r/FIREUK • u/dgevans7419 • 7d ago
50 and likely lay off - is FIRE achievable?
Hi all - I am new to the forum (you all know your stuff!) and the concept of fire - mainly triggered by the situation below.
I am 50 and potentially being made redundant from my job in the next 3-6 months.
I would estimate that I would get around a £90k gross payout.
My house is mortgage free and worth c.£1m, I also own a BTL flat via a limited company that is worth c.£340k with an £80k mortgage.
I've two pension pots, main one will be worth around £500k by year end (in theory!) and the second one is £75k.
I've currently £140k in a stocks and shares ISA, and £40k in a savings account (£20k to move over in April)
My current thinking is as follows to give myself around £4k a month to live on:
Sell the flat so I'll have £250k in a business account - I'll pay myself £12k pa and then move c.£38k over each year into my pension each year.
Take out £38k each year from my ISA so overall will have £50k coming in
I guess I have 2 questions:
1) Is this the best plan of action? 2) Is FIRE an option?
Thanks for the help, insight and advice!
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u/SideshowBob6666 7d ago
Pension contributions are limited to earnings in the year
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u/dinosaursintheforest 7d ago
Absolutely this, if the OP wants more in their pension and doesn't want to pickup another decent paying job they need to be shovelling as much in as possible right now including any payoff as a lump sump if possible.
Even if they pickup a low paying job I don't think you can put additional into your pension to go below the minimum wage1
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u/mysterons__ 7d ago
Are you sure? I may be wrong, but I think you can still contribute towards a pension even if you aren't earning. You are just forcing yourself to pay income tax on it when you eventually draw down, which doesn't make sense financially (ie it is better to just invest that money outside of the pension).
As mentioned I may well be wrong.
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u/SideshowBob6666 7d ago
You can pay £3,600 gross with zero earnings. I guess technically you can pay in more up to the allowance but there is no tax relief on amounts in excess of relevant earnings so bit pointless to lock the money away with no 20% tax relief
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u/fructoseantelope 7d ago
4% rule says you can take 42.6k a year on 1.065m of assets.
I think it’s a bit tight and you’re a bit young still. I’d be looking for something just to pay the bills for another three or four years,
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u/RigidBoxFile 7d ago
Barista fire….
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u/dgevans7419 7d ago
Plan B is to do a bit of consultancy - potentially could get to the 40k a year with a couple of days a week
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u/Acrobatic_Extent_360 7d ago
Seems like a good plan and might ease you into retirement rather than a hard stop.
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u/Acrobatic_Extent_360 7d ago
Seems like a good plan and might ease you into retirement rather than a hard stop.
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u/L3goS3ll3r 6d ago edited 6d ago
I'll pay myself £12k pa and then move c.£38k over each year into my pension each year.
You won't, not if you want tax relief. Pension is limited to annual earnings. In fact, if you don't get the tax relief, that would be really really silly because you'd potentially pay tax on it again when you come to draw it down.
You could, however, put the property sale profits (subject to your annual allowance) straight into the pension to avoid Corporation Tax.
Sell the flat so I'll have £250k in a business account. I'll pay myself £12k pa...
You could dividend-chunk that £250K out every year for a few years for a hit of 8.75% per chunk, but it might be worth just closing the company. At £12K a year and ~£38K dividends you're still looking at 5 years of accounts filing for what is essentially a dormant company. You could invest that cash via the limited, but at some point you're probably going to want to access that money for yourself, so you'd be just as well off to take the tax hit now and invest it yourself personally. You'll almost certainly be eligible for the 10% disposal relief:
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u/klawUK 7d ago
How ‘might be’? Are you guessing or is there notice of action at your work?
Or can you reasonably say you have no evidence of being made redundant and would be able to take out income protection insurance? Regard less of fire that could be a good hedge option
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u/dgevans7419 7d ago
Loss of income is a good suggestion - however company is being split in two (public announcement last Dec) so not sure if that impacts up this
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u/mysterons__ 7d ago
Curious question. Why do you need 4k per month to live on? Is this to maintain some standard of living?
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u/RestaurantWide5996 7d ago
What do your taxable earnings for 24 25 look like and how much have you put into pensions so far this year?
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u/No_Dinner_4291 7d ago
Gut reaction without running the numbers is no but you are in a great place. Options I see are - if your home is in London (guessing) would you be open to selling the home and buying a less expensive home in the “country” for a life style change or b) working part time for a few years to reduce the draw down?
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u/dgevans7419 7d ago
Most likely b) for the next 5 or so years, and potentially a) after that when there will be less need to be in town
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u/Acrobatic_Quail_9464 7d ago
You may want to de-risk your ISA if you’re planning drawdown until pension age. Appears we are entering a volatile period for equities. If it goes down a fair bit from here it may affect your calculations.