Pensions Planning: The NUMBER

enthusiasticsaver

poseidon1 said:

Thought I might chip in and perhaps provoke an alternative  thought or two  on this number thing. In my view there is no number. 
Targeting what you think you might need to enjoy a certain level of income in retirement requires a level of crystal ball gazing nobody is capable of.

What events such 2008 financial crash, 2020 pandemic, recent stratospheric interest rate rises together with concomitant high inflation  ( not to mention ongoing geopolitical conflicts ) should  teach us, is there will always be unpredictable events  ( some quite extreme ), that can and do derail the effectiveness of a targeted income plan.

My advice is amass as much as one can in pensions, savings, isas, and other income producing assets, with a view to exceeding what you think you might 'need' in retirement. If you reach the happy position of  accumulating financial resources  way beyond your needs ( and indeed wants ), then you always have the option to give away surplus to family/dependents etc.

This advice is especially directed to the younger generations, who unlike many 'boomers' will have little or no access to final salary pension schemes; a state pension starting at age 70 ( if they are lucky but in all liklihood means tested by then; far less in terms of property equity ( assuming they can get on the ladder in the first place ). Yes, some may benefit from inheritances, but security in retirement cannot hinge solely on such expectations.

If you do not know the number (or the amount you need to live on) then how do you decide when to retire?  It is all very well to say amass as much as one can but retiring on a small fortune which you will never need to spend at 70 or 75 seems to me to be the very worst sort of financial planning for retirement if someones lifestyle only demands a fraction of that.  We aimed for 60 but went at 58 as our pensions more or less matched our number.  I would have been most upset if we carried on working amassing as much as possible and eventually retiring at 66 (our NRD) or even later and finding we could have gone much earlier.  Yes of course you can give money away but making the most of retirement usually means leaving work as soon as possible. 

hugheskevi

enthusiasticsaver said:

poseidon1 said:

Thought I might chip in and perhaps provoke an alternative  thought or two  on this number thing. In my view there is no number. 
Targeting what you think you might need to enjoy a certain level of income in retirement requires a level of crystal ball gazing nobody is capable of.

What events such 2008 financial crash, 2020 pandemic, recent stratospheric interest rate rises together with concomitant high inflation  ( not to mention ongoing geopolitical conflicts ) should  teach us, is there will always be unpredictable events  ( some quite extreme ), that can and do derail the effectiveness of a targeted income plan.

My advice is amass as much as one can in pensions, savings, isas, and other income producing assets, with a view to exceeding what you think you might 'need' in retirement. If you reach the happy position of  accumulating financial resources  way beyond your needs ( and indeed wants ), then you always have the option to give away surplus to family/dependents etc.

This advice is especially directed to the younger generations, who unlike many 'boomers' will have little or no access to final salary pension schemes; a state pension starting at age 70 ( if they are lucky but in all liklihood means tested by then; far less in terms of property equity ( assuming they can get on the ladder in the first place ). Yes, some may benefit from inheritances, but security in retirement cannot hinge solely on such expectations.

If you do not know the number (or the amount you need to live on) then how do you decide when to retire?  It is all very well to say amass as much as one can but retiring on a small fortune which you will never need to spend at 70 or 75 seems to me to be the very worst sort of financial planning for retirement if someones lifestyle only demands a fraction of that.  We aimed for 60 but went at 58 as our pensions more or less matched our number.  I would have been most upset if we carried on working amassing as much as possible and eventually retiring at 66 (our NRD) or even later and finding we could have gone much earlier.  Yes of course you can give money away but making the most of retirement usually means leaving work as soon as possible. 

I'd agree with this, even though my own planning is to massively exceed my number which fits with a strategy to ignore number and save as much as possible.

I estimate my number to be about £35K p/a to cover all of my own and my wife's typical expenses each year. However, I've always saved as efficiently as possible, which meant a lot of pension saving to avoid higher tax rates. So we have an income of around £70K from age 55 (currently 46).

Our income between 46-55 would be £47K p/a with no further work. 

