Can we afford to retire?

Mr & Mrs C are a married couple in their late 50’s. They had recently sold their business and received £2,300,000 after costs, tax and repayment of business loans.

They had consulted a financial adviser who had recommended that:

• They continue to work in the business for 3 years, full time and then consider reducing their hours.
• Repay their mortgage
• Make pension contributions
• Establish a general investment portfolio and ISAs

The advisers charges were £54,000 initial fee and £18,000 per annum.

They approached AG keen for a second opinion. They really did not enjoy working under the new management and they were uncertain as to whether they really needed to continue working. Using our cashflow modelling software, we were able to demonstrate that they could comfortably afford to retire with immediate effect. This remained true even when we ‘stress tested’ their finances against a major market loss, which would see their assets drop by 20% and never recover, incur significant care costs at age 70 for life time etc.

As a result of our conversations, we recommended:

• They both retire with immediate effect.
• Repay their mortgage
• Gift £20,000 to each child to establish them on the housing ladder.
• Consider EIS to save Capital Gains Tax
• Make pension contributions
• Establish a general investment portfolio and ISAs

They made their investments and retired at the end of 2019. During the recent COVID crisis with the markets they were relaxed as they knew their plan could sustain the pressure of a market drop.

AGCFPs fees were £9,300 initial and £12,000 per annum

Summary: Can we afford to retire?

• Mr & Mrs C married couple in late 50’s.

• Sold their business and received £2,300,000 after costs, tax etc

• Their financial adviser recommended:
  • Work full time for 3 years, then consider reducing their hours.
  • Repay their mortgage
  • Make pension contributions
  • Establish a general investment portfolio and ISAs

• The advisers charges were £54,000 initial fee and £18,000 per annum.

• Using our cashflow modelling software, we were able to demonstrate that they could comfortably afford to retire with immediate effect. Even when we ‘stress tested’ their finances.
• As a result of our calculations and conversations, we recommended:
  • They both retire with immediate effect.
  • Repay their mortgage
  • Gift £20,000 to each child to establish them on the housing ladder.
  • Consider EIS to save Capital Gains Tax
  • Make pension contributions
  • Establish a general investment portfolio and ISAs

Made investments and retired end of 2019. Relaxed during the recent COVID crisis as they knew their plan could sustain the pressure of a market drop

The value of an investment and the income from it could go down as well as up. The return at the end of the investment period is not guaranteed and you may get back less than you originally invested.

Enterprise Investment Schemes (EIS) are very high risk investments. An EIS investment is usually concentrated in one single unquoted trading company. Often there is no market for the shares and it may be difficult to make a disposal. There is a strong possibility of the chosen company failing.

The contents of this case study are for information purposes only and do not constitute individual advice.