Pensions Planning: The NUMBER

atush

madeinireland wrote: »

I've been keeping a record of expenses for about the last 5 or 6 year. We are a couple with a fairly comfortable lifestyle though not extravagant. We do have a couple of kids 21 and 18 who are not self sufficient yet.

It's in the form of a 12 month moving average and has varied over the last 3 years between £39k and £46k.

If I strip out mortgage and a couple of other costs we won't have when we retire then it would drop about £10k.

So in line with an earlier poster I view my number as lying between two figures £29k and £36k.

I do know I could with a bit more effort get down to £24k in difficult times if we had to.

This lifestyle runs 2 cars, a dog and two cats, two older kids which we would expect to drop out of the costs at some point we hope and a fairly expensive house of 5 bedrooms which we could downsize.

Comments welcome...I could probably tell you average yearly costs for any category of spend if that would be of interest.

We are close to you, but with one dog only, and 2 children that age at university. so we have additional yearly costs for that, plus all their normal consumption such as clothes, food, travel etc.

Adding in our 5 bed house with Rayburn for heat and cooking and we are spending more on utilities than most do for total living expenses.

I am having trouble working out our number until next year. But one is possibly going post grad one year. So will totally mess things up again. I now have a general idea of when they are in residence, and when not, but it is very spotty due to sometimes one is home, not the other, they have different term times.

Add in I want to renovate the house and downsize to 3 bedrooms, and I still cant work it out.

So am thinking of downsizing earlier now. As the large house just eats money and we dont use half of it.

gadgetmind

Happier_Me wrote: »

one economical car, downsize from our 4 bed detached in an expensive area to a 3 bed semi in an okay area

I want those to be options for us rather than steps we're forced to take.

When I seriously took (DIY) control of my finances close to a decade ago, I was shocked to see that as things stood we'd have no choice but to downsize, and that retiring at 55 would be hard even given that.

The solution was lots of little things, but a better asset allocation couple with lower fees, plus wringing the most out of the various tax breaks and allowances, were both pretty critical.

Happier_Me

gadgetmind wrote: »

I want those to be options for us rather than steps we're forced to take.

When I seriously took (DIY) control of my finances close to a decade ago, I was shocked to see that as things stood we'd have no choice but to downsize, and that retiring at 55 would be hard even given that.

The solution was lots of little things, but a better asset allocation couple with lower fees, plus wringing the most out of the various tax breaks and allowances, were both pretty critical.

Your last sentence - This is exactly where our focus needs to be, moving forward. DH has a work DC pension and I am fortunate to have 16 years in a decent DB pension so far. But this is no where near enough to secure a comfortable early retirement.

We are not particularly asset driven so I think downsizing will be liberating for us. And we only run one car now, all be it a more luxurious one than we will have in retirement.

It's important that we find a way to fund the lifestyle we want in retirement without working ourselves into the ground over the next 17 years or so. I couldn't bear to do a job that I hate long term just for the extra in my pay packet, for instance. Been there, done that and its just not for me. So downsizing is definitely part of the longer term plan.

I have become an avid reader of the pension threads and the advise I see on here is certainly shaping my approach to retirement planning

Gatser

madeinireland wrote: »

So in line with an earlier poster I view my number as lying between two figures £29k and £36k.

Comments welcome...I could probably tell you average yearly costs for any category of spend if that would be of interest.

Oh yes please! Just a general breakdown would be fine thanks...
it is interesting to compare one's own expenditure with others to test if we are too frugal!

enthusiasticsaver

I have calculated our budget and what we need to live reasonably comfortably and reckon on about £1500 per month net which would be £25k gross? This breaks down per month as:
Council Tax £150
Water £60
Gas and Electric £110
Telephone and internet/mobile phones £85
Joint gym membership £83
TV Licence/Sky sub £40
Dental insurance £27
Food and eating out £350
Travel/car £100 (just 1 car between the two of us - no finance)
Gifts/Christmas £100
Holidays/Weekends away/Days out £250
Insurances £10 (home/contents insurance only)
Home maintenance/emergencies £135






My husband has a defined benefit and a defined contribution pension which pays out in 4 years time when he is 60 a total of £24500 approx. plus a lump sum of £100k. We have approx £90k in liquid cash savings plus will have a stocks and shares portfolio by then of approx £60k. One year after that my defined benefit pension and a guaranteed minimum pension from a previous employer will pay out a further £7610 and a lump sum of £9645. We then have to wait a further 6 years for state pensions.


Is there anything I have overlooked?

Linton

enthusiasticsaver wrote: »

Council Tax £150
Water £60
Gas and Electric £110
Telephone and internet/mobile phones £85
Joint gym membership £83
TV Licence/Sky sub £40
Dental insurance £27
Food and eating out £350
Travel/car £100 (just 1 car between the two of us - no finance)
Gifts/Christmas £100
Holidays/Weekends away/Days out £250
Insurances £10 (home/contents insurance only)
Home maintenance/emergencies £135

Is there anything I have overlooked?

Clothing
Health - optician?
Leisure - books, magazines , music, computers, subscriptions, hobbies etc and stuff
Charities
Subscriptions
Cash - miscellaneous, more stuff

I guess you have done a bottom up calculation. Strongly recommend you check whether this matches your actual expenditure. You might be surprised.

atush

Got a pet? Vets bills?

Anyway, if the OP has a DB pension and wants to retire early, save into a DC pension like the OH has- this will give you some LS and or income DD to wait out for you DB pension to start.

enthusiasticsaver

No we don't have pets and we probably don't buy a lot of clothes and I use the library and never buy newspapers, magazines etc. Hobbies will have to come out of savings or our lump sums. £1500 is about half our monthly income now with my husband working full time, me part time. We usually save around £1k per month and I do think we will probably need a £500 per month contingency fund so if we have a £200k (lump sum plus cash isas) cash fund a shortfall of £500 per month would be £6k per year to come out of savings which is what that is for. I have been recording our expenditure over the last few years and above is pretty accurate.


I am not sure it is worth paying into a dc pension 4 years before retirement on a part time wage. I overpay into my db pension to get the maximum tax relief (15% contributions on a LGPS) but years of part time working while my children were growing up have taken their toll on my pension so I have built up a cash isa fund which effectively works out at 4 years of my full salary. All cash isa savings are in my name along with the investment portfolio. My husband has not bothered with cash isas and just ploughed everything he can into his pension which has worked quite well really.

amiaspden

justme111 wrote: »

You would need to account for tax so the gross number would be about £10 k higher?

No, it's not as bad as that.Say you want 20K net. Your first 10K is tax free (at the moment, it will be more next year). So only the next 10k has to come out of taxed income. With tax at 20%, that means you have to earn 120% of your net requirement, which is 12K.

So your total gross would be 22K.

enthusiasticsaver

amiaspden wrote: »

No, it's not as bad as that.Say you want 20K net. Your first 10K is tax free (at the moment, it will be more next year). So only the next 10k has to come out of taxed income. With tax at 20%, that means you have to earn 120% of your net requirement, which is 12K.

So your total gross would be 22K.

Also bear in mind you do not pay National Insurance on private pension income providing you are not also working. That makes a difference. With me working part time and the increase in the personal tax allowance I actually pay more in NI than in tax.