Pensions Planning: The NUMBER

Gatser

jodie264 wrote: »

Thgis perspective on things has certainly helped me in working out/organising my thoughts about whether to draw my tecahers pension of 9,100 and lump sum 27,000 at 56 (next April) or wait until Im 60 and get 32,000 and 10,600....thanks. What do others think about this thread, early retirement and budget cuts that affect our 'will to work' when all around is disappearing. Want to start a thread about my loss of income....who else it will affect, then who will that job cut affect etc....what do we think......cause and effect - just HOW many people are affected by one govmt cut to a dept budget?

Think I would take the earlier sum and enjoy yourself whilst fit & healthy. Depends on any other income though and what your NUMBER is! How much would you need to live the "happy retirement"?

stagey_2

Gatser wrote: »

Can you live comfortably on £16k?
How is is split out?

haven't worked out a split - but that is what we'll have - his will be taxed mine is about £4k incl small co pension. Of course I cannot transfer the remainder of my personal allowance which would have helped a little - we don't have long holidays even now, so they will be a real luxury I suspect - won't qualify for any benefits so will just have to manage - other's are worse off then us and it's only been these past 7 years' or so that we have had a really decent income and enjoying the benefits of that. I refuse to be despondent but treat it as a real challenge when the time comes - probably about a year or so.

Gatser

stagey wrote: »

haven't worked out a split - but that is what we'll have - his will be taxed mine is about £4k incl small co pension. Of course I cannot transfer the remainder of my personal allowance which would have helped a little - we don't have long holidays even now, so they will be a real luxury I suspect - won't qualify for any benefits so will just have to manage - other's are worse off then us and it's only been these past 7 years' or so that we have had a really decent income and enjoying the benefits of that. I refuse to be despondent but treat it as a real challenge when the time comes - probably about a year or so.

Thanks.... and good for you!
You are absolutely right...there are always folks worse off..I admire that view. For those that are fortunate enough to be above £16k, I'm sure you can teach a few lessons....
I was only curious on your expected split of the £16k because I just know that the more we have (generally)...the more we waste.

Some of my best holidays have been the cheapest ones... not what I planned or expected at the time, but very encouraging.
My favourite shirt....was from Oxfam!

I am looking forward to having more time to "purchase wisely!" :T

Gatser

Mr Rebmun has a NUMBER of £30k
So, ignoring inflation, he wants to live on £30k pa

He is aged 60
His pension/savings are valued at £500k
He is happy to assume investment returns at 3%
He has no other income (but may get a govt pension if the Coalition allow it!)
He is not bothered about leaving any inheritance but ideally does not want to run out of money.
He owns an "adequate" property that he wants to stay in.
He is fit and healthy at present (fingers crossed)

Can he retire now without any worries?

This is a test of opinions and makes a change from completing Suduko's!;)

Batchy

Gatser wrote: »

Mr Rebmun has a NUMBER of £30k
So, ignoring inflation, he wants to live on £30k pa

He is aged 60
His pension/savings are valued at £500k
He is happy to assume investment returns at 3%
He has no other income (but may get a govt pension if the Coalition allow it!)
He is not bothered about leaving any inheritance but ideally does not want to run out of money.
He owns an "adequate" property that he wants to stay in.
He is fit and healthy at present (fingers crossed)

Can he retire now without any worries?

This is a test of opinions and makes a change from completing Suduko's!;)

Yes unless he lives longer than 83 years of age! (ignoring inflation/tax) lol

jamesd

Gatser wrote: »

Can he retire now without any worries?

No, because to produce the £30k of income takes twice the 3% investment return he's using as the basis for his calculations.

This means that he is relying on drawing down capital. That in turn means that he's at risk of failure if he was to suffer a 45% drop in the value of investments and continue to draw £15k of income for say five years during that drop. .55 * 500,000 = 275,000 - ( 5 * 15,000 ) = £200,000 left. Recovery back to 100% value would leave him with £364k. But worse, the £15k taken out for five years at reduced value will reduce his ongoing income and that will increase the rate at which capital is drawn down.

He can reduce his risk by using several annuities for some of the income, or by keeping enough cash in the investment mixture to cover the more credible market value drops without excessive loss of capital. This will reduce overall returns but decrease risk.

Gatser

jamesd wrote: »

No, because to produce the £30k of income takes twice the 3% investment return he's using as the basis for his calculations.

This means that he is relying on drawing down capital. That in turn means that he's at risk of failure if he was to suffer a 45% drop in the value of investments and continue to draw £15k of income for say five years during that drop. .55 * 500,000 = 275,000 - ( 5 * 15,000 ) = £200,000 left. Recovery back to 100% value would leave him with £364k. But worse, the £15k taken out for five years at reduced value will reduce his ongoing income and that will increase the rate at which capital is drawn down.

He can reduce his risk by using several annuities for some of the income, or by keeping enough cash in the investment mixture to cover the more credible market value drops without excessive loss of capital. This will reduce overall returns but decrease risk.

Good points thank you.
Although Mr Rebmun is happy to accept 3% return, capital losses can still happen.
From your reply... perhaps we should consider a mix of both Annuities & Drawdown in our retirement planning?

At least Annuities have more certainty built in.

doshunta

OK, here’s our story.

