The Month You Retire Really Matters
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- เผยแพร่เมื่อ 22 พ.ย. 2024
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Another great video James. You’re r spot on - I retired in November because I just had enough, the nights drew in and the winter was just miserable- I couldn’t do most of the things I was planning to do because of the weather. I also couldn’t go on a holiday as my Wife was still working.
My advice - Retire at the end of March and look forward to the spring and summer.
By retiring at the end of March you will have missed most of the ski season, which is what I’m planning to do much more of in my retirement, it is always possible to go away without your wife? My wife & son are currently in Poland visiting her family, I’ve been with them twice this year already & they went to The Seychelles without me back in June. We do still do holidays together, it’s just being flexible.
Each to their own . Retire when you’ve had enough of it.
I'm about to retire next month. I decided to do it now a) because I can afford it, and b) because my job is particularly grim in the winter and the prospect of bailing out before enduring another one is joyful. I've got my activities for the next few months planned out and I'm not reliant on good weather, so I'm not anticipating any mental wellbeing issues. I'll tell you next year if it was a good idea. 😂
@@iaing9028 I have no intention of splashing the cash when I retire. That will drain my fund in just a few years.
I wish they taught investing at school level. There is so much advantage to doing this!
My biggest regret is that I started so late. And still not good at it, I think at this point i need help
I wish I could have retired in my 50's. I'm 65 now, I started investing late . After some research, I found a strategy that helped. I'm pleased to say I'm retiring with at least $2 million.
@@ClemonSteve It’s worth noting that luck often plays the significant role in some cases, sometimes even more than the resources involved. Without it, its challenging
@@MichaelGabreil luck plays a part, especially in the short term. I noticed that when results remain consistent, it indicates something more than just luck. research was the challenge until It led to Julie Ann Lerch, a fund manager. her strategy made sense, it contributed to growing 950k into this and counting
@@ClemonSteve Thank you so much,i will send her a message.
Thank you James - great video.
I love how, yes of course you look at the financial facts and figures, but also really cover the human aspects as well. It is so easy to overlook.
Great point about retiring in spring vs winter!
I'm someone who retired end of November, but I had a motivation. It gave me the opportunity to do that season of skiing that I'd never been able to do. Any retirement trepidations were forgotten in the excitement of the holiday anticipation. And on returning I had been out of my work routine for long enough to simply not notice I was retired! So I completely agree with your suggestion for winter retiring James.
I need a way to draw up a plan to set up for retirement while still earning passive income to meet my day to day need and also get charged lesser taxes even while in a higher tax bracket. i want to invest around $250K savings.
Don't put all your eggs in one basket; instead, diversify into different asset classes to mitigate risk. If you lack extensive knowledge, consult a financial advisor.
Accurate asset allocation is crucial with an Experts guidance. I have 850k in equity, 300K cash earning 5.25 interest, 685k in 401k, 250k cash account, 120k in car assets ( paid off cars) Gold and silver bars. age is 48. My advisor helped me realign my portfolio to my risk tolerance and it boomed overtime.
pls how can I reach this expert, I need someone to help me manage my portfolio
Melissa Terri Swayne is the licensed advisor I use. Just search the name. You’d find necessary details to work with to set up an appointment.
Found her, I wrote her an email and scheduled a call, hopefully she responds, I plan to start the year on a woodnote financially..
I waited for my promised bonus and when they gave me less than 1/3 of what they had promised, I handed my notice in. That was in May 2022 and I haven’t looked back since. Rather than go on holiday, I relocated to the uk and started house hunting, and when I eventually found a house I had it renovated, so I had my mind focussed for well over a year… I didn’t feel like I’d retired until February 2024, and I’ve made the most of the daylight hours (I struggle to use the word “Summer” in this country! 😂). You’re so right about preparing mentally. It’s so very important!
Great video as always. Thank you!
Better to get 1/3rd than none at all. I just commented elsewhere how many things get recalculated at the start of the new tax year.
So what country are you from?
@@tancreddehauteville764 I’m British…
Don't underestimate the mental impact of retiring as James you have mentioned. For me, I have effectively semi-retired making a step change. Having worked for 46 years full-time within financial services I have taken up as a sole trader / self - employed a completely different 'job' - actually it isn't a job for me as I love it and it's more like a hobby whilst providing some additional income on top of my pension - most importantly it gives me a sense of purpose. Never retire from something (work) but retire to something - your retirement intensions / plan in other words.....
What’s your paying hobby?
