Pensions Planning: The NUMBER

Gatser

harlequinnyc said:

I wonder how 2020 has adjusted everyone's idea of their number? I always felt I would still like foreign holidays, nights out, etc in retirement .....

Good point, although a combination of underspends on most costs and health issues in 2020 has caused us to rethink(increase) planned spends in the next 10 years. Most of us take good health for granted on our NUMBER spreadsheets. 

Terron

Just caught up on this thread.

I had an endowment mortgage so the letters warning that it might not cover the mortgage encouraged me to pay it down. But I stopped with a few thousand left. Small enough that I could pay it off any time I wanted. I thought that keeping it going might make it easier should I ever want to move again.

When I did move to what I intended to be my home for the rest of my life I went for a larger property in a nicer area. It was cheaper than where I had been living though. I went from a 2 bed flat in Reading (valued at that time at £210k to a 3 bed end terrace on the edge of the peak district with a park 20' from my door that I paid £179k for. (I kept the flat and let it until selling it in March this year.)

I lost my job in 2013, but I had anticipated it and had been saving. I went into BTL with my savings, so my income started increasing in lumps. £300pm contributory JSA - £400pm from 1 property - £900 pm from 2 properties - £1500pm from three. That gave me my low number, £18,000 per year was enough for me to live on moderately frugally, though I couldn't stop there as that was too risky and was not being taxed until the following year. £22k after tax was enough for me to live moderately comfortably with the odd meal out and a yearly holiday.

I started taking some of my private pensions last year and I started to travel more with a trip to South Africa in January, but obviously that ended. My BTL income has dropped a bit, but not as much as my pensions added so I am getting more than I am spending. I haven't been in perfect health for the last 6 months, possibly long Corvid, but testing was not routine when I was first ill so I can't be certain. I have nearly fully recovered though.

LULULU1

Our Plan.......
Im in the process of doing quite a lengthy post on our number which I think will be roughly 30k PA and hope to retire in 2022
The reason it is so high (or I consider it high) is we still have a large mortgage over 100k which I have just remortgaged and last 20 years.
We have the money to pay the mortgage and have had for a while but we have chosen the more risky route of investing this money which having a 5 year mortgage rate of 1.64%. 
The investments are bring in approx 7% per year on average.
I just wondered if anybody else is doing this kind of thing.

cfw1994

LULULU1 said:

Our Plan.......
Im in the process of doing quite a lengthy post on our number which I think will be roughly 30k PA and hope to retire in 2022
The reason it is so high (or I consider it high) is we still have a large mortgage over 100k which I have just remortgaged and last 20 years.
We have the money to pay the mortgage and have had for a while but we have chosen the more risky route of investing this money which having a 5 year mortgage rate of 1.64%. 
The investments are bring in approx 7% per year on average.
I just wondered if anybody else is doing this kind of thing.

That is a risk, although I agree a reasonable one.   

We haven’t (indeed, ours is paid off), but am wondering whether there are any low interest offset mortgages worth looking into opening before stepping down from daily work!

On the number, 30k doesn’t sound too high: some research here by Loughborough Uni puts it in the middle for a couple....but I feel that kind of thing depends very much on where and how you live!

pensionpawn

LULULU1 said:

Our Plan.......
Im in the process of doing quite a lengthy post on our number which I think will be roughly 30k PA and hope to retire in 2022
The reason it is so high (or I consider it high) is we still have a large mortgage over 100k which I have just remortgaged and last 20 years.
We have the money to pay the mortgage and have had for a while but we have chosen the more risky route of investing this money which having a 5 year mortgage rate of 1.64%. 
The investments are bring in approx 7% per year on average.
I just wondered if anybody else is doing this kind of thing.

I am hoping to implement a similar plan. As the difference between historically low mortgage rates and my investment growth is at times as much as 10% at times it just goes against the grain to cash in a six figure sum, pay off the mortgage and save a couple of hundred pounds each month. I completely understand how being mortgage / debt free liberates you and allows you to relax, make plans etc however unless you're approaching LTA then why not allow your investments to grow. Also your monthly mortgage payments diminish each year in line with inflation (by 18% after 10 years at 2%). My goal is to fix for another 10 years, and overpay up to 10% if desired. The amount that would have been used to have cleared the mortgage is likely to have at least doubled over that period, increasing the value of your investments by many times the cost of the mortgage interest payments over the term. Of course there is risk, however we've (just about) survived the banking crises and are now trying to keep our heads above water with the pandemic. If there is something on the horizon that is going to be fiscally worse than what we've already been through then I think the bigger risk is holding society together, not how much retirement income will I have after repaying the mortgage!

