Balancing ISA, SIPP, and Taxable accounts
Posted: May 19th, 2018, 9:45 am
Having started taking a more structured approach to saving and investing a few years ago, I'm now at the point where I have identified a path to FI and am now just executing this plan.
I was hoping to get any feedback from this group on the below approach, as I have enjoyed reading a number of other practical and informative posts on the site.
- As a contractor with my own Ltd Co., I am currently taking a mix of low salary and dividends
- I am contributing £40k to my SIPP directly from the Company
- I'm maxing out my ISA, with any additional available funds going into a general investment account (taxable), as well as some investments in VCTs
- The company bank account increases each year as I do not withdraw all earnings
My aim is to reach a level of FI in my early/ mid 40's whereby I have the necessary funds available to support me until my SIPP becomes available around 58. I'm currently mid 30's so have between 8 - 10 years to continue to grow my savings.
I appreciate that tax rules and dates for accessing pensions may very well change in the future, however working off what we know today -
- In the first stage of FI, I was planning on taking funds out of the company each year as a salary and dividends until this pot was depleted. The logic behind this is that it is just sitting in cash and losing buying power due to inflation so best to wipe it out sooner rather than later. At the same time, it will let my invested funds (in ISA etc.) continue to grow
- In the second stage of FI, I was going to take funds from the taxable account until this pot was depleted, again, allowing the ISA funds a few more years to continue to grow tax-free
- In the third stage of FI, release cash from the ISA, both through dividend income as well as selling units as required to meet withdrawal needs. This stage will need to last until my SIPP becomes available
- In the fourth and final stage of FI, my SIPP would be available and this could be used alongside any remaining funds from any of the above accounts
Is there anything missing from the above approach, or that requires amendment?
One final point to note is that I still plan on doing something productive with my time once FI that will probably generate income, however, this will be unrelated to my current career and must be considered 'nice to have' rather than fundamental in making the numbers for FI work.
I was hoping to get any feedback from this group on the below approach, as I have enjoyed reading a number of other practical and informative posts on the site.
- As a contractor with my own Ltd Co., I am currently taking a mix of low salary and dividends
- I am contributing £40k to my SIPP directly from the Company
- I'm maxing out my ISA, with any additional available funds going into a general investment account (taxable), as well as some investments in VCTs
- The company bank account increases each year as I do not withdraw all earnings
My aim is to reach a level of FI in my early/ mid 40's whereby I have the necessary funds available to support me until my SIPP becomes available around 58. I'm currently mid 30's so have between 8 - 10 years to continue to grow my savings.
I appreciate that tax rules and dates for accessing pensions may very well change in the future, however working off what we know today -
- In the first stage of FI, I was planning on taking funds out of the company each year as a salary and dividends until this pot was depleted. The logic behind this is that it is just sitting in cash and losing buying power due to inflation so best to wipe it out sooner rather than later. At the same time, it will let my invested funds (in ISA etc.) continue to grow
- In the second stage of FI, I was going to take funds from the taxable account until this pot was depleted, again, allowing the ISA funds a few more years to continue to grow tax-free
- In the third stage of FI, release cash from the ISA, both through dividend income as well as selling units as required to meet withdrawal needs. This stage will need to last until my SIPP becomes available
- In the fourth and final stage of FI, my SIPP would be available and this could be used alongside any remaining funds from any of the above accounts
Is there anything missing from the above approach, or that requires amendment?
One final point to note is that I still plan on doing something productive with my time once FI that will probably generate income, however, this will be unrelated to my current career and must be considered 'nice to have' rather than fundamental in making the numbers for FI work.