How much do you think you’ll need to save up to retire on?

MallyGirl

michaels wrote: »

Interesting, for us 1m at 55 would be quite sufficient and we would definitely put more value on extra years of retirement over more money in retirement but 5 less years of it. (All values assumed to be in 2018 pounds)

I expect to review when we hit 55 in 3.5 yrs time. DH isn't currently as keen on early retirement as I am. Our fixed costs (council tax, fuel, water, insurances, pets, cars, basic food, phones & BB etc) come to £23k pa in the current house and we don't plan to move for a while. Add in some decent travel and a bit of eating out and the number rises quite quickly

Albermarle

We aimed for about £500,000 in savings before we felt "comfortable", as this should provide an ongoing total "income" of about £30k to start and then increasing with inflation...(hopefully..)

I think this is erring on the optimistic side . Probably to be more sure of a £30K income ( not including SP) and keeping pace with inflation then £700K would be the figure ,

michaels

Albermarle wrote: »

I think this is erring on the optimistic side . Probably to be more sure of a £30K income ( not including SP) and keeping pace with inflation then £700K would be the figure ,

But not including SP would be wrong - assuming full entitlement it is 17k pa for a couple and will keep up with inflation so once they reach SPA the gap will only be 13k.

Audaxer

Albermarle wrote: »

I think this is erring on the optimistic side . Probably to be more sure of a £30K income ( not including SP) and keeping pace with inflation then £700K would be the figure ,

I think hoping for a £30k income from even a £700k pot of investments is very optimistic as it means withdrawing over 4% per annum increasing with inflation. Depending on the sequence of returns, that withdrawal rate could mean eventually running out of money.

Peelerfart

I retired on 60% of my previous salary, would have liked more of course, who wouldn't?

I did start paying into a pension, albeit forced (thankfully), when I was 19.

Alexland

Albermarle wrote: »

I think this is erring on the optimistic side . Probably to be more sure of a £30K income ( not including SP) and keeping pace with inflation then £700K would be the figure ,

As per Audaxer's comment even that wouldn't be enough.

I think Stubod was talking about £30k total income from SP (when payable), other pensions and the £500k savings. In addition to the £500k (which wouldn't really be enough to both cover the missing 6 years of SP and generate an uplift to £30k pa) there is some guaranteed pension income which presumably gets them to where they want to be.

Alex.

Stubod

Alexland wrote: »

As per Audaxer's comment even that wouldn't be enough.

I think Stubod was talking about £30k total income from SP (when payable), other pensions and the £500k savings. In addition to the £500k (which wouldn't really be enough to both cover the missing 6 years of SP and generate an uplift to £30k pa) there is some guaranteed pension income which presumably gets them to where they want to be.

Yes exactly, spouse has an index linked pension (+lump sum) at 60, then we both have state pensions at 66. So the £500k is in addition to pensions. I would not expect to get £30k index linked from £500k

NewShadow

Well... I'm 33 and single - my main source of retirement income will be my works pension. Key dates will be work pension due at 65 and state pension at 68. Assuming all my current savings are used as a deposit on a house within the next few years. Working with the idea of retiring at 60:

1. Post retirement housing costs - Housing is my biggest single outgoing. I aim to have a mortgage and have a mortgage paid off by 60 at the latest. I have 27 years to 60 so a 25 year mortgage would be realistic. My current rent is higher than my anticipated mortgage payments in the area I intend to buy, even when stress testing at 6%

2. Post retirement income - Alpha accrues at a rate of 2.32% pa and is payable at state retirement age. I'm currently paying EAP-3 to access my pension at 65. Payment age is subject to change as it will always be three years before SRA, and I'm expecting my SRA to be 70 in the not too distant future.

Ignoring what I've already got accrued - My forecast accrual for the next 4 years averages out at c.£800 pa. If we assume I do not seek further progression and continue to work until 60, then my annual pension would be £800*27 = c. £21.5k. Add the state pension of c. 8K at 68 and I think I'll be more than comfortable.

3. Bridging the gap between 'retiring' and pension provision - If retiring at 60 with mortgage paid, and allowing some for property maintenance/improvements, I would need in the region of 12k per year to comfortably maintain my current standard of living - so around £60k to keep me going for the 5 years between age 60 and 65.

The most efficient return for me is probably the LISA - given the guaranteed 25% bonus when paying out at 60 and tax free status. I've got 17 more years that I can pay into a LISA and get the 25% bonus - to have £60k at 60 I need to pay in the max amount for at least 12 years between now and then. Hedging against future increases in the schemes retirement age, if I max my LISA every year until I'm 60, I'll have £85k as a buffer - around 7 years forecast income needs.

I currently save in the region of £800pm towards my deposit and currently max my LISA contributions each year with no difficulty so do not anticipate any problems meeting this commitment.

4. The wild cards - The above all ignores interest and inflation. My alpha pension is index linked and so, theoretically, inflation proof. The state pension is determined by the Government and it's possible it'll be means tested by the time I'm eligible so I'm not relying on it. Tax rates are also subject to fluctuation and can't be forecast 25 years in advance.

5. Additional saving - Currently, any additional monies I have left at the end of the month are split equally between an ISA and a SIPP, both invested in a global fund. The money currently in ISAs will be used towards my eventual deposit, with future money being added to the SIPP, which will form part of my bridging money for early retirement. The rate of these savings will increase once I'm no longer paying towards a deposit - my future LISA will also be invested in S&S as a long term investment to protect against inflation.


The above has all been an interesting back of an envelope view of the next 25 years - any views and comments, and conversations about dodgy maths, welcomed.

crv1963

Hi NewShadow- sounds good but, I'd throw in another wildcard- long term partner/ spouse. You never know what they might want. Good luck you sound like you have a good plan.

lisyloo

MallyGirl wrote: »

I am aiming for something near £2m between us as a couple across DC pensions and ISAs. No DB pensions for either of us. That is at 60. This gives us what I think we need plus what we want to be able to enjoy some travel and leisure time.

Like michaels I value the time off when we’re healthy more than the money so looking at £1.7m and 55 but even over a 5 year period it does depend on health.
If we’re both healthy and I’m enjoying work i might carry on a bit longer.
DH retires before me so if he’s having a ball that will also affect my choice, but the opposite might happen.