Six months Emergency Savings Necessary for Pensioners?

nownewretiredin2011

I was watching Martin last night and he keeps going on about having 3 to 6 months equivalent of salary as savings for emergencies.

What about pensioners who get pensions and know what their income is for years ahead?

Even what they are going to spend?

Obviously we don't need that amount of savings.

Even if I spend all my savings, in the present climate, no holidays, no going out etc. whithin a couple of months I could have £1500 in the bank.

And as I told the kids, when I drop dead you are getting the house so you can pay for the funeral.

So I have given up saving for my old age and am now spending to increase my enjoyment of retirement.

Silvertabby

But what happens when you need a new boiler?

MaxiRobriguez

Depends on the security of your pension income. The whole point of the pot is to cover monthly outgoings if your pension income drops.

People drawing down pensions from a DC pot probably need it more than those who are in receipt of DB pensions because they don't have any guarantees of income and are reliant on the combined value of the underlying assets.

DB pensioners have a risk of the company pension fund going bang, but in that scenario having 6 months set back doesn't mean a lot because you'd still need to adapt to potentially lower income after that anyway.

MovingForwards

New boiler, new washing machine, new fridge, new cooker, the sofa suddenly decides to break, a freak incident and the front or back door decides to split open.

How will any of these get paid for? That's why an emergency fund is recommended as it's not always viable to wait and save. 

Alexland

Even if you are receiving income from a defined benefits pension scheme there could be operational interruptions to their ability to pay that income or you could have occasional unforeseen expenses that are in excess of your regular income.

In terms of paying for the funeral it is good practice (if you do not have a prepaid plan) to leave enough cash in your estate to do this as it can take time to liquidate property and you might not want to leave your family with the cashflow issue at a difficult time. Although some banks may not release money until probate has been granted in practice they will often agree to pay the funeral directors directly in advance of probate. So you could think of the cash buffer as a combined emergency/funeral pot but just remember not to die after depleting the pot for an emergency unless you are happy to be folded up and buried inside the old boiler.

Sailtheworld

MovingForwards said:

New boiler, new washing machine, new fridge, new cooker, the sofa suddenly decides to break, a freak incident and the front or back door decides to split open.

How will any of these get paid for? That's why an emergency fund is recommended as it's not always viable to wait and save. 

Those aren't emergencies as I see them. They're known future expenditure so either stick them on a credit card and pay it off out of future income or run a float to smooth income vs outgoings.

The reason the OP is so sanguine is because they've probably been blessed with a life devoid of emergencies. I would've thought retired people with fewer opportunities to increase income would want to hold a bigger emergency fund than a working person. 6 months salary seems a bit OTT though.

Stubod

..I don't think an "emergency fund" is applicable to pensioners who "should" be on guaranteed income.

It is aimed at those people who do not have a guaranteed income that may suddenly lose their job and go to virtually no income.

If you are retired / on a regular pension then I would assume you only need to keep a sufficient emergency fund to cater for the unexpected major expense...eg as per above, boiler / car repair etc.....possibly around £4/5k if you an afford it.?

ctdctd

My dog decided to take up pole dancing.

He's fine now, but required a couple of operations, a few nights at the Vet and some follow up visits.

£5K on the credit card - paid off within the 56 day interest free period from emergency funds - that's why you have them!

Eco_Miser

nownewretiredin2011 said:

I was watching Martin last night and he keeps going on about having 3 to 6 months equivalent of salary as savings for emergencies.

I don't think he said that - he said "expenses", which are generally less than salary.

nownewretiredin2011 said:

What about pensioners who get pensions and know what their income is for years ahead?

Even what they are going to spend?

I thought I knew what I was going to spend this summer, but then I spent a load more and was grateful that my emergency fund meant nothing much changed financially, no borrowing, just a lower balance.

nownewretiredin2011 said:

Obviously we don't need that amount of savings.

Even if I spend all my savings, in the present climate, no holidays, no going out etc. whithin a couple of months I could have £1500 in the bank.

That's now, hopefully next year will be different and we can spend, spend, spend!

nownewretiredin2011 said:

And as I told the kids, when I drop dead you are getting the house so you can pay for the funeral.

So I have given up saving for my old age and am now spending to increase my enjoyment of retirement.

I gave up saving for my old age when I was 58, I still keep a nice big cash float. It's a combined emergency fund, enjoy myself fund, and proxy for bonds that pays more, but won't increase in capital value as equities sink.

Aretnap

"3-6 months" as a recommendation is probably more applicable to people who might lose their job and be without an income for, say, 3-6 months. 

If you have a steady guaranteed income (like a pension) then it is probably less useful to think in terms of a number of months and more in terms of an absolute number. What sort of expenses might crop up and need dealing with quickly - boiler packing in, leaky roof, major repairs to car etc? Work out what you might reasonably have to spend on something like at short notice and there's a good size for an emergency fund. 

MisterMotivated

Sailtheworld said:

MovingForwards said:

New boiler, new washing machine, new fridge, new cooker, the sofa suddenly decides to break, a freak incident and the front or back door decides to split open.

How will any of these get paid for? That's why an emergency fund is recommended as it's not always viable to wait and save. 

Those aren't emergencies as I see them. They're known future expenditure so either stick them on a credit card and pay it off out of future income or run a float to smooth income vs outgoings.

They could be if one (or more) of those items suddenly packs in completely.  I suppose you could live with no heating/hotwater, with microwave dinners, non-refrigerated food/milk/etc, smelly clothes and dirty undies for a few months, but many people would consider these circumstances as legitimate emergencies.

Also, my pensioner dad's car was written off last year and the insurance company valued it about £2k less than the same model/age/spec was selling for at the time.  He argued the case but they wouldn't budge, so he had to make up the difference when buying a new car.