What is a GOOD pension Pot to retire on??

Pennysmakepounds

Afternoon,

Open question, to all those due to retire in the next 15/20 years.

What do you think is a good pension amount per month to live a comfortable life and afford the odd luxury in life?

A few years back i though it would be 2K per month, but i'm not sure if that's a realistic figure or not.

I based that figure on my current living costs, but obviously once the kids are gone it should go down right!!

What are other peoples expectations for a monthly amount??

MoneySavingExpert Insert:

Great question Pennysmakepounds! Read our Pension Need to Knows for more help.

jamesd

Median average household income in retirement is around £21k, was around £18k a few years ago. Whether you need more or less than that depends on your location and lifestyle. Can be really cheap say in northern England or the Welsh valleys where property can be very inexpensive compared to say the SE of England.

dunstonh

What is a GOOD pension Pot to retire on??

One that is sufficient to meet your individual requirements.

What do you think is a good pension amount per month to live a comfortable life and afford the odd luxury in life?

What figure would you put on that is too subjective.

A few years back i though it would be 2K per month, but i'm not sure if that's a realistic figure or not.

Would that £2k be inclusive of lifetime capital requirements or would they be put aside in a different pot?

Pennysmakepounds

dunstonh wrote: »

Would that £2k be inclusive of lifetime capital requirements or would they be put aside in a different pot?

I'm not sure what you mean by this.

This was the NET figure i wanted each month once retired

molerat

It is not just about monthly income. I would never have dreamed of retiring without at least £100K in the bank to cover those capital expenses that will crop up over the years. If you have got to pay for these out of income rather than capital you will need a higher income. Renting could add £10.5K + per year on what income you need. Do you like going to the Monaco GP every year or does a week in Blackpool suffice ? There is no simple number.

atush

H meant what type of cash reserves will you have set aside, or will you have to save them from the 2K per month.

What you need to do, is read the thread called The Number. I e the amount you need to get by in retirement. For some it is 1K per month, for some it will be 4K or even more.

Pennysmakepounds

Good Point, i never considered the Capital side of things.

100K seems excessive though if you have guaranteed 2K income per month.


As for renting, not a problem. I own my home.

dunstonh

Car replacement, holidays, boiler, roofing, windows etc etc. Will you fund 25-30 years worth out of excess income or from capital lump sums?

marathonic

Pennysmakepounds wrote: »

What do you think is a good pension amount per month to live a comfortable life and afford the odd luxury in life?

That really depends. I know of retired people that consider a visit to a coffee shop as the odd luxury and others who consider a couple of holidays a year as their luxuries.

I think aiming for the traditional 2/3rds of final salary is a reasonable target assuming you have your mortgage paid off as opposed to being a lifetime-renter.

In my own situation, I'll have no mortgage to pay and, obviously, won't be contributing to a pension pot anymore. However, I'll have additional expenses due to having more time to kill in retirement.

Whether rightly or wrongly, I always assume no state pension when doing such calculations. If it's there in 2048, it's a bonus.

Taking a gross salary of £30,000 and ignoring the expected reduction in tax liability in retirement, I'd be looking for £20,000 annually.

Annuities are low at the moment but they won't always be that way so I'd take the often-used 4% withdrawal rate and assume I need a pension pot of £500,000.

If we assume inflation of 2%, a growth rate of 6% (inflation + 4%) and contributions increasing in line with inflation, I believe someone starting at 22 and retiring at 67 would need to be contributing about 13.2% to achieve the above.

A figure like 13.2% will look quite high to the majority of those in their twenties who seem to think they'll be in a good position in retirement by contributing something like £50 per month to a pension.

On the other hand, it'll seem quite low to someone with a good grasp of the maths or someone who's left it quite late to start and has recently approached a financial advisor for advice on how to get their retirement on track.

For reference, I calculate someone starting 10 years later at 32 and retiring at 67 would need to contribute about 21.8%, as opposed to 13.2%, to achieve the same result.

Of course, all the above is based on assumptions, some of which many will not agree with - this will always be the case when retirement-planning.

Pennysmakepounds

I think i just nee to send a begging letter to the 61 million Euro's winners and see if they can spare a million for a poor working man.

At 42 with NO private pension, I think that's my only hope for a decent retirement.

ajbell

I'm confused.Where are you getting the £2k a month from if you have nothing at 42?.