@peter. Hi Peter. I’m 70 and I’ve done the same sole trader route as yourself and l get 80% tax relief on my car expenses, car payments, services running costs etc, stationary allowance, home office allowance, clothes allowance, the list goes on and on! I cashed in one pension and am continuing to pay into a second one plus receiving the useless State Pension, so it allllll adds up to quite a nice deal 👍
The biggest thing l did notice regarding the car was. If l inputted into the insurance details l was retired the policy almost doubled!!! Now when l put in I’m working the price almost halves!!!
And yes it also keeps the retired brain active 🤣
As a soon retiree, keeping my 401k on course after a rocky first quarter of2024 is top priority. I have been reading of lnvestors making up to 250k ROI in this current crashing market, any recommendations to scale up my ROI before retirement will be highly appreciated.
The current market might give opportunities to maximize profit within a short term, but in order to execute such strategy , you must be a skilled practitioner.
I’ve actually been looking into advisors lately, the news I’ve been seeing in the market hasn’t been so encouraging. who’s the person guiding you?
I appreciate this. After curiously searching her name online and reviewing her credentials, I'm quite impressed. I've contacted her as I could use all the help I can get. A call has been scheduled.
I watch your videos regularly and they have really helped me to prepare for early retirement. I am turning 60 in Feb next year but will need to work a few more years to be comfortable with my dc pension level and mortgage paid off. I particularly have enjoyed this video. Adding Pension contributions from ISAs was not something I had considered. I agree with March as best month to retire. Once again you have armed me with valuable information. Keep producing the content. Great site. ❤
Very timely. I've recently taken the decision to retire in March 2025 for all the reasons stated.
Me to but hope Budget doesn't scupper some of my plans in March.
Same I tried to retire in March 25 but my job said I can't retire at 38
All the best with it !
Insights you just don't get from other finance youtubers...
They typically all regurgitate the same crap
Wow! For once in my life I did something right. Retired March 31st 2013 aged 59 from an increasingly stressful NHS job. Lost out on my final salary increment, but I couldn’t have handled another year. Have now had 10 excellent retirement summers (I’m ignoring this year’s rubbish one). Pensions are ticking over but I’m braced for a raid from the current government and have plans in place. Thanks for the sage advice.
Great video thanks. As a self-confessed personal finance geek I rarely learn new things these days but had never considered this before. As an aside, great interview by the Trappists! Thanks for your content.
Top content James, comprehensive and thought provoking. You also make it seem like you are talking directly 1:1
Such a brilliant video James - loving the things to think about and why March is such a great month to retire, invaluable thank you!
Oh my goodness James! 😳 everything was fine until you did the how many summers graphic 😢, I'm 65 next month so, happily I may only have 10 summers left! 😳🤯. I will be state pension age at 66 and it was interesting to hear the idea regarding maybe waiting until March to retire and be able to enjoy the improving weather. I could also defer accessing my pension for 18 weeks which I believe would gain me a 2% increase. 🤔 clouds and silver linings and all that. 😊
March is also a great month to retire as an employee because you are working your notice upto the end of the financial year and so a lot less pressure during this high pressure and stress period.
I retired as soon as I turned 55yrs old, it felt like winning the lottery not working anymore, didn't matter to my about the timming, I just waited till the following April until I started to draw anything from my sipp, I just used other methods I put in place, but the main objective was stopping working, it was a lottery win
Same here. I retired last month.
Congratulations!
Same...I retired last year! 🥳
This is my wife's plan. Go in September and draw her pension from the following April when I retire
It's not a lottery win. It's YOUR money, basically deferred salary.
Great video - timing is everything in life generally and certainly with respect to finances and health!
Excellent! I really do have a question. As a beginner interested in trading. How would you recommend we enter into trading ? I will greatly appreciate any suggestions
I would suggest to reach out to Mavis. What impresses me most about Mavis is how well she accumulate profit for client's and explains basic concept of winning before actually trading for you. And letting you use her trade signals. And she will also teach you how to trade as she trade for you, and let you know when to enter and exit trade for maximum profit as she trade for you. This goes a long way to ensure winning trades.
I'm really interested to reach out to Mavis so I can build wealth. How would beginners like me contact her
*She mostly communicate to client's faster on Telegrams, using the user name*
Mavis1312 that is her user-name
I'm not shocked that Mavis name was mentioned. My portfolio currently changed from 25k to 88k most people remain poor only because friends and relatives discouraged and advise them against trading while the wise one kept trading and growing highly financially
There's generally 4 public holidays in April and May, plus you generally accrue 2 days per month. Might be worth considering an easy last 2 months into a tax year and getting paid for it!