We decided to work a further 21-24 months so that we would have an income of £70K from age 47/48 when we will retire. That is clearly far more than we need, but it gives a lot of comfort given we are retiring so early. On the other hand, we could obviously work a lot longer and have far more. It was primarily a decision which fit nicely into our wider lives, is very efficient, lowers risk, smoothes everything out, and we still retire very early.

Having a good idea of the number enables targeting and just as importantly, risk management. At some point, growth strategy may turn toward asset preservation investing.

enthusiasticsaver

hugheskevi said:

enthusiasticsaver said:

poseidon1 said:

Thought I might chip in and perhaps provoke an alternative  thought or two  on this number thing. In my view there is no number. 
Targeting what you think you might need to enjoy a certain level of income in retirement requires a level of crystal ball gazing nobody is capable of.

What events such 2008 financial crash, 2020 pandemic, recent stratospheric interest rate rises together with concomitant high inflation  ( not to mention ongoing geopolitical conflicts ) should  teach us, is there will always be unpredictable events  ( some quite extreme ), that can and do derail the effectiveness of a targeted income plan.

My advice is amass as much as one can in pensions, savings, isas, and other income producing assets, with a view to exceeding what you think you might 'need' in retirement. If you reach the happy position of  accumulating financial resources  way beyond your needs ( and indeed wants ), then you always have the option to give away surplus to family/dependents etc.

This advice is especially directed to the younger generations, who unlike many 'boomers' will have little or no access to final salary pension schemes; a state pension starting at age 70 ( if they are lucky but in all liklihood means tested by then; far less in terms of property equity ( assuming they can get on the ladder in the first place ). Yes, some may benefit from inheritances, but security in retirement cannot hinge solely on such expectations.

If you do not know the number (or the amount you need to live on) then how do you decide when to retire?  It is all very well to say amass as much as one can but retiring on a small fortune which you will never need to spend at 70 or 75 seems to me to be the very worst sort of financial planning for retirement if someones lifestyle only demands a fraction of that.  We aimed for 60 but went at 58 as our pensions more or less matched our number.  I would have been most upset if we carried on working amassing as much as possible and eventually retiring at 66 (our NRD) or even later and finding we could have gone much earlier.  Yes of course you can give money away but making the most of retirement usually means leaving work as soon as possible. 

I'd agree with this, even though my own planning is to massively exceed my number which fits with a strategy to ignore number and save as much as possible.

I estimate my number to be about £35K p/a to cover all of my own and my wife's typical expenses each year. However, I've always saved as efficiently as possible, which meant a lot of pension saving to avoid higher tax rates. So we have an income of around £70K from age 55 (currently 46).

Our income between 46-55 would be £47K p/a with no further work. 

We decided to work a further 21-24 months so that we would have an income of £70K from age 47/48 when we will retire. That is clearly far more than we need, but it gives a lot of comfort given we are retiring so early. On the other hand, we could obviously work a lot longer and have far more. It was primarily a decision which fit nicely into our wider lives, is very efficient, lowers risk, smoothes everything out, and we still retire very early.

Having a good idea of the number enables targeting and just as importantly, risk management. At some point, growth strategy may turn toward asset preservation investing.

That is a big jump to go from £47k to  £70k in just 2 years?  How does that work as presumably that is accessing ISAs or some other investment vehicle given you cannot access your pensions until 55? Or are you saying that the £70k kicks in at 55 and not 47/48? 

hugheskevi

enthusiasticsaver said:

hugheskevi said:

enthusiasticsaver said:

poseidon1 said:

Thought I might chip in and perhaps provoke an alternative  thought or two  on this number thing. In my view there is no number. 
Targeting what you think you might need to enjoy a certain level of income in retirement requires a level of crystal ball gazing nobody is capable of.

What events such 2008 financial crash, 2020 pandemic, recent stratospheric interest rate rises together with concomitant high inflation  ( not to mention ongoing geopolitical conflicts ) should  teach us, is there will always be unpredictable events  ( some quite extreme ), that can and do derail the effectiveness of a targeted income plan.

