Is £25k (Which) reasonable or unrealistic for a couple?

Daffodil1234

Newbie here so would welcome people’s thoughts, either those planning for retirement or those who have recently retired perhaps.

 I found an article in Which as of q4 2020 (unforutnately forum rules don't alllow me to post the link as I've only recently joined MSE forum) but it's about "how much will you need to retire"

and the article suggests that households "couples enjoying a comfortable retirement" spend around £25,000 a year. For singles, around £19k a year.  Which state ”This [£25k] covers all the basic areas of expenditure (which had a combined cost of £17,200 per year on average) and some luxuries, such as European holidays, hobbies and eating out.”

Currently my husband and I are planning a retirement based on this approximation of £25,000 a year, then allowing for rate of inflation increases at 2%.  We are currently guessing we might begin retirement within 5 years.

 

We have no mortgage, no debt at all, 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.  We appreciate this might mean living more frugally than some people but our interests/ hobbies are often free or fairly inexpensive.   We don’t plan any big travel once retired, for example.

 

What are people’s thoughts on £25k for a couple in a “comfortable retirement”  - Do these figures seem realistic to you ? (Appreciate this is a how-long-is-a-piece-of-string question)

CookieMonster

How much will you need per annum to cover basics, including putting into an emergency fund?
Multiply by 1.25 for comfortable. Multiply by 2 for luxurious.
£25K is entirely feasible for a fine lifestyle, unless you've a cocaine habit.

hugheskevi

Here is a link to the article.

I think today £25K for comfortable lifestyle is about correct as long as an appropriately sized property is owned outright (in particular, not a huge council tax bill due to high banding and need for more maintenance on a larger property), but over time if that is a fixed income or only escalating with inflation it will erode relative to wider incomes which could be an issue for those retiring early in particular, although fine if there is a future State Pension to come.

Note that the Which article breaks down the spending under comfortable and luxurious, and the key difference is around new cars and long-haul travel. I think it is fair to call those things luxurious rather than comfortable.

Also need to consider what income the single person remaining after death will have - less of a problem if retirement is funded from DC, but if from DB and State Pension an early death of a person with a decent DB income but poor survivor benefits combined with loss of a State Pension could be a significant reduction to income.

gambleruk

For us that would be more than comfortable, for others probably not, if you read through this forum there is plenty of information at hand, one of the most common pieces of advice is to do a spreadsheet for all your living costs and run with that and that will let you know whether £25k will be enough or not. Also people tend to find they spend a lot less once retired as well so unless you are in the centre of a major city I think you will be fine.

Annemos

I also did planning like this for the ten years before retirement. And the Single person amount is about right. 
I had also kept a fund for private health treatment, as I knew that would be coming up and it is not covered under the NHS. (Dental things!) 

So I thought I was sitting there happily. 

But what I had not taken account of was a major Insurance Claim for property damage to the house, within 3 years of retirment. Although it should be covered under the insurance policy, there are items that I have had to get repaired and replaced myself. 
The ongoing insurance premiums may escalate, too. 

So really, you need a fund on the side for the unexpected things like that, too. Whenever I think about this, it reminds me of this.....

There are known knowns. These are things we know that we know. There are known unknowns. That is to say, there are things that we know we don't know. But there are also unknown unknowns. There are things we don't know we don't know.

Donald Rumsfeld

MallyGirl

There is a thread around what people's'number' is. 

https://forums.moneysavingexpert.com/discussion/2146737/pensions-planning-the-number/p165

£25k would not be enough for us but may have great lives on a lot less - see Sea_Shell's squirrelled nuts thread https://forums.moneysavingexpert.com/discussion/6019383/its-time-to-start-digging-up-those-squirrelled-nuts#latest

tacpot12

My partner and I need about £30K per year for our comfortable retirement, but we have a number of pets, so have vets bills, pet insurance and pet food to add to our costs. We went down to one car when we both retired, and this has worked out fine for us. We save money out of this amount on a monthly basis to replace the car when it needs replacing and to cover household repairs and replacements of sofas/carpets/appliances/etc.

MallyGirl

Yep - pets are a big cost for us. Older dog was recently trialled on an anti inflammatory drug that cost £100 per month - it didn't agree with her so we dodged that one but she has now been diagnosed with hypothyroidism which means medication for the rest of her life. Insurance will undoubtedly find a way to weasel out of paying for it.

Nebulous2

Some odd things in there. Some figures, such as the grocery bill and clothes don’t increase as you move through the bands - where in practice I think they would. People on an essential lifestyle aren’t allowed any alcohol. 

Looking at the video, these people look more like my father’s generation than mine. A reminder perhaps that going part-time now at 58 may still be an exception, rather than common place. 

Some issues with the funding premise, it might be an older video, but the guy who said he could draw 10% of his fund each year would be way off, given the figures I see people talking about here. 

However despite my nit-picking it was reassuring overall. Having just been paid for January, and knowing I only have two months of full-time pay left, I could have an inclination to hit the panic button, but was left feeling it’s all going to be fine. 

Linton

Daffodil1234 said:

Newbie here so would welcome people’s thoughts, either those planning for retirement or those who have recently retired perhaps.

 I found an article in Which as of q4 2020 (unforutnately forum rules don't alllow me to post the link as I've only recently joined MSE forum) but it's about "how much will you need to retire"

and the article suggests that households "couples enjoying a comfortable retirement" spend around £25,000 a year. For singles, around £19k a year.  Which state ”This [£25k] covers all the basic areas of expenditure (which had a combined cost of £17,200 per year on average) and some luxuries, such as European holidays, hobbies and eating out.”

Currently my husband and I are planning a retirement based on this approximation of £25,000 a year, then allowing for rate of inflation increases at 2%.  We are currently guessing we might begin retirement within 5 years.

 

We have no mortgage, no debt at all, 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.  We appreciate this might mean living more frugally than some people but our interests/ hobbies are often free or fairly inexpensive.   We don’t plan any big travel once retired, for example.

 

What are people’s thoughts on £25k for a couple in a “comfortable retirement”  - Do these figures seem realistic to you ? (Appreciate this is a how-long-is-a-piece-of-string question)

Basing your desired requirement expenditure rate on an article in Which is a seriously bad idea.  One persons "comfortable" is someone else's skrimping, or luxury.  Better in my view to track how much you are actually spending now and then plan to keep spending the same amount, possibly minus the things you wont be spending money on in retirement - eg commuting. The article does say "covers the basics" so you do need to leave some for pleasures.

The second point is that your assumption of 2% inflation seems rather risky to me.  The BoE is charged with keeping inflation around 2%, too little inflation is seen as equally undesirable as too much.  There is a lot more room above 2% than below so I suggest you assume 2.5-3%.

RobM99

I live alone, no mortgage/rent/debt and survived happily on £1,300 a month before lockdown. 
During lockdown I'm spending £100 a week less! So, as you say, "it depends...".