How much to live on

DT2001

Datchet said:

Very interesting and informative thread - thanks all! I’m 58, in good health and have a good job… but I am desperate to retire! I’m a late starter and have teenagers who may or may not want to go to college / university if They do, it would seriously deplete our savings. We want to downsize & move away. I’m not sure how little we can get by on and I think have been avoiding the inevitable decision. We love our holidays too.how much is enough? 

Uni does not need to seriously deplete your savings. Our DD did her degree in France so no student loans but minimal tuition fees. she swapped babysitting for accommodation so required some assistance but took Summer jobs. One of our sons started a year after we added a larger sum to OH’s pension which reduced our income for student loan purposes so he received the maximum for his 1st year. Our youngest is looking at a sponsored degree. So maybe an option to go earlier than you thought.

[Deleted User]

cjulien said:

I don’t know if anyone shared the link but there has been good research on this at https://www.retirementlivingstandards.org.uk/

Many thanks for the link. As with so many of these publications they can only ever act as a guide to possible numbers. Everything will depend on personal choices, lifestyles and priorities.
There are many examples in this thread of single people and couples enjoying a wide range of activities and lifestyles on less than suggested amounts for the various minimums.
Budgeting as well as income is key.
Furthermore in some of these guides not every category of spending is needed by everyone. For example I do not need to budget for alcohol or tobacco. I also seem to have lower insurances than those suggested. It is all very individual indeed.
However, as a single person I would find it difficult to manage on say £12000 a year in 2023. Looking at my current spending I would need a minimum of £15000 before tax. However I would probably only be able to go on one shortish holiday a year. Of course I could dip into savings which in my view are there for use in retirement!
Alternatively I could move to a smaller house and probably be fine on that income.
Fortunately my pension income is adequate to meet my needs and will be more so when state pension kicks in from July 2024.

Albermarle

Looking at my current spending I would need a minimum of £15000 before tax. However I would probably only be able to go on one shortish holiday a year. Of course I could dip into savings which in my view are there for use in retirement!

I think another way  to estimate spending long term is to include an annual figure for everything. e.g.

Daily spending  £14K pa

Holidays £3k pa

Large irregular expenditures, such as new boiler, major house maintenance, new car etc. Average spread over a number of years £3k pa 

So £20K pa before tax on average, although it will probably vary +/- 10% each year . If it was lower one year you keep that money back for another year when it is higher.

This is more the way that a company would do its budgeting.

Kim1965

jackieblack said:

Good morning all - am de-lurking as I’m just beginning the process of trying to work out the earliest I can feasibly retire. 

I work in a school and have been in the LGPS for 20 years+. My hours have varied hugely over that time but until recently been term time only so ‘pro rata’-ing has impacted hugely. Their website has a thing where you can enter the age you want to retire and get an indication of likely pension but I have to confess that I find the pension stuff very confusing. 

I would love to retire in the next 3-5 years (age 58-60) downsize my home and move closer to my daughter and granddaughter, but elderly parents with various health issues are currently 10 minutes up the road and moving away while they still rely on me would be extremely difficult, to say the least (even though sibling moved away years ago and the sun apparently shines out of him 🙄)

One good thing, I think, is that because I’ve never had a very good, or even ‘average’, income I know I can manage quite well on what some people would consider very little money. Of course that means that there’s little ‘wriggle room’ so I’m conscious that I need to be very very certain before making any rash decisions, but have to confess that there are days when I could happily throw my hands in the air and just walk away - unfortunately a luxury I can’t afford…

I think the first thing to do is make a very detalied asessment of your core spending, dds, food, car etc at retirement. Until you know how much you spend its difficult to know whether your pension is enough. 

blue.peter

Albermarle said:

So £20K pa before tax on average, although it will probably vary +/- 10% each year . If it was lower one year you keep that money back for another year when it is higher.

Ummm... "before tax"? If I'm budgeting stuff like this, I calculate the amount that I actually expect to spend, which would be the required amount after tax. I'd need to be paid more than that to have that amount available to spend.

Taking your example annual budget of £20,000, the gross requirement would be:

Personal allowance (tax free) = £12,570

Balance (to allow for 20% tax) = (£20,000 - £12,570) / 0.8 = £9,287.50

...which gives a gross total requirement of £21,857.50.

(In case anyone's not already aware, NI contributions aren't payable on pensions.)

jackieblack

[Deleted User] said:

Welcome to the thread jackieblack! Looking forward to hearing more. If you wish to share finances and future pension information I am sure the good people on here will offer lots of thoughts and ideas.
You are quite right to say that you can have an enjoyable and purposeful retirement without having ‘loads of money’. It is all about personal preferences and priorities.