Good point 👍
What on earth will the difference 4 days off work will make when you’re about to retire 😂
Our career average pension gets recalculated at the end of the tax year. One week could make a 3.5% difference in your pension for the rest of your life.
@@caio5987 true though I find if you have plenty holiday mixed into working weeks then it flies. Plus depending on organisation holiday year can be a way to either carry forward some leave to take or have paid.
It could be possible to work only about 5 weeks over an 8 week period and start the next tax year with a little bit of income...
Brilliant James easy to miss this important decision
I'm now 57 and a seriously thinking about retiring next year and end of March seems a great idea for a renewed tax year. But i may work a few months more into summer and then simply live off other means (ISA) until the next financial year. This also leaves my pension to grown a little longer without touching it. its such a had decision to retire and take the plunge and say..right thats enough and i want some me time. As my wife is slightly younger then me and needs to work for a few more years to get the full state pension. Thanks James, your insights are golden. Decisions- Decisions
Absolutely echo everything that you said James! Sadly my partner is retiring in March due to ill health and not from choice. He's been diagnosed with cancer so next year for us is going to be very different from what we planned. Our 'big holiday' is on hold but hopefully 2026 we can make that trip! I'm not anywhere near retirement but really find your videos useful! Thank you!
Perhaps still mark the ending of the job with an event for yourselves, despite our because of the news?
Another angle is if you are redundant-retired like me. I wanted to put a big wedge of my redundancy into my pension, and fortunately I got that sum in March so I had a full year of income to give me a high pension input limit. If I'd received it a month later I would have had a much lower pension input limit.
Thanks James - another super useful video. You have become my go-to source of pension wisdom.
Great tip about the health check as I need to make the most of this private health perk.
I will be 61 next August. Original plan was to retire at 62, but I suspect that I will be gone before then.
I have two defined benefit plans that kick in at 65 with more than enough savings (ISAs, premium bonds, defined contribution pension) to take me to 65.
Currently maxing out on contributions.
England cricket tour of Australia in winter '25 is my 'bucket list' plan, but I would benefit by leaving in March due to tax.
My bonus is paid in June and I am ineligible if I leave before then.
Too many variables ! :( I've decided to sit tight & wait for the budget to see whether there are additional incentives.
The only thing that I have been considering that you have not mentioned was volunteering as soon as I retire, to fill that sense of purpose.
Noy exactly retiring but my 20 yr army service was due to end in a April. But that means paying 42% tax when i could stop earlier, avoid the higher tax and then see what life brings.
So 9 month career break (therefore adding 9 months to the 20 years) was amazing . Loved life, bought house and did DiY along with travelling the world to visit friends i haven't seen for 10 years.
Enjoy life now if you can . Ive returned to finish my 20 years and happy every day in work and positive about when this episode comes to an end
Enjoy your taxpayer funded gold plated pension!
@@tancreddehauteville764in the services there are times when our lives are on the line. A pension is part of the package if you live to collect it.
Great video, covers all of our experience. I retired in 2023, giving up work in Feb/March and starting to draw from pensions in April/May - much easier to manage with a fresh tax year, and bonus for DB pension: my birthday is in April. My Wife gave up work in November of the same year and struggled a bit through the winter (cold, wet, not much going outside etc). We're all good now, but your right, time of year does matter. I did miss out on my company bonus due to resigning before it was due, but £2-3k, well in my 30-year income forecast that's a bit trivial.
I can never understand the concept of being lost without work at retirement, loss part identity. I look forward to this and although 46, I'm going to strive get there in a matter of months, I'd rather live frugally than waste my best years in a job. I'm buying my FREEDOM!!!!
Please post an update 6 months after you are retired 😀
I agree, March seems ideal. The thought of starting retirement as the days get short, dark and cold does not appeal. Longer, lighter Spring/Summer days is a far more positive time to start a new life chapter.
I was always going to retire in February, as it’s my birthday but unfortunately where I work the financial year finishes in March and the (considerable) bonus is paid in early May - so with notice I’d go at the beginning of August.
Great video James and really sensible advice about planning how and when to stop…it’s not as easy as it sounds if you enjoy what you do.
I’m going on to 67 (currently 64) and have been in semi retirement since 60 doing 2 days a week but dropping down to 1 day a week from next year.
