It's time to start digging up those Squirrelled Nuts!!!!

RetSol

FWIW, and sorry if this is off-topic but it feels like it may not be, I took my civil service pension early in April and have some investment income on top.  I am 55, own my home and can also look forward to a full state pension at 67.  I have been tinkering with my investments over the last 12 months and think that I now have an allocation which I am happy with.  Just need to implement by shifting a few things around.  However, these are uncertain times and even though the bulk of my income comes from a civil service pension which covers my basic living expenses I find myself being anxious about the future and, if anything, more inclined to bury my squirreled nuts than spend them.  Atm, maybe that's not such a bad thing.  It doesn't seem like the right time to book a world cruise... even if I could afford one.  However., there is a danger for me that I will spend less than I can afford to the detriment of my taking advantage of my early "retirement".  It is difficult, I find, to get the balance right.  

michaels

Economic theory says that if everyone spends less and saves more because they are worried about economic uncertainty ahead they will produce the very recession that they were worried about - a sort of self fulfilling prophecy. (My spending on a hair cut is the barber's income so if I don't spend it he doesn't earn it and is then not able to spend it on other services that eventually circle back to demand for whatever it is I do).  Thus it may be best if those who can safely afford to spend actually do so or we end up with a worse recession where we all suffer as the govt tax take falls so taxes rise and spending on the NHS falls.

Keynes called it the paradox of thrift

Sea_Shell

savingmore said:

Sea_Shell said:

IT'S BEEN 1 YEAR!!!!     Since I finished work. 

Wow, that's gone quick. 
Achieved bu**er all in that time, mind you.
2020 so far has been a year to forget.
Financially, we are almost exactly where we were last year, growth of pot = spends from pot.
We shall muddle through the remainder of this year, as allowed, and hope that 2021 will be better.

congratulations on your anniversary.   we are considering jumping three years before we intended to retire but would need to self fund.  when you say your pot is same and spending equals gains, have you had any other source of income  or just your savings/investments?  trying to work out if our new plan is doable....thanks for any thoughts on this.   

No other sources of income, unless you include the odd £5 here and there for doing surveys, cashback or selling bits on FB, so yes, that's just counting the overall growth of the "pot".     It includes Interest on cash (reducing every day!!), and the current values of ISA's/Pensions.    Just looked and we have "earned" £160 from the above activities so far this year.

We're currently spending down our cash, and not touching our investments, as we also have a Fixed Term Bond (2.2%) due to mature in Sept 2021, at which point DH can start to draw from his DC pensions, and we will make another decision as to how much of that cash to keep as cash (possibly Premium Bonds, if interest rates are below 1%) and how much to invest at that time.

DairyQueen

RetSol said:

FWIW, and sorry if this is off-topic but it feels like it may not be, I took my civil service pension early in April and have some investment income on top.  I am 55, own my home and can also look forward to a full state pension at 67.  I have been tinkering with my investments over the last 12 months and think that I now have an allocation which I am happy with.  Just need to implement by shifting a few things around.  However, these are uncertain times and even though the bulk of my income comes from a civil service pension which covers my basic living expenses I find myself being anxious about the future and, if anything, more inclined to bury my squirreled nuts than spend them.  Atm, maybe that's not such a bad thing.  It doesn't seem like the right time to book a world cruise... even if I could afford one.  However., there is a danger for me that I will spend less than I can afford to the detriment of my taking advantage of my early "retirement".  It is difficult, I find, to get the balance right.  

You are not alone. After a lifetime of squirrelling, many new retirees struggle with the concept of deaccumulation. This is a psychological barrier to spending at the best of times but retiring concurrent with a black swan is enough to give even the most robustly-financed the heebie-jeebies (technical term).

As michaels suggests, continuing to spend within our budgets is a good thing for us and for the economy. We may not be economically-active in the conventional sense (work) but the 'grey-pound' (hate that term) is economic fuel. Our spending creates jobs and provides tax revenue that benefits UK plc and supports working-age generations. 

Go with the probabilities....
- this economic hiccup will pass
- you will live to a ripe, old age
- you will not outlive your assets.

Enjoy your early retirement as planned. Your time on this earth is finite.

Stubod

RetSol said:

FWIW, and sorry if this is off-topic but it feels like it may not be, I took my civil service pension early in April and have some investment income on top.  I am 55, own my home and can also look forward to a full state pension at 67.  I have been tinkering with my investments over the last 12 months and think that I now have an allocation which I am happy with.  Just need to implement by shifting a few things around.  However, these are uncertain times and even though the bulk of my income comes from a civil service pension which covers my basic living expenses I find myself being anxious about the future and, if anything, more inclined to bury my squirreled nuts than spend them.  Atm, maybe that's not such a bad thing.  It doesn't seem like the right time to book a world cruise... even if I could afford one.  However., there is a danger for me that I will spend less than I can afford to the detriment of my taking advantage of my early "retirement".  It is difficult, I find, to get the balance right.  

This is not an uncommon problem, we are in the same boat, a lifetime of no debt (mortgage paid off early), and always educated by parents to save save save and it's a difficult habit to break as our brains are now hard wired into savings mode!

The key thing is to set a realistic spending budget and then spend what you have planned.

