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  • FIRST POST
    • Gatser
    • By Gatser 14th Dec 09, 1:44 PM
    • 570Posts
    • 190Thanks
    Gatser
    Pensions Planning: The NUMBER
    • #1
    • 14th Dec 09, 1:44 PM
    Pensions Planning: The NUMBER 14th Dec 09 at 1:44 PM
    The NUMBER is how much income you need to "live comfortably"
    So What's your number?
    Very important for pensions planning, to know what you are aiming for.

    My Number? (for a couple)
    I calculated: £22,000
    based on
    Food £5,000
    Car/transport £5,000
    Bills/Utilities £4,500
    Holidays/Leisure £4,500
    Clothing/Cash/Xmas/Other £2,000
    Repairs/replacements £1,000
Page 46
    • hugheskevi
    • By hugheskevi 12th Feb 17, 10:27 AM
    • 1,889 Posts
    • 2,265 Thanks
    hugheskevi
    the number I felt comfortable with is £45k net per annum for a couple...I am surprised and I guess somewhat encouraged by some of the much lower figures on this thread and yet still living a good lifestyle
    It is interesting to look at National Statistics on average pensioner income, which I find surprisingly high.

    Looking at couples who have reached State Pension age but are still within 5 years of State Pension age (age based on head of household):
    • Annual combined gross income is £40,386 (presume mean, but unstated)
    • Earnings contributes £10,227 to the gross figure above
    • Net income (including earnings) is £33,029 (mean)
    • Net income (including earnings) is £26,246 (median)
    Source: Pensioner Income Series 2014/15, table 2.5.
    (Note: weekly amounts converted to annual figures by multiplying by 365.25 / 7)

    Looking at the statistics for couples aged over 75 the figures are all quite similar, except for earnings which have unsurprisingly declined to just £1,409 p/a. Looking at gross income figures excluding earnings gives gross income of £30,159 for couples within 5 years of State Pension age compared to £28,124 for couples aged over 75.

    There are however some pretty strong headwinds which might depress future growth in pensioner incomes:
    • The decline of Defined Benefit pensions in private sector which accelerated in the 1990s but was mostly done by closing DB pension to new joiners means occupational pension income is probably going to wain - I've seen various analyses which suggest Defined Benefit pension income is probably at its highest now and will start to decline in future years.
    • Increasing State Pension age will probably depress earnings in the figures above as younger (eg those aged 62-65) people drop out of the analysis, unless there is a strong impact of people working longer due to rising State Pension age.
    • Triple lock is widely speculated to be something which should be removed (although not until 2020), although that will be a political decision.
    Last edited by hugheskevi; 12-02-2017 at 10:43 AM.
    • Northamptonblue
    • By Northamptonblue 20th Mar 17, 5:54 PM
    • 15 Posts
    • 23 Thanks
    Northamptonblue
    I did read what appeared to be sage advice from an advisor which might help:

    £10k = survival
    £20k = comfort
    £30k = 'luxury'

    I suppose the latter depends on your definition of luxury. The amounts are per household and after housing costs (I think that means assuming you own your own home.

    Obviously everybody has a different idea but this seemed to me to be a good rule of thumb.
    • chiefie
    • By chiefie 20th Mar 17, 6:12 PM
    • 261 Posts
    • 266 Thanks
    chiefie
    I did read what appeared to be sage advice from an advisor which might help:

    £10k = survival
    £20k = comfort
    £30k = 'luxury'

    I suppose the latter depends on your definition of luxury. The amounts are per household and after housing costs (I think that means assuming you own your own home.

    Obviously everybody has a different idea but this seemed to me to be a good rule of thumb.
    Originally posted by Northamptonblue
    It's all a matter of lifestyle and opinion. I'd add £10k to each of them.
    • AnotherJoe
    • By AnotherJoe 20th Mar 17, 7:06 PM
    • 6,061 Posts
    • 6,386 Thanks
    AnotherJoe
    It's all a matter of lifestyle and opinion. I'd add £10k to each of them.
    Originally posted by chiefie
    Ditto. £10k would be well below survival, unless you are counting on benefits rescuing you. And I wouldn't count £30k as luxury in any sense of the word. Or even £10k on top.
    • OldMusicGuy
    • By OldMusicGuy 20th Mar 17, 8:29 PM
    • 61 Posts
    • 85 Thanks
    OldMusicGuy
    I joined here recently because I am deep into retirement planning and have found this website incredibly helpful. Skimming through the last few pages of this thread, this post really stood out for me:
    As I get more stressed from work my number goes down ��
    Originally posted by chiefie
    That's exactly my situation. I have a high stress job that in recent years (what with bonuses and accumulating stock grants) has paid very well, for the last five years I have been an additional rate payer. I never gave much thought to pension planning until about 10 years ago, especially after the 2008 crash saw a big chunk wiped off my main pension pot, which woke me up a bit. I have no DB pensions, just DC and all I did was pay into workplace schemes whatever I needed to get the max employer contribution. No "number" in mind, I just assumed I would keep working pretty much up to SP age or close to it.

