made redundant can i live off 170k.

CluelessJock

The simple answer is no, £170K is not enough to live a comfortable life of average duration.

ctdctd

CluelessJock wrote: »

The simple answer is no, £170K is not enough to live a comfortable life of average duration.

Depends how you define comfortable.
My earlier post allows the OP to have his required £9K PA up to retirement and, with a bit of number shuffling, well beyond.

Primrose

I think that the assumptions that you need less money as your grow older can often be false. You become more frail and often need to spend extra money on heating and paying people to do simple things for you which you previously could have done free for yourself.
I think it's also dangerous to assume that with the current economic crisis we're facing, the country (i.e. we taxpayers) will be able to continue to afford the social benefits we're currently paying out. My motto is "Rely on yourself". You are more trustworthy to provide for yourself in old age than the goverment is. If this means making financial sacrifices at an earlier stage of your life, so be it.

dunstonh

My earlier post allows the OP to have his required £9K PA up to retirement and, with a bit of number shuffling, well beyond.

It does effectively mean the OP would be planning to be poor for the rest of his life. Yes, he could scrape by but at 54 and able to work, it would surely be better to try and get a few more years in yet to make retirement a bit more comfortable.

CluelessJock

Mmmmmmmm, I did not assume making up the shortfall would result in a comfortable life, I thought it more likely the shortfall was for "survival"?

ILW

There are massive returns to be made from investing in Bulgarian and Latvian new build flats. Quite a few posts on this forum.

jamesd

srg751 wrote: »

ive just been made redundant at 54 with little hope of a job in the forseeable future. I claim £60 a week jobseekers allowance, have a pension pot of 35k and £135k in savings.

See an IFA immediately. Unbiased.co.uk to find one.

You can contribute up to 100% of your annual salary to a pension but only in the tax year in which you earn it, so you need to act now to get in before 5 April while you still have a normal income year. That will get you tax relief on the money put into the pension so you'll get a boost to your effective before tax income. You can then take 25% from the pension as a tax free lump sum and invest the rest to produce an income or could buy an annuity, but at your age investing is generally going to be the more profitable approach.

In later years with no income the limit is 3600 gross of pension contributions that still get tax relief, regardless of whether you have any taxable income. Still worth doing but not enough to compensate for missing this year. Your wife, if not working, can do this as well. Since each of you gets a personal allowance that's free of income tax it's a good move to balance the income between you to maximise your tax allowances.

The investments that are traditionally used to generate income in retirement are corporate bond funds and UK equity income funds like Invesco Perpetual Income, one of the best selling funds in the UK for many years for this reason. You can hold these inside or outside a pension or stocks and shares ISA. Inside the S&S ISA the corporate bond income is free from income tax so that's one reason to favour putting corporate bond funds into the S&S ISA as first choice.

You can get enhanced income corporate bonds that deliberately sacrifice capital slowly to generate increased income. Those can pay as much as 10% and can be useful if you want to boost your short term income for some years until your state pensions start.

The equities market is not necessarily tanking. It's volatile, bouncing around all over the place. It's a better time to be gradually buying equity funds than making a large lump sum purchase, though, since you can't replace lost capital. You might want to schedule monthly investments into the equity income or equity funds over two years with even contributions to reduce risk. Prices are cheap now but there's no telling whether they will get cheaper.

You should get a state pension forecast for both you and your wife. That will tell you how much income you can get based on your current contribution record and when, so you can plan on that after your state retirement age.

Once you know the income from the state pensions you can plan to deliberately use some of your current capital to increase the amount you have to live on until then. An IFA should be able to plan this for you, given a minimum target income.

Looking at what you might fairly cautiously get as income I'll assume inflation at 3% and growth and income from investments at 4% after inflation (so 7% total).

If you are willing to use all of your capital and be left with nothing at 65 then you could take an income of £18,000 a year in real terms, increasing with inflation each year so your standard of living doesn't fall. After this you'd be left with only the state pensions, nothing else.

If I assume that you will get £8,000 in total from the state pensions when you can retire then you could take an income of £12,000 a year from now until you are 100 before running out of money. This includes the £8,000 state pensions amount when you're eligible for it.

If the state pensions would provide £7,000 then you could take £11,400 a year. If they would provide £9,000 you could take £12,500 a year.

So, until you know what the state pensions will provide, assuming you've been in PAYE jobs for life you might initially start to plan based on living on £11,400 a year and increase that if you find that you'll get more from the state pensions.

If you think that this will be a long term thing then you should consider the costs of properties in different parts of the country or different property sizes and consider whether it's worthwhile to move to free up equity to add to your capital that can produce an income and save costs, like lower council tax and heating bills for smaller properties or cheaper parts of the country.

If you were to raise an extra £50,000 by switching to a cheaper property then the numbers above change to £24,000 leaving nothing at 65. The steady amount you could get while not running out until you're 100 rises to £14,200 with £8,000 from state pensions, £13,700 with £7,000 from state pensions or £14,800 with £9,000 from state pensions.

Once you have selected your target income you should keep about six months of it in a normal savings account so that you don't have to watch the exact dates on which investment income is paid. That will vary based on the investment and can vary from monthly through quarterly, twice a year or once a year. Then you can schedule regular monthly payments from the savings account into your current account for living expenses.

Gold is near record highs. That's not the best time to be buying it. As soon as there are signs of a recovery the price will plummet and you can easily lose three quarters of the money. A little is OK but since it generates no income it doesn't really do you a lot of good.

isofa

As per ctdctd's post earlier, assuming the OP will be able to draw a full (or almost full) state pension at 65, that will also add to his money pot...

When you think many peoples' retirement pension pot is 100K to 200K (many much much lower), buying annuities with this often results in not the best income. At least with cash you have the flexibility to do what you want with it, without any pension restrictions.

jamesd

isofa, srg751's need is income, though. The initial tax relief from pensions combined with the income tax personal allowance makes pension income the top choice for the first ten thousand Pounds or so of income, given the increased personal allowances at age 65. For that much you get the tax relief on the way in and don't pay income tax on the way out. srg751 probably can't get most of the money into a pension with tax relief though, just this year's income plus 3600 for each of them every year.

Unless some of the capital is a redundancy payment that hasn't been taken yet. Then the redundancy money over 30k would be taxed at normal income rates and probably a big chunk at 40%. Asking the employer to pay the 40% money into a pension and top it up with the saved NI would be a good move for income generation.

dunstonh

isofa wrote: »

When you think many peoples' retirement pension pot is 100K to 200K (many much much lower), buying annuities with this often results in not the best income. At least with cash you have the flexibility to do what you want with it, without any pension restrictions.

Although you pay for that flexibility by getting a lower income. Annuity rates are higher than cash and the tax relief means a larger value to earn from.

Pensions have some negative sides but nothing conventional comes close to providing the same level of income in retirement (from long term planning) as a pension does. However, they are better priced for those in their 60s. Not 50s. Although current interest rates mean that annuities in your 50s may not be as bad value compared to a few years ago. There is also income drawdown as another potential option.