How much to live on

MovingForwards

I'm also going to miss @[Deleted User] comments. He(?) provided a load of support and encouragement, as has all of this thread.

Some of us had plans, others were trying to work out what to do, however what most of us have in common is going into retirement prepared and knowing big numbers are not the be all and end all, it's how we manage our budgets.

I hope this thread does carry on. It's moved on a lot from how it started, but will always have relevance.

helensbiggestfan

Good luck, Baron.   You will be missed.   

Farway

Langtang said:

Just wanted to come out of lurkdom to say that I've thoroughly enjoyed all your posts @[Deleted User]

This thread is excellent, and I feel far more comfortable posting here - so I understand your predicament. I hope you reconsider at some point in the future, but if not then good luck and I am confident that it will all work out well for you.

Just to go off on a slight tangerine, does anyone else worry that we're going to have a job backfilling all the jobs that are to be vacated by people (me, hopefully) retiring early? I remember there being a worry a few years back in the Oil and Gas industry, that everyone was coming up to retirement at the same time, and there just wasn't the new talent coming up (mainly because these jobs were (seen as) jobs for life)

Answering My bold

I don't worry about it but it is happening right now, not just due to retirement by also covid / furlough etc where many have found out that having been pushed / sacked  the grass is greener on other side of the fence and are starting new lives / jobs

I've heard in the last few days where vacancy adverts go unanswered or only half a dozen applicants whereas before there where hundreds for an employer to pick from, which to my mind is no bad thing because with boot on the other foot it should help improve pay & conditions

I think the new work world is going to be very different from the experiences of older people [that's me], and I'm glad I'm out of it

hugheskevi

Just to go off on a slight tangerine, does anyone else worry that we're going to have a job backfilling all the jobs that are to be vacated by people (me, hopefully) retiring early? I remember there being a worry a few years back in the Oil and Gas industry, that everyone was coming up to retirement at the same time, and there just wasn't the new talent coming up (mainly because these jobs were (seen as) jobs for life)

In my area, the problem we face is losing people with a lot of institutional knowledge - those who know why things were done in a particular way many years (10+) ago when decisions were taken.These people can save huge amounts of time on fruitless development, research, etc, as they know not only why things were done, but also why other things were not done which can be just as useful.

Unfortunately there has been a huge emphasis on career development requiring people to spend small amounts of time doing many roles and developing skills rather than knowledge. Those who want to be expert in an area can only ever progress to a certain level. Combined with moves away from 'jobs for life,' over the last decade we have struggled to recruit and retain people wanting to become experts in an area.

Increasingly, outsourcing is seen to be the answer to a lack of expertise, but that introduces misaligned incentives and the overhead of effective contract management. Those individuals who can combine genuine expertise with the ability to organise can earn good amounts in the outsourcing industry - far more than we would pay them.

But this is nothing new, there is always change. I was once told that the decline in pension administration standards could be traced back to the changing work patterns of women in the workplace - back in the 1970s and 1980s, a lot of pension administration roles were undertaken by women returning to the workplace after bringing up children. There was no expectation of progress (reflecting society expectations of women in workplace), and at the risk of mass stereotyping, this group of people became experienced and diligent in ther role, familiar with all aspects of a pension scheme as they remained doing the same job for 10-15 years or more. Now these roles have very few really experienced staff in them, with most only able to deal with routine queries and escalating any complicated with associated delays and hand-offs. I don't know how much truth there is in all of that, but it is just an element of constant change. Things go on, one way or another

Madrick

Gin_and_Milk said:

I know Baron_Dale won't see this, but I also find that this is a very reassuring thread, as the numbers are more within my range!  I realise that DC pots worth hundreds of thousands doesn't give a very high wage once you break it down into monthly payments over a number of years, but no two ways about it, some people will be retiring on far more than what I earn now (and fair play to them).
I'm on target to retire at 60 on £19K, I can't really afford to go sooner unfortunately.  It would be significantly more than that if I retired at 67, but some things are more important than money, and I want to have enough time to enjoy retirement.

