Pensions Planning: The NUMBER

michaels

NoMore said:

I think this thread has gone off the rails a bit, its not about drawdown strategies, its about the initial income you expect to require in retirement.

How to achieve that and what strategy to inflation proof this is a whole different subject. I'm surprised there isn't a pinned thread to discuss this very thing, it does tend to come up often.

I think it is valid to determine exactly what we all mean by the concept of 'the number' - I had taken it to mean the fixed real terms amount one would want for every year of retirement, which obviously differs from your definition of  'the initial income you expect to require in retirement' and the new suggestion that it is the (fixed) proportion of average income desired every year in retirement.

Me: Fixed real terms income required every year for life (expressed in current pounds)
You: Real terms income required for first year of retirement (expressed in current pounds)
Secret2ndAccount: Fixed proportion of average income required every year for life

Pat38493

michaels said:

NoMore said:

I think this thread has gone off the rails a bit, its not about drawdown strategies, its about the initial income you expect to require in retirement.

How to achieve that and what strategy to inflation proof this is a whole different subject. I'm surprised there isn't a pinned thread to discuss this very thing, it does tend to come up often.

I think it is valid to determine exactly what we all mean by the concept of 'the number' - I had taken it to mean the fixed real terms amount one would want for every year of retirement, which obviously differs from your definition of  'the initial income you expect to require in retirement' and the new suggestion that it is the (fixed) proportion of average income desired every year in retirement.

Me: Fixed real terms income required every year for life (expressed in current pounds)
You: Real terms income required for first year of retirement (expressed in current pounds)
Secret2ndAccount: Fixed proportion of average income required every year for life

The number needed per year is only ever theoretical unless you intend to forced spend up to that amount.  Circumstances will of course change your annual spending for various and many reasons.  The research seems to show that most people reduce their spending later on in retirement as they simply are not as busy or wanting to do as many things, with some people having a big spike if they need care near the end (which some people decide to fund through home equity if they have the option and need it).

NoMore

michaels said:

NoMore said:

I think this thread has gone off the rails a bit, its not about drawdown strategies, its about the initial income you expect to require in retirement.

How to achieve that and what strategy to inflation proof this is a whole different subject. I'm surprised there isn't a pinned thread to discuss this very thing, it does tend to come up often.

I think it is valid to determine exactly what we all mean by the concept of 'the number' - I had taken it to mean the fixed real terms amount one would want for every year of retirement, which obviously differs from your definition of  'the initial income you expect to require in retirement' and the new suggestion that it is the (fixed) proportion of average income desired every year in retirement.

Me: Fixed real terms income required every year for life (expressed in current pounds)
You: Real terms income required for first year of retirement (expressed in current pounds)
Secret2ndAccount: Fixed proportion of average income required every year for life

Actually I maybe shouldn't have used the word initial, as I essentially agree with your definition.

DT2001

michaels said:

NoMore said:

I think this thread has gone off the rails a bit, its not about drawdown strategies, its about the initial income you expect to require in retirement.

How to achieve that and what strategy to inflation proof this is a whole different subject. I'm surprised there isn't a pinned thread to discuss this very thing, it does tend to come up often.

I think it is valid to determine exactly what we all mean by the concept of 'the number' - I had taken it to mean the fixed real terms amount one would want for every year of retirement, which obviously differs from your definition of  'the initial income you expect to require in retirement' and the new suggestion that it is the (fixed) proportion of average income desired every year in retirement.

Me: Fixed real terms income required every year for life (expressed in current pounds)
You: Real terms income required for first year of retirement (expressed in current pounds)
Secret2ndAccount: Fixed proportion of average income required every year for life

You are forecasting to spend the same amount year on year adjusted for inflation?

Personally I am expecting to front load expenditure (carry on our travels) and then reduce in 80’s. I had a relatively large discretionary amount in my original forecast and have ignored (maybe blindly) negative inflationary impact on the basis that they would be absorbed in that part of my budget. I based my spending pattern on my mother and MIL who both enjoyed travelling into their early 80’s.

How big an impact do you forecast inflation impacting on your overall budget and how do you intend to mitigate this?

