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How much to live on

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  • Phossy
    Phossy Posts: 180 Forumite
    100 Posts Second Anniversary Name Dropper Photogenic
    It's not quite free money - it's potentially additional money for some associated risk (unless there are pensions with guaranteed returns).
  • Organgrinder
    Organgrinder Posts: 767 Forumite
    Part of the Furniture 500 Posts Name Dropper Combo Breaker
    edited 10 December 2024 at 8:59PM
    Phossy said:
    It's not quite free money - it's potentially additional money for some associated risk (unless there are pensions with guaranteed returns).
    Sipp savings accounts. Not really any different to any savings account.
  • barnstar2077
    barnstar2077 Posts: 1,649 Forumite
    Eighth Anniversary 1,000 Posts Name Dropper Photogenic
    edited 10 December 2024 at 11:37PM
    You don't have to invest the money in a fund after you have put it in the SIPP if you plan on taking it out the following year. 
    Think first of your goal, then make it happen!
  • I’ve been avidly reading and trying to get my head round everything being said for ages!  I’ve recently applied (not heard back yet) for voluntary redundancy (compulsory redundancies to follow).  I’m 55, and feel like I’ve rushed the decision, but think I can make it work!  I will have a £7k lgps pension, a lump sum enough to pay off my mortgage (not much left) £12k redundancy, and child benefit and £600/mth maintenance (my kids are older teenagers so these income sources will dry up soon).  I have DC pension of about £230k.  Only youngest is planning on going to uni (despite older child being more academically able).  I had planned on working until youngest finished school uni, but redundancy means pension will be as good now as it would have been at 60. 
    Guiide seems to think I can create £27k for 5 years (increasing) then £20k (when kids are 21+) increasing.  
    Full state pension at 67.  Just a bit worried I’ve missed something.
    £12k redundancy + £7k pension + child maintenance/benefit should cover 2025’s costs, starting drawdown 2026
  • I'm not expert, but looks like you have it covered.

    Keep monitoring the situation. And good luck for your retirement.
  • QrizB
    QrizB Posts: 18,217 Forumite
    10,000 Posts Fourth Anniversary Photogenic Name Dropper
    edited 14 May at 10:35AM
    Are you planning on taking the 25% tax free from your pension fund? This would be about £57000 and could top up your income for 5 years or so with the £7000 DB pension.
    People on the Pensions board would generally suggest not taking the 25% TFLS up front to spend if there's no pressing need, but rather taking it in lumps as you take the taxable part of your pension. Otherwise you end up under-using your personal tax-free allowance (£12570 pa) in the early years, then paying more tax when taking taxable money later.
    It needs some careful planning if you want to avoid unnecessary taxation.
    N. Hampshire, he/him. Octopus Intelligent Go elec & Tracker gas / Vodafone BB / iD mobile. Ripple Kirk Hill member.
    2.72kWp PV facing SSW installed Jan 2012. 11 x 247w panels, 3.6kw inverter. 34 MWh generated, long-term average 2.6 Os.
    Not exactly back from my break, but dipping in and out of the forum.
    Ofgem cap table, Ofgem cap explainer. Economy 7 cap explainer. Gas vs E7 vs peak elec heating costs, Best kettle!
  • ShyAndRetiring
    ShyAndRetiring Posts: 189 Forumite
    Seventh Anniversary 100 Posts Photogenic Name Dropper
    edited 14 May at 10:35AM
    :) As I’ve delurked myself in the previous post, I’ll share my how much to live on context. 

    With the diagnosis of a lifelong condition in 2011, last 13 years have been a struggle healthwise but I’ve always carried on working in some capacity. However, 2024 has made me realise I can’t keep struggling on, the effect on my health and well-being, in the last 3 years particularly, has been shocking. 

    Happily though, the benefit of having kept going, along with having a FIRE focus and saving furiously, means the numbers actually can add up for taking an early retirement (probably with something part-time when I recover a bit from recent flare up of illness): we can have enough to live on in a careful but comfortable way.

    Now, I’ve lurked on the How Much to Live On thread for a long while now, along with The Number thread in the pensions forum so I’m very aware that ‘comfortable’ is subjective.  D I also know that what OH and I require for a lifestyle we’re comfortable with is nothing like the definition of comfortable offered in the Retirement Living Standards etc.

    The following is where we’re at, as posted on my thread. @Organgrinder kindly shared the detail of how this compares with the general population and @[Deleted User] kindly shared how this compares with his own income in retirement, plus there is this fab thread for comparison, all of which is interesting and welcome. OH is several years older than I am and is already retired, with small but sufficient occupational pension and State Pension (not full due to his previous life before we met). :D

    So, how much to live on looks like this … 

      Short-term: 2025 - a stretched year!
    Without my wages but supplementing through my SHTF savings  D our income will be £18k net approx. This is doable for us (the budget is drawn up) and is probably at the hey-it’s-only-for-a-year end of comfortable! 
    However we value the time way more than the fiscal benefits which come at a significant cost of stress and health impact, which are considerable in the job I’m leaving, so I’m confident we’ll gain more in other ways. As mentioned, when my health improves I’ll hope to boost our income with small freelance projects, working from home.