    However I found that once I reached 55 my health started to suffer from the stress and pressures of work. I realized I needed to start thinking about retiring earlier but had no idea what kind of "number" I should be working towards. However, I knew I did not have enough in the pension pot so I made large contributions on top of what I was paying through work to take advantage of tax relief and carry forward allowances. Still no "number" in mind but at least I was doing something. I also consolidated most of my schemes into my HL SIPP. Vague idea was retirement at 62/63.

    Last year aged 59 it all got too much and I nearly had a breakdown. I realized that I could not behave at work like a 40 year old any more. My mental and physical health were both suffering. Fortunately I raised the issue with work before it got too far and to their credit they reduced my workload. But my wife and I decided I had to stop asap. That's when I started reading FIRE blogs (MMM, The Escape Artist etc) and also ended up here. I found out about safe withdrawal rates, probability vs safety first and so many other things that have made me think seriously about retirement planning (and I wish I'd known about earlier). So I have decided to retire at 60, less than one year from now.

    So my "number" has been forced on me but I wish I had planned more proactively a lot earlier. That's a message I am drumming into my 21 year old son and it's one for all you kids out there! By early next year I'll have a pension pot of around £750K and about £150K in cash and ISAs between us. We will be downsizing our house (fully owned) which will free up about £200K after we have given our son a chunk to help him get on the property ladder. The £200K will probably be used to purchase an investment property.

    My wife will get two small DB pensions totalling about £5K, that with our SPs will 23K at SP age (66 for us both). I worked out that if I took the 25% tax free cash up front that we could spend all of our cash investments and taking into account SPs once they kick in, generate an income of 36K per annum up til age 75 without paying any tax. That would leave us £560K invested (which ought to be worth at least that in real terms when we are 75, hopefully more) plus the investment property (which may generate say 5K pa in rent but I have ignored that).

    I then worked bottom up and said what is the absolute minimum we need to live on. No discretionary spending at all, and that works out at 16 to 17K per annum. My logic is that the 36K pa income leeway is plenty in excess of that so we ought to be ok with plenty of safety (given the investments and also we will own a house worth 400K in today's money). Neither of us has expensive hobbies or want to spend money travelling, we buy the whole Mr Money Mustache philosophy. So I am very happy to retire at 60. Realistcially if I had planned better I could have gone earlier.

    Not sure if that helps anyone, but it's been cathartic to write!
    Last edited by OldMusicGuy; 20-03-2017 at 8:39 PM.
    • greenglide
    • By greenglide 20th Mar 17, 10:38 PM
    • 2,587 Posts
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    greenglide
    or the last five years I have been an additional rate payer.
    You seem to say that you have a frugal lifestyle, no expensive hobbies or travel yet you have been an additional rate payer for the last five years?

    What happened to the money?
    • OldMusicGuy
    • By OldMusicGuy 20th Mar 17, 10:54 PM
    • 61 Posts
    • 85 Thanks
    OldMusicGuy
    You seem to say that you have a frugal lifestyle, no expensive hobbies or travel yet you have been an additional rate payer for the last five years?

    What happened to the money?
    Originally posted by greenglide
    Paying school fees for part of it then supporting son at Uni. However, as much free cash as possible went into the pension. I have maxed out the last 3 years carry forward allowance, my pot has grown significantly through savings Some of it has gone into a classic car, which I plan to enjoy in my retirement and of course which is going up in value and can be sold when I can no longer drive it.

