Amount needed vs Amount wanted for retirement

nevizoxi

I've been reading this and other financial forums on and off for years, and I've appreciated what I've learned, but I find I'm sometimes taken aback by the conversations about money needed for retirement. Some of you, maybe many of you, have millions set aside or you're on track to have millions. It makes me wonder, do you really anticipate needing that much in retirement? I keep a monthly budget and can anticipate roughly how much I'll need as I grow older, but it's not nearly the amount most of you have or are planning to have. I feel like maybe I'm missing something obvious.

masonic

There are lots of variables, such as inflation, investment returns, life expectancy and changes in spending needs, that require one to save more towards retirement than what it might appear is needed based on calculations ignoring these factors.

colsten

Better place to discuss retirement provisions: https://forums.moneysavingexpert.com/categories/pensions-annuities-retirement-planning

[Deleted User]

It would entirely depend on the lifestyle you wanted - if you can budget to the penny and plan to live frugally for 20 years then great. Some people want a retirement where they can go on holiday a couple of times a year, have the heating on all day from November to February, expand their house etc etc. All relative.

I think I will end up with state pension and 2 private ones, but unlikely to get close to what I earn now but not for want of trying - I might be in a much better place in 30 years time and be glad of what I did now 

Notepad_Phil

I think a lot also depends on the company that you work for and how long you work there for. e.g. work for the government, a local council or the NHS throughout your life and you'll likely have the ability to receive a defined benefit pension that is likely to provide a decent retirement income with little need for other savings/investments and has cost you relatively little compared to the benefits you'll receive.

However if you work for a company that only provides a defined contribution pension sheme or are self employed then you'll need to save a great deal to provide anywhere near a decent income in retirement. e.g. depending on what safe withdrawal rate you are willing to risk a £250K portfolio might provide somewhere in the range of £7.5K to £10K gross income per year, which even with a full state pension is not a great deal of money if you've been used to living comfortably off a full income. For instance, someone of average health targetting a gross income of £50K will likely to need to get their retirement portfolio over the million pounds mark to reliably fund that level of income, and perhaps even more if they want to retire early.

ratechaser

I've found the last year to be a useful viewpoint into what retirement income I'd want to aim for - virtually all the costs associated with work (commuting, lunches at Pret, business clothes, drinks in the evening) have disappeared.

It's not a perfect view - we still have 'children' costs included, but holiday costs are not - but even so it's made me realise that £60-70k PA would probably be enough for Mrs RC and I to live very comfortably on, significantly less than I'd previously estimated.

Given we've got net assets (property, pension, savings and investments) in the region of £3m right now, all this, yet again, leads me to the conclusion that the only reason I'm still working is because I've still not worked out what the hell I'm going to do in retirement! Need to come up with an exit plan...

MEM62

I doubt that as many of us have million-pound pension pots as the OP might think.  That said, we all make our individual choices.  Personally, I am trying to find the right balance between acting in the best interest of my current self and future self.  I expect that my disposable income in retirement will be the same, or perhaps slightly better if I am lucky, as it is now and my financial planning is aimed at maintaining the lifestyle we have now.  We could, of course, spend more now and be more frugal in retirement but that's not what we want from life.        

Fighter1986

I'm certainly under no false impressions about how little the cost of living will be during retirement when looking at the basics. 

All my ducks are in a row to have bought the only house my OH and I will ever need to own, in two years time, and to have that mortgage paid off before I hit 60 years of age. The financial plans I've made for us thus far are going just as expected and I see no reason for that to change short of redundancy... but even then we are quite resourceful and probably won't take a hit if that happens.

If I stay with my current employer through to retirement I'll have a pot with them of around £150,000 to £350,000 depending on growth, I also have shares in a SIPP which I play with; this year has been very good with Tesla increasing in value by nearly 80% since August. There's a lot I play with in the background to ensure I've got a good few fallbacks later in life and as few a burdens as possible.

I do have regrets not keeping a closer eye on Coinbase this year though, Litecoin has increased in value 400% as of late but I missed it. Didn't have notifications switched on, otherwise I'd have thrown all my money in there but hey, you win some and you lose some.

