How much to live on

BooJewels

Organgrinder said:

Careful.....that amount of interest would result in a tax bill of £1350 pa and would diminish in real terms.
[snip]

Obviously she'd have to mitigate that by fully utilising ISA allowances, maybe PBs, timing when interest pays etc, which I hope she's already doing if currently in employment - we don't have much information to go on. 

There always seems to be a shock horror, avoid at all costs attitude towards paying tax on interest - 80% of something is still better than 100% of nothing - if she happens to be holding it all in current accounts. 

I hope I need to pay tax on interest, as it means I'll be earning gob loads of interest, which never featured in my long term plans, as interest rates were very low when I first started working these things out.

blue.peter

blue.peter said:

Your state pension will, in any case, kick in long before that.

@KittyS - a PS on the subject of your state pension.

If you do retire at 56, it'll leave a hole in your NI contributions record which, in turn, will probably mean that you won't qualify for the maximum possible state pension. If this happens, you'll be able to pay voluntary NI contributions. This is one of the best investments available: the rate of return is spectacularly high. You won't be able to do it immediately, but check your state pension forecast in a couple of years' time and yearly thereafter. If it says that you can increase your state pension by paying voluntary contributions, it'll be very much worth your while to spend a bit of your savings on doing so.

If you read this thread, you'll understand why. I started it a few weeks ago when I was thinking about a completely different aspect of the state pension, but it goes on to show how some very kind people persuaded me to pay voluntary NI contributions to increase my state pension. I'm enormously grateful to them for doing so.

Albermarle

@KittyS
£1,800 a month sounds plausible. However, I don't think that a couple of months is really enough on which to base an assessment

I would take note of the above, and also add in an average yearly amount for unexpected expenses, such as needing a new boiler or expensive work on the roof etc. Probably the IFA figure of £24K pa included these costs.
Or alternatively, take account of the fact that at some point you will have to dip into your savings to pay for these one off items. 

Also, your £160k in savings - I hope that's earning a good rate of interest for you - if you had that in savings at around 5% and interest paid monthly, it could earn you around £650 per month - enough to top up your pensions by a decent amount.

As you have seen an IFA, it is a bit surprising that they did not advise you to invest some of this, rather than keeping it all as cash savings? Although at the moment cash savings at around 5% are beating inflation, in the long run investments would be expected to outperform savings. 

Organgrinder

Retirement planning is always a very tricky thing especially as there are so many unexpected things we may need eg car repairs, house maintenance etc.

Equally there are a lot of savings to be made and a lot to be gained with bank switching etc. I've made over £1,000 since November which I've used for an extra holiday to Egypt for example. 

These days I believe a lot of things are commodities eg mobiles, broadband, energy etc and I see little benefit in brand loyalty. 

Of course everyone is different in their outlook but I believe if the figures look about right, then reviewing your outgoings and  potential to make extra can free up hundreds of pounds a year.

Don't get me wrong, I'd probably opt to fly SAS to Oslo if I could, but I can put up with Ryanair for a couple of hours if need be!

My own retirement journey looks nothing like it was originally planned either. Myself and Mrs O had a few smallish pension pots plus some DB pensions. Since I cut my hours we've both invested in boosting our pension pots. We've more than enough to pay off the mortgage too, but at 1.6% it's makes a lot more spread across Isa's and savings accounts. We should at retirement have savings and pension pots of about £160k between us with DB pensions of about £30k and I intend carrying on with a bit of exam marking too for extra income.

I haven't budgetted for big one off's per se, it will come out of savings if need be as we're highly unlikely to touch £100k or so of it.

Does it still make me think...." Maybe one more year than planned?". Hell yes. But you never know what is around the corner. So make the most of it!

BooJewels

Indeed, the recent and unexpected loss of my friend is proof that planning and strategy is all well and good until someone throws the first punch. 

