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

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  • Sea_ShellSea_Shell Forumite
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    Yes, sorry for going off topic Sea Shell.

    One question I was meaning to ask, apologies if you’ve already stated this, is what differences have you accounted for within your budget from your squirrelling phase to your retirement phase?

    Interested as some folks report lower spending due to costs of commute etc whilst others budget for increases to hobbies with having more free time.

    To be honest I think the two will balance each other out. Our hobbies are mainly outdoorsy, walking/hiking, sightseeing etc. We do plan to buy a National Trust membership. Our petrol costs will go up a bit, but again mostly offset my no more commuting. And to be fair, we're not going to be out and about every day, probably once a fortnight for specific day trips and once a month for longer (approx 7 months of the year) Mainly UK short breaks. Unless in rains all year and we'll stay put!!!!

    It's all a bit suck it and see !!!! - who want's to plan life to the minute detail anyway. We'll do what feels right, and see where that takes us.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow ":beer: JOB DONE!!
    This should now read "It's time to start digging up those Squirrelled Nuts"!!! :j:j:j
  • Sea_ShellSea_Shell Forumite
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    DairyQueen wrote: »
    The big differentiator was the realisation that we had been modelling income including taking only the natural yield from our investments. When we realised that we aimed to deplete the capital (doh) then we entered a different income league.

    Anyone else in this happy, if unexpected, situation?

    This is where we hope to be. We have no reason NOT to deplete the capital, BUT, we've been working to the model of what natural yield our pot might generate, and it only needs to consistently give 4%, to give us £20k. However, if we decided to run the pot into the ground, then blimey, we could blow through £40k pa for 12 years, and then plead poverty!!!

    This is, of course, that we don't suddenly go through a major crash, and lose a substantial chunk of that overnight!! (It'll happen the day after I finish work you know - be warned!)

    Our rough plan is this...

    next 2 years spending cash - £30k
    Capital expenditure / Emergency cash - £70,000 (to be drawn on in a downturn)
    £436k @ 60% ave. exposure to Equities = £261k, which if it lost 50% value, would reduce that part of the pot by £130k = £306,000, of which 4% of that still gives £14,500.

    Also, we're the sort that if we did go though a major equity crash, we WOULD rain in our spending, we are just not the type to just blindly carry on spending in those circumstances, 4% "rule" or not!!
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow ":beer: JOB DONE!!
    This should now read "It's time to start digging up those Squirrelled Nuts"!!! :j:j:j
  • jimi_manjimi_man Forumite
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    I'm interested in this. How do you deal with, psychologically, the process of decumulation? I think from a personal point of view, this is something that I would struggle with and the whole concept of draining funds and thus gradually reducing wealth, I'd find quite scary. My retirement plan (virtually all DB based) still has a proportion of saving built in and once the state pensions kick in we'll have more than we need and will save a fair amount.
  • Anonymous101Anonymous101 Forumite
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    Sea_Shell wrote: »
    To be honest I think the two will balance each other out. Our hobbies are mainly outdoorsy, walking/hiking, sightseeing etc. We do plan to buy a National Trust membership. Our petrol costs will go up a bit, but again mostly offset my no more commuting. And to be fair, we're not going to be out and about every day, probably once a fortnight for specific day trips and once a month for longer (approx 7 months of the year) Mainly UK short breaks. Unless in rains all year and we'll stay put!!!!

    It's all a bit suck it and see !!!! - who want's to plan life to the minute detail anyway. We'll do what feels right, and see where that takes us.



    I agree its totally "suck it and see" and planning life out to the N'th degree would be very boring. For me its just an estimate, if you know you've got an expensive hobby that you'll be doing more of then its wise to budget accordingly. Likewise if you plan on doing a lot of travelling etc. Although in retirement there are a lot of angles you can work to reduce the cost.
    A National Trust membership would certainly be on my list... very good value.
  • cloud_dogcloud_dog Forumite
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    Hi Sea Shell

    I can't remember but how much of your income will be from investments, or what percentage will be from guaranteed sources (FS/SP), pre SPa and post SPA?
    Sea_Shell wrote: »
    Capital expenditure / Emergency cash - £70,000 (to be drawn on in a downturn)
    What are your plans regarding your £70k emergency pot? Are you going to have X% always available and then the rest in a savings ladder?

    I am always interested in the conversations of how people will manage their decumulation but feel there needs some context of any guaranteed income; which can greatly alter how you manage/treat investments /cash.
    Personal Responsibility - Sad but True :D

    Sometimes.... I am like a dog with a bone
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  • Suffolk_lassSuffolk_lass Forumite
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    Audaxer wrote: »
    Yes, it easily mounts up. When I looked at you food bill for the month at £300, including a meal out, that seemed low compared to our supermarket spend, which is usually over £400 but then realised ours includes non-food items like toilet rolls, kitchen rolls, shower gel, deodorant, various cleaning products etc. Have you accounted for these sort of things somewhere else?

