How much to live on

Tastiger

As a teacher for 31 years, I decided I'd had enough and was going to take early retirement at 57. However, I've managed to strike a deal so will go part time instead as a step down to retirement. So I'm only going to work Mon to Wed, and am still taking my DB pension early - get less but have it for longer. With part-time wages phasing into drawing of SIPP and ISA until 67 when fully funded state pension kicks in. My wife has stopped working, no pension but will have state pension. We have no mortgage. Hoping my figures are right, as I think we as a couple will have £30k a year after tax index linked. I'm pretty sure that should see us OK for a comfortable retirement. We fancy travelling but no other expensive pastimes. Fingers crossed the maths works out.

[Deleted User]

Tastiger you will be fine!

Bobinyorkshire

Such an interesting thread. I’ve been part-time for the last 4 years and the time off has been great. It has also had the added benefit of adjusting to living on the income I’d have in retirement. Just had my part-time NHS contract extended to the end of 2024 which will help me add to my SIPP. The SIPP will get me over the line to my NHS pension at 60. I’ll be 57 next year and this seems a nice age to transition to a life not reliant on a work-based income. Thank you to all contributors, your words are both helpful and encouraging 😀

Albermarle

time2change_2 said:

I have been reading this thread with interest having been signposted here from DFW board by Baron Dale.

I'm 57 now and know that I will have a reasonable income on retirement (enough for me anyway) currently £21k in SRP (full) and occupational DB scheme which is index linked.

However, I don't want to work until 67 - I want to retire earlier and hopefully still have energy and health to do lots of things. I am currently focussed on saving enough to bridge the gap between work and pension. I'm aiming for £25k a year although looking at the amounts people live on that may be too much. So to retire at 62 I need something in the region of £100K.

As well as this thread there have been many threads ( some long like this one) on the Pensions board, about how much to live on. One thing to remember is that inflation has pushed up costs significantly in the last 18 months.
The amounts discussed varies a lot, and it depends of course on how much money you have. If we take away the extremes, the lower amount needed for an acceptable retirement seems to be for a couple - two X state pensions + other income of around £5K pa. So £25Kpa. Or to look at it another way £20K for day to day expenses and £5K from somewhere each year for holidays,  house maintenance/upgrade costs, replacement vehicles etc
For a more comfortable retirement another £10K pa helps a lot, as does another £10K on top of that, especially if you like eating out, going on holiday a lot, and having a nice car ( as examples) 
For a single person you can reduce these figures by about a third.

You should consider saving the £100K in a separate DC pension ( not the same as your occupational pension) , as you will get the benefit of tax relief that you will not get by saving in a savings account. You do not need to take any investment risk, you can keep the money in cash in the pension, or something similar to cash.
If you can withdraw it before your state and occupational pensions kick in, you will not have to pay much tax ( 25% is tax free and you will have your personal allowance of £12570) so most of the tax relief will be a straight gain. 

[Deleted User]

Albermarle. I always appreciate your informative and knowledgeable comments.
So would you say that my current planned income from July 2024 of nearly £33000 a year gross for single person will give me a comfortable retirement? I believe it is, but always good to have someone else give me the thumbs up too! 
Fortunately my occupational pension has full index linking as will my state pension (although I realise things can change).

My annuity is very small (about £675) a year and varies by a few pounds a year depending on fund performance as it is a Prudential Income Choice Annuity. To be honest I don't really include it in detailed planning but the £45 a month after tax is useful for miscellaneous spending!

To be honest I have done well out of that small fund. I only ever paid in about £5000 and then stopped. At 55 it was worth about £12000 or so. I took the 25% lump sum and bought an annuity with the remaining £10000 which has paid out about 6.5% to 6.8% yearly since then. So I have already had about £8000 back, so not too bad.
Ten years ago I did not know about MSE, but if I had, I  would probably have added more to the fund and left it a few years. However, it is what it is and hasn't worked out too badly!
Again thanks again for your comments on this thread.