Thanks for the welcome
This thread seems very friendly (and much less intimidating than some of the others 😟)  

jackieblack

Albermarle said:

Their website has a thing where you can enter the age you want to retire and get an indication of likely pension but I have to confess that I find the pension stuff very confusing. 

On this specific point, it could be worthwhile asking the question on the pensions forum, where there are regular posters familiar with the LGPS scheme.

If you want more feedback generally, you would need to post more details about your situation. Such as is the mortgage paid? What amount do you hope to achieve by downsizing? Any savings etc.

Also have you checked that you will get a full state pension?

Thanks for the suggestion, I might well do that (when I’m feeling a bit braver 😟)

Small mortgage still outstanding (less than £15k) - it should have been paid off by now but I had to extend the term in order to take the mortgage over in my sole name when I got divorced). Monthly payment is currently just under £100 a month on a fixed rate which finishes next Jan. I have been putting overpayments aside with a view to either paying off early, moving expenses or putting towards some necessary renovations if I end up staying here, although I need a new boiler so this will be somewhat depleted this year. Depending on what happens with interest rates I might need to pay a lump off when fixed rate ends to keep the payments affordable.

I have no clue about current value of the house.  I’ve lived here (smallish development built in 1960s) 23 years and houses very rarely change hands - in my road of 12 houses only 2 have changed hands in that time - also this is now the only house on the development that hasn’t been extended so nothing sold is similar enough for comparison.  The area my daughter lives in has seen huge rises in house prices in the last couple of years and there is a lot of second home ownership so downsizing may not release much, if anything, unfortunately. 

My state pension forecast is £203.85 a week and it says that I cannot improve this any more. (This is roughly equal to the monthly income I had when my marriage ended, but the cost of almost everything has increased significantly since then!) 

jackieblack

Kim1965 said:

jackieblack said:

Good morning all - am de-lurking as I’m just beginning the process of trying to work out the earliest I can feasibly retire. 

I work in a school and have been in the LGPS for 20 years+. My hours have varied hugely over that time but until recently been term time only so ‘pro rata’-ing has impacted hugely. Their website has a thing where you can enter the age you want to retire and get an indication of likely pension but I have to confess that I find the pension stuff very confusing. 

I would love to retire in the next 3-5 years (age 58-60) downsize my home and move closer to my daughter and granddaughter, but elderly parents with various health issues are currently 10 minutes up the road and moving away while they still rely on me would be extremely difficult, to say the least (even though sibling moved away years ago and the sun apparently shines out of him 🙄)

One good thing, I think, is that because I’ve never had a very good, or even ‘average’, income I know I can manage quite well on what some people would consider very little money. Of course that means that there’s little ‘wriggle room’ so I’m conscious that I need to be very very certain before making any rash decisions, but have to confess that there are days when I could happily throw my hands in the air and just walk away - unfortunately a luxury I can’t afford…

I think the first thing to do is make a very detalied asessment of your core spending, dds, food, car etc at retirement. Until you know how much you spend its difficult to know whether your pension is enough. 

Yes, I did this at the start of the year but everything has increased since then so needs redoing. 

[Deleted User]

jackieblack so with a full state pension you will have an index linked £10636 a year.(From your state pension age)

You need to find out what your other pensions such as your LGPS pension will give you at different ages from say 60.

Also as part of your divorce settlement was there any agreement about pension provision with your ex?

I would also double check that your state pension is definitely £203.85 a week. Its just that you say you have been in the LGPS pension scheme for over 20 years and you may have been opted out for this time. However, if you had NI contributions before that time and after 2015 you may well (as you have said) already qualify for the full amount.

It would also be useful to get an approximate value for your house to help with forward planning.

Do you have an emergency fund and any others savings?

What are your approximate yearly outgoings? Do you manage on your current income? 

Perhaps look at different spending/income possibilities from 58 onwards?

Lots of questions and lots to think about. However, planning for the future can also be fun and exciting too!

Albermarle

blue.peter said:

Albermarle said:

So £20K pa before tax on average, although it will probably vary +/- 10% each year . If it was lower one year you keep that money back for another year when it is higher.

Ummm... "before tax"? If I'm budgeting stuff like this, I calculate the amount that I actually expect to spend, which would be the required amount after tax. I'd need to be paid more than that to have that amount available to spend.

Taking your example annual budget of £20,000, the gross requirement would be:

Personal allowance (tax free) = £12,570

Balance (to allow for 20% tax) = (£20,000 - £12,570) / 0.8 = £9,287.50

...which gives a gross total requirement of £21,857.50.

(In case anyone's not already aware, NI contributions aren't payable on pensions.)

You are right of course. I meant after tax.