I definitely get the sentiment about loss of status and feeling you’re making a contribution…I need to get my head round that by 2027!
Helen is in trouble. How does she think she’ll cope with a £12,000 p.a. annuity when she has previously been earning £55,000 p.a.? It’ll be 10 years before her state pension kicks in. My advice to her would be to stay in work and save like a demon
Doesn't it depend on what she needs the money for? My parents both have good pensions, now they are wealthy in money but short in time.
@@grumpy9250 to live
I did something similar. Earning 50k a year, now I survive on the UK tax free allowance of circa 12.5k. I don't feel I'm missing out on anything. I didn't need fancy holidays now as I'm on holiday 365 days a year!
really interesting video. Never given the mental aspect of retirement just focusing on maximising my SIPP each year. Suspect many people do the same
Brilliant video and advice! My DB pension kicks in January 2025. But I'm retiring end May for all the reasons you mention (and in comments). Bonus dates + planning near 100% Salary Sacrifice for the first few months of FY25/26 to my DC pension + Easter/May Bank Holidays with accrued leave means I get max £££ and still finish at Easter.
Great video James. I will definitely take this advice in a few years. Thanks
As an educationalist, I retire in September, but the end of term is in July. I booked a holiday for the first day of the new school year. I felt superb, a little like skipping school. The adjustment was tough, and my identity was lost. It took a while to redefine myself. Three years on I book a September holiday every year it feels great
I Hit 110k today. Thank you for all the knowledge and nuggets you had thrown my way over the last months. Started last month 2024. Financial education is indeed required for more than 70% of the society in the country as very few are literate on the subject. thanks to Brooke Grace Miller for helping me achieve this
She is my family's personal broker and also a personal broker in many families I'm United States, she's a licensed broker and a FINRA AGENT in United states
The very first time we tried, we invested $1000 and after a week, we received $5500. That really helped us a lot to pay up our bills.
I'm surprised that you just mentioned and recommended Brooke Miller, I met her at a conference in 2018 and we have been working together ever since.
I'm new at this, please how can I reach her?
I just withdrew my profits a week ago, To be honest it was an amazing feeling when the profits hits my wallet I wish I could reinvest but, too much bills
@jamesshack ....can you make a video on the process/benefits of paying a work bonus into your DC Workplace pension? Many thanks
And/ or just general overpayment (over the standard 8%)
See your GP for a health assessment? Have you tried to get a GP appointment recently? It might be a safer option to arrange a comprehensive medical assessment at a private clinic. It would probably cost upwards of £500 for full diagnostics but it could be worth it.
I use Bluecrest - recommend them.
I retired in November 2024 when I turned 60, I took a reduction in my occupational pension but for me it was worth it. The job was awful and actually no longer exists, but my deciding factor was that i don't come from a long lived family and I didn't want to die still working. I flippin' love being retired!
Very interesting video .. I only managed to skim it . Did you mention about ‘Helen’s’ unused pension contributions allowances from previous years if she had any ? I assume that is still allowed ?
Worth noting how important working One More Year is. If you quit right when you hit your target, you're likely to have a rough start, because by conditionality your investments likely did over-the-odds well to get you to that target.
Another great video and we have communicated before. I retired at the end of January, but working for an American company that works on calendar years meant that I almost maximised the financial aspect including bonus into the pension before the new tax year, and I do not need to touch this DC pension as I have two reduced value DB pensions together with another DC pension to use for 2024/25 and part of 2025/26 tax years. I had a blood test last December which resulted in me being deemed pre-diabetic so needed to attend a course. Retirement has enabled me to reduce stress from work, and a more healthier lifestyle. Used some of your suggestions from your trading income video for effectively pocket money, and keep my mind and body trained with various things. I have always had hobbies that I can devote more time to as well as enjoy my surroundings as you realise the smells and sounds more now than you used to. I have lost weight as well.
Great advice thanks. 👍
One financial issue you should perhaps have mentioned James is how the revenue treat your first withdrawal from a DC pension. You don't want to get on and emergency tax rate...
This is a very good point, which gives many retirees a shock!
I do not fully understand how tax codes work through HMRC, but it seems like if you have two different PAYE income sources in the same year, they apply an emergency code to the second one.
So in theory, you could avoid this if you retired in March and had first pension PAYE payment in April the following tax year.
Perhaps there's an accountant who can confirm?
That's true, although when I took a lump sum and paid emergency tax I applied for a refund right away and it only took two weeks, so it wasn't that bad.
