How Much Pension Do You Really Need?

Samsonite1

I think if you calculate it and add in buying expensive clothes, shopping at M&S, some first class train journeys and some holidays abroad, new PCs, tablets, phones every couple of years - this probably falls into £10k-20k per year and if the basic cost of living is valued at around £10k - it seems as though you could live a pretty comfortable life with bells and whistles for under £30k.

Many working people (probably depending on where you live) can probably live off £30k comfortably with a mortgage/rent and other costs they will not have at retirement. In a similar way if you earn £60k you will probably find that not only are you comfortable but you can treat yourself regularly and probably save for a rainy day. If you earn £100k, you will most likely have a bit of spare money unless you cannot help yourself to regularly having first class flights and a Ferrari...

The point I am (badly) making is that there is a certain point financially where you can live really comfortably and have many nice things and any more money beyond that is really spare and although you can find things to spend it on, you do not need to count towards maintaining a lifestyle unless you stubbornly must drive super cars for the rest of your life, etc.

And to come full circle (or is it more of a spiral now?) It is the comfortable level I want to aim for with my pension, not having more than enough. I do plan on having the other incomes I mention - renting out property, other investments, etc. all of which are unknown but will surely add to the retirement pot.

tgon

I'm aiming for £25k and on track but a job redundancy at the start of the recession cleared me out of savings and quashed any notion of early retirement, 1st class flights and the Ferrari...

Goldiegirl

I think the key to a retirement income is to be sufficient to allow you carry on living a similar lifestyle as you did when you are working.


You might spend less on some things like travel to work/petrol, and a bit more things like holidays, but I think you've got it cracked if you end up with the same life, but much improved by not working any more

hugheskevi

One thing to be careful about is what terms the numbers being talked about are in.

Back in the days of final salary schemes, whatever pension was accrued was effectively shown in earnings terms (unless the scheme closed or you left employment) as any forecast amount would increase in line with your earnings.

Many (most?) DC projections are in price terms. The difference isn't much if you are 60 years of age, but if you are 30 then the difference is huge.

Personally I target my current consumption level excluding mortgage payments and pension contributions (as they will drop away in retirement), assuming that figure increases in line with averge earnings growth until I am age 70, and by RPI thereafter.

I also calculate consumption at the end of each financial year looking at all income and where it went - all savings/investments are tracked, so the difference between net income and what was saved is our consumption. That ensures I capture all expenditure, and I keep a track of that each year to ensure that I have a good idea of what will be needed.

That should all lead to an accurate target which isn't eroded relative to earnings' growth. Then plan for some surplus as a contingency and work backwards as to how to effectively meet those spending demands (pension, ISA, downshifting, etc).

tony4147

Well I've always liked my holidays twice a year and a new car every three years and a couple of hobbies etc, so I've been aiming for around £20k private pension and then state pension on top. I feel this is achievable and will give me a life style similar to what I have now.

Thrugelmir

jamesd wrote: »

Working and living in London gives you a significant advantage if you plan to retire in a lower cost area.

Live and work in a cheaper area and have a better quality of life. Probably enjoy a longer retirement too........

Not all about the money.

Samsonite1

Thrugelmir wrote: »

Live and work in a cheaper area and have a better quality of life. Probably enjoy a longer retirement too........

Not all about the money.

Living in a cheaper area is no guarantee of a better quality of life - in fact I would argue the opposite for the most part!

swampduck

Blimey!! I think I'm in the wrong job!! Salary now circa £17k - I have been paying into pensions most of my working life. On todays' figures my pensions will pay out around £13k per annum and hubby will have his too. Between now and hubbys' retirement the mortgage and debts will be paid off so our monetary requirements will naturally go down.
I never think the average figures that get tossed around ever bear any reality to real life figures. Either that or my employer really is tight!!

Swampy

atush

Basically you Need the Number thread. As some say 25K is 'lavish' and i say it is my min i want to live on.

Everyone is different, and everyone lives a different place. Living in London is expensive even if you are mtg free, but given travel links to the Continent, you save money there for travel.

How much do you need now? What will be cheaper later on?

Work our your Number first, then work out how to get there.

Personally, as long as you have enough savings and investments for the medium term, I dont think you can have too much in a pension. Esp given t ax relief, employers contributions, compound growth and the new regulations for Drawing it down.

TBC15

If a couple was buildinga pot of investments to supplement pensions on retirement it appears traditionalto go into bonds as they gets closer to retirement to avoid the inevitable dipsin the market.

Is this a golden rule or if the investments are substantialenough could they carry on as normal?

Joint pensions come to about £20000, willing to live on£25000 in lean times.