‘We want £60k a year in retirement – are two buy-to-lets and £665k enough?’

Would you like Kyle to rate your portfolio? Email money@telegraph.co.uk with the subject line: “Rate my portfolio”. Please include a breakdown of your portfolio, your age and what your investing goals are. Full names will not be published.

Dear Kyle,

I’d like to give up work and look after my parents who are in their 90s.

I originally planned to work till age 60, and I’m currently 57. If I stop working now, I can draw a sufficient income to enjoy a good standard of living, but won’t be able to save anything. I’m concerned that if I stop working now, the savings and pension income I’ve built up won’t last me for the duration of my retirement.

I’m married, and we own our house outright. My husband will be 60 this year and has a pension of £350,000 and savings of about £200,000. We don’t have children.

I’m not a very savvy investor and have money in a passively managed global equity fund. I’m happy to leave my cash there, pay minimal fees and, in time, live off the return. My husband’s a very nervous investor and is considering doing the same.

We’re both on track to receive the full state pension at age 67.

Together, we would like a joint income of £60,000 net in retirement. My portfolio is as follows.

Thanks,

– Charlotte

Dear Charlotte,

There’s a lot to unpick here. But first, I think you are being too hard on yourself. While you say you are not a savvy investor, you clearly know your onions when it comes to personal finances. You have been very diligent in saving for your golden years and have multiple income sources.

The aim for you and your husband is £60,000 net of tax in retirement. Your husband has a pension pot of £350,000 and savings of about £200,000.

I don’t think your goal is unrealistic given that you have a solid base with your pension pots, plus cash savings and two rental properties. In addition, you’ll have the state pension from age 67. The full state pension will rise to just under £12,000 from April 2025.

So, provided it keeps pace with the rising cost of living between now and when you retire – which it will if the triple lock mechanism stays in place – you can expect to jointly receive £24,000 a year. Note, your husband can claim it a couple of years before you, and if you retire early, you will need to use your personal savings to plug the gap.

Putting the defined benefit pensions and two rental properties to one side for now, you have £339,000 in two defined contribution pensions, just over £140,000 in cash savings, £100,000 in BP shares, and just over £76,000 in a stocks and shares Isa. That leaves a grand total of around £655,000.

Using a blanket withdrawal rate of 4pc, net of fees, you could receive £13,560 a year from the defined contribution pensions.

The two defined benefit pensions, which are inflation linked, will provide around £17,500 a year of income, provided you don’t dip into them before the age of 60 or take any tax-free cash. Defined benefit pensions are great for someone like you seeking a regular income in retirement.

Therefore, in total, you could have around £30,000 from the pension pots alone. However, in the absence of a crystal ball, investment performance is impossible to accurately predict. If your portfolio gets off to a bad start, continuing to draw 4pc could mean your pot drains quicker than planned. That said, 4pc a year isn’t an overly aggressive withdrawal rate.

Clearly, the longer you keep working and beefing up your savings, the more financially comfortable you’ll be in later life. However, if you chose to retire soon or in the next couple of years, you should have sufficient assets to live comfortably. Just make sure you think carefully before drawing from your pensions as some decisions cannot be reversed.

In addition, you have two properties – one owned outright and valued at £265,000 and the other worth £235,000 with £100,000 left on the mortgage. You could either use the rental income to help achieve the combined £60,000 target, or sell the properties to raise cash, which could be used to top up your pension investments.

You also mention potentially consolidating the two defined contribution pension.

Bringing them under one roof within a self-invested personal pension (Sipp) could make things easier to manage and potentially save costs. Provided you are happy to put the work in, a Sipp allows you to make your own investment decisions. 

Given that you are well-versed in the fundamentals of personal finance, I’m confident you could get to grips with the nuts and bolts of the world of investing.

Having said that, you may prefer to keep the two defined contributions pensions as they are. I’m sure you are already aware, but the lifestyle pension fund will de-risk ahead of your retirement and is typically designed for those who are looking to buy an annuity.

Building your own portfolio takes time and effort. There are, however, short-cut options for those who prefer a more hands-off approach, and investors can outsource the decision-making over what to hold.

Multi-asset funds split your money across shares and bonds, which tend to complement each other in different market conditions.

To keep costs low, you could look to multi-asset funds that track the market. These funds invest in a spread of assets by using index trackers and exchange-traded funds (ETFs), which aim to mirror the performance of a particular stock or bond market.

The funds have different risk levels. Basically, the more stock market exposure, the higher risk the fund. Fund ranges include Vanguard LifeStrategy, BlackRock MyMap, Legal & General Investment Management’s Multi-Index funds and Aberdeen Investment’s MyFolio Index range.

Your stocks and shares Isa fund choice – Vanguard FTSE Developed World ex UK Equity Index fund – has paid off handsomely. It’s in the top 25pc of fund performers over one, three and five years, up 96.7pc over the latter period versus 69.3pc for the average global fund. This passive fund has beaten most global funds run by professional investors.

I don’t know where you have the BP shares, so it’s unclear whether capital gains tax will come into play. The company is regarded as an income staple, and is the seventh most-held investment among our customers aged 65 or over.

Last month, when BP outlined its dividend intentions, it said it would row back on its green energy commitments in order to drive cash flows from oil and gas production. It promised a “resilient” dividend by growing the ordinary payout at least 4pc a year. The current dividend yield is 6pc.

As ever, diversification is key. Good luck!

Kyle Caldwell is funds and investment education editor at interactive investor. His columns should not be taken as advice or as a personal recommendation, but as a starting point for readers to undertake their own further research.