Pensions Planning: The NUMBER

enthusiasticsaver

Some people like to drill right down into the details of spending.  We keep our finances simple.  We have one joint internet savings  instant access which is our emergency fund but also there to renew cars every 7-10 years, do essential home improvements and pay for long haul holidays. We never let it go below £10k which is the emergency fund. It is topped up each year by regular savers when they mature but we do not tend to add to it monthly unless we know new cars will be needed imminently or new windows/long haul holiday. At the moment though we are saving for South Africa so money does go in. 

Our everyday finances really consist of just our Starling account for bills and food/groceries and fuel and everyday expenses which we can moniter using the Starling app which adds up spending for us.  We also have a personal account each with a regular monthly payment in for each of us.  Everything else is just put into spending pots attached to the Starling account so Christmas and birthdays, Holidays, Car expenses and House Expenses. We no longer do spreadsheets to moniter each category but I did prior to retirement.  Our spending has changed in retirement though.  Much less on bills now there is no mortgage/children to support but more on entertainment and hobbies and travel. 

MarriedWithKids89

For what it is worth, our (couple, coasting, no mortgage, 1 car, no dependents, no pets, non-smokers) spending for CY2023 was ...

Subsistence (e.g. food (including alcohol at home), toiletries, cleaning, fuel, taxes/rates, utility bills, insurances, etc): £17925*
Non-discretionary CAPEX (e.g. house/garden maintenance, white goods, vehicles and any unexpected bills, etc., i.e. expensive stuff you have to buy every so often): £2203** 
Discretionary Expenditure (e.g. meals/days out, theatre/cinema visits, take-aways, holidays, weekend breaks, etc.): £7740***
Total: £27868

* With regards to subsistence, we spend far too much on alcohol. We also buy and cook food for OH's parents most weeks. Therefore, I thinks we could easily reduce this figure by £2500-£3000.

** With regards to non-discretionary CAPEX, I have actually budgeted £7100 per annum.

*** This included taking the whole family and their partners to Spain for a week but no other foreign holidays last year.

Best of luck everyone.

Quantifier

I have been recently looking at my retirement plans with a financial planner. Until I did this retirement seemed a bit scary as we will be looking at a very big drop in income. However, the reality is that although we do earn a lot of money compared with the average, we pay two lots of private school fees, two mortgages, save as much as possible trying to max out annual pension allowances, ISAs etc. Taxman also takes a big fat slice. Reality is that 70% of where our money goes today simply disappears over the next two years. I'm 53 and my wife is 50 and we plan to retire in 3 years time. Our typical expenditure excluding mortgages, school fees and amounts we currently save is in the ballpark of £50k pa, so we are aiming for that amount, although that does include £6k pa train fares and about £1k pa on lunches for me working in London. We will both get full state pensions, eventually, but have no DB pensions so have had to stash as much away as possible into DC pensions. 

MallyGirl

Quantifier said:

I have been recently looking at my retirement plans with a financial planner. Until I did this retirement seemed a bit scary as we will be looking at a very big drop in income. However, the reality is that although we do earn a lot of money compared with the average, we pay two lots of private school fees, two mortgages, save as much as possible trying to max out annual pension allowances, ISAs etc. Taxman also takes a big fat slice. Reality is that 70% of where our money goes today simply disappears over the next two years. I'm 53 and my wife is 50 and we plan to retire in 3 years time. Our typical expenditure excluding mortgages, school fees and amounts we currently save is in the ballpark of £50k pa, so we are aiming for that amount, although that does include £6k pa train fares and about £1k pa on lunches for me working in London. We will both get full state pensions, eventually, but have no DB pensions so have had to stash as much away as possible into DC pensions. 

My husband was in a similar mindset till I pointed out what we actually take home (due to large sal sac into pensions) and that we then pay into ISAs and make significant mortgage payments so what we live on is a much lower figure than the salaries might suggest.

Quantifier

MallyGirl said:

Quantifier said:

I have been recently looking at my retirement plans with a financial planner. Until I did this retirement seemed a bit scary as we will be looking at a very big drop in income. However, the reality is that although we do earn a lot of money compared with the average, we pay two lots of private school fees, two mortgages, save as much as possible trying to max out annual pension allowances, ISAs etc. Taxman also takes a big fat slice. Reality is that 70% of where our money goes today simply disappears over the next two years. I'm 53 and my wife is 50 and we plan to retire in 3 years time. Our typical expenditure excluding mortgages, school fees and amounts we currently save is in the ballpark of £50k pa, so we are aiming for that amount, although that does include £6k pa train fares and about £1k pa on lunches for me working in London. We will both get full state pensions, eventually, but have no DB pensions so have had to stash as much away as possible into DC pensions. 