One thing my OH and I are very much keeping in mind is the fact that in retirement, we will have a lot of spare time, and we want to enjoy ourselves. We won't want to be penny pinching and frugal to the Nth degree, there's a whole world out there.

We'll see a lot of it with our kids when they come along but I don't expect anything to compare with not having the burden of an employer to come back to when you fancy just being somewhere else for a little while.

I think we'll be OK. 

What's important is that we all think, plan and act with eyes wide open about our lives today, and for tomorrow. 

blue.peter

Well, for what it's worth, I've been through it and am now retired, so here's my two penn'orth.

Although my retirement was precipitated by redundancy at 56, I'd always been planning to retire early and had been running a spreadsheet on which I'd been keeping updated estimates of my retirement income for a few years before it happened. I therefore already had a good idea of what regular income I could expect before the axe fell. (I had a defined benefit pension from a company for which I worked for many years and a smaller defined contribution fund with which I bought an index-linked annuity.) All I then had to do was a careful analysis of the last couple of years' bank statements to see what my likely expenditure would be in retirement if I wanted to maintain my existing lifestyle. (My lifestyle is not by any means extravagent, and never has been.) Would income exceed expenditure if I was to retire on redundancy? I concluded that the answer was "yes", and didn't bother looking for another job.

With my mortgage paid off, I own my house (and therefore don't have to pay either rent or mortgage). As others have noted, some expenses fall away at retirement. Also, you don't pay National Insurance contributions on pensions. And, for obvious reasons, no pension contributions are payable. However, I'm finding that I do run my central heating more now, and so that's a cost that has increased.

Everyone has different needs and desires, so a "one size fits all" approach won't work. You might have dependants still; you might still need to pay rent in retirement; you might want to travel a lot; you might want to buy a flash new car every couple of years: none of these apply to me, so I'm living very comfortably on a pension of a lot less than the £60k - £70k mentioned by one poster above. There's no need for a retirement fund of millions if your lifestyle doesn't require it.

nevizoxi said:

... it's not nearly the amount most of you have or are planning to have. I feel like maybe I'm missing something obvious.

That's by no means certain. If your analysis is complete and you come to a relatively small amount required, you're probably right. Remember, it's your lifestyle that you need to support, not somebody else's. But do be sure that your analysis is complete. Keep thinking about it, keep notes, and add to those notes as thoughts occur to you. I found that a multi-page spreadsheet helped me a lot.

Think about not just capital needs, but also about income needs (although I appreciate that the two are interrelated).

HHarry

i think it’s all so very personal it’s difficult to compare.

I originally had worked out a budget of £30k a year for the 2 of us, but after some thought and discussion (which involved a retirement dog!) I revised it to £35k.

A poster last week was working on a figure of £20-25k, and I’m looking at the figure thinking ‘there’s no way you can retire on that’ And then a poster above is targeting £60-70k, and I’m thinking ‘why would you need so much’.

If you’re number is realistic for you, and you have a contingency, then everything is good, and it’s just a case of being able to hit that number.

Baron_Dale

The answer to this is very individual. However, I must say that most forum members who post in the retirement section of these forums are far from typical of the rest of the population. Indeed one or two posters above are extremely above average. I just dont get the need to have to mention having '3 million' in assets and still not retired! Its a bit like the, mine is bigger than yours syndrome.

Time and health are the most important things in my view.

My mother who is now over 80 has a perfectly happy retirement on just over £14000 a year.  Myself, at the age of 62 manage very well on just over £19000 pension income a year and manage to save several hundred pounds a month too.(For annual bills and hopefully, future travel) I have some savings and investments but certainly not loads!  I currently work a few hours a week (casual contract zero hours) because I enjoy the work, not because I have too. I dont earn much but the money goes towards wants rather than needs. I probably won't do this for much longer, as I have other things to occupy my time.

From age 66 my income from pensions, both work and state will be just over £28000 a year, which is more than enough.

Meanwhile, I will contine to visit the 'Over 50s' and 'How Much Have You Saved' sections where the real world continues to exist.

Maybe those who believe they need thousands and thousands to retire ought to peruse some of the other sections of these excellent forums and realise they should be counting their blessings rather than their money.

Best wishes and keep safe.