@@JamesShack There's something about taking your first withdrawal as £1 that an accountant can explain...
Like working for 2 employers...you have to nominate which one to receive your personal allowance on & the other is taxed in full. The £1 is to force a new code from hmrc before taking the taxed part of your pension. If you retire in line with tax year this 'shouldn't' matter.
@@JamesShack I took early retirement last year and started drawing from my SIPP in April this year and was given a tax code with LX suffix. The L means I'm entitled to the standard tax-free personal allowance and the X means my tax is based on my monthly pay in each period, not the whole year, so whatever my taxable income is per month is X 12 and taxed accordingly. So with the 25% tax free portion I can take a bit more than £1300 / month tax free. I did mess up one month and withdrew money too early, before the 6th, so I had 2 withdrawals in the same period and was taxed. However I'll make sure I don't exceed my yearly tax-free amount so I'll get this back.
Well the plan/decision deadline was tail end of August.
Numbers already worked out by April - so just a waiting game to really test why I was still working.
The last-straw meeting meant I ended up handing notice in May.
So - best laid plans - thats a few months of summer to settle into the new retired routine.
No deadlines anymore! 😄
Well I had planned on retiring April 2024, but was made redundant in Nov 2023. When I looked at severance package, plus a small pension pot accrued while working for the company it effectively funded me through to April 24.
I had already checked my plans via a pensions advisor, then pension wise and lastly my son a recently qualified financial advisor.
From April 24 accessing a crystallised DC fund, utilising my tax allowance, in Feb 25 I’ll start to receive a DB pension allowing me to reduce monies coming out of the DC fund, plus cash lump sum, some of which will go into a second DC fund (£2880) then another £2880 in the 25/26 tax year.
I then have to wait till Feb 26 for a full state pension, again allowing me to reduce the amount coming from the smaller DC fund.
Once state pension kicks in I’ll be receiving more monthly than I was earning net in my last job
My company went through redundancy processes recently and I know of a few people that retired simply because the redundancy amount after many years would tide them over to a key date (accessing pension age) or triggered a 'sod it' response. One even was planning on retiring and the proposed redundancy date fell 1 day before, lucky so-and-so (especially since they didn't look that old)!
@@AgileSnowWeasel The best I have heard of was 15 months money to retire two years early. It is waiting for a deal like that which keeps me at work. In contrast I knew one person who asked HR about early retirement and they said "fill in this form". About a fortnight later the company announced a big round of redundancies. The person was told that they would miss out on any redundancy money as they had already put in writing that they wanted to leave. That cost them over a years wages.
This month 😊.
Another point worth considering is that DB pensions that are in deferment are revalued every year on the anniversary of you leaving. With high inflation years it may be worth holding your retirement for another year to take advantage of this.
Is that true. Ours get revalued at the start of the tax year using the September CPI figure.
@@MrDuncl might be just my scheme. I know a full year revaluation is on the anniversary of deferment (leaving) and shows on the pension website early jan (in my case).
@@paulmussett94 It depends on the scheme. Some have it anniversary of date of leaving, some as a set date (usually 1st of January or 1st of April of your year of retirement). Even if its anniversary though, the reference month of CPI revaluations is fixed and decided by the scheme, so if reference month is September and you retire at October, you get September's CPI, but if you retire before September, you get the previous year's September CPI (and not the month that you retired) etc.
Awesome video, thank you James
This is very timely for me, well no actually, maybe the opposite. I retire next Tuesday at the age of 61. I’d always thought to myself that spring would be the best time to go and that the beginning of November would be the very worst, but because I had to sell my business to retire, here we are.
I’m going to take on board what you said about setting the tone at the beginning and I need to find some big event to kick it off in a positive way, I don’t want to get in a rut of self imposed isolation due to weather. Thanks for your videos over the last few years, they’ve been really helpful.
another banger great work!
Excellent video James on a topic that I haven't seen given much focus. Personally I'd been thinking of a date towards the end of Spring for similar reasons than those you outlined in the 'Health & Wellbeing' section. Unfortunately this doesn't align well with my company's bonus date! 😂
excellent! very useful info - and well thought out!
Pension contributions aren't just limited by your salary. A contribution significantly larger than your usual annual contribution in the final year followed by drawndown will attract the attention of hmrc for recycling.
It's definatly worth being aware of the rules.
adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/
Nice video. The last point - last and not least
If you go for march watch out when your march payment is of course as it could be in April the next tax year!!