Mind you we have been retired for 3 years now and according to our income/expenditure budget we should be about £60k down from our retirement starting point (some pensions don't start for another year or two so we planned to live off savings), but we are actually showing a small increase in overall funds available.....so I can't even follow my own advice!

When you find out how to spend it please let me know...

bigfer

michaels said:

Economic theory says that if everyone spends less and saves more because they are worried about economic uncertainty ahead they will produce the very recession that they were worried about - a sort of self fulfilling prophecy. (My spending on a hair cut is the barber's income so if I don't spend it he doesn't earn it and is then not able to spend it on other services that eventually circle back to demand for whatever it is I do).  Thus it may be best if those who can safely afford to spend actually do so or we end up with a worse recession where we all suffer as the govt tax take falls so taxes rise and spending on the NHS falls.

Keynes called it the paradox of thrift

Running out of money is optional. Running out of time is mandatory. 

Bravepants

Retsol, do you have a monthly budget, which you might have perhaps recorded in a spreadsheet? Also, do you have another spreadsheet that shows your total monthly income after tax, including from your CS pension, and perhaps 3 to 4 % (the Safe Withdrawal Rate) equivalent annual drawdown from your investments?

For my retirement planning I have such a spreadsheet that lists my age from age 55 up to about 90 or so, against a projected monthly income for each year. I include all pensions from the year I expect them to kick in, and uprate each total income amount by inflation (I assume 2% as that's the Government target). In this way I've created a road map of income and I can balance that against my needs and my discretionary spending. I can also look at various scenarios, for examples, suppose I don't draw anything from my ISA, thus reducing monthly income, but perhaps saving the capital and letting it grow for big purchases? Or perhaps drawing from my ISA allows me to save more cash towards holidays?

If you haven't already, it really helps to write things down and actually see it all projected forward as an aid to thinking and planning. .

Sea_Shell

Bravepants said:

Retsol, do you have a monthly budget, which you might have perhaps recorded in a spreadsheet? Also, do you have another spreadsheet that shows your total monthly income after tax, including from your CS pension, and perhaps 3 to 4 % (the Safe Withdrawal Rate) equivalent annual drawdown from your investments?

For my retirement planning I have such a spreadsheet that lists my age from age 55 up to about 90 or so, against a projected monthly income for each year. I include all pensions from the year I expect them to kick in, and uprate each total income amount by inflation (I assume 2% as that's the Government target). In this way I've created a road map of income and I can balance that against my needs and my discretionary spending. I can also look at various scenarios, for examples, suppose I don't draw anything from my ISA, thus reducing monthly income, but perhaps saving the capital and letting it grow for big purchases? Or perhaps drawing from my ISA allows me to save more cash towards holidays?

If you haven't already, it really helps to write things down and actually see it all projected forward as an aid to thinking and planning. .

We do something similar, with a rolling "day one".    No point worrying about what's been!

Opening pot total, predicted spends subject to inflation, predicted growth, with DB/SP income then coming into play at relevant points.

We play around with the % for growth/inflation to see what predictions it makes.

RetSol

Bravepants said:

Retsol, do you have a monthly budget, which you might have perhaps recorded in a spreadsheet? Also, do you have another spreadsheet that shows your total monthly income after tax, including from your CS pension, and perhaps 3 to 4 % (the Safe Withdrawal Rate) equivalent annual drawdown from your investments?

For my retirement planning I have such a spreadsheet that lists my age from age 55 up to about 90 or so, against a projected monthly income for each year. I include all pensions from the year I expect them to kick in, and uprate each total income amount by inflation (I assume 2% as that's the Government target). In this way I've created a road map of income and I can balance that against my needs and my discretionary spending. I can also look at various scenarios, for examples, suppose I don't draw anything from my ISA, thus reducing monthly income, but perhaps saving the capital and letting it grow for big purchases? Or perhaps drawing from my ISA allows me to save more cash towards holidays?

If you haven't already, it really helps to write things down and actually see it all projected forward as an aid to thinking and planning. .

Thank you all for your responses. 
I have started keeping a monthly budget spreadsheet, along the lines which Bravepants suggests, so that I know more about where I stand.
I haven't gone as far as projecting my income up to age 99 but I might give it whirl.  Does anyone know of a template for this? 

Sea_Shell

I don't have a template as such, i just played around with Excel.

I have the following columns.

Year
Starting fund
Growth in £  (based on an adjustable % in another cell)
Fund plus growth
Estimated Spends - adjustable (linked to an adjustable inflation % each year)
Income ( nil at present and then includes DB/SP when due)
Net Balance
Number of years spends at this rate

Copy the Net balance back to the next line down as the starting fund for year 2, repeat. 
You need to play around with the formulas a bit to get them to do what you need.

It basically tells me that if i had say a starting pot of £500,000, with a 3% growth rate, that would give me growth in £ of £15,000.
If I then said I would spend £20k per year, increasing at 2% inflation, it would show i'd have £495,000 for year 2, with growth in year 2 of £14,850 and spends of £20,400.   Drag the formulas down the columns to see when (if) you run out of money!!    Using the above, shows 25 years of spending, initially, with £400,000 left after 12 years.

£166,200 of growth, to offset £266,400 of spends.  

Hope that helps.