My advice is amass as much as one can in pensions, savings, isas, and other income producing assets, with a view to exceeding what you think you might 'need' in retirement. If you reach the happy position of  accumulating financial resources  way beyond your needs ( and indeed wants ), then you always have the option to give away surplus to family/dependents etc.

This advice is especially directed to the younger generations, who unlike many 'boomers' will have little or no access to final salary pension schemes; a state pension starting at age 70 ( if they are lucky but in all liklihood means tested by then; far less in terms of property equity ( assuming they can get on the ladder in the first place ). Yes, some may benefit from inheritances, but security in retirement cannot hinge solely on such expectations.

If you do not know the number (or the amount you need to live on) then how do you decide when to retire?  It is all very well to say amass as much as one can but retiring on a small fortune which you will never need to spend at 70 or 75 seems to me to be the very worst sort of financial planning for retirement if someones lifestyle only demands a fraction of that.  We aimed for 60 but went at 58 as our pensions more or less matched our number.  I would have been most upset if we carried on working amassing as much as possible and eventually retiring at 66 (our NRD) or even later and finding we could have gone much earlier.  Yes of course you can give money away but making the most of retirement usually means leaving work as soon as possible. 

I'd agree with this, even though my own planning is to massively exceed my number which fits with a strategy to ignore number and save as much as possible.

I estimate my number to be about £35K p/a to cover all of my own and my wife's typical expenses each year. However, I've always saved as efficiently as possible, which meant a lot of pension saving to avoid higher tax rates. So we have an income of around £70K from age 55 (currently 46).

Our income between 46-55 would be £47K p/a with no further work. 

We decided to work a further 21-24 months so that we would have an income of £70K from age 47/48 when we will retire. That is clearly far more than we need, but it gives a lot of comfort given we are retiring so early. On the other hand, we could obviously work a lot longer and have far more. It was primarily a decision which fit nicely into our wider lives, is very efficient, lowers risk, smoothes everything out, and we still retire very early.

Having a good idea of the number enables targeting and just as importantly, risk management. At some point, growth strategy may turn toward asset preservation investing.

That is a big jump to go from £47k to  £70k in just 2 years?  How does that work as presumably that is accessing ISAs or some other investment vehicle given you cannot access your pensions until 55? Or are you saying that the £70k kicks in at 55 and not 47/48? 

It is a big jump as pensions cover everything from age 55, so it is just the period between age 46-55 that is covered by a combination of savings and ISAs.

If we did no more work at all, we would have £47K p/a from 46-55. To boost that £47K to £70K for the whole period requires an additional £23,000 x 9 years = £207,000

By both of us working another 21 months or thereabouts, as well spending much less than £70K p/a during the period, we should end up getting to around £207K net additional funding for the period. If investment and interest returns (net of fees) exceed inflation, that will also help.

So when we retire at 47/48 in 21 months time, everything should line up for an annual income of around £70K after tax, initially from savings and ISAs until age 55, then from DB and DC pensions to State Pension age, and from State Pension and DB pensions after State Pension age.

Once you have enough to retire, the gains from working one more year can be surprisingly high - but need to be carefully balanced with the loss of one year of retirement. Christmas 2025 will be our limit.

sgx2000

The nearer to my pension, the higher the number goes.
I am pretty sure most people would always be happier with a little more...

barnstar2077

sgx2000 said:

The nearer to my pension, the higher the number goes.
I am pretty sure most people would always be happier with a little more...

I am still eight years away, but I change my mind on a near daily basis between having a bit more money or a bit more time retired!

FIREDreamer

hugheskevi said:

enthusiasticsaver said:

hugheskevi said:

enthusiasticsaver said:

poseidon1 said:

Thought I might chip in and perhaps provoke an alternative  thought or two  on this number thing. In my view there is no number. 
Targeting what you think you might need to enjoy a certain level of income in retirement requires a level of crystal ball gazing nobody is capable of.

What events such 2008 financial crash, 2020 pandemic, recent stratospheric interest rate rises together with concomitant high inflation  ( not to mention ongoing geopolitical conflicts ) should  teach us, is there will always be unpredictable events  ( some quite extreme ), that can and do derail the effectiveness of a targeted income plan.