    I should have been clearer - the frugal lifestyle will happen when we retire. I'm stocking up now on all hobby related items so that I will not need to spend much at all once retired. We'll be living a much simpler lifestyle. Holidays will be pootling around in the classic car, we'll be renovating our downsized house and my wife is into breadmaking, food preserving, gardening and growing veg. Can't wait to ditch the high tech world. I told you we bought into the "MMM" philosophy....
    Last edited by OldMusicGuy; 20-03-2017 at 10:58 PM.
    • Linton
    • By Linton 20th Mar 17, 11:02 PM
    • 7,507 Posts
    • 7,258 Thanks
    Linton
    ....

    I should have been clearer - the frugal lifestyle will happen when we retire. I'm stocking up now on all hobby related items so that I will not need to spend much at all once retired. We'll be living a much simpler lifestyle. Holidays will be pootling around in the classic car, we'll be renovating our downsized house and my wife is into breadmaking, food preserving, gardening and growing veg. Can't wait to ditch the high tech world. I told you we bought into the "MMM" philosophy....
    Originally posted by OldMusicGuy
    Up to you but I'm not sure it makes sense to change your standard of living when you retire. The "Good Life" may pall after a few years. Better to plan to keep it the same, if necessary by reducing your standard of living whilst working.
    • Yorkshirebornandbred
    • By Yorkshirebornandbred 21st Mar 17, 10:52 AM
    • 18 Posts
    • 43 Thanks
    Yorkshirebornandbred
    Up to you but I'm not sure it makes sense to change your standard of living when you retire. The "Good Life" may pall after a few years. Better to plan to keep it the same, if necessary by reducing your standard of living whilst working.
    Originally posted by Linton

    I would agree with Linton. We are both 55 and we have spent the last 3 years living on our proposed retirement budget. Whilst we are not frugal, in the true sense, our retirement budget is more thoughtful about how and where we spend money. This has taken some getting used to for both my wife and I. The outcome is that despite achieving financial independence (@ 3% withdrawal rate), I have carried on working part time, to delay draw down. This will give us more spending in retirement, should we require it. By the time I retire we will have been living on our retirement budget for at least 5 years, so the spending patterns should be well ingrained.

    In my case, I mostly enjoy my work so a couple of extra years part time is well worth it for the peace of mind. However, if my health was suffering because of work I would quit as soon as possible. I just think it makes sense to test out any lifestyle/budget changes before you make that decision.
    Last edited by Yorkshirebornandbred; 21-03-2017 at 11:06 AM. Reason: Grammar
    • OldMusicGuy
    • By OldMusicGuy 21st Mar 17, 11:20 AM
    • 61 Posts
    • 85 Thanks
    OldMusicGuy
    You both raise the key issue - you can never really know the "number" until you retire. All the models and supposed rules of thumb (2/3 final salary, safe withdrawal rates etc) are only that, guesses and rules of thumb. It's only once you have retired you really know what you need to sustain your lifestyle.

    In recent years I have started searching for the "number." Financial advisers would just say 2/3 of final salary, which is probably not achievable for me even if I kept working until SP age. My crisis at work over the last couple of years has forced us to rethink our life priorities and how we want to spend the next phase of our life. I've also come to terms with mortality, something it was hard to think about even 5 years ago. I've been in the corporate world for nearly 40 years and it has served me very well, but in the last couple of years I've realized it is driving me to an early grave. Hence a philosophical readjustment.

    Reading about FIRE and the approaches espoused by the likes of the Escape Artist have really resonated with me. So my wife and I have have looked at how we want to spend the next phase of our lives, and our goal will be to live a more sustainable life and spend time together enjoying the simple things in life. For example, I'm a musician so instead of buying new guitars and other toys but never having the time to play them, I am streamlining all my gear and making sure I have the right tools to spend many years making music without needing to waste money on new toys. Instead of consuming, we will be using what we have more effectively. I'm not too worried by inflation over the next 5 to 10 years because we will be downsizing our house and lifestyle.

    Hence I've focused more on what is the absolute minimum we think we need to support our retirement lifestyle and then look at anything on top of that as a bonus. I think what we have accumulated should cover it but like Linton and YB&B say we won't know for sure until we are retired. It's funding the years until we get to SP age that could be challenging and I am particularly worried about pound cost ravaging during those years (hence holding a lot of cash right now). I could always do some part time work in the first few years but I want to try to avoid that if possible.