Love this kind of content, even for a mid thirties viewer!
@@kat3400 makes me think about retirement a bit too early mind!
@@jamesdaw131It's never too early to think about it a modest monthly feed now will because of compound interest be well worth doing.
@@hougrel9514oh sorry. Yes of course I do that. I save pretty aggressively into my pensions and ISAs. What I meant is I am not yet 40. I shouldn’t be planning my retirement (emotionally) yet! Still got 20’years of work left!
This all makes perfect sense, however I retired in October last year and have no regrets whatsoever.
From a tax perspective, I lived off savings until April, when I started drawing from my SIPP, taking the max tax free amount (~£1300 / month). From a health perspective, I enjoy running and actually prefer the cooler weather so no problem there. I also cycle and have an indoor trainer set up with Zwift, so again no issue with weather. Sure, I could have waited until March but I'd just had enough of the corporate rat race and I'm thoroughly enjoying retired life. It honestly feels like I've been released from a lifetime prison sentence! 😆
I retired just before my 56 birthday . I was made redundant this gave me the money to test how much I needed. I would advise people to save up enough money to last one year and then see if you can take that amount out of your pension. I lot of my money was used just going to work . A job and an employer I hated .
Good content and balanced options. If all the rules on private pensions ages are the same, I'll finish the end of May after my 57th birthday, which would be the december beforehand. Maxmisise the tax years and because holidays work by the calendar year, ill carry over the 5 days from the prior year, take none but the bank holidays in the 5 months i work in that year so i get paid out on those when i leave and maximise pension contributions in those 5 months too.
Makes a lot of sense 👌something to definitely consider, great and informative 👌
Glad you think so!
Next April will be fine for me, just waiting see if the budget messes up my financial plans and force me to start my pensions before then, hopefully they are not that stupid. Planning to throw a load of bonus in my DC pension in April 25 and will have used the max for the last 4 years already so in will be in a good starting position. If you think about your life most of have been in education from age 4 and then work 40 years plus so this is the first time in life most get the chance to do what you want and when you want i will definitely enjoy retirement 😊
Maxing AVC last few years helps a lot although does not allow time to accumulate
Thanks for the video. I wish I had the chance to retire when I choose. However, in my job we have to retire at 65. It sucks! There was a guy who took the Government to court a while ago as like me, his State pension starts at 65, but the law forced him to retire at 65. It was in the news and the. When quiet, not sure what happened.
I decided to finish 31st December. Got Xmas holiday pay from work. Plus it can take quite a few weeks, a couple of months in my case for pension company to organise payments. Just all fell into place for me by the end of the tax year at the end of March.
175k extra for main residence is taken from about 2,000,009 to2,350,000. So those with pension and house over 2,350,000 only get 325,000 it allowance
March for the new golf season start
I know of someone who was desperate to retire and retired in December. In six weeks he was back at work...
It does happen. That's why it's often best to test the waters first, perhaps by taking a long sabbatical or by reducing your hours at work.
One of my clients did this. They really enjoyed the challenge of work but decided to take a year off work 5 years before he was actually planning to retire.
When he returned to work after the year off, he quickly realised that his heart was no longer in it; so he quit and has never looked back.
That's actually quite sad, if you have nothing to do other than work! There should be more to life.
Another excellent video James; but you didn't consider DB pensions with a GAR that increases on each birthday. If the GAR is high enough to be worth taking, isn't there an incentive to take the pension just after one's birthday?
Hi James could you cover the benefits of taking drawdown
But working part time and continuing pension salary sacrifice and the tax free cash recycling rules ? I'm happy to discuss my planned scenario to add context .
This is hard because as soon as you take money from the taxable part of your pension, you trigger the MPAA which limits the amount you can put back into a pension to £10,000 per year.
You can put part of your pension into "drawdown" and take the tax free cash but as soon as you take money from the "drawdown" pot you trigger this limit.
Which means that most people only dip into this bucket when they no longer want to contribute to a pension.
So I could still put up to 10k per year into pension while drawing down, without breaching tax free cash recycling rules?
@@user-xh9tw7vr1r take a look at the flow chart here - adviser.royallondon.com/technical-central/pensions/contributions-and-tax-relief/recycling-of-tax-free-cash/
Hi James - One thing I've not seen anyone looking at is the 2-3 years before retirement and the benefit (or not) of putting significantly more money into your company pension, over and above the matched portion. This is because you are more likely to have independent children and hopefully in a better financial position. You get the Tax benefit going in and then are able to withdraw 25% tax free in a few years time.
