also roll your fixed rate bonds with one maturing most years e.g. some one year, some 2, some 3 and some 5. Max on ISAs if you are able is a no brainer of course.
But I would agree that just relying on interest for income is a risky business - you will need to draw down on capital as well. I expect my capital to reduce gradually and am not looking to just live on investment income, we intend to to spend it all!
Spreadsheets are a wonderful thing!!
100%, there's plenty of calculators out there, or indeed simple spreadsheets.
I'm taking my 25% at 57 regardless, my wife has a couple of work final salary pensions that come out at 60 and 67. Bizarrely she'll more than double her income in retirement compared to working!
It's a balance, but I know too many people scared of spending capital and it ends up just racking up more and more, spend it!! Of course be careful with it, don't blow it all at once, but spend what you've worked hard for. You can't take it with you.
I was having this exact conversation with my father in law this morning. When he retired he had savings of around £140k (12 years ago) - he now has just over £200k as he doesn't spend it, I keep telling him to spend it, upgrade the cabin on the cruise he takes every year, new car etc etc. But he struggles with that mindset but I'm slowly getting through (he bought a new piano last year!)
I believe if you have more than 23grand of cash/assets you have to pay for it until you run out(or get down to 23 grand?), then government pays for it or if you don’t have any money at all the government pays for it
So basically another form of tax
Yes, if you live your life on the streets, never earn, never pay any taxes (extreme scenario) you’d get free care in a care home. If you work bloody hard, save well, have a good pension, a paid for house, pay tax on everything then at 60 you get dementia and go into a care home then eventually you’d lose the lot.
And then it would be paid for , so more you earn more you’re affectively taxed , just the way of the world we live in more you earn more you pay
Apologies I am going this conversation late I thought they were going to put in a limit on how much a person would have to pay. With a cap of around £89,500 or am I imagining this?
Is this not the case?
That was the Teresa May Government & then got changed during an Election campaign iirc.
(See her "nothing has changed" rhetoric when she had to back peddle).
Idle hans, Golfaddick, Rob7Lee thanks for this info.
So as has been said, save for retirement and cross your fingers that you don’t need to go into care.Alternatively don’t save and if you need to go into care you get it for free.
I have a chunk of cash currently in S&S ISAs and in a GIA account, totaling around £150k, with another £100k potentially coming my way from an investment I made in a company I used to work for.
Can someone let me know if I'm off my rocker thinking of doing buy to let? I know landlords always plead poverty I'm just trying to work out of that's actually true...
With £150k, I could get hold of 3 buy to let properties at around 3.99% interest only, with the properties being worth under £200k each.
I know about the 5% stamp duty etc, just wondering how crazy I am thinking this might be a good idea.
My S&S ISA has earned 12% since I opened it in Feb 2024. But obviously none of that is leveraged whereas property is.
Idle hans, Golfaddick, Rob7Lee thanks for this info.
So as has been said, save for retirement and cross your fingers that you don’t need to go into care.Alternatively don’t save and if you need to go into care you get it for free.
If you've got money though you've might have a choice of a better care home.
I have a chunk of cash currently in S&S ISAs and in a GIA account, totaling around £150k, with another £100k potentially coming my way from an investment I made in a company I used to work for.
Can someone let me know if I'm off my rocker thinking of doing buy to let? I know landlords always plead poverty I'm just trying to work out of that's actually true...
With £150k, I could get hold of 3 buy to let properties at around 3.99% interest only, with the properties being worth under £200k each.
I know about the 5% stamp duty etc, just wondering how crazy I am thinking this might be a good idea.
My S&S ISA has earned 12% since I opened it in Feb 2024. But obviously none of that is leveraged whereas property is.
What is it you are trying to achieve ? Capital growth ?? Income ?? Or both ??
The issue I have with BTL's is that they are tax inefficient and not very liquid. The income is taxable and when you come to sell it there is Capital Gains Tax to pay - currently 28%. Whereas an ISA is totally tax free.
It is a shame that the annual CGT Allowance is now a paltry £3k as a GIA feeding your ISA would be the most sensible idea. Even so, annually moving money from a GIA into your ISA could be managed in a way so that little or no tax is paid.
Or there is Investment Bonds for your forthcoming £100k. If you are a basic rate taxpayer on encashment (partial or full) then there is no tax to pay. Again, a better idea if you are looking for income.
