I’m 62 – can I retire in three years with my £270,000 savings?

In our Pensions Crisis Coach series, we aim to help ease your retirement worries. Are you concerned you’re not saving enough for your later years? Do you want to know if you have enough to retire or don’t know how to find your lost pensions? Email us at money@theipaper.com. We’ll seek to get you on the right track with help from some of the best financial experts and advisers in the business. Andy writes… I am 62 and would like to travel and make the most of retirement while still healthy enough – please can you tell me if I am in a good place to retire at 65? I have £270,000 in ISAs and pension savings. Alina Khan, the i Paper’s money coach reporter responds… After receiving your email and some back and forth, we established a clearer picture of your finances. You have £210,000 invested in a pension savings fund, as well as £60,000 in cash ISAs. The ISA money is cash that you have put into tax-wrappers after being made redundant in 2011 and receiving a payout. But you also have other money that’s worth taking account of. In that job, you were paying into a public sector defined benefit (DB) pension. These pensions don’t involve money going into a savings pot – so can’t be quantified as simply as your other pension. Instead, you receive a guaranteed payout each year in retirement, and in your case this will be worth £10,000 a year if you retire at 67. You are set to receive the full new state pension – currently £12,548 per year, when you hit 67. Separate from your £60,000 in cash ISAs, you also have some money invested in a stocks and shares ISA that’s worth £21,000. Now that we have a full financial picture, we can look at whether the amount you have matches your retirement goals. Alex Henry, partner at Realise Wealth Management, said: “Now that the main period of wealth accumulation is behind you and you are beginning to think about retirement, it’s helpful to step back and look at the broader picture. “The £10,000 per year from your defined benefit pension, alongside a full state pension, provides a solid foundation. Having guaranteed income streams in place can offer flexibility when planning withdrawals from your investment portfolio, although the level and timing of withdrawals will still need careful consideration.” You mention wanting to retire at 65, so you need to ensure you have enough income to bridge the gap between when you retire and when you receive your state pension at 67. Henry added: “During these years, it is reasonable to expect that your ISAs and your other pension pot will provide much of the required income. However, gaining clarity on your total needs, both in the earlier, more active phase of retirement and later in life, is essential.” You mentioned wanting to travel in retirement; well, to get a good gauge of how much you would need to be able to do this, we can look at Pension UK’s Retirement Living Standards. To have a two-week holiday abroad in the Mediterranean as well as three long weekend breaks in the UK a year, Pension UK estimates a couple would need £62,700 a year in post-tax retirement income. It is important to note that these figures are simply a guide, not a target, but can give you a good idea of how much you may need to fulfil your travelling goals. In terms of what other expenses you will have in retirement, you mentioned your expenses are £800 a month and you are mortgage-free, which is very helpful. Henry said: “With people generally living longer, it’s not uncommon for a retirement plan to need to provide an income for 25 or even 30 years. “Based on the information you’ve shared, your essential expenditure appears to be covered by guaranteed income streams that will rise alongside inflation, which provides a strong foundation. This means your discretionary spending will play a significant role in shaping the type of retirement you experience.” It is also important to think about occasional foreseeable costs you may have in retirement, such as replacing cars or carrying out home maintenance, and take this into account when thinking about how much income a month you might need to take. Once you do retire, there are different options for how you can take your benefits. “Typically, 25 per cent of a personal pension pot can be accessed tax-free and can either be withdrawn entirely at outset, withdrawn gradually, or left in the pot for future use. Any remaining withdrawals are generally subject to income tax so it’s important to carefully consider how this might fit in with your other income streams,” Henry explained. Money that is left invested in your pot can rise and fall depending on market conditions and some people buy an annuity if they want greater certainty over their retirement income. An annuity converts your savings into an annual pension and provides you with a guaranteed income for life. Whether this is appropriate for you depends on personal circumstances, preferences and market conditions at the time, but it can form part of a broader retirement income strategy, according to Henry. He also highlighted it was important to use your assets strategically, like checking all your pension paperwork for your defined benefit pension to make sure you fully understand what you are entitled to as you may be entitled to a lump sum payout as part of your pension in exchange for a reduced annual payment. Henry added: “Alongside your pensions, you have significant ISA holdings, which can be used to fund larger one‑off expenses or provide additional income without increasing your tax bill. “Maintaining a healthy cash reserve can also reduce the need to sell investments during market downturns, giving your portfolio time to recover, but too much held in cash can risk losing out to inflationary pressures over the long term. Each of your assets can play a different role within your overall plan and the use of each should be balanced appropriately.” Henry said you now have a range of assets and income sources that give you options as you approach retirement, and based on what you have shared, retiring at 65 appears possible. It looks like you have been really pragmatic over the years when it comes to your savings to be able to offer you the type of retirement you want. I hope you enjoy your retirement when it comes.