Pensions_matter_2

I think Albermarle’s comments are spot on when it comes to figures. Its also good to have some spare capital funds set aside aswell for emergencies and one offs.

Albermarle

[Deleted User] said:

Albermarle. I always appreciate your informative and knowledgeable comments.
So would you say that my current planned income from July 2024 of nearly £33000 a year gross for single person will give me a comfortable retirement? I believe it is, but always good to have someone else give me the thumbs up too! 
Fortunately my occupational pension has full index linking as will my state pension (although I realise things can change).

My annuity is very small (about £675) a year and varies by a few pounds a year depending on fund performance as it is a Prudential Income Choice Annuity. To be honest I don't really include it in detailed planning but the £45 a month after tax is useful for miscellaneous spending!

To be honest I have done well out of that small fund. I only ever paid in about £5000 and then stopped. At 55 it was worth about £12000 or so. I took the 25% lump sum and bought an annuity with the remaining £10000 which has paid out about 6.5% to 6.8% yearly since then. So I have already had about £8000 back, so not too bad.
Ten years ago I did not know about MSE, but if I had, I  would probably have added more to the fund and left it a few years. However, it is what it is and hasn't worked out too badly!
Again thanks again for your comments on this thread.

Thanks for the appreciation !
You will know that there are a couple of retirement income surveys around that sometimes get linked in threads. This one in particular ( now updated with recent inflation) 
Home - PLSA - Retirement Living Standards
Some of the detailed spending figures can be argued with, but overall the figures look a good enough guideline. £33K for a single person puts you close to 'comfortable' although that definition will mean different things to different people. Some things to note with these types of figures.
1) The figures are after tax. So probably your net income will be more like £30K ? and slightly less 'comfortable' 
2) It need not all be income as such, but could be income + using up a set amount of savings each year.
3) Sometimes you see posters saying ' We only spend £20K pa ( or even less) but then later it turns out they have a separate pot for one offs like holidays, replacement car etc. Or a separate pot for travel/motoring  expenses.
 These figures include everything, with bigger expenditures, averaged out over many years. So for example if your annual expenditure is £33K but every 5 years you swop your car for a newer one at a cost of £10K, then your real annual expenditure is £35K.

[Deleted User]

I think I will be fine on nearly £2400a month after tax. With the current tax thresholds remaining constant for next ew years I will be paying about £4000 a year in tax when state pension kicks in.

blue.peter

[Deleted User] said:

Albermarle. I always appreciate your informative and knowledgeable comments.
So would you say that my current planned income from July 2024 of nearly £33000 a year gross for single person will give me a comfortable retirement? I believe it is, but always good to have someone else give me the thumbs up too! 

I'm not @Albemarle, but I hope that you don't mind me throwing in my two penn'orth here.

Whether or not any figure is sufficient for a "comfortable retirement" depends very much on what you mean by the term. For what it's worth, though, I'm finding my retirement to be comfortable (for my personal meaning of the word!), and my income is a bit less than that.

(I'm a single man, outside the home counties, and live in a Band D house.)

Albermarle

blue.peter said:

[Deleted User] said:

Albermarle. I always appreciate your informative and knowledgeable comments.
So would you say that my current planned income from July 2024 of nearly £33000 a year gross for single person will give me a comfortable retirement? I believe it is, but always good to have someone else give me the thumbs up too! 

I'm not @Albemarle, but I hope that you don't mind me throwing in my two penn'orth here.

Whether or not any figure is sufficient for a "comfortable retirement" depends very much on what you mean by the term. For what it's worth, though, I'm finding my retirement to be comfortable (for my personal meaning of the word!), and my income is a bit less than that.

(I'm a single man, outside the home counties, and live in a Band D house.)

At the other end of the spectrum, sometimes it is said you need £50K to £60k for a 'luxury' retirement.
In reality to have a real luxury retirement say  with a second home in Cornwall and another one in Marbella + a big yacht + three or four fancy cars + eating out in expensive restaurants + always flying business/First, then £50K might just about last you a month, not a year.
As you say all these descriptions are rather subjective.