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  • FIRST POST
    • fatbeetle
    • By fatbeetle 12th Sep 17, 6:24 AM
    • 296Posts
    • 426Thanks
    fatbeetle
    Living on savings
    • #1
    • 12th Sep 17, 6:24 AM
    Living on savings 12th Sep 17 at 6:24 AM
    In order to retire early, me and SWMBO will be living on a lump sum I am due.

    From Jan 2018 until sometime in 2024, we will live on a pot which currently stands at roughly £274,000

    Has anyone else lived on a savings pot for a period?

    Any tips or advice?


    This Forum tip was included in MoneySavingExpert.com's weekly email!
    Last edited by MSE Andrea; 20-09-2017 at 9:20 AM.
    “If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and who weren't so lazy.”
Page 1
    • chiefie
    • By chiefie 12th Sep 17, 6:46 AM
    • 305 Posts
    • 315 Thanks
    chiefie
    • #2
    • 12th Sep 17, 6:46 AM
    • #2
    • 12th Sep 17, 6:46 AM
    Yes to advice - enjoy it ��
    • ukdw
    • By ukdw 12th Sep 17, 7:10 AM
    • 43 Posts
    • 34 Thanks
    ukdw
    • #3
    • 12th Sep 17, 7:10 AM
    • #3
    • 12th Sep 17, 7:10 AM
    Not having an income does confuse some financial organisations - so I would suggest applying for new credit cards etc before leaving work. Other things like motor insurance may get slightly more expensive too.

    Also depending on your pension situation it may be worth making full use of your income in your last year of working to maximise pension contributions.
    Last edited by ukdw; 12-09-2017 at 7:12 AM.
    • Apodemus
    • By Apodemus 12th Sep 17, 7:41 AM
    • 844 Posts
    • 629 Thanks
    Apodemus
    • #4
    • 12th Sep 17, 7:41 AM
    • #4
    • 12th Sep 17, 7:41 AM
    Any advice would really need to take account of what happens in 2024! If the lump sum can be spent down to zero over the six years, then enjoy! If it is needed to contribute to further income after 2024, then you need to be more careful what you do with it!
    • tacpot12
    • By tacpot12 12th Sep 17, 8:17 AM
    • 630 Posts
    • 556 Thanks
    tacpot12
    • #5
    • 12th Sep 17, 8:17 AM
    • #5
    • 12th Sep 17, 8:17 AM
    Budget carefully in the first couple of years to check that you can cover all your expenses and expenditure plans.

    You can declare your occupation as retired if you are not doing any work and have no intention to work in your area of experience again. This may reduce insurance premiums.

    Enjoy it.
    • NotSkint
    • By NotSkint 12th Sep 17, 8:27 AM
    • 45 Posts
    • 38 Thanks
    NotSkint
    • #6
    • 12th Sep 17, 8:27 AM
    • #6
    • 12th Sep 17, 8:27 AM
    Any advice would really need to take account of what happens in 2024! If the lump sum can be spent down to zero over the six years, then enjoy! If it is needed to contribute to further income after 2024, then you need to be more careful what you do with it!
    Originally posted by Apodemus
    Yes, as Apodemus says, it depends on whether this is money to spend or whether you need it after 2024.
    If the former, then mentally split it into yearly/monthly amounts, maybe incorporating an inflation assumption (say 2% per annum) and enjoy it.
    If the latter, then too little info to go on.
    • marlot
    • By marlot 12th Sep 17, 8:41 AM
    • 3,047 Posts
    • 2,176 Thanks
    marlot
    • #7
    • 12th Sep 17, 8:41 AM
    • #7
    • 12th Sep 17, 8:41 AM
    In order to retire early, me and SWMBO will be living on a lump sum I am due.

    From Jan 2018 until sometime in 2024, we will live on a pot which currently stands at roughly £274,000...
    Originally posted by fatbeetle
    I'll be doing something similar.

    I've prepared by downloading three years of bank statements so I can see typical spend. I've removed a few large one-off things, but replaced them with an allowance for car/house repairs.

    I'm still working (for now), but am able to track month-by-month spending to see if it remains in line with my forecasts.
    • BLB53
    • By BLB53 12th Sep 17, 8:54 AM
    • 1,106 Posts
    • 890 Thanks
    BLB53
    • #8
    • 12th Sep 17, 8:54 AM
    • #8
    • 12th Sep 17, 8:54 AM
    From Jan 2018 until sometime in 2024, we will live on a pot which currently stands at roughly £274,000

    Has anyone else lived on a savings pot for a period?
    A lot will depend on the returns you can generate from your lump sum. I have been living off savings/investments for the past 10 years which have returned 7% p.a and this means the original amount is more or less the same as when I retired early.

    If I had the money just in savings getting 1% or 2% it would now be a lot less.

    If you invest the lump sum wisely, you should be able to get a return of ~5% so that would be £13,700 p.a.
    If you choose index funds you can never outperform the market.
    If you choose managed funds there's a high probability you will underperform index funds.
    • westv
    • By westv 12th Sep 17, 9:29 AM
    • 4,291 Posts
    • 1,864 Thanks
    westv
    • #9
    • 12th Sep 17, 9:29 AM
    • #9
    • 12th Sep 17, 9:29 AM
    Has anyone else lived on a savings pot for a period?
    Originally posted by fatbeetle
    I'd expect everybody on this board will be doing that at some point.
    • fatbeetle
    • By fatbeetle 12th Sep 17, 9:45 AM
    • 296 Posts
    • 426 Thanks
    fatbeetle
    Many thanks all.