Yes thanks Baron_Dale for your many enlightening posts 👍

That's why I like this little thread...
Gin_and_Milk's numbers are just a grand higher than my own, with my humble little DC pot and factoring in state pension in 7 years... 
I look at my numbers and think I can't afford to retire at 60 or 61.... Then see this thread and realise yes it can be done... Its just when🤔

In another world, I have a good friend who retired a few years ago from the Bank, aged around 57 on a DB pension  of £2.5k per month, and a huge lump sum...
Had never in his life paid into a pension

It really is a different life for us mere mortals. 

blue.peter

Madrick said:

I look at my numbers and think I can't afford to retire at 60 or 61.... Then see this thread and realise yes it can be done... Its just when🤔

Yes, it can. But it might require changes to your lifestyle.

Some people are naturally more or less extravagent than others. We all have different circumstances (e.g., dependants). Some live alone, whlst others live with another person or people, who might or might not have their own income. One person might find that an income of, say, £15,000/year is sufficient, whilst another might find that they need at least £25,000/year.

Please do your own sums very carefully before you make the decision to retire. Could you maintain your present rate of expenditure on the income that you expect, or would you have to make sacrifices? Are those sacrifices acceptable to you? What works for one contributor to this thread can't be assumed to work for all.

Madrick said:

In another world, I have a good friend who retired a few years ago from the Bank, aged around 57 on a DB pension  of £2.5k per month, and a huge lump sum...
Had never in his life paid into a pension

In law, that DB pension is deferred pay*. It's money that the employer owes him for work already done. In effect, the employer withheld part of his pay and dropped it into a pension scheme on his behalf.

*Barber v Guardian Royal Exchange (European Court of Justice), 17 May 1990.

Madrick

blue.peter 

Thanks for your thoughts blue peter

Live with just 2 grown up sons
One just left home today, the younger just qualified from uni as a primary school teacher and starts in sept
Bills should drop with older son gone and come Sept younger one will contribute from his salary. Don't expect him to leave for at least 2 years

I feel that I could survive on the drop in income, as for the last 2 to 3 years I have been saving loads in pension and ISA bringing salary down to around that level anyway
But just never really know until you try

blue.peter

Madrick said:

blue.peter 

I feel that I could survive on the drop in income, as for the last 2 to 3 years I have been saving loads in pension and ISA bringing salary down to around that level anyway
But just never really know until you try

Yes, trying is a good idea. And you could do exactly that. A good practical test is to work out what you expect your retirement income to be and to try living on that amount for a year or two prior to retirement. It sounds as if you think you're getting close to doing this, but it might be worth doing some sums and maybe getting closer. It's worth being conservative, and possibly creating a bit of a safety margin if you can.

It does sound as if you're pretty well-placed, though. That's great.

(I did this. Last time I saw one of my former colleagues, in late 2019, she and her husband were doing the same.)

Time4T_Accounts

A factor to consider for those of us with DC pensions and who go into drawdown, is what happens if/when there is a stock market drop. To avoid selling investments while the market is down,do we have the room to cut our expenditure, for example? Or, maybe, have we got a cash cushion?

blue.peter

Steve_PL_too said:

A factor to consider for those of us with DC pensions and who go into drawdown, is what happens if/when there is a stock market drop. To avoid selling investments while the market is down,do we have the room to cut our expenditure, for example? Or, maybe, have we got a cash cushion?

Absolutely right. And the timing of such a stock market drop is possibly even more important than the "what if it happens?" question. The earlier it happens in retirement, the worse the effect will be. This is because the income drawn down will be a higher proportion of the total initial fund, meaning that there's less available to benefit from any recovery. It's worth reading the blog here. This is aimed at advisers, but there's no reason why we shouldn't benefit from it directly.

I'm very well aware that annuity rates are awful at the moment, and have been for several years (I used to work in the annuity department of a large insurer). Nonetheless, it was issues like this that prompted me to buy an annuity with my DC fund. I'm pretty risk-averse. I value the certainty of a known income arriving in my bank every month. Obviously, that doesn't mean that it's the right thing for everyone. Or maybe the compromise position of taking part annuity and part drawdown will be right for some. (Under the original Finance Act 2004 rules, legislation actually required that you have a guaranteed income of £20,000/year before you were allowed to take drawdown from your remaining pension fund. That rule has since been abolished.)