My advice is amass as much as one can in pensions, savings, isas, and other income producing assets, with a view to exceeding what you think you might 'need' in retirement. If you reach the happy position of  accumulating financial resources  way beyond your needs ( and indeed wants ), then you always have the option to give away surplus to family/dependents etc.

This advice is especially directed to the younger generations, who unlike many 'boomers' will have little or no access to final salary pension schemes; a state pension starting at age 70 ( if they are lucky but in all liklihood means tested by then; far less in terms of property equity ( assuming they can get on the ladder in the first place ). Yes, some may benefit from inheritances, but security in retirement cannot hinge solely on such expectations.

If you do not know the number (or the amount you need to live on) then how do you decide when to retire?  It is all very well to say amass as much as one can but retiring on a small fortune which you will never need to spend at 70 or 75 seems to me to be the very worst sort of financial planning for retirement if someones lifestyle only demands a fraction of that.  We aimed for 60 but went at 58 as our pensions more or less matched our number.  I would have been most upset if we carried on working amassing as much as possible and eventually retiring at 66 (our NRD) or even later and finding we could have gone much earlier.  Yes of course you can give money away but making the most of retirement usually means leaving work as soon as possible. 

I'd agree with this, even though my own planning is to massively exceed my number which fits with a strategy to ignore number and save as much as possible.

I estimate my number to be about £35K p/a to cover all of my own and my wife's typical expenses each year. However, I've always saved as efficiently as possible, which meant a lot of pension saving to avoid higher tax rates. So we have an income of around £70K from age 55 (currently 46).

Our income between 46-55 would be £47K p/a with no further work. 

We decided to work a further 21-24 months so that we would have an income of £70K from age 47/48 when we will retire. That is clearly far more than we need, but it gives a lot of comfort given we are retiring so early. On the other hand, we could obviously work a lot longer and have far more. It was primarily a decision which fit nicely into our wider lives, is very efficient, lowers risk, smoothes everything out, and we still retire very early.

Having a good idea of the number enables targeting and just as importantly, risk management. At some point, growth strategy may turn toward asset preservation investing.

That is a big jump to go from £47k to  £70k in just 2 years?  How does that work as presumably that is accessing ISAs or some other investment vehicle given you cannot access your pensions until 55? Or are you saying that the £70k kicks in at 55 and not 47/48? 

It is a big jump as pensions cover everything from age 55, so it is just the period between age 46-55 that is covered by a combination of savings and ISAs.

If we did no more work at all, we would have £47K p/a from 46-55. To boost that £47K to £70K for the whole period requires an additional £23,000 x 9 years = £207,000

By both of us working another 21 months or thereabouts, as well spending much less than £70K p/a during the period, we should end up getting to around £207K net additional funding for the period. If investment and interest returns (net of fees) exceed inflation, that will also help.

So when we retire at 47/48 in 21 months time, everything should line up for an annual income of around £70K after tax, initially from savings and ISAs until age 55, then from DB and DC pensions to State Pension age, and from State Pension and DB pensions after State Pension age.

Once you have enough to retire, the gains from working one more year can be surprisingly high - but need to be carefully balanced with the loss of one year of retirement. Christmas 2025 will be our limit.

@hugheskevi aren’t you hit by the pension access age increasing to 57 in April 2028?

hugheskevi

FIREDreamer said:

hugheskevi said:

enthusiasticsaver said:

hugheskevi said:

enthusiasticsaver said:

poseidon1 said:

Thought I might chip in and perhaps provoke an alternative  thought or two  on this number thing. In my view there is no number. 
Targeting what you think you might need to enjoy a certain level of income in retirement requires a level of crystal ball gazing nobody is capable of.

What events such 2008 financial crash, 2020 pandemic, recent stratospheric interest rate rises together with concomitant high inflation  ( not to mention ongoing geopolitical conflicts ) should  teach us, is there will always be unpredictable events  ( some quite extreme ), that can and do derail the effectiveness of a targeted income plan.

