Pensions Planning: The NUMBER

michaels

LULULU1 said:

Our number is 30k per year.

 I am 58 and have a full time job paying 45k per year gross. I am hoping to retire from this role next year in March 2022 and work part time with an income of approx 10k per year gross. I will just tip into the higher tax bracket this year by 2k as I still pay a lot into my AVC, Approx £1k per month.

I have a final salary pension which will pays me £15k gross a year which I now taken to help us pay down our debts.
My wife is 54, she is earning gross 12k per year. She has a final pension of £5k per year due when she is 55.

Both of us are due to receive full state pension.
We have a mortgage of 114k at 1.64% interest rate fixed for 5 years and due to finish in 19 years time. This is still high as currently we favour investments over mortgage overpayments but can flip this if things change when rate expires in 2024. 
We a few small debts less than 5k in total which we will pay off before retirement

We have 105k in our AVCs which we can access when we reach 55. (me 45k, wife 60k)
We have 100k in my wife’s SIPP.

Any other thoughts or ideas would be greatly appreciated. 

Initial suggestion - pay extra AVCs into your pension or a sipp this FY to avoid the 40% tax.

Gatser

lollynerd said:

Hi Gatser,
I worked out my monthly spend for a number years (monthly) before I retired in 2017. The conclusion was that we (Me, wife, grown up, live in daughter) needed £40K per year. It turns out I have spent a little bit less than that, but not much. Here is my detailed breakdown.

Groceries	7,300
Holidays	6,500
Social	5,600
1 Car & petrol	3,660
2 Car & petrol	3,660
Council Tax	2,900
DIY & Garden	1,800
Gas & Electric	2,000
Clothes	1,300
Golf	1,300
Presents	700
Hair, Beauty Health	700
Gym	800
BT	700
Water	570
Mobile	500
Total	39,990

A lot of companies say "You will need X% of your final salary. This makes no sense to me, as I was saving most of my salary in my final years. Some people may earn £200K and live on £50K and others may earn £60K and spend it all.

Hello Lollynerd
Thanks for your detailed NUMBER breakdown. I agree with your points totally.
The NUMBER is about what each person feels they (ideally) need to have a comfortable retirement.
Income is something else and hopefully exceeds The NUMBER! 
The "x% of salary" model is rather outdated now for us Number Ninja's! 
It's a personal thing but always interesting to compare the makeup of our individual numbers....
Your figures suggest that you have a more active social life, not ventured into one car family trial yet, have a warmer home, keep fit by golf/gym, have more showers, invest more in telecoms provision... or just simply.... not as tight as me!
Now I am feeling like a meanie!  (No wonder I cannot squeeze my Number further...)

michaels

Gatser said:

lollynerd said:

Hi Gatser,
I worked out my monthly spend for a number years (monthly) before I retired in 2017. The conclusion was that we (Me, wife, grown up, live in daughter) needed £40K per year. It turns out I have spent a little bit less than that, but not much. Here is my detailed breakdown.

Groceries	7,300
Holidays	6,500
Social	5,600
1 Car & petrol	3,660
2 Car & petrol	3,660
Council Tax	2,900
DIY & Garden	1,800
Gas & Electric	2,000
Clothes	1,300
Golf	1,300
Presents	700
Hair, Beauty Health	700
Gym	800
BT	700
Water	570
Mobile	500
Total	39,990

A lot of companies say "You will need X% of your final salary. This makes no sense to me, as I was saving most of my salary in my final years. Some people may earn £200K and live on £50K and others may earn £60K and spend it all.

Hello Lollynerd
Thanks for your detailed NUMBER breakdown. I agree with your points totally.
The NUMBER is about what each person feels they (ideally) need to have a comfortable retirement.
Income is something else and hopefully exceeds The NUMBER! 
The "x% of salary" model is rather outdated now for us Number Ninja's! 
It's a personal thing but always interesting to compare the makeup of our individual numbers....
Your figures suggest that you have a more active social life, not ventured into one car family trial yet, have a warmer home, keep fit by golf/gym, have more showers, invest more in telecoms provision... or just simply.... not as tight as me!
Now I am feeling like a meanie!  (No wonder I cannot squeeze my Number further...)

This is actually a relevant point for those who want to fire by minimising expenditure rather than amassing a large pot.  If you do the latter you have plenty of scope to cut your cloth should markets fall and can thus be more aggressive with your SWR.  Do the former and there really is no where to go if you get a once in 100 year bear market. 

geoffers4

geoffers4 said in September 2016:

Marine_life wrote: »

I am curious to know how a 26k (or average 23k) budget breaks down across expense categories?