My husband was in a similar mindset till I pointed out what we actually take home (due to large sal sac into pensions) and that we then pay into ISAs and make significant mortgage payments so what we live on is a much lower figure than the salaries might suggest.

It's almost depressing until you stand back and think that actually that is the reason we can retire in our mid-50s and not have to wait until we are 65. Then it all begins to make sense. I have colleagues who earn as much as me and in some cases much more but they are invariably planning to work until 65 as they say they don't have enough saved to retire. They do have very expensive hobbies, holidays, sports cars, eating/drinking habits and clothes/shoes though! I'm more an M&S guy than Saville Row and Church's shoes! 

Bod_1234

I have gone self employed this year, currently paying myself £1k a month salary for the last 9 months and my current account hasn't dwindled, that includes putting £200 a month away in a regular saver and taking 2 holidays  a year, So mine is £12k a year.

Qyburn

MallyGirl said:

My husband was in a similar mindset till I pointed out what we actually take home (due to large sal sac into pensions) and that we then pay into ISAs and make significant mortgage payments so what we live on is a much lower figure than the salaries might suggest.

That's how we estimated. For quite a few years I tracked how much we received (net) and how much we saved. The difference gives a rough figure for what we need. Take off fixed out-of-pocket outgoings that stop when we retire, in our case that was DD payments into personal pensions. Take off another rough estimate for commuting costs.

Then add 50%. That was our "number".

Speaking of pessimism two things unnecessarily concerned me. One, everytime I looked my main private looked worse, going from originally forecasting retirement income of £34k/year from age 60 but progressively dropping each year to at one stage forecasting only £1,500/year from age 65. 

The second was I completely discounted the State Pension assuming it was a pittance not worth factoring in. In reality looking at the actual figures it will cover a good chunk of our essentials.

saucer

Qyburn said:

MallyGirl said:

My husband was in a similar mindset till I pointed out what we actually take home (due to large sal sac into pensions) and that we then pay into ISAs and make significant mortgage payments so what we live on is a much lower figure than the salaries might suggest.

That's how we estimated. For quite a few years I tracked how much we received (net) and how much we saved. The difference gives a rough figure for what we need. Take off fixed out-of-pocket outgoings that stop when we retire, in our case that was DD payments into personal pensions. Take off another rough estimate for commuting costs.

Then add 50%. That was our "number".

Speaking of pessimism two things unnecessarily concerned me. One, everytime I looked my main private looked worse, going from originally forecasting retirement income of £34k/year from age 60 but progressively dropping each year to at one stage forecasting only £1,500/year from age 65. 

The second was I completely discounted the State Pension assuming it was a pittance not worth factoring in. In reality looking at the actual figures it will cover a good chunk of our essentials.

50%? What’s the thinking there? It seems quite a lot for contingencies. 

sheslookinhot

Qyburn said:

MallyGirl said:

My husband was in a similar mindset till I pointed out what we actually take home (due to large sal sac into pensions) and that we then pay into ISAs and make significant mortgage payments so what we live on is a much lower figure than the salaries might suggest.

That's how we estimated. For quite a few years I tracked how much we received (net) and how much we saved. The difference gives a rough figure for what we need. Take off fixed out-of-pocket outgoings that stop when we retire, in our case that was DD payments into personal pensions. Take off another rough estimate for commuting costs.

Then add 50%. That was our "number".

Speaking of pessimism two things unnecessarily concerned me. One, everytime I looked my main private looked worse, going from originally forecasting retirement income of £34k/year from age 60 but progressively dropping each year to at one stage forecasting only £1,500/year from age 65. 

The second was I completely discounted the State Pension assuming it was a pittance not worth factoring in. In reality looking at the actual figures it will cover a good chunk of our essentials.

It seems your estimating skills leave a lot to be desired. I’m glad you’re not quoting me for a two story extension.😄

Phossy

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.

I have been refining MY (OUR) NUMBER over the last month or so and digging more into house maintenance, replacing white goods, computers, phones etc and I now have three levels that I think equate to the Go-Go, Slow-Go and No-Go years. I have not added anything for care in later years, I see that as a house funded thing. Two of us, two cars currently moving to one later on and refreshing it every 3 to 5 years. Main difference is in Travel budget (and entertainment). All based on 'todays money'. I think all, in reality, are overestimates and the lowest figure there is something we could live well on. We have no mortgage or other debts.

Go-Go        £4,129/ month           
Slow-Go     £3,204/ month
No-Go        £2,312/ month