    On my spend spreadsheet I also have a column for Cash withdrawn. That is less than it used to be when I was working, but we still need to withdraw cash a few times a month so it counts as part of our monthly spend.

    Audaxer, if you want some tips on reducing that housekeeping bill, you could check out the Old-style Moneysaving part of the Forum.

    I first started when our overall spending housekeeping hit £700 per month over a three month period. Over the next several years my housekeeping budget has reduced every year and is now £3000 per annum. As you suggest, this includes all the store-cupboard items, toiletries and cleaning products, and all the pet supplies I buy (my other half occasionally buys cat litter somewhere else and it goes into his credit card spending) - I work on £200 per month plus a stores budget (£400) and a doubling to £400 for December. With a bit of extra effort I have not paid full price for any of the non-perishables you list for at least five years, and buy a few when they are on offer to maintain my stash and brands I love. Conversely I have used up the Bogoff (no pun intented) supplies of toilet rolls (and other stuff) I had when I started, TR numbered close to 100 - rolls, not packs :o:)

    As Sea Shell knows, it is about both sides of the equation - save well, spend well

    Save £12k in 2020 - #20 £5,010.84/£5k 100.22% after September
    OS Grocery Challenge 2020 target £2,230.32/£3k 74.34% so far at end of Sep
    Mortgage Free Wannabes 2020 #37 - exceeded our £15,000 target and paid the whole thing off
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  • DairyQueenDairyQueen Forumite
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    Audaxer wrote: »
    Wow, that's quite a jump. Is that achievable because you have DB pensions to cover your essential spend? With good DB pensions and State Pensions added on when received, that's the only way I can think of when you can be comfortable running down capital completely without the risk of leaving yourself short in later years.
    You hit the nail on the head. However, happenstance has worked in our favour. Pension freedoms, the nSP, and the opportunity to transfer-out of my DB, all worked to our benefit.

    Having said that, the biggest impact on our projected retirement income is the result of an unforeseen change in our circumstances. We met and married in later life and joining finances accounts for the big jump. Two can live cheaper than one. Married couples have methods of optimising tax across their savings and income that aren't available to singles. Our income and savings will stretch further now they are shared.

    This wasn't a carefully crafted plan but demonstrates the benefit of each individual accumulating sufficient pension savings to cover their own basic living expenses regardless of whether they are one of a couple.

    It is also an example of how sacrificing standard of living when working benefits retirement. You become used to enjoying life without spending loads of cash. You lose the need to impress via consumption. It makes for a less complicated and cheaper lifestyle.

    seashell has used the same strategy but I am amazed at how she and OH live so well on £12k-£15k p.a. It would be do-able for me as a single but OH's spending would never reach such an exemplary level. He has definitely improved since marrying me :)
    Audaxer wrote: »
    I'd love to know your strategy. To achieve that level of income have you gone for a very high equity percentage, and is your drawdown strategy a certain percentage every year increasing by inflation, or only drawing income in good years with a cash buffer for poor years?
    OH and I shared the same strategy before we met - i.e. we were each aiming for guaranteed income that would cover all of our projected, non-discretionary expenses in retirement. We were each prepared to reduce our standard of living if necessary to ensure that primary aim was met. Had there been insufficient SP/DB, despite reducing expenses to the bone in retirement, then we would have purchased annuities sufficient to plug that gap before considering drawdown despite the lousy rates. It was worth the peace of mind.

    This level of income has been achieved by a combination of factors.

    Firstly, we max'ed-out any sources of guaranteed income:
    - We have deferred OH's DB for three years. This has increased his DB income by 20%.
    - OH will work an extra two years beyond his scheme NRA to max-out his SP. This also enables us to stash more cash for later drawdown/bridge to SP.
    - I paid sufficient voluntary contributions to receive the max SP.

    We will never increase our basic expenses beyond guaranteed income order to hedge against first death, sequence of returns risk and changes in the political climate (e.g., dare I say, a Corbyn government?).

    Secondly, we used tax-efficient vehicles to increase the amount available for drawdown, especially SIPPs:
    - OH paid HRT so his pension was stuffed with our cash savings (bolstered by unused previous year allowances).
    - I am a non-earner so each year we have transferred the max £2880 net into my SIPP. We will continue to do this until I reach 75.
    - I transferred-out of my DB after receiving a positive recommendation.
    - We use ISAs and also seek-out the best returns for unwrapped cash.

    This squirrelling has come at a cost. OH drives a 10-year-old car. Mine is now 7 years old. Nothing flash. We own two, modest homes to facilitate OH working whilst I continue to support elderly parents. We have taken only one longish holiday overseas since we married 5 years ago. We have depleted our unwrapped cash reserves. We have foregone £5k of guaranteed income (but mostly non-indexed once in payment).

    However, in those 5 years our portfolio (ex property equity) has increased from £300k to £700k. The markets have been kind - so far. Happenstance again but the markets could crash at any point.

