How much to live on

blue.peter

This thread did start ages ago. Now that it's come to the top of the list again, it occurs to me that there's something more worth mentioning (though I hope that most here are already aware of it).

MSE offers a free budget planner. It can be downloaded as a spreadsheet from this page. It's very useful as an aide-mémoire, in that the "what do you spend" page includes some helpful reminders of things on which you probably spend money, but might not immediately think about. Completing that page with retirement in mind might be helpful in thinking about how much you'll need to live on. By the way, it does ignore future capital expenditure (e.g., car or boiler replacement), so it's a good idea to budget some savings to cover any such items that you anticipate needing.

Don't forget that the income need that you calculate with this spreadsheet is net of tax. If your needs come to more than your tax allowance, you'll have to add a bit on to get the gross pension income required.

As a matter of personal curiosity, I've just completed it. It doesn't tell me anything that I didn't know, but it's interesting in that it crystallises some things for me. Apparently, I spend just under £16,000 a year. Fortunately, my pension is more than this. I sweep the excess into savings and investments for the proverbial rainy day.

MovingForwards

@blue.peter that's a useful guide in the link, for those who don't already budget.

I have a spreadsheet for income and outgoings and another for all my savings accounts (pots) and pensions. My pots are earmarked for various things.
All I had to do was remove mortgage, work expenses and the majority of savings (aside from everything related to my car and all insurances), that quickly showed what I needed for retirement and why I was then able to look at early retirement. 

ErinGoBrath

duncanthedog said:

My budget is going to take a huge hit as the cost of dental treatment starts to kick in, I have a broken upper bridge and first estimate says that a tooth (root) will need to come out and a denture fitted but it could be more depending on the x-rays.
I may need to borrow some money from the dog's account.

Hope its not a canine tooth.

Langtang

blue.peter said:

MSE offers a free budget planner. It can be downloaded as a spreadsheet from this page. It's very useful as an aide-mémoire, in that the "what do you spend" page includes some helpful reminders of things on which you probably spend money, but might not immediately think about

I've just binge-read this thread and it makes very interesting, down-to-earth, reading. Thanks for the link to the spreadsheet, most useful.

I am not a wizz with excel, but get by. If anyone is willing to share their retirement spreadsheet format (devoid of figures of course) It would be very much appreciated.

Terron

I followed a link here from the pensions board. There are a few people there with very large NUMBERs but plenty of us with lower ones too.

I started with the amount I was spending when I was working - ~£18k in 2012/13. That heppens to be very close to Which's comfortable level for a single person, which has increased to £19kpa. I know I can live without skimping on that.

As it is my income is higher and I am struggling to get out of the saving mindset. I did take the most expensive holiday of my life in January 2020, but nothing since, of course.

I recently paid a year's class 2 NIC. That has added ~£4pw to my state pension forecast as I was close to the maximum. Class 2 is unbelievably cheap. I qualified to pay it voluntarily as a BTL landlord, being "gainfully self-employed" but not engaged in a "trade, profession or vocation".

blue.peter

Langtang said:

I am not a wizz with excel, but get by. If anyone is willing to share their retirement spreadsheet format (devoid of figures of course) It would be very much appreciated.

There are two sides to retirement financial planning: income and expenditure. The latter is covered very nicely by the relevant page of the MSE spreadsheet.

I'd be happy to share my income spreadsheet, but I don't think that it'd be much use to you or to anyone else. For starters, it assumes two private pensions, one being a preserved defined benefit and the other an active defined contribution because that's what I had in the last few years of my working life. It completely ignores the state pension, because I was always planning to retire before I qualified for it. (Indeed, I've now been retired over five years and still have over three more before I can draw it.) Also, it relied on me obtaining annuity quotes from time to time in order to convert the DC fund to an income. Put simply, all it did was to record my income from both sources, add them together and knock a bit off (tax!) to give the net monthly figure at the calculation date. I completed a line like this every few months for the last few years before I retired. There were two versions for the DB figures - with and without a levelling option. In other words, it's very personal to my circumstances.

(As it happens, my retirement was eventually precipitated by redundancy, but that happened at exactly the right moment for me. I ended up getting a generous payoff and lived on that for over a year. This meant that I could draw my pension later than originally planned, and so get a greater income.)

SomeMadeUpName

Terron said:

I recently paid a year's class 2 NIC. That has added ~£4pw to my state pension forecast as I was close to the maximum. Class 2 is unbelievably cheap. I qualified to pay it voluntarily as a BTL landlord, being "gainfully self-employed" but not engaged in a "trade, profession or vocation".

That's an awesome tip (the BTL landlord piece). My missus needs two more years and I was weighing up the 2x£800 for voluntary against the hope that our Ltd Co will pay her over the lower NI limit for a couple of years in the next seven, But using the Class 2 qualification for BTL (she has a couple of shared BTL's) shifts the equation. 

Langtang

blue.peter said:

Langtang said:

I am not a wizz with excel, but get by. If anyone is willing to share their retirement spreadsheet format (devoid of figures of course) It would be very much appreciated.

I'd be happy to share my income spreadsheet, but I don't think that it'd be much use to you or to anyone else

Thanks for the offer. I do know that there were a couple of blank spreadsheets kicking around this place, but it is trying to navigate the forum to try and find them. I did download one, but it was in $ and took into account 3 or 4 pensions. I played around with it, but it seemed complex to my little brain.

Langtang

We're in the process of trying to retire early (58) and I am trying to go back through our spending over previous years to see how much we actually spend. I've managed to download the last 5 years' transactions from the bank website in excel format, but wading through them trying to filter the transactions into groups (food, entertainment, cars etc) is proving hefty. 

How many years do you think would be reasonable to go through to get a figure? is 5 years too many?

It doesn't help that i'm fairly green when it comes to excel. I'm probably doing some things in longhand that have an easier or quicker way of doing it. 

blue.peter

Langtang said:

How many years do you think would be reasonable to go through to get a figure? is 5 years too many?

This is endlessly debatable. It rather depends on how much things vary for you from year to year and how thorough you want to be. Do you have expenses that recur at long intervals, or is your spending pretty much steady state? When I went through this exercise, I only used two years, and found that enough for me. It gave me an accurate answer. My spending, though, was (and remains) pretty much steady state.

However many years you do use, I recommend doing your analysis separately for each year, rather than lumping several years together. I'd also recommend starting with the most recent year and working backwards. This approach will make it easier to see how things have varied from year to year. (And "year" can be defined on any basis that suits you - you could use calendar years, tax years, year to today, year between birthdays... it doesn't matter.)