How much cash at retirement?

LeafyBarnet

Wentthedaywell? wrote: »

My query was less about pension income and more about a sensible level of savings excluding pension pot and house equity.

Nevertheless it's well worth calculating the net income which your pension will give you. You won't be paying NI and pension contributions, and your income tax deductions will be that much less. listentotaxman dot com is a very pleasant and easy read, I found.

Bear in mind its calculations are based on current tax and NI rules.

Wentthedaywell?

I've never seen that listentotaxman site before, thanks Leafy, I've bookmarked it.

pineapple

Well I'm managing on about £1000 per month net income.
No rent or mortgage - I paid off the remaining mortgage with my cash sum and got a few essential building repairs done. Probably have about £10,000 left in savings (though I can also save from my income).
It's not much but it's enough for me. I'm time rich and cash poor and try to make it work in my favour. But frankly if hard times hit, I'll go for Equity Release (yes I know all the pitfalls). For one thing, I don't have to worry about leaving an estate for kids.
It's very much a 'how long is a piece of string' issue.

middlepuss

LeafyBarnet wrote: »

Nevertheless it's well worth calculating the net income which your pension will give you. You won't be paying NI and pension contributions, and your income tax deductions will be that much less.

As above work out your annual net earnings, then work out how much you'll be spending each year.

If you conclude your income will comfortably exceed your spending each year then you don't need too much of a cash buffer: cash will tend to build up anyway. If things are going to be very tight then you will need a cash buffer in ISAs or whatever. How much depends eg on if you own a house that might need expensive repairs, car... etc, which only you can judge.

jennifernil

Our net income in retirement is about 70% of our pre retirement income, due to no NI and pension contributions.

We also went from 2 cars to one, spend far less on petrol etc, and need fewer fancy clothes. Mortgage paid off too, so far less going out each month. We find we can live comfortably on about 60% of our pensions, then we save some as a hedge against inflation, save some for the grandchildren, and spend the rest on long holidays.

We have about 4 years worth of pension in savings stashed in various places.....Isas, shares, term deposits (max 3 years) and instant access. Each year we review the situation, look at our holiday plans, add on a fair bit for emergencies, and set that aside in the instant access account.

I don't go below £15k in the instant access, quite a bit of stuff in our house is elderly now, so replacements are bound to be needed soon!

Wentthedaywell?

jennifernil wrote: »

We have about 4 years worth of pension in savings stashed in various places.....Isas, shares, term deposits (max 3 years) and instant access. Each year we review the situation, look at our holiday plans, add on a fair bit for emergencies, and set that aside in the instant access account.

I don't go below £15k in the instant access, quite a bit of stuff in our house is elderly now, so replacements are bound to be needed soon!

Thanks Jennifer for that practical viewpoint form one who's already doing it. I'd be chuffed if I were able to live on 60% of my pension, and to actually save some of it. 4 years of pension set aside (apprx 2 years of salary) looks acheivable, plus I'll have the lump sum. I'll have a bit of a hiatus betwen retiring (hopefully) at 60 and the state pension at 66, so I'll try save enough beforehand to cover the equivalant sum about 30 grand.

caeler

Interesting thread. I'm 30 and I've been thinking alot about retirement. I've no idea what my company pension / state pension will do by the time I get to retire. I'm already trying to start ISAs and keep the money in there as well as overpaying my mortgage so that I'll be mortgage free in say 8-10 years so I can then focus on savings, having a couple of years gross salary saved seems like a good target.

jennifernil

Wentthedaywell? wrote: »

Thanks Jennifer for that practical viewpoint form one who's already doing it. I'd be chuffed if I were able to live on 60% of my pension, and to actually save some of it. 4 years of pension set aside (apprx 2 years of salary) looks acheivable, plus I'll have the lump sum. I'll have a bit of a hiatus betwen retiring (hopefully) at 60 and the state pension at 66, so I'll try save enough beforehand to cover the equivalant sum about 30 grand.

Oh went on to 65 to preserve his final salary pension, and we were pleasantly surprised by the result.

He took the lump sum as we realised we would not need all his pension, and taking it did not affect the widow's pension.

We would have had more in the bank now, as OH had a good lump sum, but we treated ourselves, and others over the years........wedding present to son for deposit on first house, flat for our student daughter, new car, new caravan for our holidays, and recently giving the kids money within our IHT allowances.

Saves us worrying too much about investing it, we are not that sure when it comes to S&S investing.

We still have the house, having decided we like it here too much to move right now, so there is that to fall back on too if necessary.

Wentthedaywell?

jennifernil wrote: »

Saves us worrying too much about investing it, we are not that sure when it comes to S&S investing.

You've invested in memories, that's just as important as hard cash. You have to have a good life even more than a good bank balance.:)

jamesd

Wentthedaywell? wrote: »

I'm in a final salary scheme - it should give just less than half my income... And of course I'll get the state pension.

That final salary pension greatly reduces the cash requirement compared to someone using income drawdown, where the target might two or three years of spending to smooth out market investment income levels.

Wentthedaywell? wrote: »

My query was less about pension income and more about a sensible level of savings excluding pension pot and house equity. Is there the retired equivalent of 3 months' contingency that is used when one is of working age? Bearing in mind there will be so salary coming in to replenish any spending out of it so I expect it needs to be considerably more than 6 months.

It's no higher than usual but I don't personally like just three months of contingency money, I prefer a couple of years worth plus enough to cover a couple of large bills happening at the same time.

I don't think that you should be overpaying the mortgage. I'd rather have that money going into investments in a stocks and shares ISA where it can generate ongoing tax free income for the rest of your life. The pension and that ISA income can take care of the mortgage later.