Pensions Planning: The NUMBER

gadgetmind · 11 December 2014 at 9:52AM

richbeth wrote: »

The amount which will give me all of the above which is ca £4.5k pm net and the amount I need to get by which is half of this.

I'm aiming for £5k pm after tax, which is something of a challenge given that (until very recently) my wife didn't work and we only have DC pensions.

And yes, the stock markets will throw lean periods at us, which we need to be able to weather, hence us wanting the kind of "buffer" you have outlined.

Hopelessly_Hopeful · 11 December 2014 at 10:41AM

Morning

Subscribed a while ago and enjoy reading.

Having paid off a DMP this is my next major goal to work towards.

Re;THE NUMBER is how much you need to live comfortably: very IMPORTANT as part 1 of Retirement Planning. (Average response to my thread is £23k pa)

Do you have any thoughts on this for a couple or a single person living alone number?

Thanks

HHx

Linton · 11 December 2014 at 11:38AM

Hopelessly_Hopeful wrote: »

Re;THE NUMBER is how much you need to live comfortably: very IMPORTANT as part 1 of Retirement Planning. (Average response to my thread is £23k pa)

Do you have any thoughts on this for a couple or a single person living alone number?

Trouble is the Number is very much a personal requirement. You get used to a certain standard of living, and then anything significantly smaller could feel like poverty. Many couples now live on less than £23K. But I would feel that for a couple perhaps £30K is a basic requirement and the ability to go above £40K gives the necessary flexibility.

The best way in my experience of getting the right Number is to accurately measure how much you are actually spending each year, including all one-off expenditures. Then you can plan to at least match the average (minus things which will no longer apply) plus inflation during retirement. Budgetting bottom-up doesnt work.

gadgetmind · 11 December 2014 at 12:36PM

I saw a comment once that said that (for a couple) £1k pcm was frugal, £2k a month was reasonable, and £3k was luxury.

You can argue with the numbers and the wording, but it's probably a handy rule of thumb.

Linton · 11 December 2014 at 1:37PM

gadgetmind wrote: »

I saw a comment once that said that (for a couple) £1k pcm was frugal, £2k a month was reasonable, and £3k was luxury.

You can argue with the numbers and the wording, but it's probably a handy rule of thumb.

Seems a reasonable rule of thumb for normal living expenses. What is more difficult is how to account for major extras eg replacement cars, expensive holidays, major house maintenance and refurbishment.

One could have a separate fund for such things. I preferred to include them in the annual budget for planning purposes as I had several years spending data available to estimate an average.

Hopelessly_Hopeful · 11 December 2014 at 2:17PM

Thanks

I think my number for a single person household is £16800 but hoping to get more in the pot!

HHx

hugheskevi · 11 December 2014 at 3:04PM

The best way in my experience of getting the right Number is to accurately measure how much you are actually spending each year, including all one-off expenditures. Then you can plan to at least match the average (minus things which will no longer apply) plus inflation during retirement. Budgetting bottom-up doesnt work.

Absolutely agree with this. Personally I didn't want to record every bit of expenditure, but I keep good financial records. Hence I can apply the simple formula below at the end of each financial year:

Consumption=Gross salary - pension saving - ISA saving - income tax - National Insurance - Mortgage + Saving interest - change in net value of other debts and saving

To very accurately calculate the amount of money I spent on things which I will still be spending money out of post-tax income on in retirement.

For 2013/14, the figure for our household (2 adults, no children, in London) came to £26,704.

Others I have spoken to have found this surprisingly large given I don't spend a great deal on anything, but I think they fail to account for all their small spending, as well as one-off larger expenditure and fall into the trap of thinking they plan to save £x each month, and hence save 12*£x in a year, without ever accurately checking whether or not this is happening.

madeinireland_2 · 11 December 2014 at 8:23PM

I've been keeping a record of expenses for about the last 5 or 6 year. We are a couple with a fairly comfortable lifestyle though not extravagant. We do have a couple of kids 21 and 18 who are not self sufficient yet.

It's in the form of a 12 month moving average and has varied over the last 3 years between £39k and £46k.

If I strip out mortgage and a couple of other costs we won't have when we retire then it would drop about £10k.

So in line with an earlier poster I view my number as lying between two figures £29k and £36k.

I do know I could with a bit more effort get down to £24k in difficult times if we had to.

This lifestyle runs 2 cars, a dog and two cats, two older kids which we would expect to drop out of the costs at some point we hope and a fairly expensive house of 5 bedrooms which we could downsize.

Comments welcome...I could probably tell you average yearly costs for any category of spend if that would be of interest.

Happier_Me · 11 December 2014 at 9:26PM

gadgetmind wrote: »

I can't speak for others, but I want to be able to ride nice bicycles, buy decent cars, take good holidays, enjoy the sports I like, eat out without guilt, go to concerts, and generally enjoy life without having to watch the pennies all the time.

If this isn't "normal" then I'm perfectly happy to be abnormal, which is pretty much status quo anyway.

This is what we're aiming for but our figure for doing this is lower than yours at £30k net for a couple. The aim is for us to live relatively frugally in the UK in terms of our assets to keep running costs low (one economical car, downsize from our 4 bed detached in an expensive area to a 3 bed semi in an okay area) and then indulge in some travel, ideally some long term holiday lets if the budget will stretch to this.

Will definitely review my number regularly to make sure this all still stacks up for us.

justme111 · 11 December 2014 at 9:41PM

You would need to account for tax so the gross number would be about £10 k higher?

Pensions Planning: The NUMBER

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