Tax Credits

michaels

lisyloo wrote: »

Just goes to demonstrate how people's limited social circles (compared to the entire nation) can be entirely unrepresentative.
If you're well-off then you're likely to live in a well-off area and mix with well-off like minded people.

I wouldn't necessarily say like minded but I think the country does have a problem that a lot of politicians, the media, the more wealthy etc all move in the same circles and whilst they are aware of how others live they don't understand that they are the small minority and those 'struggling' on a household income of less than 60k are the overwhelming majority.

Generali

£400k isn't much to live off for 30 years and that's before you factor in the likelihood that the welfare state will be bust before you get to 80 years old.

I reckon I'll need a pension pot of c. £1,000,000 to retire and I plan to work until age 70+.

lisyloo

I wouldn't necessarily say like minded but I think the country does have a problem that a lot of politicians, the media, the more wealthy etc all move in the same circles and whilst they are aware of how others live they don't understand that they are the small minority and those 'struggling' on a household income of less than 60k are the overwhelming majority.

Totally agree that many are out of touch especially the independently wealth tories.
We really could do with many more conviction politicians.
I don't agree with Jeremy Corbyn's politics but I do respect the fact that he's a conviction politician and lives by his principles.

lisyloo

Generali wrote: »

£400k isn't much to live off for 30 years and that's before you factor in the likelihood that the welfare state will be bust before you get to 80 years old.

I reckon I'll need a pension pot of c. £1,000,000 to retire and I plan to work until age 70+.

Agree, but a couple of points.

Some people (like michaels) may prefer to live more frugally and work less years. That's a perfectly valid choice if you genuinely accept the consequences.

Others may have impaired health. I know plenty of people who have family histories that lead then to believe they won't live a long time (one of them died at 46 !!) and some who might even qualify for an impaired annuity. It's obviously a difficult thing to plan for, but I'm just saying bear in mind that not everyone expects to live a long time.
Personally I'm expecting to live a long time (about 90) and I'm expecting to outlive my husband. I think we all have those expectations even if we are unaware of them - for example many women grow up with an expectation that they have a good chance of being a widow.

I would certainly factor it in. For example if I had a very high likelihood of getting crippling arthritis then I'd be factoring that into my plans, by doing my bucket list early.

Just saying that one size doesn't fit all.

wotsthat

My calculations are simple..

WHEN (pension pot x 4%) = current annual spending (minus mortgage and pension contributions + £10k buffer) THEN fully retire.

I've a really complicated spreadsheet though with assumptions about spending, state pension income, tax, inflation, savings ratio, investment return but it's a certainty that all of my assumptions will be out so I assumed the arbitrary figure of £10k as a buffer.

Each year, as the predicted future becomes the known past, the margins of error reduce.

Mistermeaner

So how long you got until you retire? And how long did you assume you would live?

lisyloo

And how long did you assume you would live?

I'll be interested to hear the answer, but some people may make the assumption that you can drawdown 4% per annum and maintain your pot in real terms - that means the pot would last forever.
This is clearly a risk, but might be suitable for people with a significant plan B (like a large property they can downsize, or BTLs they can sell).

setmefree2

Here’s how it works. Part-time work on average pays around £6,500 a year, entitling claimants to the maximum tax credit, which on average pays another £6,340. This in turn entitles renters to housing benefit (£14,260) and council tax (£1,400), making total benefits of £22,000, with a cap of £26,000. The average part-time couple may only earn £8 an hour for two days’ work, but that’s tax-free. On top, benefits can take the family’s post-tax income up to more than £36,000 before they hit the cap, equivalent to earning almost £50,000 pre-tax – the same as a GP or barrister.
Because part-time workers on benefits can earn the equivalent of £30 an hour for the three days they don’t work, compared to the £8 an hour they earn for the two days they do, there’s no incentive to work more than 16 hours. Sure enough, the median number of hours worked by part-timers is 16.1. Not much will change: even the new cap is £23,000, more than the average after-tax wage. So a minimum wage, part-time worker can still take home almost £30,000. Little wonder tax credits cost us £30bn a year.

http://moneyweek.com/tax-credits-unaffordable-and-unfair/

Seriously, that's nuts.

No wonder supermarket workers look so happy.

michaels

I thought a single or couple had to work at least 30 hours without kids and 24 with kids to get wtc - I guess your example is for 2 in a couple both working 16 hours but then especially under the new rules you lose tax credits.

More generally, because housing costs so much more than 'build' cost we are always going to have this situation where low paid work doesn't pay.

I would provide a minimal 'citizens income' to everyone plus very unattractive communal housing+food and abolish the personal income tax allowance so all work pays although even then there would be a huge hurdle to move out of the social housing.

wotsthat

Mistermeaner wrote: »

So how long you got until you retire? And how long did you assume you would live?

The spreadsheet says retirement will probably be around 58 - 62. I have half an idea to upsize the house at 55 but downsize the job and go and do something else even on minimum wage. I fancy being a hospital porter - something useful, get to meet people but fully disengage at home time. Might have to work longer via this route but I'll get 5 years extra in part of the country I want to live in. The opportunities for surfing after work are a little limited in the Midlands - it's something I'll definitely want to be doing when I'm 55 but probably less so at 60 so worth the trade off.

I've assumed, even after retirement, that old habits will be hard to break and my savings ratio will still be positive so it doesn't matter how long I live.

I'm completely flexible though. I have half an idea to buy the retirement house now in the South-West and commute. I fear I'm one of those 'just one more year' types and this option has the advantage of being a ballsache so time limited.

If the target is reached earlier I might keep working and gift the income to my kids so they have an easier life than me.

For me, saving isn't all about retirement but having the option to do so on my own terms.