Pensions Planning: The NUMBER

penjam

Thank you Triumph13 some very useful points there. I should have made clear that the SIPP (in my name) is only part of the savings pot - I'm hoping it will be about £200k.But I will need to confirm that I'm below the LTA - I think its quite close. Looks like I also need to do a bit of reading up on the state pension levels.

I was aiming for 50k pre-tax but that was based on my erroneous calculations where I included only the DB pensions for tax purposes and omitted the SIPP. Some rework required there also.(I had included 1.5k pa. tax age 65 to 67 and 3.2 k pa. from 67 onwards)

YellowStarling

TheTracker wrote: »

Yellow, are you expecting investment growth of 4% AFTER inflation or before the 3.5% you expect?

I'd recommend not modelling forward inflation in your calculations. It's just such a wildcard over 35 years. Instead, adjust your figures each year to account for inflation of the previous year.

Thanks very much for the detailed response - yes, the investment growth was before inflation. I agree with you and Triumph that modelling in today's values with annual configurations for inflation would be more straightforward for me to use.

TheTracker wrote: »

You're also missing some other assumptions, unless I didn't spot them.

What's your safe withdrawal rate (the max you can withdraw safely per year), fees during drawdown (taken from the SWR). Many people use 4% and .5%. Anything more is ambitious.

Apologies for not stipulating this, I had used 4% and 0.75% respectively.

TheTracker wrote: »

I think you are being very conservative estimating SP age of 68 in 40+ years time for someone your age. I'd model 70-72. Many people, myself included, simply disregard state pension even existing throughout retirement. If you come to rely on part of your income being at the mercy of other parties you need to account for the risk.

As is the beauty of this site and its community, another great point. Very naive to take the current retirement age for my sex-age group and assume this will remain unchanged for the next 39 years or, indeed, that I should model a dependency on it at all! I fear that I shall have to postpone my retirement to remove the need for SP, or tinker with contribution levels (all other things left equal) to see what sacrifices I may need to make now to achieve the exit at 60. Worth playing around with though, as I do like the idea of removing the risk of dependency.

TheTracker wrote: »

Have you modeled typical major purchases? House, wedding, children, spousal income, cars, etc.

As mentioned, the major omission at present is children. Already a homeowner with room for children so don't foresee any major upscaling of house purchasing, have other savings and investments planned to cover major 'bucket list trips' each decade and a wedding. Cars would typically come from the disposal income and savings I have modeled to be saving each year too. Apart from children (arguably the biggest expenditure, admittedly), I'm confident I have the other major purchases covered.

YellowStarling

Triumph13 wrote: »

Making any assumptions around the BTL market in 9 years time is a complete lottery. I definitely would NOT assume a better yield than what you use for general investments, particularly with the changes that keep being put through to try to make BTL less attractive.

Thanks for this and your other points Triumph. I do very much agree with this - I feel I must have got carried away modeling my life! BTL isn't the attraction it was 5 years ago, but it is something I really want to do, that or flipping one or two. Luckily, I was not planning on being the next Jim Haliburton, so my forecasted BTL profit was only a very, very small portion of my retirement pot, so I am happy to simplify my model by removing this aspect.

YellowStarling

madeinireland wrote: »

Also with regard to your point 3 - why not bung more into your pension now every year so as to avoid having to pay back your student loan. I believe your penion contribution would effectively reduce your salary meaning the amount you pay back to the student loan would disappear and after 30 years it is written off - meaning you have used the money you would have used to pay off your loan to increase you pension instead.

Thanks for your input MII - this is an interesting tactic and one I hadn't thought of at all (the write-off bit). I have lowered the repayments as much as I can (hence still 8 years to go), as a byproduct of increasing my pension contributions to the most I can allow whilst covering my other expenditure at present. Something in me wants to ensure I pay it all off, and whilst perhaps not the most financially astute objective, the small amount I shall forgo saving is the price of pride!

gallygirl

Yellow Starling, my main thought on reading your initial post was 'why is someone who is so financially aware and focused on the future planning on retiring at 60?'. Wouldn't you choose to retire sooner?

Don't just look at savings/investments but also look at your lifestyle and unconscious spending habits. For example, if you buy The Times/Sunday Times every day that's over £500 a year. With a 4% withdrawal rate you're looking at a pension pot of almost 13k just to buy your newspaper. Are you prepared to work x longer to fund it?

Fair play to you for being so astute - good luck to you :T.

richy999

gallygirl wrote: »

Yellow Starling, my main thought on reading your initial post was 'why is someone who is so financially aware and focused on the future planning on retiring at 60?'. Wouldn't you choose to retire sooner?

I must admit that this was my 1st thought.

Starling, give consideration to achieving financial independence as early as you can.

fcandmp

To cut to the chase I have calculated my Number as 48k, or at least that is what I am currently working to. I am reducing my working days to balance this and in a way have a practice run at hitting this number whilst tuning elements of expenditure to get closer to 40k. This I would have to say is at the comfortable end of the Number and DB pension projections illustrate approx. 25k income from age 60 in four and a bit years time after TFC has been taken.

In the mean time I will monitor both the stresses of even part time working with growing pleasures from hobbies, interests and travel in extended free time and determine the point at which drawing DC funds to support earlier complete exit from the work environment becomes too tempting to ignore. I guess I am lucky in that I enjoy aspects of my chosen work and through planning have accumulated sufficient DC funds to make the exit at any point pretty painless.

I have the obligatory spreadsheets with current values for all regular items, with a longer term add in for replacements of key bigger items and home projects. Against each of these i have added columns illustrating where the opportunities to cut back are (either to cut the spend out, or reasonable reduction, e.g. Dual fuel contracts which I have yet to get around to. I have used the same approach to position areas of potential increased spend e.g. Travel). This approach gives me a target range to work from and via another series of income spreadsheets the ability to illustrate where the money will come from to fund it.

Gatser

As I occasionally review my "Master Spreadsheet", my main dilemma is how much I should allow for expenditure in the ages 80-90 columns! Several issues on this:


* I have to assume the grim reaper at some point so I have gone for 90 (I know he likes nice round numbers)


* When do I expect to stop car owning/driving, or shall I just keep at it and just slow down to 20 mph?


* Will I still be spending so much on "Capex"... new fixtures and fittings etc? (Stairlift?)


* Holidays: when will trips abroad be replaced with coach trips to Skegness?


* I admit that I have no provision for care homes etc... if, as and when that happens, I will probably be incapable of updating the spreadsheet anyway (or logging on to MSE Forum!)

patanne

Gatser wrote: »

* When do I expect to stop car owning/driving, or shall I just keep at it and just slow down to 20 mph?

On mine the column name just changes to taxi fares! I have no desire to either turn into a hermit or to be reliant on other people to go anywhere.

greenglide

I admit that I have no provision for care homes etc...

But have you factored in the cost of potential care at home instead of residential care?

Presumably as we all age we reduce the scope of what we do (do overseas holidays) but the reduced things we do become more expensive - public transport / taxis etc can cost as much as running a car.