How much to live on

Durban

[Deleted User] said:

On further reflection I think even in retirement I will remain a man of routine and doing things in order.

For example I can never just get up up and go sit in the garden on a nice day or have a spontaneous walk unless the I’ve done my exercises, the household chores and got myself ready lol! It’s a family joke that I don’t do spontaneous.  🤷‍♂️. 

Of course I go for walks, sit in the garden etc but it’s all part of a daily plan lol.

We are certainly all different.

Me too 

shortperson

I have been avidly reading this thread and it's been very interesting to see how many people our age are talking about retiring! My OH and I are constantly having the 'when can we retire' conversation and we think we now have a plan. 

I am currently 52, OH is 55. We have no kids, no debt (no mortgage, PCPs, etc), and don't plan to work any longer than we need to as we plan to spend all our money as best we can - we have no-one specific to leave anything to, only two nephews on my OH's side, they are welcome to whatever's left but we are not working longer than we need to to leave them money! Our plan is to retire when OH is 57 and I am 54, which is less than 2 years from now. 

OH works full time and I have been working part-time since March - our puppy was 6 months old at that point and we hadn't banked on it being *quite* such hard work (fools that we were). The reduced income wasn't planned for but we are managing fine, the main change is that we aren't able to save as much cash as we had been. We are still both paying into our SIPPs, Stocks & Shares ISAs, and OH's auto-enrolment work pension, and then saving some cash where we can. I get a small pension contribution from my employer (I don't do auto-enrolment as I didn't want yet another small pension in a vanilla scheme so they pay into my SIPP instead). OH doesn't plan to go part-time, would rather just stop work completely - he already has a long list of things he wants to do!

Our pots between us currently consist of £460k in SIPPs/other small pensions and £95k in ISAs, so £555k in all at the moment. We hope to get to a total pot of £575k-£600k by the time we retire. Our IFA has helped us with some cashflow modelling for our retirement and we plan to end up with £40k net per year between us, using a mix of tax-free pension cash, pension withdrawals, and our ISAs. The ISAs are likely to run out around the time OH and I are both receiving our state pensions, and our SIPPs are estimated to run out when OH is 80, at which point, if we're still going, then we will start equity release on our house to top up our state pensions. We also have £80k in other savings, which is not factored in providing our £40k p.a. income, and we have a long-term shopping list for these monies, including replacing major items in the house, garden, cars, etc. There also may well be some inheritance along the way as I still have both my parents and OH has his mum, but not likely for a good while.   

Our essential monthly outgoings are likely to be £2,500; adding on holidays, some items for the house, and clothes takes it to £3,250, hence the £3,333 per month target. 

My OH is constantly doing various versions of spreadsheets to manually work out if our IFA's software calculations are correct and we usually come back to the same answer - yes, it all tallies and we should have enough money to retire in 2025. So we are planning for that and hoping it does indeed all work out!

Albermarle

shortperson said:

I have been avidly reading this thread and it's been very interesting to see how many people our age are talking about retiring! My OH and I are constantly having the 'when can we retire' conversation and we think we now have a plan. 

I am currently 52, OH is 55. We have no kids, no debt (no mortgage, PCPs, etc), and don't plan to work any longer than we need to as we plan to spend all our money as best we can - we have no-one specific to leave anything to, only two nephews on my OH's side, they are welcome to whatever's left but we are not working longer than we need to to leave them money! Our plan is to retire when OH is 57 and I am 54, which is less than 2 years from now. 

OH works full time and I have been working part-time since March - our puppy was 6 months old at that point and we hadn't banked on it being *quite* such hard work (fools that we were). The reduced income wasn't planned for but we are managing fine, the main change is that we aren't able to save as much cash as we had been. We are still both paying into our SIPPs, Stocks & Shares ISAs, and OH's auto-enrolment work pension, and then saving some cash where we can. I get a small pension contribution from my employer (I don't do auto-enrolment as I didn't want yet another small pension in a vanilla scheme so they pay into my SIPP instead). OH doesn't plan to go part-time, would rather just stop work completely - he already has a long list of things he wants to do!

Our pots between us currently consist of £460k in SIPPs/other small pensions and £95k in ISAs, so £555k in all at the moment. We hope to get to a total pot of £575k-£600k by the time we retire. Our IFA has helped us with some cashflow modelling for our retirement and we plan to end up with £40k net per year between us, using a mix of tax-free pension cash, pension withdrawals, and our ISAs. The ISAs are likely to run out around the time OH and I are both receiving our state pensions, and our SIPPs are estimated to run out when OH is 80, at which point, if we're still going, then we will start equity release on our house to top up our state pensions. We also have £80k in other savings, which is not factored in providing our £40k p.a. income, and we have a long-term shopping list for these monies, including replacing major items in the house, garden, cars, etc. There also may well be some inheritance along the way as I still have both my parents and OH has his mum, but not likely for a good while.   

