How much to live on

helensbiggestfan

PennyForThem_2 said:

With inflation rampant and energy firms going bust 'how much to live on' where people are advocating their low income level seems w do need new posts as to how we can live on much greater outgoings.  If energy and transport goes up so does everything else.

Good point.....

September  and October are my heaviest months.  House insurance, car insurance road tax.  

I managed to shop around and save around £420 on my car insurance and house insurance renewals from what I paid last year.  I also had to pay an extra £25 car tax.  So a net gain of £395.  I am hoping that will help mitigate rising energy bills.  It's a faff having to continually shop around each time insurances come up for renewal but it does pay off.  

Interesting point about pension survivor rates. I get 50% of my late husbands private pension, plus an enhanced state pension from his contributions (it's not much), in addition to my own enhanced pension.  Not sure where my enhancement came from - something to do with SERPS back in the day. 

Not wealthy by any means but I live in abundance.  😉

Daffodil1234

This is a very useful and interesting thread, thank you to everyone who's contributed.

So here is my current plan (for me plus spouse) - on the famous "how much to live on" query - (also known as how long is a piece of string).  Your comments welcome if you think this plan may have any flaws...

Currently my spouse and I are planning a retirement based on £26,000 a year (£13k each), then allowing for rate of inflation increases at 2%.  We are currently guessing we might begin retirement within 4 years, so autumn 2025.

We based the £26k initially on an article in Which - then we have been tracking spending on absolutely everything for a year now, on a big spreadsheet.

We have no mortgage, no debt, no kids / dependents.  Our house has had some major work done to it in the past 8 years (new roof, kitchen, bathroom, damp treated etc) and we aren’t expecting to have to do anything else really big to the house.  Our interests/ hobbies are often free or fairly inexpensive.   We don’t plan any big travel once retired, for example. We are expecting that the higher spending years of retirement might be the first 5 or so.

At present our plan is :

Spouse - gets an occupational pension in 4 years time (not huge) so can live on that plus pulling down from savings until state pension age.

Me - living on savings as from 4 years' time, then taking drawdown from my pension likely as from age of 60 onwards.

Both - It's possible we might wish to / choose to get something part time which provides a little bit of income, but we aren't including that at present in calculations, to check if we can manage without.

The £26k has felt quite comfortable for the last year (although with Covid, that meant no entertainment, cinema, theatre etc where we might otherwise have gone out more). It's allowed us treats and a holiday.  So I think we could reduce it if we had to.

At present while we are both still working, we're focussing on saving - but also I think the important part of retirement is focussing on the positives of the change , for example looking at it as an opportunity to learn, enjoy, relax, more time on things that get squeezed out when working.

blue.peter

Daffodil1234 said:

We are expecting that the higher spending years of retirement might be the first 5 or so.

I'd be a bit wary of this as an assumption. The generally accepted spending profile for retirement is a U shape:

• high in the early years, when you're still active;
• then dropping as you become less active;
• then rising again as you need to pay for care.

It may be that care can be funded from selling the house or equity release. I've heard this referred to as "eating bricks". However, if there are two of you and only one needs to go into care, selling a house can be problematic. And if you both need to pay for care, but at different times, will there be sufficient money or realisable assets to pay for the second?

I've seen this in action myself. My parents were pretty active, and spent a fair bit, in the years following retirement. Then their spending fell away. My father died before he needed to go into care, but he was my mother's carer for the last few years until he died (Mum has Alzheimer's disease). Now she lives in a care home, her living expenses are eye-watering.

Daffodil1234

Thank you Blue Peter .

I think we would look at equity release from our house.   I've made a few assumptions / guesses on my planning spreadsheet about additional costs in very old age - it's really hard to be able to put anything like an estimate in so I do think it really is guesswork.

blue.peter

Daffodil1234 said:

 it's really hard to be able to put anything like an estimate in so I do think it really is guesswork.

Yes, it is. If it's any help, a good care home currently costs about £6,000/month. And, if you need one, you could well find yourself needing it for several years. I recall once being told by someone that the average life expectancy of someone going into care is four years. Obviously, some don't live that long. But others live longer - my mother, for example, has been in hers for nearly six years now. Although her mind's failing, her body's still pretty strong.

blue.peter

blue.peter said:

If it's any help, a good care home currently costs about £6,000/month.

(Looks at mother's bank statement) Sorry, make that £7,000/month.

ex-pat_scot

blue.peter said:

Daffodil1234 said:

 it's really hard to be able to put anything like an estimate in so I do think it really is guesswork.

Yes, it is. If it's any help, a good care home currently costs about £6,000/month. And, if you need one, you could well find yourself needing it for several years. I recall once being told by someone that the average life expectancy of someone going into care is four years. Obviously, some don't live that long. But others live longer - my mother, for example, has been in hers for nearly six years now. Although her mind's failing, her body's still pretty strong.

This article Written questions and answers - Written questions, answers and statements - UK Parliament notes that the average stay in a care home (until death) is 26 months, but does note that it doesn't include any time the resident might have spent in another care home.

Bravepants

My grandmother spent 6 years in her care home, from 2006 until her death in 2012. It was a private home and her house was used to pay the bills by a charge being put against it. Once the total value of her savings and the total equity in her house reached £23,500, the state continued to pay the fees. She was entitled to attendance allowance, which wasn't means tested. It was a reasonably good home, but her latter years were spent bed-bound, so she didn't really see much of it, or need to go anywhere to spend her money on anything else. 

blue.peter

ex-pat_scot said:

This article Written questions and answers - Written questions, answers and statements - UK Parliament notes that the average stay in a care home (until death) is 26 months, but does note that it doesn't include any time the resident might have spent in another care home.

Fair enough. The chap who told me it was four years was the actuary responsible for pricing immediate needs annuities* for the large life insurance company for which we both worked. He told me that in the context of our work: it was relevant to something that I was doing at the time.

*These are, in case you don't know, annuities that are used by care home residents to pay part or all of their fees.

[Deleted User]

It is worth remembering that only 4% of the population over 65 go into care and 15% over the age of 85. So the odds are most people will not do so. Some people will have to pay help as they become older for certain things, but that is less costly than full time care. I know for some people costs are an issue, but I  feel that at times people get too fixated with care costs and delay their retirement for this reason. Ironically, they then miss out on a few years of retirement when they are actually in good health.
Over the years I have only had one relative a, great aunt,  go  into care at the age of 90, she had severe dementia, for the last few months of her life. My grandmother lived to 102 without any need of care facilities. At the moment my mother is going strong in her 80s.