Pensions Planning: The NUMBER

tiptop1_2

Monthly expenses (Fixed): £750 (this covers council tax, utilities, regular food shops, mobile, insurance, car, fuel, subscriptions, memberships, etc, etc)

Other expenses are discretionary. Holidays, meals out, buying things like furniture/TV/etc. Monthly we allow £1000 for this. Most of it goes on holidays and meals out. Many months we have a surplus which we use to upgrade holidays.

We earn from a couple of part-time gigs totalling approx £6k per year.

Out = £1,750 x 12 = £21,000 per year
In = £6k per year
To cover this we draw approx £15k from pension pots per year. 
Additionally, we draw approx £5K - £10k per year for work on the house as and when we need.

The £20K -£30K we draw from the pension pot is easily made back from the investment. Therefore we sometimes splurge on huge holidays and a new car every year or two.

We do pay tax but have ignored from this basic info as it's not huge.

This is all without state pension as we're not old enough.

To get to this we both worked for 35 years without stopping and saved hard from the start. We then stopped full-time work because we could. To enjoy it while we can.   

Smudgeismydog

Sounds like you have it sussed @tiptop1_2, and are living the exact retirement you want. Well done

Again, it just shows how required income in retirement is so subjective, and why we should take the surveys with a punch of salt. 

BogStandardBob

Good for you @tiptop1_2 Would you mind sharing how much of a pot you needed and how far along on the risky level your pension has to be invested in to get the 30k a year (I presume for 40 years since you're not retirement age yet?)

I can't work out how much we would need as it all seems so dependent on how investments continue to do and I don't have much of a risk appetite. 

cfw1994

BogStandardBob said:

Good for you @tiptop1_2 Would you mind sharing how much of a pot you needed and how far along on the risky level your pension has to be invested in to get the 30k a year (I presume for 40 years since you're not retirement age yet?)

I can't work out how much we would need as it all seems so dependent on how investments continue to do and I don't have much of a risk appetite. 

One much quoted ‘rule’ is the 4% rule.  See here for a discussion on this.
So if you want £30k pa, you need a £750k pot (£30k x 25).
Cautious folk will suggest 4% is a risky number, & perhaps 3.5% is safer, although the creator of it did at one point suggest it could be 4.7% 🤷‍♂️

I firmly believe the retirement chapter will be more of a U-shape to spending: the Go-Go, Slow-Go & No-Go years ahead.  The early years, maybe to the age of 70-75, being the years of more expensive travel and activity….then a propensity to not do as much for maybe 5-10 years, then final years where more is spend on help or care.  Plenty of info you can search on that, such as this article.

Your risk appetite is always going to impact how you view things, and how your wealth might grow in the years to decades ahead.  I believe having some cash-based reserves stored away (savings accounts or premium bonds) can allow your other main investments (esp pensions) to be allowed to be riskier.  Low-cost global trackers being a fair place to ‘more safely’ invest - see Lars videos for more on the logic behind this.

MallyGirl

BogStandardBob said:

Good for you @tiptop1_2 Would you mind sharing how much of a pot you needed and how far along on the risky level your pension has to be invested in to get the 30k a year (I presume for 40 years since you're not retirement age yet?)

I can't work out how much we would need as it all seems so dependent on how investments continue to do and I don't have much of a risk appetite. 

As well as the above from @cfw1994 , it depends on how much of your number can be funded by the state pension and how long it is till you get it. If you only need £30k a year as a couple and are going to get 2 full SP then you only need another £6k once you reach that age. If you retire just 2 years before SP in that scenario then the pot can be much smaller than if it is needed to fund 10 years of £30k plus £8k ongoing.

cfw1994

MallyGirl said:

BogStandardBob said:

Good for you @tiptop1_2 Would you mind sharing how much of a pot you needed and how far along on the risky level your pension has to be invested in to get the 30k a year (I presume for 40 years since you're not retirement age yet?)

I can't work out how much we would need as it all seems so dependent on how investments continue to do and I don't have much of a risk appetite. 

As well as the above from @cfw1994 , it depends on how much of your number can be funded by the state pension and how long it is till you get it. If you only need £30k a year as a couple and are going to get 2 full SP then you only need another £6k once you reach that age. If you retire just 2 years before SP in that scenario then the pot can be much smaller than if it is needed to fund 10 years of £30k plus £8k ongoing.

Indeed 👍

I found it useful to build a spreadsheet of the years ahead, and when any income sources will drop in: it isn’t unusual for people to have even two or three small pensions kicking in leading up to the State Pension.

Also important: do check you have the full entitlement for the State Pension - check at https://www.gov.uk/check-state-pension.  If you are missing years, it can often make sense to “buy them back”.