Pensions Planning: The NUMBER

Time4T_Accounts

My 18th birthday, mid-1970s, was a very financially restrained/constrained time. 

Thatcher (and Reagan) may be reviled but (lights blue touchpaper and takes early retirement!) their economic policies arguably (very, very arguably) fixed the boom and bust cycles that we suffered back then. You have 3 hours ... discuss...

SouthCoastBoy

Not the biggest Maggie fan, think she created the start of the housing bubble due to selling off council houses. Awful policy imo. I could go on but dont think it is for here.

Gin_and_Milk

Gatser said:

The NUMBER is how much income you need to "live comfortably"
So What's your number?
Very important for pensions planning, to know what you are aiming for.

My Number? (for a couple)
I calculated: £22,000
based on
Food £5,000
Car/transport £5,000
Bills/Utilities £4,500
Holidays/Leisure £4,500
Clothing/Cash/Xmas/Other £2,000
Repairs/replacements £1,000

Just in case some had forgotten what the thread is actually about, this is the very first post. 

Silvertabby

Gin_and_Milk said:

Gatser said:

The NUMBER is how much income you need to "live comfortably"
So What's your number?
Very important for pensions planning, to know what you are aiming for.

My Number? (for a couple)
I calculated: £22,000
based on
Food £5,000
Car/transport £5,000
Bills/Utilities £4,500
Holidays/Leisure £4,500
Clothing/Cash/Xmas/Other £2,000
Repairs/replacements £1,000

Just in case some had forgotten what the thread is actually about, this is the very first post. 

It's also important to consider how much the survivor will have to live on when the inevitable happens.

Gin_and_Milk

Silvertabby said:

Gin_and_Milk said:

Gatser said:

The NUMBER is how much income you need to "live comfortably"
So What's your number?
Very important for pensions planning, to know what you are aiming for.

My Number? (for a couple)
I calculated: £22,000
based on
Food £5,000
Car/transport £5,000
Bills/Utilities £4,500
Holidays/Leisure £4,500
Clothing/Cash/Xmas/Other £2,000
Repairs/replacements £1,000

Just in case some had forgotten what the thread is actually about, this is the very first post. 

It's also important to consider how much the survivor will have to live on when the inevitable happens.

It is, and whilst it's inevitable that a thread as big as this will go off topic from time, it would be a shame if it just turned into a political debate, (which it very quickly and easily could).  As SouthCoastBoy said, here isn't the place.

Time4T_Accounts

Wrists duly slapped.  I was though just making the point (attempting to be tongue in cheek) that we almost certainly don’t need to consider in the future the very, very high rates of inflation that were suffered in the past. If we had to do so then the NUMBER for many of us would be impossible to calculate.

Terron

Steve_PL_too said:

Wrists duly slapped.  I was though just making the point (attempting to be tongue in cheek) that we almost certainly don’t need to consider in the future the very, very high rates of inflation that were suffered in the past. If we had to do so then the NUMBER for many of us would be impossible to calculate.

Just work using current values.

But unless you only have a fully inflation linked DB pension you do need to consider the possibilty of high interest rates.

DairyQueen

We are now R minus 5 months as Mr DQ is on the glide-path to full retirement in December.

Our number has been in a work-in-progress for the best part of 5 years. Once housing projects are complete we should be in the ballpark of the topside of my first number guesstimate back in 2016 (plus inflation). £40k (then) has morphed into £45k. A lucky guess but inflation has been higher than the headline rate on some items. Utilities and eating-out in particular.

In prep for retirement we have replaced our town apartment with a detached, rural home. It needs a major refurb and (fingers crossed) the work will complete by this time next year. In the meantime we are squeezed into a tiny cottage with OH WFH 4 days a week in the soon-to-be-refurbed home.

Our number was difficult to assess until we purchased the new home as our retirement housing costs were a complete unknown. I have disregarded the additional costs of running the cottage in the above number as that is a temporary expense which will disappear as soon as the house refurb is complete and the cottage is sold.

When I began researching our number I missed many items off of the budget. A detailed review of our actual spending opened my eyes to just how much we spend on 'incidentals'.


Housing - 11,696
inc council tax, utilities and service contracts, logs, TV licence (ahem, possibly not for much longer), tree surgeon, insurance, brown bin rental, garden materials, window cleaner, maintenance/replacements, cleaner. 

Communication - 876
Phones and internet.

Cars (x2) - 4778
inc fuel, insurance, maintenance, tax, breakdown cover, car wash, MOT.

Household - 7200
inc food, alcohol, pet food, cleaning products, toiletries.

Gifts - 2100
(ex Christmas)

Charity - 1000

Health and Grooming - 1480
inc - dentist, hairdresser, optician, make up.

Clothes - 1200

Subscriptions - 810

Christmas - 1500

Entertainment and Misc spending - 5400

Vet/pet treatments - 340

TOTAL - 38,380

From 2023 our requirement will be around £45k net (allowing for inflation) and to include our basic travel budget. Big, bucket-list holidays will be financed from capital, as will replacement vehicles.

We will front-load drawdown to finance the two homes until the cottage is sold, and to fund holidays until SPs kick-in. From 2025, all guaranteed income will be in payment and drawdown rate should drop to between 1 and 1.5%

We have sufficient funds to cover care home fees if needed and have planned our finances such that the survivor will be fine.

This 'golden retirement' has come at some cost. Much saving, many holidays and treats foregone. Living apart during the week and in modest homes. OH continuing to work until age 64 to recoup the costs of daughters' education, weddings and house deposit, and to cover my lost income (retired a decade ago in order to care for disabled mum). This last year has been more of a OMY because of the pandemic but, minus those extra costs, he could've retired before 60.

I have reduced life expectancy so we intend to spend the max we are able tax efficiently. OH is determined never to pay HRT again, and I can't say I blame him. 

Ibrahim5

We have sufficient funds to cover care home fees if needed and have planned our finances such that the survivor will be fine.

Say a care home costs £1000 a week. A 10 year stay would cost £500K. Say your property is worth £500K that could be used for the last survivor. Do you keep £500K to pay for the first person? If 'the number' is how long is a piece of string then surely care home fee planning is worse. Most people need £0. 2 years is the average stay £100K. A 20 year stay would be £1M.

DairyQueen

Ibrahim5 said:

We have sufficient funds to cover care home fees if needed and have planned our finances such that the survivor will be fine.

Say a care home costs £1000 a week. A 10 year stay would cost £500K. Say your property is worth £500K that could be used for the last survivor. Do you keep £500K to pay for the first person? If 'the number' is how long is a piece of string then surely care home fee planning is worse. Most people need £0. 2 years is the average stay £100K. A 20 year stay would be £1M.

A 20-year care home stay would be way beyond the right side of the bell curve. Our home would cover £325000 of care home fees as, assuming this would apply only to the survivor, 50% of the value of our house would be ring-fenced in trust on the first death. Remember that (e.g.) care home fees of even £1000 pw would be partly covered by pension income. The balance could be covered by other assets.

I think it would be appropriate to offer tax advantages for drawdown if required to cover care fees.