Is this something people regularly do?
Yes!
Why the 5 Years Before Retirement Are So Important (You’re closer than you think!)
th-cam.com/video/ECOCa6FS8C8/w-d-xo.html
Depends how much you earn, how much in savings etc. People earning say 15k-20k a month with savings, may want to retire around 3 months into the tax year, so all that money goes straight into the pension, live off savings the rest of the year.
Just 0.5% of the working population earns this so an exception
Was planning to go in my birthday month of February but maybe I’ll hang on a few weeks longer
On the DB pensions point, if you are retiring early or late, you may get significantly more value from your pension than you would have if you retired at the normal retirement date. If you are in poor health taking a pension earlier means that you'll be receiving pension payments for longer (maybe 10 years rather than 2), if you are in better health retiring later can give you significant increases to your pension, as the scheme assumes you won't be living much long after. Schemes derive their early and late retirement factors (how much they reduce or increase your pension if you retire early or late) based on an average of mortality data.
I finished 6th September, yes right at the wrong time apparently !!! I just hit the wall, had had enough of company BS & elf n safety. It help me hugely that I had gone down to 3 days a week for a year so it was not a complete shock to the system. 62 next month, have no intentions of going back (which I could easily do if I wanted). Not sure how I ever had time for work.
I'm 78. I was amused that you think that retirement is the second season of your life. Would welcome a review of the variations in the drawdown schemes from the major Investment platforms. II seems to offer a more flexible scheme than HL. There's a dirth of advice on this issue. Can you use ISAs efficiently in drawdown?
What is the point of ISA in the first place, if you recommend sinking that into pension eventually? Few people have 20k ISA budget once whey have maxed out the pension allowance.
Can you tell us about the ‘hack’ of earning less before retirement to pay less overall tax on pension? I just heard about this. Im 46.
As a high tax payer it is better to stop working in the middle of the tax year and start claiming the pension in the middle of the next tax year. That way you get a massive tax refund that can help finance the months that you didn't work.
The precise day of retirement may be influenced by a calculation of how many days annual leave you have accrued.
I was going to retire on a particular day, purely calculated as 3 months after giving my notice, but I calculated that if I worked one extra day, I would have one additional day of annual leave.
Very interesting. I have a civil service pension coning to me in three years (January) and i presume that my lump sum payment will be taxed (due to that tax year's earnings). I'm not sure if i can defer it beyond my 60th birthday, but it will be worth looking into.
Your tax free lump sum should be tax free. Or are you referring to another lump sum?
@@JamesShack thank you. My lump sum is tax free but my pension will be taxable. It might be worth deferring from January to the new tax year, as I would potentially have a full allowance to fall back on. Given that I only have 17 years of reckonable service, I will have to do the maths. Thanks again.
Is the pension really more tax efficient than an ISA? That surprised me.
In the scenario given (lowish pension pot, early retirement, lowish pension annunity payout (and so minimal tax to be paid)) then maybe. But I was a little surprised as that wasnt something I had considred.
In a more typical scenario of reasonable pension pot (that is already enought to last you), normal retirement age, and pension income being taxed, then keeping the isa as an isa / source of extra tax free draw down income might be better. Main exception would be if want to boost the pension post for better inheritance tax planning.
Great well timed video, I have been looking two dates to retire, end of the finacial year for pretty much teh reasons you stated or my birthday, which is in August 2025, to finish on a round number, 70. So, thank you it looks like it is going to be the end of March. I am already drawing my state pension, which takes up most of my tax free allowance and I also have an Army pension and that will make the tax change on that tidy. Better let the company know, maybe keep them waiting until the new year.
I'm guessing halfway through the tax year is best? I worked for a year in Australia, with 6 months in two financial years, very tax efficient.
I had planned to retire in December but the pension I was going to draw pulled the plug on any withdrawals.
I ended up retiring end of the following March.
Financially it better but having the longer days to find things to do was a big bonus.
My financial advisor had said 12 months before that I shouldn’t retire when it was dark wet and cold!!!
Good points, however you didn't mention the tax threshold of £60k per year limit on paying into your pension fund ? Or am I missing something? Thanks
For most people it's not a big deal when you retire, quite frankly. March is good for tax purposes, but it makes very little difference at the end of the day. I would prefer to retire in June, so that I have the summer to look forward to.