Ok M_L
Units are £1,000s

---

2 Groceries
3.5 Utilities & Home Maintenance
0.1 Health
2 Transportation
0.5 Animals & children
1 Entertainment
3 Holidays
1.5 Home improvements
1 Charity & gifts
5 My Personal items
5 Wife Personal items
1 Car replacement fund
TOTAL = 25.6k

Good to see the NUMBER thread more active again - thought I would look back at the numbers I posted on here 4-and-a-half years ago to see how they compare with our actual outgoings over the last year. Still pretty accurate actually, for example: 
Groceries 1.89k
Holidays (remember them??)  2.5k
But quite an increase in unavoidable costs:
Utilities & Home Maintenance  4.18k
Has anyone else noticed similar trends over time, apart from the obvious inflation?

chiefie

Aiming for £50k for the first 12 years then down to £45. Will retire at 58. I worry most about home maintenance costs and getting this right. 

DT2001

It (geoffers4 and gatser’s breakdowns) just shows how important it is to work out your own number rather than utilise a survey of basic, medium and luxury living standards. £7k to under £2k for groceries and both probably happy with their own spend. We are closer to the higher but with 6 of us and I did wonder if I could just divide by 3  for when the nest was empty (no idea when that will be!). It does back up my belief that a budget is quite flexible and we’ll be able to adapt with any fluctuations of income.
Thank you for sharing the breakdowns.

MarriedWithKids89

Hello all. Thank you for an excellent thread. I estimate that our NUMBER for a comfortable retirement is £32400 based on being mortgage free and running a single car. 

For what it is worth this figure can be broken down into following types of expenditure:

£14600: Everyday living expenses, e.g. consumables, bills, insurances, travel/car costs, presents, haircuts, etc.

£8000: Irregular but unavoidable, non-discretionary outlay: car replacement, new boiler, white goods, household repairs, etc. This is averaged over retirement as a whole.

£9800: Discretionary outlay: Holidays, short breaks, going out for meals, takeaways, etc.

The first 2 types of expenditure represent the minimum annual provision that we think we need to make for the “at home” part of the lifestyle we would like to have (£22600).

The discretionary figure (£9800) is the annual amount we have to play with each year. We can spend as much or as little of it as we like. Any unused amount effectively rolls over to the following year which would allow us to “save” for any extra special holidays or events. In addition, it also gives us a buffer we can draw on in harder times.

michaels

MarriedWithKids89 said:

Hello all. Thank you for an excellent thread. I estimate that our NUMBER for a comfortable retirement is £32400 based on being mortgage free and running a single car. 

For what it is worth this figure can be broken down into following types of expenditure:

£14600: Everyday living expenses, e.g. consumables, bills, insurances, travel/car costs, presents, haircuts, etc.

£8000: Irregular but unavoidable, non-discretionary outlay: car replacement, new boiler, white goods, household repairs, etc. This is averaged over retirement as a whole.

£9800: Discretionary outlay: Holidays, short breaks, going out for meals, takeaways, etc.

The first 2 types of expenditure represent the minimum annual provision that we think we need to make for the “at home” part of the lifestyle we would like to have (£22600).

The discretionary figure (£9800) is the annual amount we have to play with each year. We can spend as much or as little of it as we like. Any unused amount effectively rolls over to the following year which would allow us to “save” for any extra special holidays or events. In addition, it also gives us a buffer we can draw on in harder times.

This is how I see it too, adding an amount for 'accrual' for irregular capital spend son house, car etc.  A lot of others just seem to consider they have a separate 'capital' pot to cover such things but in the end money is money and these are not 'optionals' as they facilitate a basic lifestyle.

MarriedWithKids89

michaels said:

MarriedWithKids89 said:

Hello all. Thank you for an excellent thread. I estimate that our NUMBER for a comfortable retirement is £32400 based on being mortgage free and running a single car. 

For what it is worth this figure can be broken down into following types of expenditure:

£14600: Everyday living expenses, e.g. consumables, bills, insurances, travel/car costs, presents, haircuts, etc.

£8000: Irregular but unavoidable, non-discretionary outlay: car replacement, new boiler, white goods, household repairs, etc. This is averaged over retirement as a whole.

£9800: Discretionary outlay: Holidays, short breaks, going out for meals, takeaways, etc.

The first 2 types of expenditure represent the minimum annual provision that we think we need to make for the “at home” part of the lifestyle we would like to have (£22600).

The discretionary figure (£9800) is the annual amount we have to play with each year. We can spend as much or as little of it as we like. Any unused amount effectively rolls over to the following year which would allow us to “save” for any extra special holidays or events. In addition, it also gives us a buffer we can draw on in harder times.

This is how I see it too, adding an amount for 'accrual' for irregular capital spend son house, car etc.  A lot of others just seem to consider they have a separate 'capital' pot to cover such things but in the end money is money and these are not 'optionals' as they facilitate a basic lifestyle.

I agree, it is not an insignificant amount to be left to chance. For example, based on my figures that pot would need to be about £200K to last 25 years into retirement. Now, it may be possible to make some savings, e.g. by reducing the amount you spend on changing your car, but you are still probably talking about a minimum of £100K to cover the basics.

MarriedWithKids89

So if our NUMBER is £32400 and that my OH can take a small DB pension of £2400/annum when they reach 55, how much do you think that would we need in savings/pension pots to last, say, 30 years from 55-85? Assume that we are both the same age and that we will both be eligible for a full state pension when we reach 67 (dangerous I know).