In terms of our number, we're planning on each drawing down our personal allowances via UFPLS, giving us a joint tax free retirement income of £33k3, as a minimum.

peterg1965

LULULU1 said:

Our Plan.......
Im in the process of doing quite a lengthy post on our number which I think will be roughly 30k PA and hope to retire in 2022
The reason it is so high (or I consider it high) is we still have a large mortgage over 100k which I have just remortgaged and last 20 years.
We have the money to pay the mortgage and have had for a while but we have chosen the more risky route of investing this money which having a 5 year mortgage rate of 1.64%. 
The investments are bring in approx 7% per year on average.
I just wondered if anybody else is doing this kind of thing.

I have done similar.  I went Interest Only on our mortgage back in 2007 and started investing heavily in a Personal Pension.  Having moved house since then, to a larger property, I went back to repayment mortgage about 2 years ago and have quite a large mortgage still outstanding (£330k @ 1.85% rate), but also a decent sized SIPP to balance this off.  I also have a sizeable DB pension which is in payment and I am still putting £30,000 year into my SIPP/work DC pension

Now at 55 and wanting to hang up my boots in three years or so, I am turning my mind to how I am going to structure my pension and savings income to give me sufficient income to pay the mortgage (16 years to run) and also to have a good standard of living in retirement.

My (my wife and myself) NUMBER translates into an income requirement of c£6000/month after tax.  This is a lot, I have a way to go but will be there in three years or so.  It will equate to having £360k in drawdown, £110k in savings, £44,500 in DB pensions (both already in payment) and a small amount of income £7000 pa from other sources.  My intention is to take £25k pa from my SIPP drawdown and gradually reduce this as SPs kick in in 2029 (wife) and 2032 (me), and we both qualify for the full amount. 

pensionpawn

peterg1965 said:

LULULU1 said:

Our Plan.......
Im in the process of doing quite a lengthy post on our number which I think will be roughly 30k PA and hope to retire in 2022
The reason it is so high (or I consider it high) is we still have a large mortgage over 100k which I have just remortgaged and last 20 years.
We have the money to pay the mortgage and have had for a while but we have chosen the more risky route of investing this money which having a 5 year mortgage rate of 1.64%. 
The investments are bring in approx 7% per year on average.
I just wondered if anybody else is doing this kind of thing.

I have done similar.  I went Interest Only on our mortgage back in 2007 and started investing heavily in a Personal Pension.  Having moved house since then, to a larger property, I went back to repayment mortgage about 2 years ago and have quite a large mortgage still outstanding (£330k @ 1.85% rate), but also a decent sized SIPP to balance this off.  I also have a sizeable DB pension which is in payment and I am still putting £30,000 year into my SIPP/work DC pension

Now at 55 and wanting to hang up my boots in three years or so, I am turning my mind to how I am going to structure my pension and savings income to give me sufficient income to pay the mortgage (16 years to run) and also to have a good standard of living in retirement.

My (my wife and myself) NUMBER translates into an income requirement of c£6000/month after tax.  This is a lot, I have a way to go but will be there in three years or so.  It will equate to having £360k in drawdown, £110k in savings, £44,500 in DB pensions (both already in payment) and a small amount of income £7000 pa from other sources.  My intention is to take £25k pa from my SIPP drawdown and gradually reduce this as SPs kick in in 2029 (wife) and 2032 (me), and we both qualify for the full amount. 

Blimey, there are not many people in the country that earn that much, let alone retire on it! A fifth of that would pay all our essentials in retirement!

DT2001

No change but like rebuswad happier with minimum requirement figure after last few months. We can stop anytime now when OH wants to. She enjoys her work, is self employed and only takes on what interests her. Lockdown has increased her options with a greater acceptance of virtual meetings. 

Gatser

Blimey, there are not many people in the country that earn that much, let alone retire on it! A fifth of that would pay all our essentials in retirement!

Our number is on the lower side too.  I have budgeted a higher spend but even without Covid it was a challenge to spend at that level... our lifestyle preferences do not include cruises, exotic holidays or high spec cars. 

Everyone to their own, whatever we are happy with... 

LULULU1

Some interesting thoughts and good to hear that some others are running some kinds oflower/extended mortgages and maximising their investment/pensions.
Im a bit sad and also listen to various financial podcast which for me contain useful general financial/pension/investing information.

Meaningful Money
Money Hat Tip
Mavern Money
The Witch Money Podcast
The Money week podcast
Wake up to money
This is money
Investors Chronicle
Mad Money with Jim Cramer
Squawk Box Europe


See I told you I was sad......LOL