Pensions Planning: The NUMBER

DairyQueen

This was the first thread that I subscribed to after I joined the forum and it was a great help in creating the first draft of our retirement plan. A couple of years on and that plan has changed several times.

I began planning our number by calculating the minimum income necessary to cover essentials if living in a small (2-bed), mortgage-free, well-maintained home, and running one, cheap car. If memory serves, that was in the region of £18-20k in July 2016.

Second calculation added some jam on the bread. Including hobbies, eating-out (pub grub) once per week, decent annual holiday, 3-bed home, 2 cars. The income figure increased by £10k.

Final figure added cream and cherries to the jam: a £10k holiday budget, two higher-spec cars, indulging our foodie and wine tastes, nicer 3-bed home. I could easily spend an imaginary £50k per year.

I recently re-ran the calculations. Interesting that inflation has bitten hardest on the lowest sum whilst the higher sum has remained the same. It seems that the cost of essentials has risen disproportionately higher than inflation, whilst the total cost of discretionary and luxury items has actually fallen.

My three numbers are now: £20-22k, £29-31k and £50k.

This is anecdotal but, over the last two-ish years, have well-heeled retirees seen an improvement in their living standard whilst those on lower incomes have been belt-tightening? Or is this simply a reflection of our personal spending habits and priorities?

I am now considering applying different inflation rates to different expense categories. Anyone else considered this? Using a blanket, projected, official inflation rate for all expenses doesn't seem to work at an individual level.

k6chris

DairyQueen wrote: »

I am now considering applying different inflation rates to different expense categories. Anyone else considered this?

Perfect Plan Prevarication?? Sometimes you just have to jump and see what happens!

TBC15

DairyQueen wrote: »

This was the first thread that I subscribed to after I joined the forum and it was a great help in creating the first draft of our retirement plan. A couple of years on and that plan has changed several times.

I began planning our number by calculating the minimum income necessary to cover essentials if living in a small (2-bed), mortgage-free, well-maintained home, and running one, cheap car. If memory serves, that was in the region of £18-20k in July 2016.

Second calculation added some jam on the bread. Including hobbies, eating-out (pub grub) once per week, decent annual holiday, 3-bed home, 2 cars. The income figure increased by £10k.

Final figure added cream and cherries to the jam: a £10k holiday budget, two higher-spec cars, indulging our foodie and wine tastes, nicer 3-bed home. I could easily spend an imaginary £50k per year.

I recently re-ran the calculations. Interesting that inflation has bitten hardest on the lowest sum whilst the higher sum has remained the same. It seems that the cost of essentials has risen disproportionately higher than inflation, whilst the total cost of discretionary and luxury items has actually fallen.

My three numbers are now: £20-22k, £29-31k and £50k.

This is anecdotal but, over the last two-ish years, have well-heeled retirees seen an improvement in their living standard whilst those on lower incomes have been belt-tightening? Or is this simply a reflection of our personal spending habits and priorities?

I am now considering applying different inflation rates to different expense categories. Anyone else considered this? Using a blanket, projected, official inflation rate for all expenses doesn't seem to work at an individual level.

Are your figures before or after tax?

lisyloo

My three numbers are now: £20-22k, £29-31k and £50k.

Can I confirm, is that for 2 people?

Flim

Ref inflation figures used for planning. I use 2 rates, one for “expenditures, and another lower figure for interest and pension increases. They can be adjusted but are “linked” so that the income based inflation is always about 75% of the “costs/inflation” rate. My worst case assumes 4.5% annual inflation, (approx 3.5% on incomes), and my “best case” scenario assume 3.5% inflation, (approx 2.5% on incomes)....

ger2000

Hi All
Me and the wife hope to semi retire next year.I will have a pension of about 23-24k before tax.We will be mortgage free and have about 70k in savings.I would like a part time job earning about 10k.Both of us are 55 and would like to holiday a bit more and generally slow down and live life a bit better.No major outlays anticipated.Do the sums add up. Thanks in advance

Mnd

We can't answer that without knowing your spending levels you aspire to.everyone is different

DairyQueen

TBC15 wrote: »

Are your figures before or after tax?

Net of tax.

DairyQueen

lisyloo wrote: »

Can I confirm, is that for 2 people?

Lord, I hope so
Having said that, Non-discretionary spending wouldn't be that much less on the lowest figure.

DairyQueen

ger2000 wrote: »

Hi All
Me and the wife hope to semi retire next year.I will have a pension of about 23-24k before tax.We will be mortgage free and have about 70k in savings.I would like a part time job earning about 10k.Both of us are 55 and would like to holiday a bit more and generally slow down and live life a bit better.No major outlays anticipated.Do the sums add up. Thanks in advance

As mnd says, first step is to work out how much income you need. Some posters on the forum can spend £12-£15k pa and be very happy. Others aspire to 3 x that (and more). Do you have simple tastes or do you fancy some world travelling? Are you happy to eat at home or do you have a social life that requires several restaurants trips each week? Etc.

Horses for courses.