My advice is amass as much as one can in pensions, savings, isas, and other income producing assets, with a view to exceeding what you think you might 'need' in retirement. If you reach the happy position of  accumulating financial resources  way beyond your needs ( and indeed wants ), then you always have the option to give away surplus to family/dependents etc.

This advice is especially directed to the younger generations, who unlike many 'boomers' will have little or no access to final salary pension schemes; a state pension starting at age 70 ( if they are lucky but in all liklihood means tested by then; far less in terms of property equity ( assuming they can get on the ladder in the first place ). Yes, some may benefit from inheritances, but security in retirement cannot hinge solely on such expectations.

If you do not know the number (or the amount you need to live on) then how do you decide when to retire?  It is all very well to say amass as much as one can but retiring on a small fortune which you will never need to spend at 70 or 75 seems to me to be the very worst sort of financial planning for retirement if someones lifestyle only demands a fraction of that.  We aimed for 60 but went at 58 as our pensions more or less matched our number.  I would have been most upset if we carried on working amassing as much as possible and eventually retiring at 66 (our NRD) or even later and finding we could have gone much earlier.  Yes of course you can give money away but making the most of retirement usually means leaving work as soon as possible. 

I'd agree with this, even though my own planning is to massively exceed my number which fits with a strategy to ignore number and save as much as possible.

I estimate my number to be about £35K p/a to cover all of my own and my wife's typical expenses each year. However, I've always saved as efficiently as possible, which meant a lot of pension saving to avoid higher tax rates. So we have an income of around £70K from age 55 (currently 46).

Our income between 46-55 would be £47K p/a with no further work. 

We decided to work a further 21-24 months so that we would have an income of £70K from age 47/48 when we will retire. That is clearly far more than we need, but it gives a lot of comfort given we are retiring so early. On the other hand, we could obviously work a lot longer and have far more. It was primarily a decision which fit nicely into our wider lives, is very efficient, lowers risk, smoothes everything out, and we still retire very early.

Having a good idea of the number enables targeting and just as importantly, risk management. At some point, growth strategy may turn toward asset preservation investing.

That is a big jump to go from £47k to  £70k in just 2 years?  How does that work as presumably that is accessing ISAs or some other investment vehicle given you cannot access your pensions until 55? Or are you saying that the £70k kicks in at 55 and not 47/48? 

It is a big jump as pensions cover everything from age 55, so it is just the period between age 46-55 that is covered by a combination of savings and ISAs.

If we did no more work at all, we would have £47K p/a from 46-55. To boost that £47K to £70K for the whole period requires an additional £23,000 x 9 years = £207,000

By both of us working another 21 months or thereabouts, as well spending much less than £70K p/a during the period, we should end up getting to around £207K net additional funding for the period. If investment and interest returns (net of fees) exceed inflation, that will also help.

So when we retire at 47/48 in 21 months time, everything should line up for an annual income of around £70K after tax, initially from savings and ISAs until age 55, then from DB and DC pensions to State Pension age, and from State Pension and DB pensions after State Pension age.

Once you have enough to retire, the gains from working one more year can be surprisingly high - but need to be carefully balanced with the loss of one year of retirement. Christmas 2025 will be our limit.

@hugheskevi aren’t you hit by the pension access age increasing to 57 in April 2028?

Protected minimum pension ages of 50 on vast majority of DB pension, and 55 on all of DC.

Although I can take DB pension before age 55, the rules of the scheme mean the payments are heavily reduced between 50-54, so that isn't attractive.

saucer

hugheskevi said:

enthusiasticsaver said:

hugheskevi said:

enthusiasticsaver said:

poseidon1 said:

Thought I might chip in and perhaps provoke an alternative  thought or two  on this number thing. In my view there is no number. 
Targeting what you think you might need to enjoy a certain level of income in retirement requires a level of crystal ball gazing nobody is capable of.

What events such 2008 financial crash, 2020 pandemic, recent stratospheric interest rate rises together with concomitant high inflation  ( not to mention ongoing geopolitical conflicts ) should  teach us, is there will always be unpredictable events  ( some quite extreme ), that can and do derail the effectiveness of a targeted income plan.