    To Clarify; the pot can be spend down to zero, as at that point we will switch to living on my wife's superannuation, and my pensions. These combined will give us an embarrassingly good income, well above what we would need.
    “If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and who weren't so lazy.”
    • crv1963
    • By crv1963 12th Sep 17, 9:46 AM
    • 82 Posts
    • 333 Thanks
    crv1963
    Our plans are similar- use a DB Pension and a savings pot to make the bridge from ceasing work and SPs starting so that we can go earlier into retirement, we're getting our sums together and it seems doable!


    Good luck and enjoy!
    • dunstonh
    • By dunstonh 12th Sep 17, 10:42 AM
    • 89,525 Posts
    • 54,975 Thanks
    dunstonh
    Savings are a high risk option for income provision. Exception being if you intend to draw the capital to fill a gap expecting it to run out.

    Cash in itself is low risk but the provision of a regular withdrawal for income pushes the risk level up. It WILL suffer inflation risk and shortfall risk. Whilst investments will have a higher base risk, they may only suffer inflation risk and shortfall risk.

    With 7 years to go, I would be inclined to use investments rather than cash.
    I am an Independent Financial Adviser (IFA). Comments are for discussion purposes only. They are not financial advice. Different people have different needs and what is right for one person may not be for another. If you feel an area discussed may be relevant to you, then please seek advice from a Financial Adviser local to you.
    • fatbeetle
    • By fatbeetle 12th Sep 17, 10:51 AM
    • 296 Posts
    • 426 Thanks
    fatbeetle
    Exception being if you intend to draw the capital to fill a gap expecting it to run out.
    Originally posted by dunstonh
    As indicated above, this is the case.
    “If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and who weren't so lazy.”
    • coyrls
    • By coyrls 12th Sep 17, 10:55 AM
    • 853 Posts
    • 867 Thanks
    coyrls
    So to get down to zero, say £40,000 a year over 7 years, I would put £40,000 in the highest interest instant access account or combination of accounts. I would then put £80,000 into the highest interest 1 year fixed term account and £40,000 into the highest 2,3,4 & 5 year fixed term accounts that compound interest rather than distribute it each year. At the end of year 1, I’d take half of the 1 year fixed term account and place it in the best paying compounding 5 year fixed term account and transfer the remainder into your instant access account(s). For subsequent years you take the maturing fixed term accounts.

    You may or may not keep pace with inflation with this approach and so I would look to make some savings out of your £40,000 a year to carry forward to the next year. You are unlikely to be liable for any income tax, unless you have other sources of taxable income. You will need to ensure that you do not exceed £85,000 with any one provider.
    • JezR
    • By JezR 12th Sep 17, 11:35 AM
    • 1,503 Posts
    • 1,070 Thanks
    JezR
    Insurance companies often have a category these days of 'own means'. Makes you sound a bit like a Victorian toff but it generally has a lower risk rating and hence cost than employed, let alone unemployed.
    • PasturesNew
    • By PasturesNew 12th Sep 17, 11:42 AM
    • 59,968 Posts
    • 350,539 Thanks
    PasturesNew
    6 years, £275k, easy to do.

    Why not just "pay" yourself the standard Old Age Pension each week/month from that amount and see how you get on. You won't run out. For a couple this is a very generous £122/week each. I bet you'd struggle to spend all that!

    At £122/week each, for 6 years, you'd have only spent £76k.

    Having a set amount, that's identifiable such as the standard pension amount, makes you aware of how much you'll be living on when you get to pension age - and, once you're used to it, you can then plan when to splash out and what on... making those visible purchases and spends you're aware of and have decided upon ... as "treats" from the rest of your money.
    • Terron
    • By Terron 12th Sep 17, 11:55 AM
    • 41 Posts
    • 32 Thanks
    Terron
    When I lost my job in 2013 one of my options was to live off my savings (>£400k) until my pensions were due in 2019., but I decided instead to put the money to work and to try to live off the interest. I could have gone for shares at about 5%, but chose instead to go into property from which I am gettting about 7%. It took about 18 months before I was earning enough to live off.

    I had the advantage of having grown up in and still having contacts in an area where property yields were fairly high.
    • xylophone
    • By xylophone 12th Sep 17, 12:00 PM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    Why not just "pay" yourself the standard Old Age Pension each week/month from that amount and see how you get on. You won't run out. For a couple this is a very generous £122/week each. I bet you'd struggle to spend all that
    The OP ( who will be returning from Australia to the UK to his unmortgaged property in January) says that from 2024, their pensions

    combined will give us an embarrassingly good income, well above what we would need.
    It would not seem to be necessary to prepare to live in straitened circumstances......
    • Triumph13
    • By Triumph13 12th Sep 17, 12:23 PM
    • 1,038 Posts
    • 1,245 Thanks
    Triumph13
    My challenge to OP would be this - you have saved this money, specifically to do this task. It is now nearly time to spend this money for its intended purpose which is great. The question is, can you handle the psychological adjustment from being a saver to being a spender and to stand by and watch as you burn through all that lovely capital? I know I'm expecting to find that very hard indeed!
    • xylophone
    • By xylophone 12th Sep 17, 12:28 PM
    • 22,881 Posts
    • 13,243 Thanks
    xylophone
    and watch as you burn through all that lovely capital?
    It will not last the night;
    But ah, my foes, and oh, my friends—
    It gives a lovely light!




    .......apologies to E.St John Millay
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