Our essential monthly outgoings are likely to be £2,500; adding on holidays, some items for the house, and clothes takes it to £3,250, hence the £3,333 per month target. 

My OH is constantly doing various versions of spreadsheets to manually work out if our IFA's software calculations are correct and we usually come back to the same answer - yes, it all tallies and we should have enough money to retire in 2025. So we are planning for that and hoping it does indeed all work out!

You seem to have it all well planned out, obviously not having any kids or debts helps financially.
If you have any specific questions, you would be best to ask on the pensions forum to get a wider spread of ( usually informed) opinion and comments.
Regarding the comments highlighted in bold. Predicting investments returns ( which will have a big impact on SIPP income and longevity) is not an exact science and is mainly based on historical data ( although quite a lot of data). For example if you start with £100K and take out £4 Kpa + inflation from age 60 there is a wide range of possible outcomes. From running out by 80, to dying with a pot three times bigger than when you started.
This can be mitigated to some extent by varying annual income taken from the pension.
Obviously your IFA can monitor this, but at the same time their charges will have to come out of the pot as well of course.

Organgrinder

So more offers via MSE.

This time another wealthify referall. Refer a friend (family member) and if they invest £250 and leave it there for 3 months you both get £50!. Obviously you have to have an account to do this.

So with the £75 wealthify offer my wife and I have invested £325 for £175 in bonuses.

That really is some return!

Loch_Lochy

Hi

Due to not having the best of health, I am thinking about taking early retirement from the Scottish NHS. Ideally, I would have liked to work till 60 to boost my pension a bit more, but I think I could manage if I retired sooner. I have been in the SPPA pension scheme for 30 years.

I would appreciate a sanity check to see if what I am thinking of doing is sensible. The normal retirement age for my scheme is 60. I think I'm able to access it from 55.

Pension statements aren’t being issued this year, as they are working on implementing McClouds Judgement (basically, I should be getting 7 years of contributions taken out of my CARE Pension and added into my previous Final Salary Scheme).

I am thinking of working another 2 years, which would take me to 57. I recon my pension at this point would be around £14000 per annum & a lump sum (not sure of the amount, but think it would be between £30,000 and £42000).

Taking tax (19% on amounts over £12,570 in Scotland) off the £14,000 would leave me with £13,728 per annum. This amount virtually matches my total actual expenditure in the past year.

I have made the required 35 years of NI contributions to get the full State Pension at 67. I need income to bridge the 10 years till I’m 67.

My thinking is to use the Lump Sum (is this tax free?) and add savings to it, to allow me £8,000 a year (for 10 years) to spend on holidays and luxuries.

I also have a contingency fund for emergency house/ car repairs.

Does my thinking above make sense?

I appreciate any comments/ thoughts.

Thanks

Catpuss66

Loch_Lochy said:

Hi

Due to not having the best of health, I am thinking about taking early retirement from the Scottish NHS. Ideally, I would have liked to work till 60 to boost my pension a bit more, but I think I could manage if I retired sooner. I have been in the SPPA pension scheme for 30 years.

I would appreciate a sanity check to see if what I am thinking of doing is sensible. The normal retirement age for my scheme is 60. I think I'm able to access it from 55.

Pension statements aren’t being issued this year, as they are working on implementing McClouds Judgement (basically, I should be getting 7 years of contributions taken out of my CARE Pension and added into my previous Final Salary Scheme).

I am thinking of working another 2 years, which would take me to 57. I recon my pension at this point would be around £14000 per annum & a lump sum (not sure of the amount, but think it would be between £30,000 and £42000).

Taking tax (19% on amounts over £12,570 in Scotland) off the £14,000 would leave me with £13,728 per annum. This amount virtually matches my total actual expenditure in the past year.

I have made the required 35 years of NI contributions to get the full State Pension at 67. I need income to bridge the 10 years till I’m 67.

My thinking is to use the Lump Sum (is this tax free?) and add savings to it, to allow me £8,000 a year (for 10 years) to spend on holidays and luxuries.

I also have a contingency fund for emergency house/ car repairs.

Does my thinking above make sense?

I appreciate any comments/ thoughts.

Thanks

I retired because of ILL health 2 yrs ago. I worked in the nhs for 36yrs. I got a bit a bit more than you, but paid off mortgage. Also got stuffed because I stopped doing weekends & nights as couldn’t cope with 12 hr shifts, so lost those unsocial hours. I have given 40 years in state pension payments I still owe them another 2 years because the nhs opted out so leaves us short. How long does McCloud protection last? Get a government gateway account check your state pension contributions . Rules might be different in Scotland.

Albermarle

I think it makes sense, but I will try to add some useful comments.