And that is just the tax side of BTL's. You also have to think of bad tenants not paying & having to go to court to evict them....could be months of no income coming in. Then the cost of renovation should they trash the place. Have you seen any of the TV programmes and the state of places when tenants are evicted ?
I have a chunk of cash currently in S&S ISAs and in a GIA account, totaling around £150k, with another £100k potentially coming my way from an investment I made in a company I used to work for.
Can someone let me know if I'm off my rocker thinking of doing buy to let? I know landlords always plead poverty I'm just trying to work out of that's actually true...
With £150k, I could get hold of 3 buy to let properties at around 3.99% interest only, with the properties being worth under £200k each.
I know about the 5% stamp duty etc, just wondering how crazy I am thinking this might be a good idea.
My S&S ISA has earned 12% since I opened it in Feb 2024. But obviously none of that is leveraged whereas property is.
BTL…… I’d give a wide berth!! Not the investment it once was.
the only way I’d consider it now is for long (15+ years) capital growth, but the costs to buy and potential pitfalls are huge and outweigh the value IMHO. The tax regime from SDLT to on the income makes it not worthwhile anymore, especially if a higher rate tax payer.
one bad tenant can crucify any return for years.
if you do go ahead. 1. Make sure you get a very good managing agent. 2. Charge reasonable rent, that way you get a much bigger pool to vet and they tend to appreciate what they’ve got and will look after the place/pay on time etc.
not for the feint hearted…… it’s also very illiquid.
Are you thinking of BTL as an additional investment after using your £20k ISA allowance, or instead?
It would be taking the cash out of ISAs and going down that route instead.
In answer to @golfaddick's question, not really interested in an income, would probably just use the cash to buy more BTLs. I've watched lots of the bad tenant programmes!!!
The aim would be capital growth in the long term, I understand it's all illiquid, but illiquid assets should come with a premium as a consequence.
And thanks @Rob7Lee I think you've probably all managed to talk me out of it.
Probably one for consideration once all other tax efficient schemes have been rinsed through, and definitely not worth pulling cash out of an ISA to do this with.
Annoyingly I've also seen that the entire rental income counts as contributing to your income, meaning I would step over into the dreaded 60% marginal tax bracket.
Happy with our 3, we have assets under our control and are well aware of the bad tenant risks. Currently all is well fortunately but we have had an absolute shocker in the past. Brings in £25+k per year and it helps that we have no mortgage on them so if we need to sort anything out we have at least had the income. All investment comes with a risk imho.
Happy with our 3, we have assets under our control and are well aware of the bad tenant risks. Currently all is well fortunately but we have had an absolute shocker in the past. Brings in £25+k per year and it helps that we have no mortgage on them so if we need to sort anything out we have at least had the income. All investment comes with a risk imho.
I suspect you bought at a time when there weren’t so many issues (SDLT much lower, being able to offset expense etc).
would be interesting to compute the numbers v’s a Stocks and Shares ISA over the same period.
Idle hans, Golfaddick, Rob7Lee thanks for this info.
So as has been said, save for retirement and cross your fingers that you don’t need to go into care.Alternatively don’t save and if you need to go into care you get it for free.
If you've got money though you've might have a choice of a better care home.
Yes mate until the money runs out.
i would rather my family enjoy it. If I have to go into a home I would like to think I won’t know or care.
Bloody hell was depressed enough after Saturday this isn’t really cheering me up.
Comments
Put us much away tax free in ISAs, PSBs & in the name of the lower tax payer.
If you invest you could earn a lot more.
If no mortgage or rent drawing £3,000 pm is more than comfortable.
I retired at 49 and my capital has gone up in 13 years.
Do you invest well, do you look for the best savings rate, do you know how to invest and save tax efficiently?
Someone could have £500K and it would be “gone” in a couple of years.
Another person may by then have closer to £600K.
Think as we get older the £3,500 per month will reduce. I’ve worked out the current value of our SIPP’s will last until I’m about 77 (not allowing for increases or decreases in value). I’ve purposely not included our state pensions in my calculations so they are effectively a bonus meaning once they kick in we will take less from our SIPP’s which will give them added longevity. At some point too we will downsize so releasing capital.
