How much is enough?

aajax42

I have been following this forum with great interest for a long time and viewed so many posts about how to save and invest. I don't remember ever seeing a post that explores 'how much is enough'? According to Which, Households spent a shade under £2,200 a month, or around £26,000 a year, on average.
Of course everyone will have different aspirations, but it seems saving can become an obsession that may mean sacrifices made today were not necessary. How do you know how much to save/risk unless you have a target?

John D. Rockefeller. When asked once, "How much money is enough money?" He replied, "Just a little bit more."

So, do any of you wise investors have a target. I am interested because I am now 64 with a household income of around £40,000 after tax and savings of nearly £400,000. Should I risk that in investments to make more, or let it stay safe in cash, even if it is losing value through inflation?

Do you have targets?

bowlhead99

On the Pensions board there is a long-running thread referring to The Number. Everyone has a Number ; how much do you need, to give up work and just retire on what you have and be happy enough with it forever. Some of the concepts there are probably applicable to your situation.

In your case, you have a nice pile of savings. Age 64 you may have three or four decades to go. Properly invested, you could maintain the real value of your £400k capital and take 3-4% a year from it. Left in cash and withdrawing the interest from it, and assuming 3.5% inflation, the capital and interest will lose 30% of its value every decade or halve in value every 20 years. So £400k now will be £100k in real terms by the time you're age 104 and the interest income from it will only be a quarter then of what it is now.

You probably don't think you will have much use for it by then because you'd be happy to shuffle off this mortal coil. But maybe a shame not to have so much ot give to your heirs, or fund five years of nursing care at £50k a year each for you and your partner, or whatever life throws at you.

A property to live in and between a third and a half a million of cash / investment assets, plus pensions is easily enough for most people - as the median household has modest income and wealth. But if you are used to a £40k lifestyle you may prefer more. By the time you get to 84 or 94 you are probably not going to have as much desire for day-to-day spending as you have at 64. But you may be spending money on care, or if you fancy a holiday to the Caribbean at age 74 you'll want comfy flights and all mod cons, whereas when you were younger you might have been content with backpacking in hostels in south east asia on a pittance.

Bravepants

It depends entirely on what you want to do with the money.

A basic, confortable life, with all bills paid and a little extra over for home comforts, the occasional meal out etc., will require less than someone who has a larger home with mortgage, perhaps a yacht, an expensive sports car in the garage, and a penchant for expensive wine and jewellery.

The ideal situation of course is to determine your annual income requirement based on your aspirations/needs, then work out how long you are going to live and use up all of your money exactly on the day you die.

You can see the problem with the above statement though can't you?

You might also want to leave some money for kids/other relatives in your estate. Then again you might not!

So it all depends.

Your £40k a year is a solid amount (above the UK average as you say) you could consider drip feeding a S&S ISA using a multi-asset fund, upto say £20k a year, that would take 20 years to transfer in the full £400k. In that way you can be happy that you are investing, but also happy that you have cash for emergencies etc.

OldMusicGuy

This is the thread I would recommend you read and comment on:
https://forums.moneysavingexpert.com/discussion/2146737

I am retiring aged 60 in 8 weeks and I am planning that we will live on around 30K per annum after tax. We currently live in an expensive part of the country, although we will be downsizing to a cheaper location in 1 to 2 years.

IanSt

aajax42 wrote: »

I am interested because I am now 64 with a household income of around £40,000 after tax and savings of nearly £400,000. Should I risk that in investments to make more, or let it stay safe in cash, even if it is losing value through inflation?

Do you have targets?

Is the income just your own or is their a partner contributing too? Is your pension defined benefit? What will your state pension contribute? What age do you think you will retire? How do you view investing? Would you sell them all should the market fall and suddenly they're worth less than you bought them for? Do you wish to leave an inheritance?

All of the above questions (and many more) have a bearing on how much money someone feels they need to have and in what ratio between cash and savings.

I personally have always been a jam tomorrow type of person so have put as much money away into a mixture of cash savings and investments as possible throughout my life, but still leaving enough to have a comfortable but not excessive lifestyle. E.g. one holiday a year in the UK, nearly new cars rather than brand new, etc.

So although I've never had a specific monetary target, I'm now in the comfortable position of having options on what I wish to do at the grand old age of 56.

jimjames

:T

aajax42 wrote: »

So, do any of you wise investors have a target. I am interested because I am now 64 with a household income of around £40,000 after tax and savings of nearly £400,000. Should I risk that in investments to make more, or let it stay safe in cash, even if it is losing value through inflation?

Do you have targets?

