How much do I need to Retire?

greeneking

I am new here so please bear with me.

I am 53, have served 32 years in Local Government (so am lucky enough to be able to pick up full works pension at 60 as things currently stand). Approx £12,000 per year and a lump sum in 2014 of £40,000.

I have got some £200,000 invested in various forms at the moment as well as a property worth £190,000 (though I will always need somewhere to live).

In addition in two years time I get £20,000 endowment payment.

Mortgage free and debt free.

I am considering leaving full time work in about 12 to 18 months time, possibly picking up some part time work (2 or 3 days a week) and am looking to live on perhaps £17,500 per year - using savings for the 6 or 7 year gap before my works pension comes into play.

My wife works as a swimming instructor is 55 and earns approx £5,000 per year - she has her own savings of approx £70,000.

Can I have any views on what I intend to do - as once I have burned my boats there is no going back - I just want to make sure that I am not deluding myself that I can afford to do this without the potential for poverty in future years (65+) for me and wife.

Any suggestions or advice will be welcome.

sinizterguy

Firstly, you need work out how much of a retirement income you want.

Then we need to take your currently available assets including pension and figure out how much short you are.

Then you need to come up with a plan to fill that shortfall - options are work for longer, plan for lower retirement income, re-adjust available assets to decrease the shortfall or a combination.

So what would you like to retire on ? And where exactly are these savings and what interest are they bringing in ?

EdInvestor

greeneking wrote: »

I am new here so please bear with me.

I am 53, have served 32 years in Local Government (so am lucky enough to be able to pick up full works pension at 60 as things currently stand). Approx £12,000 per year and a lump sum in 2014 of £40,000.

What's the position with your state pensions?

I have got some £200,000 invested in various forms at the moment as well as a property worth £190,000 (though I will always need somewhere to live).

The 200k can generate 10k a year in net income depending on how it is invested.

I am considering leaving full time work in about 12 to 18 months time, possibly picking up some part time work (2 or 3 days a week)

How much income will this work generate?

.. and am looking to live on perhaps £17,500 per year - using savings for the 6 or 7 year gap before my works pension comes into play.

I'd be concerned about running down all your savings to fiund the period before the pensions kick in, although you do have the 40k lump sum. But almost certainly in a very long retirement like you are contemplating, there will be signnificant capital expenditure needed, on house, car, travel, family etc.

The size of you and your wife's state pensions is importnat, as is the level of part time income you can earn, so as not to deplete savings.

[Deleted User]

greeneking. My dh retired from his full time work 3 months ago. He is retiring from his p/t own business as a photographer this week. He is 60. I finished work 6 years ago. I placed my fsavc in a sipp 5 years ago and we placed my dh`s pension in a sipp 16 months ago. We now have complete clarity re our sipps and the amount of money available. All money in the sipps is in cash at the moment, due to the turmoil in the stockmarket

I have state pension and teaching pension starting in january. His state pension starts in 5 years. I manage his sipp and have chosen to vest (start) his pension in 5 years. As you see we also have a gap when we are going to rely on savings so our position is very similar to yours

You need to do a spreadsheet on all your outgoings, savings and income and be absolutely honest

I took out ns&i savings certs from 2004 and they start maturing in 2009 so the period from 2009 to 2012 is well covered. I did a very good, in depth, study of the period to 2009. eg I get a lump sum in jan 2008 and both pensions, covering about half the realistic income needed per month. start for me so I need to cover the shortfall to 2009. This is where the spreadsheet is worth its weight in gold and I can put in dates when I will expect various sums of money. To help I vested my own sipp to start immediately ie I have requested the lump sum and a yearly amount in arrears

greeneking the only sensible thing to do is to sit down and get the figures on paper plus dates. This will give you clarity on which you can then base your decision

our essential outgoings pm eg council tax etc are £527 and I have to add the yearly costs eg car costs, tv, insurances etc I also need to add food and so on. I should think that Martins mse incoming/outgoing sheet will focus the mind.

firesidemaid

yes, please do be honest about spending and standard of living for both of you.

my parents 'retired' 2 years ago -with my dad needing to live off savings for 4 years still his state pension kicked in.

i discussed it all with them, devised a budget etc. but they have just continued to spend as they did, not communicated about their different savings accounts and now i have realised all the savings will be gone by the time my dad retires proper in just over 18 months.