Well that's kind of his point. Retiring in March means you have spring/summer to still look forward to, but have the tax efficiency too. I agree it's no big deal, but worth considering for some.
I think I'd prefer April or May because if I retired in October I'd be onto plan B which is trying out every pub in the evenings in the local city which might turn out to be lifespan-dehancing.
@@noggintube Yes, but if your employer pays your annual bonus in April then retiring in March makes little sense.
@@tancreddehauteville764 Well that's hopefully obvious 🤦♂ This video isn't about stating a month that everyone is obliged to retire on, simply highlighting what could be useful to some with all things being equal. Obviously adapt to your own situation.
Half of my pensions are in a career average DB scheme. It gets revalued at the start of the new tax year at CPI + 1% to a maximum of 6%. Once in payment the maximum increase is 2.5%. So retiring just after the start of the tax year could make a 3.5% difference in pension whether it is taken as a lump lump or monthly.
p.s. Are there any rules about pension recycling when you are still working. Can you really put a huge chunk of your salary into your pension in just before you retire?
Most govt schemes require 12 months for the pay rise to completely impact your pension. So going a day after the pay rise makes no difference to going the day before.
Recycling is post retirement. James is suggesting recycling ISA funds before retirement which is perfectly legal and a really good strategy.
@@ianwall9152 According to the HMRC Pensions Tax Manual they will pick up on a significant (over 30%) increase "the 2 tax years immediately preceding the tax year in which the individual took the lump sum".
There do seem to be various exemptions, like the increase being due to an increase in salary, but the whole subject is worthy of a video from James.
I am some way off (hopefully less than 7 years) and was originally using my birthday in late summer as target but then thought March seemed a better option to make the tax situation easier, then the more i thought about it,it made sense to accelerate the target(not delay!!) to march for the summer reason too. Once this was quite set in mind i then considered end of June as thats when bonus is paid but its not enough to be worth losing those months and if i really need the money at that point then the time isn't right anyway!
I'm aiming to retire sometime in the next 2.5 years. I will be 55 in April 2027. Ive recently been thinking about what month would be best to retire in and came to the same conclusions as you. Particularly having the new personal allowance.
Interesting video - I chose to retire at the end of May because there that maximised the number of bank holidays in the run up to that date, which together with unused leave allow me to stop working a few weeks earlier.
I'm planning the exact same in 2025 🙂
Depends on the bastard factor in play at your work regarding bank holidays vs personal holidays. But still, I'd let Easter roll by for the cheap 10 days in a row, then hope to be given no work for the final month before leaving drinks.
The company I work for does a "wind down". Six months as a 4 day week then six months at 3 days. It is supposed to incentivise the department to do a proper handover and succession planning but the message doesn't seem to have got through recently.
Another factor - on my scheme the actuarial pension reduction for early retirement counts down in complete months from the standard birthday related date. I was born on the 22nd, so retiring on the 21st instead of the 22nd would shrink my pension by about 0.3% (2015 figures). The difference isn't huge, but every little helps.
@@MrDunclthis is a first for UK but I love it
Retire and go on a long holiday. I want to travel to the far east where it is cheap and hot and spent 2-3 months there then return to uk in April and have another summer 🥰😍
@JamesShack Isn't it possible to carry forward unused pension contribution allowances from previous years? If so, Helen may be able to boost her pension regardless of the month of retirement.
Yes if she had sufficient qualifying earnings. You pension can't exceed 100% of your salary regardless of carry back
Do you have a video explaining how tax free lump sums are taken from dc pensions please? Ive tried to research thia but cant find a clear answer
Good to know my plan to retire at the end of March 2026, just before my 60th birthday, appears to be good timing. 18 months to go.
I want to reduce my hours a couple of years before retiring at 60, should I wait till March to do this? I will then boost my salary with my pension pot?
Well not watched the video yet. It alway made sense in my head that I would retire at the end of March to start the the new tax year. It's also as spring time and as the weather gets better I feel more positive, so would enjoy the start of my retirement more.
I guess in the next 12 minutes I'll find out if I'm right or wrong. 😬
I am not sure I understand the benefit of taking money from a cash ISA and putting it into the pension and leaving it as cash in the pension.
If it is already tax free in the ISA and you can withdraw it as you see fit, why put it into a pension where 75% of it then becomes potentially taxable again as income when you draw it out?
Great video
I think there's a kind of similar logic in scheduling personal surgery so that recovery occurs before a release in spring!?
You plan your recovery whilst still employed and off sick 😂