    I guess the point I would make is that for anyone doing retirement planning, it's more than knowing the "number". It's about looking at your future self/selves and deciding how you want to live your lives. The more expensive the lifestyle, the more money you will need and the longer you may have to work unless you start investing early and plan well. We plan on going all Tom and Barbara rather than Margo and Jerry in our old age, so let's hope it doesn't pall. But my wife and I have had serious discussions about this and we are both looking forward to doing things differently in future. Keep your fingers crossed for us.....
    Last edited by OldMusicGuy; 21-03-2017 at 11:28 AM.
    • Yorkshirebornandbred
    • By Yorkshirebornandbred 21st Mar 17, 11:40 AM
    • 18 Posts
    • 43 Thanks
    Yorkshirebornandbred
    It is good that you and your wife are on the same page with regards to your retirement lifestyle. That will count for a lot if things get tough. I hope that it goes well for you both and I am sure that you are doing the right thing if your health is suffering.
    Last edited by Yorkshirebornandbred; 21-03-2017 at 11:40 AM. Reason: spelling
    • beaker141
    • By beaker141 21st Mar 17, 12:17 PM
    • 416 Posts
    • 165 Thanks
    beaker141
    Reading about FIRE and
    Originally posted by OldMusicGuy
    Hi - Whats FIRE - I feel I'm missing out on a blog somewhere having already read MMM and the escape artist ?
    • JoeCrystal
    • By JoeCrystal 21st Mar 17, 12:22 PM
    • 1,199 Posts
    • 665 Thanks
    JoeCrystal
    FIRE stands for Financial Independence and Retiring Early
    • Triumph13
    • By Triumph13 21st Mar 17, 3:00 PM
    • 962 Posts
    • 1,102 Thanks
    Triumph13
    I should have been clearer - the frugal lifestyle will happen when we retire. I'm stocking up now on all hobby related items so that I will not need to spend much at all once retired. We'll be living a much simpler lifestyle. Holidays will be pootling around in the classic car, we'll be renovating our downsized house and my wife is into breadmaking, food preserving, gardening and growing veg. Can't wait to ditch the high tech world. I told you we bought into the "MMM" philosophy....
    Originally posted by OldMusicGuy
    I would very much agree with the others about switching to that Frugal lifestyle now whilst you still have the opportunity to change your mind if you find it doesn't suit. That doesn't mean only spending now what you expect to spend then, but it does require some detailed budgeting and discipline to separately identify 'living costs' from 'getting things ready for retirement costs' such as stocking up on tools that will see you out. You need to be very honest with yourself about a) whether a cost really is a one-off that won't need to be repeated; and b) whether the fun of buying all these toys isn't something you are really going to miss when you can't afford to do it any more.
    • OldMusicGuy
    • By OldMusicGuy 21st Mar 17, 5:01 PM
    • 61 Posts
    • 85 Thanks
    OldMusicGuy
    I would very much agree with the others about switching to that Frugal lifestyle now whilst you still have the opportunity to change your mind if you find it doesn't suit. That doesn't mean only spending now what you expect to spend then, but it does require some detailed budgeting and discipline to separately identify 'living costs' from 'getting things ready for retirement costs' such as stocking up on tools that will see you out.
    Originally posted by Triumph13
    Good advice but I'm quite used to budgeting at a detailed level (I have a finance background), and although for the last 5 years I've been a high earner with no mortgage, before that our living costs were much closer to income. So it will be going back to running a household budget again. Stocking up on high quality tools for all the hobbies is what we are doing right now so that should keep us going for at least 5 to 10 years without major expenditure. But maybe I'll treat the first year of retirement as more of an experiment to see if my plans really do stack up. I have a US IRA that I can bring over as a lump sum of around £25K after US tax and my wife will have around 5K of DB pension income. We'll see how we manage on that for the first year (although we won't have downsized the house at that stage so utility bills and council tax will be higher than after downsizing).