My advice is amass as much as one can in pensions, savings, isas, and other income producing assets, with a view to exceeding what you think you might 'need' in retirement. If you reach the happy position of  accumulating financial resources  way beyond your needs ( and indeed wants ), then you always have the option to give away surplus to family/dependents etc.

This advice is especially directed to the younger generations, who unlike many 'boomers' will have little or no access to final salary pension schemes; a state pension starting at age 70 ( if they are lucky but in all liklihood means tested by then; far less in terms of property equity ( assuming they can get on the ladder in the first place ). Yes, some may benefit from inheritances, but security in retirement cannot hinge solely on such expectations.

If you do not know the number (or the amount you need to live on) then how do you decide when to retire?  It is all very well to say amass as much as one can but retiring on a small fortune which you will never need to spend at 70 or 75 seems to me to be the very worst sort of financial planning for retirement if someones lifestyle only demands a fraction of that.  We aimed for 60 but went at 58 as our pensions more or less matched our number.  I would have been most upset if we carried on working amassing as much as possible and eventually retiring at 66 (our NRD) or even later and finding we could have gone much earlier.  Yes of course you can give money away but making the most of retirement usually means leaving work as soon as possible. 

I'd agree with this, even though my own planning is to massively exceed my number which fits with a strategy to ignore number and save as much as possible.

I estimate my number to be about £35K p/a to cover all of my own and my wife's typical expenses each year. However, I've always saved as efficiently as possible, which meant a lot of pension saving to avoid higher tax rates. So we have an income of around £70K from age 55 (currently 46).

Our income between 46-55 would be £47K p/a with no further work. 

We decided to work a further 21-24 months so that we would have an income of £70K from age 47/48 when we will retire. That is clearly far more than we need, but it gives a lot of comfort given we are retiring so early. On the other hand, we could obviously work a lot longer and have far more. It was primarily a decision which fit nicely into our wider lives, is very efficient, lowers risk, smoothes everything out, and we still retire very early.

Having a good idea of the number enables targeting and just as importantly, risk management. At some point, growth strategy may turn toward asset preservation investing.

That is a big jump to go from £47k to  £70k in just 2 years?  How does that work as presumably that is accessing ISAs or some other investment vehicle given you cannot access your pensions until 55? Or are you saying that the £70k kicks in at 55 and not 47/48? 

It is a big jump as pensions cover everything from age 55, so it is just the period between age 46-55 that is covered by a combination of savings and ISAs.

If we did no more work at all, we would have £47K p/a from 46-55. To boost that £47K to £70K for the whole period requires an additional £23,000 x 9 years = £207,000

By both of us working another 21 months or thereabouts, as well spending much less than £70K p/a during the period, we should end up getting to around £207K net additional funding for the period. If investment and interest returns (net of fees) exceed inflation, that will also help.

So when we retire at 47/48 in 21 months time, everything should line up for an annual income of around £70K after tax, initially from savings and ISAs until age 55, then from DB and DC pensions to State Pension age, and from State Pension and DB pensions after State Pension age.

Once you have enough to retire, the gains from working one more year can be surprisingly high - but need to be carefully balanced with the loss of one year of retirement. Christmas 2025 will be our limit.

A very comfortable position to be on from such a young age. Plenty of time to work on your golf swing, if that floats your boat.

PattiTelongo

I plan to retire in 5/6 years time when mortgage is paid off.

 I have a DB scheme from an old employer which I can take from 55 but I would lose around 15% if I did. It’s index linked and currently has an TFLS of approx 127k and approx £19k/yr. I’m also very fortunate to be in a great DC scheme with my current employer which I estimate will be at about the same level when l retire based on forecasts from provider. 

Neither me or the wife are in the best of health so we plan to max out on drawdowns and enjoy the finer things in life while we can. My youngest will be in his last year or 2 of uni by then but we hope to live on around 45k/yr and then adjust the drawdown when the SP kicks in at 67. I’m aware we’re very fortunate but joining a pension scheme before my 18th has helped get me to this stage.