The above is all well and good but I still struggle now when deciding should we spend x amount on this or that because it’s always in your mind ‘what if I don’t have enough in later life’? Then what do I do?
Lot worse ‘problems’ to have, I fully realise that and know that I’m ‘lucky’ to have worked bloody hard to be in this position but it’s still a worry to me.
I'm taking my 25% at 57 regardless, my wife has a couple of work final salary pensions that come out at 60 and 67. Bizarrely she'll more than double her income in retirement compared to working!
It's a balance, but I know too many people scared of spending capital and it ends up just racking up more and more, spend it!! Of course be careful with it, don't blow it all at once, but spend what you've worked hard for. You can't take it with you.
I was having this exact conversation with my father in law this morning. When he retired he had savings of around £140k (12 years ago) - he now has just over £200k as he doesn't spend it, I keep telling him to spend it, upgrade the cabin on the cruise he takes every year, new car etc etc. But he struggles with that mindset but I'm slowly getting through (he bought a new piano last year!)
He then became a bus driver, still lived very frugally, but managed to save up a reasonable pension and some savings. But he'll still spend weeks fixing something when £200 would fix it/replace it straight away. I lost it last month when he was messing around with the soldering iron on his oven (from a safety perspective!) so marched him to Curry's where he bought........ the cheapest oven they sell! But at least he bought one rather than blowing the house up!
I agree it's generational, but many from that generation had very tough financial times and it's hard to change that frugality.
(See her "nothing has changed" rhetoric when she had to back peddle).
So as has been said, save for retirement and cross your fingers that you don’t need to go into care.Alternatively don’t save and if you need to go into care you get it for free.
Can someone let me know if I'm off my rocker thinking of doing buy to let? I know landlords always plead poverty I'm just trying to work out of that's actually true...
With £150k, I could get hold of 3 buy to let properties at around 3.99% interest only, with the properties being worth under £200k each.
I know about the 5% stamp duty etc, just wondering how crazy I am thinking this might be a good idea.
My S&S ISA has earned 12% since I opened it in Feb 2024. But obviously none of that is leveraged whereas property is.
The issue I have with BTL's is that they are tax inefficient and not very liquid. The income is taxable and when you come to sell it there is Capital Gains Tax to pay - currently 28%. Whereas an ISA is totally tax free.
It is a shame that the annual CGT Allowance is now a paltry £3k as a GIA feeding your ISA would be the most sensible idea. Even so, annually moving money from a GIA into your ISA could be managed in a way so that little or no tax is paid.
Or there is Investment Bonds for your forthcoming £100k. If you are a basic rate taxpayer on encashment (partial or full) then there is no tax to pay. Again, a better idea if you are looking for income.
And that is just the tax side of BTL's. You also have to think of bad tenants not paying & having to go to court to evict them....could be months of no income coming in. Then the cost of renovation should they trash the place. Have you seen any of the TV programmes and the state of places when tenants are evicted ?
the only way I’d consider it now is for long (15+ years) capital growth, but the costs to buy and potential pitfalls are huge and outweigh the value IMHO. The tax regime from SDLT to on the income makes it not worthwhile anymore, especially if a higher rate tax payer.
one bad tenant can crucify any return for years.
if you do go ahead. 1. Make sure you get a very good managing agent. 2. Charge reasonable rent, that way you get a much bigger pool to vet and they tend to appreciate what they’ve got and will look after the place/pay on time etc.
not for the feint hearted…… it’s also very illiquid.
In answer to @golfaddick's question, not really interested in an income, would probably just use the cash to buy more BTLs. I've watched lots of the bad tenant programmes!!!
The aim would be capital growth in the long term, I understand it's all illiquid, but illiquid assets should come with a premium as a consequence.
And thanks @Rob7Lee I think you've probably all managed to talk me out of it.
Probably one for consideration once all other tax efficient schemes have been rinsed through, and definitely not worth pulling cash out of an ISA to do this with.
Annoyingly I've also seen that the entire rental income counts as contributing to your income, meaning I would step over into the dreaded 60% marginal tax bracket.
would be interesting to compute the numbers v’s a Stocks and Shares ISA over the same period.
i would rather my family enjoy it. If I have to go into a home I would like to think I won’t know or care.
Bloody hell was depressed enough after Saturday this isn’t really cheering me up.