And in respect of contingency funds - I've just been to the dentist and need a root canal and crown - I broke half the tooth off during lockdown and had an emergency, temporary repair, as that was all they were doing at the time, but it's held pretty well, but it's now getting sore as the root is dying, so needs doing properly.  Quoted me £1,500!  That's going to make a dent in the fun funds.  Nor will it be fun.

helensbiggestfan

BooJewels   Poor you. Root canals definitely aren't much fun. Lol.  

Is it worth asking your dentist if you can spread the payments.  My dentist allows 10 months interest free on any treatments costing more than £500.  

I have just finished a course of implants.  Set me back £14k. (Worth every penny, I can now talk and smile without feeling embarrassed or ashamed)  I had the money in the bank but they asked me if I would like to spread the payments so of course I said yes.  The longer it's in my bank the better.  Interest free payments and 5.6% interest earned on the capital in the meantime.  Win-win.  

And funnily enough implants were not nearly as painful as root canal. 😂

helensbiggestfan

Hi Kitty. 

Your figures sound pretty much ok.  You have a good size "cushion" and your income sounds ok.  Is that pre or after tax, even if it's pre tax it should be still be ok, because of that £160k savings pot.  

I agree whilst savings rates are pretty good at the moment, in the longer term it might be worth investing some of it rather than just keeping it in savings accounts.  Obviously take expert investment advice. 

I also agree that you should look at your state pension forecast and check if you have enough contributions for the full state pension. If not it is definitely worth buying up any shortfall or missing years,  

re sideline hustles.  This what I do to supplement my income.  I have always dabbled in antiques and bric a brac and I recently added vintage and preloved clothing.  It wont make me rich beyond the dreams of avarice but it's fun.  

BooJewels

The funny thing is @helensbiggestfan - my initial reaction was relief, as I thought I needed 2 doing.  She said the thing with root canals is to get them done before they get too bad - it's a much easier process, the sooner they're done - she advised to get it done as soon as it started to deteriorate any further.  Yes, I can spread the payments, they already offered. I only held back for now, as I want my bashed up leg sorting first - I see the physio tomorrow and might need to go back to orthopaedics, as some parts aren't healing as well as I hoped.

Delighted that your implants have been a success and that you're happy with the results.  It it makes you feel good etc., then the cost is well worth it.

BooJewels

helensbiggestfan said:

[Snip]

I also agree that you should look at your state pension forecast and check if you have enough contributions for the full state pension. If not it is definitely worth buying up any shortfall or missing years,  

re sideline hustles.  This what I do to supplement my income.  I have always dabbled in antiques and bric a brac and I recently added vintage and preloved clothing.  It wont make me rich beyond the dreams of avarice but it's fun.  

I also highly encourage the voluntary NI payments - a sound ROI and very well worth doing. 

If she does start a side hustle and declares it as self employed income and does a tax return, she'll qualify for Class 2 NI which is even better value.  I'm still self employed and do just enough work to keep that status.

Albermarle

helensbiggestfan said:

Hi Kitty. 

Your figures sound pretty much ok.  You have a good size "cushion" and your income sounds ok.  Is that pre or after tax, even if it's pre tax it should be still be ok, because of that £160k savings pot.  

I agree whilst savings rates are pretty good at the moment, in the longer term it might be worth investing some of it rather than just keeping it in savings accounts.  Obviously take expert investment advice. 

I also agree that you should look at your state pension forecast and check if you have enough contributions for the full state pension. If not it is definitely worth buying up any shortfall or missing years,  

re sideline hustles.  This what I do to supplement my income.  I have always dabbled in antiques and bric a brac and I recently added vintage and preloved clothing.  It wont make me rich beyond the dreams of avarice but it's fun.  

Regarding the comment highlighted in bold.

Whilst professional financial advice can certainly be the right thing to do for some people, in many circumstances it is not really necessary or appropriate. In any case a financial advisor will not be interested in cash savings or any investments less than £50K, or even less than £100K in some areas. Even if they were, the fees would be very high in proportion to the investments.
DIY investing can seem quite scary but it is a lot easier and cheaper than it used to be. 
Robo investing and/or managed ISA/SIPP are a kind of half way house of simplified advice.