Do you have any investments at all or is everything in cash at £400k? There is no need to have all your money in the same place so you may want to have some cash and some invested, that then gives some balance between protecting from inflation and having funds available for spending as well as balancing against stock market movements.

aajax42

jimjames wrote: »

:T

Do you have any investments at all or is everything in cash at £400k? There is no need to have all your money in the same place so you may want to have some cash and some invested, that then gives some balance between protecting from inflation and having funds available for spending as well as balancing against stock market movements.

We have about £110,000 invested through Nationwide and £9000 with Woodford. Just met with the advisor at Nationwide who is recommending we switch to one of their recommended fund with a 0.7% service charge.They have a very limited amount of funds to offer and the only tracker is 100% equity. I am embarrassed to say I have been following this forum for a couple of years and have read a number of books on the subject, but still get terrified of making the wrong decisions and losing the money we have sacrificed and worked so hard to accrue. I know people will quite rightly suggest other IFA's, but I also hate to give money away to people who may or may not give good advice depending on the luck of the draw. I think we will use this and next years isa allowance on VLS 60 through i-web and see how that goes and then maybe have a look at trying to pick a winner company for a side bet with a couple of thousand. Need to take a brave pill!.

aajax42

OldMusicGuy wrote: »

This is the thread I would recommend you read and comment on:
https://forums.moneysavingexpert.com/discussion/2146737

I am retiring aged 60 in 8 weeks and I am planning that we will live on around 30K per annum after tax. We currently live in an expensive part of the country, although we will be downsizing to a cheaper location in 1 to 2 years.

I just took a look at the thread you suggested and was shocked at the amount of abuse people are hurling at each other. Really could not believe my eyes having only looked at this respectful, thoughtful, helpful and inspiring forum up to this point.:T:T

Linton

aajax42 wrote: »

........

So, do any of you wise investors have a target. I am interested because I am now 64 with a household income of around £40,000 after tax and savings of nearly £400,000. Should I risk that in investments to make more, or let it stay safe in cash, even if it is losing value through inflation?

Do you have targets?

We are in the sort of position you describe. Having retired early 12 years ago on what have turned out to be very pessimistic assumptions we now have enough to last all our lives on even more pessimistic assumptions with a standard of living significantly higher than provided by our Number, which appears to be similar to yours, and to pay for many years of care for both of us should that be necessary. Our nearest relations are almost all our age, so there is no reason to aim to leave behind a small fortune.

Trading up the house and booking exotic holidays is helping a bit but we have reached a point where extra ongoing expenditure provides very little, if any, extra pleasure.

Our current strategy is twofold:

1) To keep an increasing % of our assets in Wealth Preservation funds with perhaps 30% left in growth funds to provide some level of protection against extreme inflation and provide an ongoing intellectual stimulus. Beyond that there is no great wish to increase our wealth.

2) Avoid higher rate tax by clearing my SIPP completely into income generating funds in an S&S ISA before taking a significantly deferred SP.

Large charity donations may well be an option at some stage but I think it is too early to seriously deplete our assets.

AndyT678

aajax42 wrote: »

We have about £110,000 invested through Nationwide... Just met with the advisor at Nationwide who is recommending we switch to one of their recommended fund with a 0.7% service charge.They have a very limited amount of funds to offer

The Nationwide SALESMAN is paid by Nationwide to sell Nationwide's products and will be motivated to ensure the most favourable outcome for Nationwide and his own career.

aajax42 wrote: »

I know people will quite rightly suggest other IFA's, but I also hate to give money away to people who may or may not give good advice depending on the luck of the draw.

"Other IFAs"? Have you seen an IFA? They are people who will be paid directly by you and only you and should therefore only have your best interests at heart. It's possible that they could be incompetent but at least they should be goal aligned!

aajax42

Linton wrote: »

We are in the sort of position you describe. Having retired early 12 years ago on what have turned out to be very pessimistic assumptions we now have enough to last all our lives on even more pessimistic assumptions with a standard of living significantly higher than provided by our Number, which appears to be similar to yours, and to pay for many years of care for both of us should that be necessary. Our nearest relations are almost all our age, so there is no reason to aim to leave behind a small fortune.

Trading up the house and booking exotic holidays is helping a bit but we have reached a point where extra ongoing expenditure provides very little, if any, extra pleasure.

Our current strategy is twofold:

1) To keep an increasing % of our assets in Wealth Preservation funds with perhaps 30% left in growth funds to provide some level of protection against extreme inflation and provide an ongoing intellectual stimulus. Beyond that there is no great wish to increase our wealth.

2) Avoid higher rate tax by clearing my SIPP completely into income generating funds in an S&S ISA before taking a significantly deferred SP.

Large charity donations may well be an option at some stage but I think it is too early to seriously deplete our assets.

I would love to know what wealth preservation funds you have chosen as it seems we are in very strange times at the moment and a defensive strategy seems prudent.