    You need to be very honest with yourself about a) whether a cost really is a one-off that won't need to be repeated; and b) whether the fun of buying all these toys isn't something you are really going to miss when you can't afford to do it any more.
    Originally posted by Triumph13
    This is a great point and it's where the philosophical side of retirement planning comes in (for me at least). My wife and I are a bit on the "alternative" side, we have grown weary of the consumerist lifestyle and in particular I know I have used "buying toys" as a way of making me feel good when work has been stressful. Time for that to stop and instead make time for playing with the toys I have in what little time remains. Like the MMM blog and similar espouse, for us the first rule of retirement will be to reduce expenditure on (what we view as) unnecessary consumer goods to allow us to make the best use of the assets we have.
    • p00hsticks
    • By p00hsticks 21st Mar 17, 6:06 PM
    • 5,283 Posts
    • 4,741 Thanks
    p00hsticks
    Like the MMM blog and similar espouse, for us the first rule of retirement will be to reduce expenditure on (what we view as) unnecessary consumer goods to allow us to make the best use of the assets we have.
    Originally posted by OldMusicGuy
    Why do you feel the need to buy 'unnecessary consumer goods' now ? I don't really understand why, if you feel this way, you aren't making these lifestyle changes now, rather than waiting for retirement.
    • Northamptonblue
    • By Northamptonblue 21st Mar 17, 7:02 PM
    • 15 Posts
    • 23 Thanks
    Northamptonblue
    Ditto. £10k would be well below survival, unless you are counting on benefits rescuing you. And I wouldn't count £30k as luxury in any sense of the word. Or even £10k on top.
    Originally posted by AnotherJoe
    Wasn't what I was planning I would be the first to admit. Average desired amount quoted on this thread by early retirees is about £25k though. Presumably, they think that will do nicely for them or they wouldn't be retiring early. My own number is about £32k plus a largish buffer of savings to cover big holidays, new car and contingency. I am retiring in August this year at age 59. Not expecting to spend too much time travelling by private jet but do plan a couple of major holidays.



    I suppose that would be peanuts to some and 'luxury' to others.
    • OldMusicGuy
    • By OldMusicGuy 21st Mar 17, 8:21 PM
    • 61 Posts
    • 85 Thanks
    OldMusicGuy
    Why do you feel the need to buy 'unnecessary consumer goods' now ? I don't really understand why, if you feel this way, you aren't making these lifestyle changes now, rather than waiting for retirement.
    Originally posted by p00hsticks
    Netflix, Amazon Prime, Spotify, BT Sport are examples. Stuff that we make some use of but can live without. Right now it doesn't make much difference because I am saving so much that I can "easily" afford these things, but when I have no salary coming in they can go. We're already doing some trimming back (food and household expenses mainly) so have a pretty clear idea of what we need in that area to sustain ourselves. We're also cutting down on stuff like expensive coffees (a weakness). We bought a bean to cup machine, my wife buys the beans in bulk at a cheap price and we worked out that we are getting a week's worth of excellent coffees at home now for less than the price of a large latte from Costabucks (ok not quite so impressive if I included depreciation and electricity). The coffee's much better though.

    Like many people I've been guilty of indulging myself (like buying expensive guitars for example) because I "think" I need them and I can justify it because I work so hard (it's a reward for me, right?). I haven't bought anything like that in the last year and I don't plan to. So I guess we are on the way but not fully there yet.....
    Last edited by OldMusicGuy; 21-03-2017 at 8:34 PM.
    • OldMusicGuy
    • By OldMusicGuy 21st Mar 17, 8:32 PM
    • 61 Posts
    • 85 Thanks
    OldMusicGuy
    Wasn't what I was planning I would be the first to admit. Average desired amount quoted on this thread by early retirees is about £25k though. Presumably, they think that will do nicely for them or they wouldn't be retiring early. My own number is about £32k plus a largish buffer of savings to cover big holidays, new car and contingency. I am retiring in August this year at age 59. Not expecting to spend too much time travelling by private jet but do plan a couple of major holidays.



    I suppose that would be peanuts to some and 'luxury' to others.
    Originally posted by Northamptonblue
    And it shows very nicely why it's so hard to say what the "number" is, because it's so much down to personal preference and lifestyle choices.
    • Bootsox
    • By Bootsox 22nd Mar 17, 6:57 AM
    • 169 Posts
    • 104 Thanks
    Bootsox
    Since it started, there does seem a general trend on this thread for an increase in "the NUMBER".

    Seems like the old mantra figures have gained £5-10k each, £25k has now become +£30k, etc.

    Which makes sense, as this country seems a very expensive one to live in on a day to day basis (I put this down to the large number of indirect taxes and their trickle down effect).

    The cheapest coffee shop coffee these days is over £2, nearer £2.50.

    Although I did discover yesterday that you can get a Waitrose sit in coffee for the price of a banana (25p) and you get to keep the banana.
    Last edited by Bootsox; 22-03-2017 at 7:00 AM.
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