 Do you own your own home, and the  mortgage is paid ?
A car will need replacing at some point, have you taken account of that?
Will your health likely incur any extra costs as far as you can tell of course?
Although your NHS pension will increase with inflation, your savings ( including the tax free cash) will probably not. Even ignoring the current bout of inflation, it can whittle away at your spending power long term even when it is less high.
So maybe nearer the time give some thought about what to do with this cash. Maybe a ladder of fixed term savings accounts ( maturing in different years) and maybe investing some of it. For sure do not just leave it in your current account, or in a low paying savings account with your bank.

Nebulous2

Loch_Lochy said:

Hi

Due to not having the best of health, I am thinking about taking early retirement from the Scottish NHS. Ideally, I would have liked to work till 60 to boost my pension a bit more, but I think I could manage if I retired sooner. I have been in the SPPA pension scheme for 30 years.

I would appreciate a sanity check to see if what I am thinking of doing is sensible. The normal retirement age for my scheme is 60. I think I'm able to access it from 55.

Pension statements aren’t being issued this year, as they are working on implementing McClouds Judgement (basically, I should be getting 7 years of contributions taken out of my CARE Pension and added into my previous Final Salary Scheme).

I am thinking of working another 2 years, which would take me to 57. I recon my pension at this point would be around £14000 per annum & a lump sum (not sure of the amount, but think it would be between £30,000 and £42000).

Taking tax (19% on amounts over £12,570 in Scotland) off the £14,000 would leave me with £13,728 per annum. This amount virtually matches my total actual expenditure in the past year.

I have made the required 35 years of NI contributions to get the full State Pension at 67. I need income to bridge the 10 years till I’m 67.

My thinking is to use the Lump Sum (is this tax free?) and add savings to it, to allow me £8,000 a year (for 10 years) to spend on holidays and luxuries.

I also have a contingency fund for emergency house/ car repairs.

Does my thinking above make sense?

I appreciate any comments/ thoughts.

Thanks

It certainly does make sense. There is a balance to be struck between waiting later and having a lot of pension, and leaving early to enjoy time in good health, but not having money to do what you want to do. 

35 years only applies to people starting from 2016. For the rest of us our years needed for a state pension will vary depending on individual circumstances. 

Have you had a state pension forecast? Check your State Pension forecast - GOV.UK (www.gov.uk)   

As for your plan, you would be getting a pension which matches your outgoings, and would have your lump sum to top it up for emergencies and holidays / luxuries. The lump sum is tax-free.

I have an LGPS pension, and started working for the NHS part-time after retiring. That would be an option if things were tight, to help bridge from 57 to state pension age, take a part-time job. 

Loch_Lochy

Thanks for your points you have raised Catpuss66, Albermarle & Nebulous2. I'll try and address the points you all made.

I don't think I'll be able to retire due to ill health. I don't have a bad sickness record, although I do have to take a bit of time off regularly for hospital and GP appointments.

My mortgage is fully paid off.

I have 39 years of full NI contributions.

Thanks to those who mentioned about the state pension forecast site, I didn't know about this. This is what it says:

"You can get your State Pension on xxxxxxxxxx 2035
Your forecast is £203.85 a week, £886.38 a month, £10,636.60 a year.....

£203.85 is the most you can get
You cannot improve your forecast any more.....

You’ve been in a contracted-out pension scheme

Like most people, you were contracted out of part of the State Pension."

Despite having been contracted out at some point, I'll still get the full State Pension? Am I eligible for the Full State pension, without any more NI contributions (I'm sure that is what it's saying)?

My understanding is that the McCloud Judgement affects the payments which were paid into the newer CARE Scheme between 2015 and 2022. If you didn't voluntary opt into the CARE scheme, the Judgement should have the effect of putting those 7 years of payments back into the Final Salary Scheme.

Should be leaving around £70,000 in savings to cover car replacement and any big house repairs. Not a huge amount, but I'm not planning on spending my £8,000 lump sum in full each year.

Don't think my health will incur extra costs.

I have my savings in Fixed Term ISA's just now, receiving reasonable amounts of interest. I was planning on keeping my savings like this and only releasing the money as I need it. Am also looking to use interest on my lump sum towards the end of the 10 years.

Although I certainly won't be loaded, I don't want to work till I drop. There's no point in being the richest person in the Graveyard!

I also have a private FSAVC with £25,000. What would be the best way of getting the money from this before State Pension age? It wouldn't matter to me if it was a single lump sum, or staged payments. Just wouldn't want hit with too much tax.

QrizB

Loch_Lochy said:

Thanks to those who mentioned about the state pension forecast site, I didn't know about this. This is what it says:

"You can get your State Pension on xxxxxxxxxx 2035
Your forecast is £203.85 a week, £886.38 a month, £10,636.60 a year.....

£203.85 is the most you can get
You cannot improve your forecast any more.

Despite having been contracted out at some point, I'll still get the full State Pension? Am I eligible for the Full State pension, without any more NI contributions (I'm sure that is what it's saying)?

Yes, the statement "You cannot improve your forecast any more" means that your NI to date has already earned you a full new state pension.