Since posting my original figures my OH continued to work and we inherited money (£150k) so I am now working from a different angle - not what I want per year but what the pot will produce and what I can then gift out of excess income. I am guessing that we won’t have the psychological wherewithal to change from looking for value (so no business class seats) and therefore will not increase our spending patterns.

LL_USS

kimwp said:

LL_USS said:

Hi everyone,

Could you please help by adding the information of whether the NUMBER you mention is gross or net. For e.g. 2/3 current income for retirement that @gmje mentioned, is that after tax or gross? Or the "35K/year flat in real term" mentioned by @michaels is it before or after tax? Thank you :-)

Is the number not your outgoings? In which case gross and net are irrelevant?

Ah, thanks; outgoings means the actual money you need to spend, thus what you have after tax then.

I just asked as it (35k/year) looks quite big number for spending a year at retirement (for one person), of course people can spend a lot more with travels and eating out etc.

fistfulofsteel

If my number is significantly less than the state pension, should I save for a private pension at all?

I won't have housing costs by then, I don't drive, despise travel outside my home city, don't drink or smoke, fancy food makes me ill, and I generally enjoy living quietly without accumulating a lot of clutter. My current yearly spend (excluding housing) is a lot less than £11k/year, without any attempt to minimise it. So can I rely on the state pension, or should I assume that won't exist by then?

I'm 37. Self-employed since leaving education with a SIPP of around £30k (and cash savings a few times that figure). No target retirement age but I'd like to do as little work as possible from now until death.

Pat38493

fistfulofsteel said:

If my number is significantly less than the state pension, should I save for a private pension at all?

I won't have housing costs by then (mortgage soon to be paid off). I don't drive, despise travel outside my home city, don't drink or smoke, fancy food makes me ill, and I generally enjoy living quietly without accumulating a lot of clutter. My current yearly spend (excluding housing) is a lot less than £11k/year, without any attempt to minimise it. So can I rely on the state pension, or should I assume that won't exist by then?

I'm 37. Self-employed since leaving education with a SIPP of around £30k (and cash savings a few times that figure). No target retirement age but I'd like to do as little work as possible from now until death.

Depends how you are going to pay for the housing when you are retired.  If you own a house, at some point it will require expensive maintenance.  If you are renting you need to find rent from somewhere?

Nebulous2

fistfulofsteel said:

If my number is significantly less than the state pension, should I save for a private pension at all?

I won't have housing costs by then (mortgage soon to be paid off). I don't drive, despise travel outside my home city, don't drink or smoke, fancy food makes me ill, and I generally enjoy living quietly without accumulating a lot of clutter. My current yearly spend (excluding housing) is a lot less than £11k/year, without any attempt to minimise it. So can I rely on the state pension, or should I assume that won't exist by then?

I'm 37. Self-employed since leaving education with a SIPP of around £30k (and cash savings a few times that figure). No target retirement age but I'd like to do as little work as possible from now until death.

One of the problems you have is how much the world may tilt in the rest of your lifetime. The further out you are looking - and you could be looking another 60-70 years, the murkier the future becomes. 

You're living on a very modest sum, but you've a long way to go, and that may change. 

kimwp

fistfulofsteel said:

If my number is significantly less than the state pension, should I save for a private pension at all?

I won't have housing costs by then (mortgage soon to be paid off). I don't drive, despise travel outside my home city, don't drink or smoke, fancy food makes me ill, and I generally enjoy living quietly without accumulating a lot of clutter. My current yearly spend (excluding housing) is a lot less than £11k/year, without any attempt to minimise it. So can I rely on the state pension, or should I assume that won't exist by then?

I'm 37. Self-employed since leaving education with a SIPP of around £30k (and cash savings a few times that figure). No target retirement age but I'd like to do as little work as possible from now until death.

Factor in some larger spends like replacing roof, annual, house maintenance, hearing aids and stannah stair lifts, dentures, replacing white goods, paying for a cleaner, gardener as you get older.

kimwp

Also consider how you live now and whether that is feasible when you are older. I spend less than £12k (including around £1k on work related stress and a further 1k ISH on having a car), but I'm aiming for 30k in retirement because I don't want old me to be worried about turning the heating up. I want her to have the freedom to go out and socialise when she's not spending 40 hours a week working, without worrying about having a pudding. I don't worry about those things now, but I have the ability to work for money at the moment, which will reduce as I get older.