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Chiglepig

[DELETED USER] said:

I should probably have mentioned that whatever pot I save needs to be enough for her as well.

I appreciate that when children are young, having a stay at home parent is not only beneficial for the children, but probably financially efficient in the short term vs. nursery costs. But EVERYONE should really be involved in their own financial future rather than relying on a partner to cover them. She should be claiming child benefit for the NI contributions if she isn't, and looking to build her own pot once child care costs are less onerous.

Mutton_Geoff

blue_mango said:

Mutton_Geoff said:

[DELETED USER] said:

How would I go about assessing how much I need to live on?

https://www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

A very general amount used is £2k for a single person, £3k for a couple as a base figure. If you are a high rate tax payer, now is the time to take full advantage of the benefits available at the moment.

Really? I don't even get 2k after tax whilst working... Sometimes it's really depressing to read articles about pension planning.

Don't let it depress you, your skills to live on a much lower budget will stand you in good stead and if you can manage now, hopefully you'll manage in retirement. Don't forget that on a low income, your state pension will make up a bigger proportion of your needs in retirement than someone who is used to earning £10k a month. Say you take home £1,100 a month now. The state pension should pay you £760 a month, leaving you only to plan for a pension income of £340 to effectively retire on "full salary".

There are advantages of being able to manage on a more frugal budget. Only if you want to retire on more than you earn now or retire before state retirement age do you need to start saving hard.

Very roughly, a pension pot of £100,000 could provide the top up income you need. Do you have any ability to start building into that?

[Deleted User]

Chiglepig said:

[DELETED USER] said:

I should probably have mentioned that whatever pot I save needs to be enough for her as well.

I appreciate that when children are young, having a stay at home parent is not only beneficial for the children, but probably financially efficient in the short term vs. nursery costs. But EVERYONE should really be involved in their own financial future rather than relying on a partner to cover them. She should be claiming child benefit for the NI contributions if she isn't, and looking to build her own pot once child care costs are less onerous.

It's not because of kids.

Stubod

I think Which did an article that seemed to suggest £2k/month, (in today's money) for a couple should provide an "OK" standard of living, £3k for a very comfortable standard of living. Although if you read through the "Number" thread there are people spending significantly less and seem to be very happy.

It is all down to your own expectations as to what you want to do. (My parents lived quite happily on the basic state pension but they had very simple tastes).

If you still have a mortgage and like expensive holidays several times a year then you will obviously need a lot more.

As suggested above you need to do your own "budget" using a simple spreadsheet where you can analyse your current and planned spending.

Only you can determine how much you need to live off?   

[Deleted User]

Let's say 25 years of work left, want to end up with £300,000 pot. That's 300 months, £1000/month. Not easy with a mortgage but not impossible.

I picked £300k because that's what Which? said was needed for a fairly comfortable lifestyle... But they are assuming you own your own home, and are retiring with today's pension products and cost of living. I have a feeling that when I retire things will be significantly worse.

Marcon

[DELETED USER] said:

Let's say 25 years of work left, want to end up with £300,000 pot. That's 300 months, £1000/month. Not easy with a mortgage but not impossible.

I picked £300k because that's what Which? said was needed for a fairly comfortable lifestyle... But they are assuming you own your own home, and are retiring with today's pension products and cost of living. I have a feeling that when I retire things will be significantly worse.

Anyone currently employed on minimum wage would see that as more than 'fairly comfortable', especially with a flat rate state pension thrown in. 

Someone currently in the highest tax bracket (as you say you are, and must therefore be earning upwards of £150K) would see it as pocket money.

Mutton_Geoff

[DELETED USER] said:

Let's say 25 years of work left, want to end up with £300,000 pot. That's 300 months, £1000/month. Not easy with a mortgage but not impossible.

Your calc assumes no growth which would be a useless pension investment. If you took a growth rate of 6% over 25 years, then the monthly investment is less than half that (c £425 to reach £300k at 6% over 25 years). Naturally you may want to inflation proof your investment by increasing monthly contributions along with inflation/payrises as you go along.

MaxiRobriguez

[DELETED USER] said:

Let's say 25 years of work left, want to end up with £300,000 pot. That's 300 months, £1000/month. Not easy with a mortgage but not impossible.

I picked £300k because that's what Which? said was needed for a fairly comfortable lifestyle... But they are assuming you own your own home, and are retiring with today's pension products and cost of living. I have a feeling that when I retire things will be significantly worse.

They mean £300k in today's money.

A £300k pot on 3% drawdown (to build in some resilliency) is £9k a year, add state pension and you get to about £17k a year, which might be OK for most people, especially if mortgage is paid off and especially if the household has two earners both on £17k.

You need to factor in inflation though. Your investments should be giving you gains greater than inflation. If they do you can do less than £1000/month. Or, you can do £1000/month and expect a bigger pot than £300k in today's money.

As always, your mileage may differ, and you need to work out your own needs. My needs are a pot of £900k as I don't expect to have paid the mortgage off by the time I retire (plan not to too as quite happy to avoid 40% tax on pension contributions), want to retire earlier than normal so no state pension for ages, and I also want to fund children's university and first houses. 

nyc_451

Mutton_Geoff said:

Don't let it depress you, your skills to live on a much lower budget will stand you in good stead and if you can manage now, hopefully you'll manage in retirement. Don't forget that on a low income, your state pension will make up a bigger proportion of your needs in retirement than someone who is used to earning £10k a month. Say you take home £1,100 a month now. The state pension should pay you £760 a month, leaving you only to plan for a pension income of £340 to effectively retire on "full salary".

There are advantages of being able to manage on a more frugal budget. Only if you want to retire on more than you earn now or retire before state retirement age do you need to start saving hard.

Very roughly, a pension pot of £100,000 could provide the top up income you need. Do you have any ability to start building into that?

Thank you for your insights, very helpful. I can build a pension pot of 100k, will be focusing on it once I save up an emergency fund. 

Ideally,  I'd like to have an option to retire earlier, perhaps around 60, but I'm not quite sure how to plan it. Perhaps I should educate myself on investing. 1k per month would mean a comfortable life for me, assuming the mortgage is paid off and no major home improvements are needed. Anything over 1k is a bonus. 

[Deleted User]

Marcon said:

[DELETED USER] said:

Let's say 25 years of work left, want to end up with £300,000 pot. That's 300 months, £1000/month. Not easy with a mortgage but not impossible.

I picked £300k because that's what Which? said was needed for a fairly comfortable lifestyle... But they are assuming you own your own home, and are retiring with today's pension products and cost of living. I have a feeling that when I retire things will be significantly worse.

Anyone currently employed on minimum wage would see that as more than 'fairly comfortable', especially with a flat rate state pension thrown in. 

Someone currently in the highest tax bracket (as you say you are, and must therefore be earning upwards of £150K) would see it as pocket money.

I meant >50k.