Retirement Income

ndbetty.getrich

Hi,
When the 'experts' speak of a good retirement income they often say 2/3 rds of earned income at retirement. Do they mean gross or net income?
Thanks in anticipation.
ndbetty.getrich :j

Pal

Both. The historical target for many final salary pension schemes is 2/3rds of gross income, which after tax, is also 2/3rds of net income.

ReportInvestor

Hi ndbetty.getrich and welcome to the site .

I think this target is unnecessarily high, once we have paid off our mortgages and seen our children on their way.

Which would be fortunate as it is becoming an increasingly unattainable goal for most.

exil

Exactly my thoughts. The so-called "pension crisis" is partly based on unrealistic expectations - that is, of maintaining the same income after retirement as when working.

Quite frankly, no matter what your income was pre-retirement, no-one "needs" more
than, say, 15k a year after retirement for a couple and say 10k for a single person.
It would be silly for people now to impoverish themselves during their working lives in order to save for a nirvana of luxurious retirement (and that other holy grail of leaving vast sums of money to their descendants).

jennifernil

I would think it depends on what you are planning to do once retired and also on whether you have any savings . A couple retiring on £15000 would not have much spare for something like a new car unless they had some capital in the bank too.

lilac_lady

When I see what some people expect as income in retirement, it's more than I earn by working full time! I think (hope) that the key to successful financial retirement is no debt and no more mortgage payments. I think that we do expect too much. As long as our health is fine we should be glad to be retired and hopefully happy.

cheerfulcat

exil wrote:

Quite frankly, no matter what your income was pre-retirement, no-one "needs" more
than, say, 15k a year after retirement for a couple and say 10k for a single person.
It would be silly for people now to impoverish themselves during their working lives in order to save for a nirvana of luxurious retirement (and that other holy grail of leaving vast sums of money to their descendants).

Someone used to a lifestyle based on even a fairly modest income of £25,000 - £30,000 is going to find life on £10,000 a year pretty unpleasant. £10k after taxes leaves about £8800; take off rates/council tax, energy and water costs ( using figures in my area ) and you're left with about £5000 to live on. That's pretty tight.

There's a lot to be said for aiming for a pension "pot" which will give you three quarters of your income before retirement; this should allow you to maintain more or less the same lifestyle ( assuming no debt or young children ) . Note that to get an income of £10,000 currently requires a capital sum of ~£200,000...

By the by, how is it possible to "impoverish" yourself when you are saving money rather than spending it?

dunstonh

You need what you need.

Everyone is different and £15k pa. may be fine for some but not others. We have a little joke out here in Norfolk that when people retire, they get a pay rise. Thats because wage levels are generally very low and the state pension plus their small personal pension actually give them more than they were on whilst they were working.

margaretclare

Well, we probably have approx £24 - £25K between us.

We didn't 'aim' for this throughout our working lives, and because we both receive our pension incomes independently, this total would be cut in half when/if one of us dies.

I made a lotta wrong decisions during a working life from 16 to 67, but I did make a couple of good decisions - one was to pay full NI contributions and the other was to join the NHS pension scheme. He, on the other hand, was 'taken to the cleaners' in his first divorce and gave up some property equity in the second one, but his SRP is almost doubled by the addition of SERPS and he managed to hang on to his Scottish Widows annuity.

Essential costs as cheerfulcat has listed come to £202.21 a month, that's not quite £2500 a year, and of that figure by far the biggest amount is council tax - £94 a month. We both tip into a joint account from where all these are paid by monthly direct debit.

We live simply but comfortably. We have all we need. I dislike the stereotype that *all* retired people are poor and needy, and grateful for 'freebies' like free bus passes and hand-outs like winter fuel payment.

What I think people should think about in coming up to retirement, is where they're going to live. A family house, where you've brought up your kids, may be less manageable as you get older. We live in a bungalow and I'm glad we do, because I don't 'do' stairs any more. And we have a shower rather than bath - again, I don't 'do' baths any more but I need my daily shower!

Aunty Margaret

beverleyhills

ndbetty.getrich

Following on from jennifernil, dunstonh and Aunty Margaret it depends on the individual and their aspirations.

You may save on some expenses associated with going to work NI, paying into the 'Pension Pot', travel, the smart clothes required for some jobs, collections etc.

If you are at home for more time heating and telephone bills may increase, but you have more time to search for bargains.

If you haven't done it already, a detailed budget is the basic planning tool.

Look after your health

bh

Pal

The 2/3rds target is the standard set by final salary pension schemes, and generally requires the individual to start saving for the retirement at age 25 so that they can get 40 years service in the scheme by age 65. People who join a final salary scheme after age 25 normally get less than a 2/3rds pension.

Unfortunately most people saving through other means (personal pensions, ISAs etc) do not start seriously saving for retirement until they are well past age 25 - normally mid-30s. By that stage the 2/3rds target is a distant dream.

The moral of the story is that it doesn't matter how you save for your retirement, as long as you start as early as possible.