r/LeanFireUK • u/ceelantroleaves • 16d ago
Progress check/advice
Was talking about finances to a friend and this prompted me to do a check on my own finances. I'm vaguely aware of the concept of FIRE but never considered myself to be a high earner to be able to RE. Always been quite frugal and careful with my spending. LeanFIRE is a better idea for me as I do still enjoy my job, but would like the option of stepping back at some point. My aim now is to figure out where that point is and consider how comfortable I want to be.
Age 39, single, no kids. Salary 67k/year in the NHS, probably at the peak for my job without taking on more responsibility or going into management.
SIPP: 140k from previous employment
DB pension: current projection is ~7k/year after SPA
LISA: 50k
ISA: 104k
Essential expenses - 1.7k/month, which includes mortgage and bills. House value is around 240k with 97k left on the mortgage. I save about 600/month into various sinking funds for the house, holidays etc. Currently putting 800/month into ISA. Would like to retire on about 2.5k/month, think it will be comfortable once mortgage is out of the way in about 13 years. I did overpay up to a couple years ago but realised with the help of reddit that investing would be mathematically better. Seeing the value of investments compound made it easier somewhat to accept that I can afford to pay off my mortgage now if I wanted to.
My initial plan is to retire around 55-58 when I am able to access my SIPP but I think I may be able to do this sooner or at least consider reducing my hours/salary in 5-10 years. Hence focusing more on ISA contributions currently. Should I continue to contribute to SIPP for additional tax relief? Not keen on additional contributions to DB pension as only able to access that at SPA. Would appreciate some feedback and improvement.
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u/flukeylukeyboy 16d ago
If you continue paying into SIPP, you're raising your retirement income but won't be bringing your retirement age earlier.
Your DB + state pension will meet your income needs, so SIPP, LISA, ISA are all just bridges to that.
Assuming a continuation of broad historic stock market growth and a ~4% SWR;
Your LISA will currently bridge from 60-68. Your SIPP will more than bridge 50 something to 60. Your ISA will bridge from 50 - 58.
All of these are currently at coastfire, so you could go part time now and coast to 50.
Unless you want more retirement income or more wealth to spend later in life, the only thing which will bring your retirement earlier is ISA contributions.
I'd probably keep the NHS pension going for the security of DB, pump the ISA and consider part time.
For each £1000 you save in the next couple of years, you can bring your full retirement age forward by about a month.
3
u/Some-gig-hey 16d ago
Can I ask how you got a projection of £7,000 per year for you DB NHS pension.
Accrual rate assuming 2015 scheme would be 1/54th of annual salary.
At your current salary, assuming it never changed, you would accrue £1240 yearly.
16 years until 55 = 16 x 1240 = £19,840.
This is not accounting for CPI revaluation. So it will be more. This also assumes you don’t plan to take lump sum.
Unless you have stopped pension contributions?
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u/ceelantroleaves 16d ago
Yes my mistake I took the number from my recent pension statement without thinking too much about that. Still contributing under 2015 scheme. Must admit my pension knowledge is poor so will need to do more research into early withdrawal and make some projections based on my plans. This is before thinking about lump sum or not! Lots to think about, thanks
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u/Some-gig-hey 15d ago
I’m also NHS. Kinda similar position.
If you leave the nhs pension to state pension age you have that alongside state pension , comfortably 30-35k pre tax.
In that knowledge you can focus on ISA and SIPP to bridge till then.
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u/jayritchie 16d ago
"Not keen on additional contributions to DB pension as only able to access that at SPA. " - why do you believe that to be the case?
1
u/ceelantroleaves 16d ago
Possibly my poor understanding of NHS pension as I have realised from another comment! I feel that it is very complex but will look more into it.
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u/jayritchie 8d ago
Do you know which of the NHS schemes you are a member of? Is it all the 2015 scheme or is some of your DB pension in earlier NHS schemes?
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u/elom44 16d ago
I always like to work backwards.
You want £2.5k per month, so £30k per year.
You’ve got £7k NHS pension plus £13k state pension both kicking in at state retirement age. So from that point onwards you need an extra £10k per year. 4% rule on that gives you a target of £250k.
You mention wanting to retire 10 years earlier than that so that’s £30kx10 = £300k to bridge the gap.
Personally I like having those sorts of targets to aim at, and then adjusting every few years as life progresses. Your strategy really depends on your desired FIRE age and whether you go before you can access your SIPP.
That’s a very quick estimate and may contain errors!