Racing cars

“Will my £ 140,000 pension cover lavish vacations and race cars?”

Many of us worry about funding our retirement. Retirees must find a balance between the lack of a reliable monthly salary and the desire to occupy their free time. Add in the estate and care costs and each book is divided in several ways.

But Malcolm Ash, a 70-year-old man from Shropshire, devoted his savings to the finer things in life. The retired university professor has an employer pension which pays £ 18,000 a year. This, added to a state pension of £ 8,000 and £ 8,000 in rental income, means he and his wife have enough to live on.

Then there is £ 113,000 in a personal pension, but half of it is in cash for fear of falling stock markets. A further £ 27,000 is invested via an Isa stock. These, he said, must fund his desired luxuries such as international travel. The first, when the rules allow, is Japan. “I’ve been to Shanghai several times and worked in Kuala Lumpur, but I’ve never been to Tokyo,” he said. “We don’t have kids, so my wife and I want to spend our travel money before we croak.”

However, spending £ 10,000 a year on vacation, as expected, will soon eat into their savings. He also wants to keep some money to cover the cost of care, so he has started investing. “I hadn’t invested until I retired, but I was teaching statistics so I knew the compound interest would be against me if I didn’t,” he said. “I did well, but that’s because there was a strong market rather than my skills.”

Mr Ash wants to focus on increasing his personal pension by 8% per year. This is a tall order considering that 45% is held in cash and the rest is spread over 33 funds. He wishes to leave his Isa as it is. It has 22 funds working to beat inflation, with high risk choices.

Mr Ash recognizes this and fears his strategy is not up to par. He wants to know how he can finance his travel and future child care expenses while pursuing his hobbies.

These include Caterham race cars – which cost around £ 5,000 a year.

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