    We intend to take the max TFC and then drawdown at a flexible rate. This will be determined by striking a balance between prudence and desire. We will hold sufficient cash in reserve to provide an additional index-linked £9k p.a. income for three years in addition to emergency cash. This will allow us to suspend drawdown completely should the markets crunch in a big way whilst still maintaining a higher standard of living.

    In normal times, and when all guaranteed income is in payment, we will drawdown at a rate of 2-2.5%. Prior to that (whilst bridging to DB/SP), and In good market years thereafter, we will increase the percentage relative to our needs and wants.

    We have divided and allocated the portfolio around three investment periods:
    Access in < 5 years = All cash.
    Access in 5-10 years = 60/40 Equities/Fixed Interest
    Access >10 years = 95/5 Equities/Fixed Interest (although I am querying the wisdom of that 5% given that it will hardly dampen volatility).
  • Sea_ShellSea_Shell Forumite
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    jimi_man wrote: »
    I'm interested in this. How do you deal with, psychologically, the process of decumulation? I think from a personal point of view, this is something that I would struggle with and the whole concept of draining funds and thus gradually reducing wealth, I'd find quite scary. My retirement plan (virtually all DB based) still has a proportion of saving built in and once the state pensions kick in we'll have more than we need and will save a fair amount.

    Good question! Ask me again in a year's time.

    It's going to feel very different, that's for sure. All those years watching the pot grow and now...???

    I think we're ready....but I might hyperventilate and have a full on panic and ask for my old job back.

    For us it does help that I've only been bringing in £750 pm for the last 2 years, so it's not like I'm walking away from a £3000pm salary!!

    I'll keep this thread updated with the emotional, not just hard figures, too.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow ":beer: JOB DONE!!
    This should now read "It's time to start digging up those Squirrelled Nuts"!!! :j:j:j
  • Sea_ShellSea_Shell Forumite
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    cloud_dog wrote: »
    Hi Sea Shell

    I can't remember but how much of your income will be from investments, or what percentage will be from guaranteed sources (FS/SP), pre SPa and post SPA?

    What are your plans regarding your £70k emergency pot? Are you going to have X% always available and then the rest in a savings ladder?

    I am always interested in the conversations of how people will manage their decumulation but feel there needs some context of any guaranteed income; which can greatly alter how you manage/treat investments /cash.

    DH will get 2 DB Final Salary pensions (combined) of approx. £8300 in todays money (pension is indexed), in late 2031 (65). We'll both, eventually, get SP's too, but not until 2033 and 2039 (67) ?? We're both a bit short, but currently at approx. £7000 pa (we'll probably make them up much nearer the time.) So in about 20 years time we'll have £22,300 pa in todays money.

    So one could argue that we only need to fund those 20 years, out of our own total pot of £536,000.

    Our £70k emergency/contingency fund, we'll probably keep at a similar level, maybe a little less, as time goes on, and we see where we're at. But we want at least 4 times annual living expenses, so anywhere between £50-£70k feels about right, with some capital expenditure wiggle room in there too. Probably about £10-20k of that as instant access cash.

    For the far future, our MF house is worth approx. £360k, so there's always the option to downsize eventually.

    Hope that answers your questions.
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow ":beer: JOB DONE!!
    This should now read "It's time to start digging up those Squirrelled Nuts"!!! :j:j:j
  • Sea_ShellSea_Shell Forumite
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    DairyQueen wrote: »
    It is also an example of how sacrificing standard of living when working benefits retirement. You become used to enjoying life without spending loads of cash. You lose the need to impress via consumption. It makes for a less complicated and cheaper lifestyle.

    seashell has used the same strategy but I am amazed at how she and OH live so well on £12k-£15k p.a. It would be do-able for me as a single but OH's spending would never reach such an exemplary level. He has definitely improved since marrying me :)

    Luckily neither of us are really spenders. We don't have a taste for the high-life and have never been bothered about what others are doing, or what they have. We enjoy the simple things, like an 8 mile walk in the countryside, with our sandwiches and a flask of (shock horror) instant coffee!!!!

    Rather than eat out, we'd rather have a nice meal and a bottle of wine at home, in the peace and quiet!!!

    I guess, because we didn't have children, we did lots of the things that people say they're going to do "in retirement" whilst we were working. We sometimes had 3 foreign holidays a year. We've been to numerous gigs, shows and festivals. Although our spends back then were more than now, we still saved hard, but I bet we still didn't spend more than £20k.

    There are a few things left on our "bucket list", but nothing too radical. In the short term DH is just going to be glad of a hand with the jobs round the house!!! I may even have to start doing the ironing again!!!! :eek:

    9 working days to go!!!
    " That pound I saved yesterday, is a pound I don't have to earn tomorrow ":beer: JOB DONE!!
    This should now read "It's time to start digging up those Squirrelled Nuts"!!! :j:j:j
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