How much to live on

blue.peter

Albermarle said:

Better than that it is 'Triple Locked' although probably not for ever. The consensus ( if there is one) is that just a link to average earnings increases would be fair, and more affordable. 

Yes. I've always thought that the triple lock was rather generous, and wondered if it was sustainable in the long term.

Organgrinder

Well once again the budget delivers NI cuts but not income tax cuts.

I'm not complaining at the moment as I still work part time and all in all this year will see me gain £84/ month. 

But of course the personal allowance is frozen which effectively means £10 or so of that £84 is clawed back (rough calculations).

One thing of note for teachers in the average salary scheme is the 1.6% addition to the annual revaluation until retirement. Eg, this year the indexing was I believe 6.7% on the final salary schemes but 8.3% on career average (whilst still in service). How long this will last remains to be seen.

I never thought in real terms the 1/57th I earned 9 years ago translates to 1/50th of that amount due to this! But in terms of retirement planning it is very helpful. Indeed by the time I fully retire that will be 1/47th.

I'm pretty certain this was only available to those who moved from final salary though.

Tastiger

Does anyone else have the "one more year" dilemma? I went part time in September - 3 days a week at age 57. Also took my teacher DB pension early. I did all the maths, tracked my budget and found we could just about reach the PLSA suggested £34k for a standard retirement for a couple.
 So I know, financially, on paper we should be OK.
 Well, the new PLSA figures suggest £43k annually - a massive increase, and way more than what I have calculated we would need. But it just puts that little grain of doubt in your head.
 Also, I have been offered another years contract from September on 2 days a week (2 whole days at the beginning of the week). It would mean one more year without drawing off savings/SIPP. I don't love or hate my job. My wife has finished work.
 So do I ignore the ridiculous PLSA estimates? Is time better than money?
 I know at the end of the day only I will know, but I find I spend hours and hours going over it, and am finding it hard to break free from thinking about it.

Pat38493

Tastiger said:

Does anyone else have the "one more year" dilemma? I went part time in September - 3 days a week at age 57. Also took my teacher DB pension early. I did all the maths, tracked my budget and found we could just about reach the PLSA suggested £34k for a standard retirement for a couple.
 So I know, financially, on paper we should be OK.
 Well, the new PLSA figures suggest £43k annually - a massive increase, and way more than what I have calculated we would need. But it just puts that little grain of doubt in your head.
 Also, I have been offered another years contract from September on 2 days a week (2 whole days at the beginning of the week). It would mean one more year without drawing off savings/SIPP. I don't love or hate my job. My wife has finished work.
 So do I ignore the ridiculous PLSA estimates? Is time better than money?
 I know at the end of the day only I will know, but I find I spend hours and hours going over it, and am finding it hard to break free from thinking about it.

Search the pensions board here for the recent thread called cloud cuckoo land - a lot of discussion about those big increases.  Lots saying they are nonsense and a few defending them.   In the end you are the one in the best position to calculate what you need.

Also on the pensions board there are plenty of threads about OMY dilemma - in fact some like me are more in the OMM one more month dilemma!

blue.peter

Tastiger said:

 So do I ignore the ridiculous PLSA estimates?

Forget what anyone else says is needed. It'll be based on assumptions that might or might not be valid for you. All that matters is your desired lifestyle and the cost of meeting that.

I suggest that you analyse your bank statements for at least one full year (more if your spending fluctuates from year to year). See how much you spend at the moment. You don't need a detailed analysis or budget for this purpose, just a rough breakdown. Then think a bit about what might change in retirement, e.g.:

• less on travelling to/from work?
• less on office lunches?
• more on heating etc. at home?
• more on holidays?
• more on leisure activities?

...and so on.

So, roughly how much will you need, net of taxes, in retirement to live as you want? What gross income does that equate to? Will your expected pension provide that much? Should you add a safety margin?

That's how I did it before I retired. That was in 2015. That approach served me well. Over eight years on, and I'm still living comfortably on my private pensions, even having taken them early.

Organgrinder

You should do your own figures. As has been said, if you get the lifestyle you want and you're happy then that's all that matters.

The PLSA have a vested interest in pension plans and in my opinion you should take their figures with a pinch of salt. 

Albermarle

blue.peter said:

Tastiger said:

 So do I ignore the ridiculous PLSA estimates?

Forget what anyone else says is needed. It'll be based on assumptions that might or might not be valid for you. All that matters is your desired lifestyle and the cost of meeting that.

I suggest that you analyse your bank statements for at least one full year (more if your spending fluctuates from year to year). See how much you spend at the moment. You don't need a detailed analysis or budget for this purpose, just a rough breakdown. Then think a bit about what might change in retirement, e.g.:

• less on travelling to/from work?
• less on office lunches?
• more on heating etc. at home?
• more on holidays?
• more on leisure activities?

...and so on.

So, roughly how much will you need, net of taxes, in retirement to live as you want? What gross income does that equate to? Will your expected pension provide that much? Should you add a safety margin?

That's how I did it before I retired. That was in 2015. That approach served me well. Over eight years on, and I'm still living comfortably on my private pensions, even having taken them early.

Whether the PLSA figures are realistic or not, one important point is that they include an average annual expenditure on large one off items, like buying new cars, home refurbishment etc .
So you need to estimate regular annual spending, and then either add an average annual estimate for expensive one offs, OR have a separate pot for these items.
I am sure you do this, but you see many posters on different threads say ' I only spend £Xkpa' and then later it comes out they have other funds/income to cover large one off items. So in reality they are spending more than £Xkpa.
Possible one reason why the PLSA figures look on the high side, as they include all expenditure.

MarzipanCrumble

I would add - but only because I know it affects me - stress level. 

Assess that too because if you are going to stress out if you are too close to debt or even just think you are going to be that, then think about working a little longer to stuff excess earnings into ..... whatever you decide will give you the best return.

I actively worked longer, deferred SP and now am not stressed.  But then again I enjoyed my job and found it an intellectual challange, not stressful, and in a life balance employer.

Organgrinder

Sound advice as you really don't want to stress about unexpected bills.

I'm probably OTT with money saving/making in the sense that I'll happily move banks for say £100 etc. But it's all geared to maximise the amount I have to live on as I don't want my lifestyle to change for the worse in retirement.

I've realised of late that my "control" of my spending lends itself to stoozing so I've taken out two interest free purchase credit cards which I fully intend to max out to the tune of £16,000 which should earn me approx £800 interest over the whole period.

I must confess that my spreadsheet is getting ever more complicated!

blue.peter

Organgrinder said:

I must confess that my spreadsheet is getting ever more complicated!

Perhaps you might find a dedicated money management program beneficial? In effect, it's a spreadsheet with all the necessary functionality already built in. You could take a look at AceMoney or MoneyManager Ex . MMEx is free. I currently have AceMoney set up with:

• 3 current accounts (one of which is PayPal)
• 2 credit cards
• 18 savings accounts (some easy access, some regular savers)
• a large number of closed accounts (not normally visible, but easily accessible if I want to look anything up).

If I had a mortgage or any loans, I could easily add them. Indeed, when I lent some money to a family member a while ago, I set that up as a loan account in AceMoney - it's since been repaid, and is now one of the hidden closed accounts.

AceMoney also has scheduling functionality, to cater for future transactions, and reporting capability.

Of course a spreadsheet is good enough. But a proper money management program makes everything easier, once you've spent a little time familiarising yourself with it.