Wider application of retirement living standards

fred246

I was reading the retirement living standards wondering what it all means. I realised that even though I was a high earner we probably never spent more than £30k a year. With the extra we paid off the mortgage and then invested and voila early retirement. So if a couple earned £40k each a year they would take home £60k. If they limited their spend to £30k early retirement is easy.

Notepad_Phil

Or as Mr Micawber would nowadays say "Annual income twenty pounds, annual expenditure nineteen pounds nineteen and six, result early retirement. Annual income twenty pounds, annual expenditure twenty pounds ought and six, result state pension at state retirement age"   

I guess Mr Dickens may have been the first FIRE adherent.

Prism

I would say kids and the number of them have the most impact on how early you can retire. Bigger house, bigger car, more expensive holidays, clothes, uni costs etc
As a couple we spend significantly more than 30k per year.

fred246

When I was in my late forties I was desperate for the sort of information provided by the retirement living standards. The more I read them the more I realise they are actually aimed at young people. They expose the flaws in defined contribution pensions. They are saying "how much do you want in retirement?" without saying how much needs to be saved. Of course nobody knows the answer.

MovingForwards

I haven't read them, but even doing pension calculators it's based on 70% of my current income. That % would give me a high standard of living, plus holiday each year, running a car etc

What I've personally done is calculated how much my current outgoings are/ will be based on today's costs. 

I haven't included proposed mortgage costs or current rent costs, also nothing for commuting as these won't be needed in retirement.

Worked out how much I can save between buying a home and retiring, across all platforms eg cash, ISA, S&S, PB, pensions and additional private pension. That gave me decent pension pots and savings, in today's money.

The worked backwards to see how much I need to put away each month between now and retirement.

I'm one of the lucky ones whereby if I only had the full state pension, I would still have enough to save some each month and cover my outgoings, based on today's prices.

My DB pension, proposed private pension and old pension pots are bonus money.

fred246

It's easy to carry on working much later and have more than you need. Most of my work colleagues will be in that position. Not sure why you want to be saving in retirement. It's much harder to plan what you need and retire early.

Linton

fred246 said:

When I was in my late forties I was desperate for the sort of information provided by the retirement living standards. The more I read them the more I realise they are actually aimed at young people. They expose the flaws in defined contribution pensions. They are saying "how much do you want in retirement?" without saying how much needs to be saved. Of course nobody knows the answer.

The answer isnt to shrug your shoulders and do nothing.  You know do enough to provide a basis to start saving.....

1) Make assumptions on income, inflation and investment return.

2) Decide at what age you would like to reture

3) Decide what expenditure you would like to sustain in retirement - your current expenditure should prove a reasonable first guess

4) Make a spreadsheet plan based on those assumptions to determine how much you need to save each year given your current savings

5) Revisit the plan once a year and adjust as necessary

With this approach reality and the plan will coincide when you are ready to retire.

crv1963

fred246 said:

It's easy to carry on working much later and have more than you need. Most of my work colleagues will be in that position. Not sure why you want to be saving in retirement. It's much harder to plan what you need and retire early.

I agree with you that it is easy to carry on working the "one more year" syndrome. I think that it depends on several things- personal assurance that there is enough in the pot for the desired lifestyle, a wish to ensure a spouse will be financially sound in the event of first death of the major earner, a desire to have the finances to live with more travel, a wish to not take a drop in living standards. They are my drivers for OMY.

I think it is all about working out what your personal number is, review regularly and discuss with your spouse/ partner. There is also the work area/ profession- I know that if I worked in a manual job I couldn't work OMY, I also know that the stress levels in my employment will eventually get the better of me if I don't bail out by 60. One heart attack down already, changed roles to a less stressful one.

Savings in retirement- for us save for major purchases- replacement cars, money into a SIPP the old 2880 trick to have something put by for old, old age/ care provision, save major item replacements such as kitchens/ bathrooms etc. My Mum age 81 recently decided she was fed up of her serviceable bathroom so had a new one fitted, feels her house is dated so bought new sofas, paid someone to hang the new wallpaper, did emulsion her own walls and ceilings- so never think you might not want to make major changes as you age!