        Mid & long across 2026 - 2032
    I’ll access 2 occupational pensions without penalty when I hit 60 in 2026  These years will be the gap years to my State Pension - accessing occupational pensions + drawing down a smaller amount from the TFLS and then accessing my current NEST pension later on. 

    During this time we’ll be on a much more comfortable £24k net approx.

    The great thing about this is we’ll have more flexibility (and fun) in the budget BUT if we need a money-saving couple of months, we can drop back to the 2025 budget without too much hassle. Obviously the cost of living will affect this too, but I always run two budget options - preferred budget and a bare bones (contingency) budget which I review every 6 months, so we’ll always have a frugal fall-back if we need it.

     D 2033 and Beyond
    I’ve checked and am on track for a full State Pension from 2033. Once we have both State Pensions and as well as occupational pensions, we should have approx £28k net.

    In the background for our future finances:
    * We have a fairly healthy 5-figure emergency fund (ISA, Premium Bonds and Savings). This is all separate to my SHTF savings which have been saved for the eventuality of having to stop work before pensions kick in. 
    * We’re thankfully mortgage-free, so we have the capacity to sell up and downsize to free up additional funds. Our home is small and we’ve already future-proofed it as much as possible.
    * Importantly also, we’ve run the numbers so that if something happens to either of us sooner or later, the other will have enough to live on, again in a way that’s comfortable for us on that lower income.

     :) I do want to say that I’ve followed this thread from the start and without doubt, every contributor here has over the years inspired ideas, offered pointers or made a comment which resulted in me having a thought or taking an action which has helped us get to the point where the numbers add up enough for me to take breathing space in 2025. Thanks to all of you, S&R x
    In case you haven't seen or used it, the guiide website is a great way of assessing your income, pensions and savings against what you need. 

    I used it as a sanity check against my own calculations and they came out almost identical which was nice.

    MSE in general also has some great free ways of getting extra cash. I know not everyone wishes to do them but I think there's over £800 of bank switching offers around at the moment. Plus there are lots of discounts to be had using Quidco etc.

    Also don't forget you can move savings into pensions even if retired up to £2880 net which HMRC will top up to £3600 a year. In your case (I'm guessing here) this could be very beneficial as you may not pay any tax on drawdown, effectively getting £720 for doing very little!

    Good luck with your plans.
    @Organgrinder very useful info, thank you :)

    Yes, I absolutely make the most of free money where I can! I think I achieved about £400 through bank switches in the last 14 months. I'm a bit limited now but may see if there are any Lloyds ones in 25, as I've not had anything with them for a long while. :D

    I always use TopCashBack, for discounts and for cashback and have about £30 pending, which I'm hoping to take in the new year then let it build up again in 25. I do belong to an 'industry-related' discount site, but find I get more benefits through using TCB than through the discount site.

    You're right to flag up the taxation side of savings vs pensions, as I don't know enough about this. I have 2025 in which to rethink my strategy about taking all the TFLS available to me, or leaving them and gaining benefits that way.

    Appreciate your support and good wishes, thank you, S&R x

    ~ * ~ "A goal without a plan is just a wish" Antoine de Saint Expuery ~ * ~

    My WIRE-y Diary: https://forums.moneysavingexpert.com/discussion/6572212/more-wire-than-fire-simplifying-saving-and-savvy-spending
  • I am confused about stoozing, taking advantage of bank transfer incentives and Topcashback from a tax viewpoint.  Are any gains from these taxed?  Do you have to declare them?
  • I am confused about stoozing, taking advantage of bank transfer incentives and Topcashback from a tax viewpoint.  Are any gains from these taxed?  Do you have to declare them?
    Bank transfer incentives. No. Cashback no.

    Stoozing is taxable but only if you earn more than £500 interest (higher rate payer) or £1,000 interest (basic rate). 
  • louby40
    louby40 Posts: 1,598 Forumite
    Part of the Furniture 1,000 Posts Photogenic Name Dropper
    I've claimed about £3k through TopCashback over the past 10 years or so. I tend to swap it for Amazon vouchers which I then use to fund my book addiction. I read at least 50 books a year and they have all been free as I just muse Amazon vouchers. I've just had a brand new Kindle which should have been £120 but was free! 

    I've got over £100 yet to clear via TopCashback. We moved house recently so have had to change broadband, house insurance so we've used TopCashback a lot.
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