I'm 47 (wife 3 years older with small £2k pa pension due in 10 years) and I’m looking to retire at 56.

My number is £30k to do so (Gross £37k) ...I will try to provide breakdown later...

Having remortgaged several times we had a great big house with outgoings bigger than income. We were spending money like water we didn’t have :mad: and I sat down with my wife to discuss things as I felt we were on the brink at the time. So we downshifted (emotional) to a smaller, older place which I did up 3 years ago. We chose to keep a high monthly payment schedule over a shorter term so we can have it paid when I am 56 as part of our plan. We are paying a sizeable mortgage off until then...£2k+ pm!

I have always paid into pensions and am glad I have done and am fortunate enough to now have a personal pension pot of £330k. The plan is to have the fund in a state where it can achieve my objectives by the time I'm 51 as I'm nervous at any expected income longevity after this point...redundancy risk etc.

By 51 my daughter will have completed Uni (which I am funding right now) and son left school.

My thinking is that I want to have a fund of £450k by 51 to trigger required number once it has grown (to c £550) when I’m 56. Assuming 6% growth of pot pa and further contributions I make into it, I think I need to pay in £20k pa to get close to that number.

I would start drawing down the number, then would reduce this 4 years later by £6kpa when I am 60 (as I have £4k pa annuity from a previous employer and my wife gets £2k pa also at this point). My IFA has got my SIPP invested in some relatively safe and balanced funds that generally pay at least 6% net of inflation and charges, so why are we so conservative with pot performance projections if they continue to be actively managed?

God knows whether we will be given a state pension after paying in all those years, my suspicion is this will be at least reduced on a means tested basis (as my wife missed out on the 60 pension age break by a couple of months and I missed out on being able to take my pension at 50 by a similarly small margin), so I have only planned in a modest £2k pa each for state pension expectation. These will further reduce capital leakage from the fund later on.

For the last year we have rented an overseas apartment which costs us £6k a year (plus contribution from others family who use it), maybe we've done it too soon but it was offered to us unexpectedly by a Spanish family we know and is lovely so we are trying to keep it going. The associated flight and car hire costs etc also are expensive. Not easy when we are paying out the large mortgage, fully funding our daughter at Uni and at the same time trying to put £1800 into the aforementioned pot to hit our target.

So although we've spent a lot on sunny times (and a lot to be very grateful for), we actually live pretty frugally on a week to week basis... it means driving an older car than the neighbours, careful grocery shopping, not splashing out on new clothes etc. but at least we know that the bulk of our cash is going on worthwhile stuff rather than just wasting it. It also has the benefit of controlling our spend expectations for later in life, as our actual disposable income is much lower than my salary would suggest (given the above commitments I calculate we'd need around £15k net to keep our current UK lifestyle going...excluding the hols).

At retirement we plan to downshift to a smaller home and hopefully either continue to rent (which has the advantage of having no longer term risks), or buy something small with some of the equity released from downshifting again.

The cost of continuing to have a UK 'bolthole' is the main reason our 'NUMBER' is so high really...as stated above, we actually could live on a lot less but don't want to burn our bridges.

Our main conundrum is how to have the UK bolthole without the permanent drain on our retirement funds – thoughts of 'should we rent out our UK place to cover it's costs etc?' have been discussed, but then it wouldn’t really be there as our home for us to use..anyone have any thoughts or experiences?

Anyway, sorry to go on…

Gatser

thanks Doshunta... for a detailed "conundrum".... now we are all very different and there is no right answer, but my main question would be:
Do you REALLY REALLY want the expense of renting the Spanish property with associated costs of getting there?
Depends on how long you will live out there each year, but I would be more inclined to rent short term... different properties.
Then again...I have not seen this property...

I agree that renting out the UK property could give you more problems... how about getting an apartment? Was that already the plan?

Well done on supporting your daughter at Uni .... ours has yet to go (?) but we are all wondering if its worth it.... especially after the latest spending reviews are concluded.

56 is a GREAT age to go for it!
We are working towards a 55-56 goal too.
Lots of our friends are around that age already and confirm that your NUMBER does not have to be so high.... health and fitness are far more valuable while you have them... I don't need telling twice!

I am wondering if we should use Drawdown + Annuity too. OK Annuity rates are not brilliant but they do offer some stability/certainty

Good Luck with your plans.... interested to know your £30k analysis... to compare!

Gatser

It's relatively easy estimating our NUMBER in (say) 3 years time as our spend will probably be similar to today.

How do we guess at what we will need to spend when we are aged 75 and 85 though?
(I was reading other threads that suggest planning forward to age 90)

Ignoring Inflation, and assuming a current NUMBER of £28k made up as:
* Food £6k
* Transport/Car etc £6k
* Bills £5k
* Leisure £6k
* Cash/Sundries £3k
* Repairs/Replacemnts £1k
* Healthcare £1k

How do we expect this to change as we hit 75 & 85?

> Will we eat less?
> Can we sell the cars and use (free) bus and taxi's?
> Will we still want holidays abroad or happy for weekend in Margate?
> Will we need to spend £28k on healthcare alone?
(or just give the £28k to a care home and be done with the rest!)

Interested to hear some opinions, hints & tips! Thanks....