How much to retire on and how to get it ?

Loughton_Monkey

First of all, I would say the £22K is a complete red herring. A Company Director having earned over 6 figures for many years, is unlikely to be able to 'live' on less than £60K in retirement, while someone who never earned much more than about £20K less tax must be capable of a retirement lifestyle costing £15K.....

The point is, that age 64 is far from the 'ideal' to start retirement planning. You have obviously realised this, and this is perhaps a perfect 'lesson' that your sons can learn - with your encouragement.

So anything you do, I feel, will just be 'fine tuning' since the general size of your retirement funds is set into concrete. But it is important (and hence your question I suppose) to make sure you maximise your opportunitites. The 'principles' of retirement planning can still apply.

By this, I mean that (a) you are not retired yet, and are receiving an income. (b) you currently have a 'spending pattern' that you can quantify, and that you should be able to 'predict' when you retire.

Hence, you should be able to write down an honest prediction of a 'realistic' income you need in retirement. Write it down. Assume it will need to rise by inflation (for which you have to make assumptions). Now if your current income is higher than this, and you spend all your income, then there is really little you can do.

But provided there is some flexibility there, it is possible to write down how much your existing Pru pension might grow. How much your ISA might grow. How much you might be able to enhance your pension by paying more into it (and get tax relief). All of this will increase the more you can 'tune down' your current lifestyle to something nearer what you need in retirement.

And then if you calculate properly, you will find that there is a certain age at which you should be able to throw in the towel and put your feet up. Typically, this will not be an age that appeals to you. Hence you then need to go back to the calculations again, and make different assumptions.

Even at age 40 or 50, such calculations might not 'add up', despite there being another 20 years or so to 'correct' things. So if they don't add up at age 64, do not be too surprised. Maybe a couple more years of taking a pain of living extremely frugally might just make a difference. Another (more sensitive) route might be to 'counsel' your 4 sons to see if they can do anything financially to help out. If any are still living at home, could they make a larger contribution?

morgana

Thanks everyone.
I have always kept spreadsheets of income and outgoings so know exactly what I have coming in, how much I need to survive and how much I have saved. The unknown factor is how to get the maximum income from (as has been pointed out) the little I have and whether to defer the pension.
I do want to run a car as I am a driving instructor ATM and would miss the freedom that brings. (and ATM, the loss of income I have to endure thru the bad weather ) It would be a poor existance if all I could do for the next how many years was to sit and watch TV or knit- not my style at all.
Thanks again
I will see the local IFA asap and discuss these things with her / him.

morgana

BTW Loughton Monkey, I don't drink, smoke or go out much (maybe 6 times a year)so only need buy clothes for work. I have to have a fairly new car in my work but other than that my main extravagance is the holidays I take that I couldn't when my boys were growing up and probably won't be able to take when I do stop working. So I think I do live 'extremely frugally' ATM.
My sons have long since left home so I have only my own income and I stopped paying into the pension 5 years ago on the advice of an IFA who suggested that putting the money into ISAs was a better idea.
I have also been told that when I die, the pension fund dies with me, which I didn't appreciate when I started it. So I have to live longe enough to deplete it <g>

middlepuss

morgana wrote: »

It would be a poor existance if all I could do for the next how many years was to sit and watch TV or knit- not my style at all.

If you run out of money for the car, apply for your bus pass. If you keep spreadsheets of earnings and outgoings (I'm impressed!) you'll find bus timetables a doddle. You can tour the country for free if you research the connections.

sleepless_saver

If you didn't have as much as £40k in ISAs/shares, you would definitely be entitled to pension credit, plus help with your rent and council tax when you no longer have an income from your self employment. (This assumes you don't have a partner living with you and that your state pension is no more than £5200.) You may still have some entitlement even with your savings, but you'd need to get along to welfare rights/CAB to do a benefits check. Or use this benefits checker.

It is well worth bearing the benefits issue in mind before deciding how to manage your savings pot in the future.

morgana

Middlepuss, I already have a bus pass and do use it on trains to get to the city 2 or 3 times a year to save parking charges and congestion.
Sleepless saver- I've looked at benefits entitlement previously but don't qualify unfortunately. If I hadn't been careful and saved as much as I can, I probably would. Ironic isn't it?

getmore4less

With such a low outgoing potentialy the benifits route may be a better option so small(£40k) visible savings might be a false economy.

It might be a better option to set yourself up with good housing all the potential capital outlays now to deplete savings to a lower level and reduce the need for future income for maintancence replacement.


Check what you would be entitled to if you had nothing.

sleepless_saver

morgana wrote: »

Sleepless saver- I've looked at benefits entitlement previously but don't qualify unfortunately. If I hadn't been careful and saved as much as I can, I probably would. Ironic isn't it?

If you use the £40k to buy an annuity, that may well be enough to tip you into being just over the benefit threshhold for life, and worse off than if you had not had the £40k. However if you draw on the £40k after you stop work to bring your income up to what you need to live on, you are likely at some point to reduce your capital to the point where you become eligible for guarantee pension credit, which will also mean you get help with rent and council tax.

As always though, you can't guarantee what the future rules about pension related benefits will be so you really do need a crystal ball when making these decisions .

patanne

Are you already taking your state pension? If so, if you are still working, you could freeze it for a while (I suggest not until the increase in April). You can only do it once I think, but the gains are 1% increase for every 5 weeks frozen. Unfreeze in time for next April - increase 9% for life. Regarding the number, I wish I had ever earned £22k pa. but the lower your income the less it seems to me you can afford to drop. Not if you still want some sort of a life after retirement. Personally I can afford to drop only about £1k from my short time earnings (very bad timing for me to go on short time as my savings have taken a serious hit). Check that the state pension reflects all that it should. From old graduated pension through credits re (ex-husband - an assumption - sorry about that), home responsibilities etc. Whilst they are not as bad as some people paint them they are not infallible. Good luck with your effort to increase your income.

jamesd

morgana wrote: »

whether to defer the pension.

Deferring the state pensions is a good move for three to five years assuming normal health. Can do it after starting taking them if necessary, then take the higher income after the deferrment, not the lump sum. It'll provide useful inflation-adjusted long term income if you live an average to long time.

Pension lump sum funds don't die with you. They get inherited. If you're using income drawdown that means a spouse gets 100% of the pension pot. Otherwise there's a tax charge of 55% from April and the rest is added to your estate. Assuming you don't have other dependents or want the money paid into a charity at 0% deduction.

What does die with you is annuity income from a pension, the state pensions or final salary work pensions, though some benefits for a spouse might remain.

There's talk of an increase in the state pensions to payout £130 a week, £6760 a year, regardless of contributions, with income from savings on top but most benefits stopped. So it's too soon to conclude that your saving won't be rewarded, it may be on top of this state pension. Unclear what happens to those getting more from th state pensions but it's unlikely to be cut.