EdInvestor

sazzacat wrote: »

my parents 'retired' 2 years ago -with my dad needing to live off savings for 4 years still his state pension kicked in.

....now i have realised all the savings will be gone by the time my dad retires proper in just over 18 months.

But doesn;t that mean the plan has succeeded?

greeneking

Sinizterguy, Thanks for responding.

We are certainly capable on living reasonably well on the £17,500 pa which I mentioned as we have no major outgoings, and modest pursuits - once works pension kicks in at 60 and state pensions for wife (at 61) and me at 65 and me, there will be much less reliance on savings to supplement income.

Savings currently in fixed bonds - (£100,000,bringing in approx £5k interest per year, £12,000 ISA's, £10,000 National Savings, £30,000 Premium bonds and the remainder in higher interest regular savings accounts - also have a modest sum of £5,000 in shares.

greeneking

EdInvestor - thanks for your questions

I will pick up approx 89% of state pension at last look, though new rules re length of working (30 yrs) to obtain 'full pension' may have an impact ? - wife will pick up full pension at 61.

My proposed 2-3 days a week work is only likely to bring in £5,000 pa tops.

The impact on savings will be in first 4-5 years when drawdown will be approx £12,000 or £13,000 a year (assuming income from part time of some £5,000) after 60 my works pension will reduce dependance on savings - well thats the plan!

greeneking

Kittie - pleased it is being done by others good luck to you - yes I have to work out in detail - using spreadsheets and the like - but from what I have calculated so far (not taking inflation into account) think its a runner.

That's why I posted really to find out whether it was pie in the sky or whether it can actually happen.

Thanks

[Deleted User]

greeneking yes it can actually happen but it takes a while for it to sink in. Try to get some savings bonds and/or ns&i certs bought out of current income so that you have some money dropping in from time to time during the lean years

I must warn that the mindset switch from buying things on an `I want` basis to an an `I need` basis is quite difficult. I bought a couple of things yesterday on an `I want` basis and referred back to my spreadsheet last night. From today I will be getting monthly spends out in cash and I have also reduced my cc limit by half to reduce temptation. I always pay my cc out of savings so cc spending must be drastically cut. When my cc payment has gone through, this week, then I will shave another 1k off the limit and have it down to 2k as an emergency fund or a safe way of buying via the net

Living on savings is rather different to having a fixed income every month, when it is easy to see what is what and it requires a lot of self-discipline. This, for many people, could be another time in their lives when cc spending can run away and suddenly savings become stretched

I run ms money and have done for years and I now also record in a book, all sums removed from the bank or spent on cc. Anyway so far so good. I have to tweak spending but we`re doing fine after only 3 months. I think this month will see us on a roll and it is nice to know that I have 3 sums dropping in before january. The acid test will be to see if I can put them into savings and keep them there as the safety net we all need

EdInvestor

greeneking wrote: »

Savings currently in fixed bonds - (£100,000,bringing in approx £5k interest per year, £12,000 ISA's, £10,000 National Savings, £30,000 Premium bonds and the remainder in higher interest regular savings accounts - also have a modest sum of £5,000 in shares.

It would be better if you increased the amount you have in shares - possibly by moving the money in the premium bonds over to your S&S ISAs over the next couple of years.Otherwise your cash savings will be eaten away by inflation over the years and your income will be subject to fluctuating interst rates and unnecessary tax.

Have a look at this idea:

http://www.fool.co.uk/specials/2006/specials060208.htm

The HYP has a number of low risk features, pays a stable divi income of 5% (no tax to pay for people on basic rate) and should deliver long term rising capital and income. Once you have bought the shares you pay only negligible charges eg 25 quid a year for the self select ISA wrapper at a provider like https://www.selftrade.co.uk