Are we mad?

Skibunny40

Jamesd - definitely something to consider when we get closer to that point (if it's still offered then) . Had a quick look at annuity rates and unless they improve dramatically in the next 20 years, that will not be an option!

But again, this is all subject to change and |I'll continue to keep an eye on it as the years go by. I'm really starting to see how the "one more year" mindset comes in once you get close to actually pulling the plug.

Skibunny40

Another Joe - thanks for the feedback!

Had an interesting discussion with OH about some of the points raised here and the main takeaway is that we'll probably keep to the £36k per year in the first 10 years, then scale it down gradually after that to ensure there's slightly more than just the state pension between 80 and 90...but also that we'll keep constantly reviewing it.

Skibunny40

Sorry, one other thing!

During our discussion last night, we were thinking of large unexpected spends that might crop up and how to plan for them on the off-chance.

One of those was health problems such as hip/knee replacements and the very long NHS waiting times. What have others planned? Just suck it up, private health insurance, halfway schemes such as Benenden Health, keeping a "healthcare" pot of cash available? OH has private medical cover through his work for both of us & obviously that would come to an end when he stops working. We've never really used it but sod's law suggests when we don't have it....!

p00hsticks

Skibunny40 said:

Sorry, one other thing!

During our discussion last night, we were thinking of large unexpected spends that might crop up and how to plan for them on the off-chance.

One of those was health problems such as hip/knee replacements and the very long NHS waiting times. What have others planned? Just suck it up, private health insurance, halfway schemes such as Benenden Health, keeping a "healthcare" pot of cash available? OH has private medical cover through his work for both of us & obviously that would come to an end when he stops working. We've never really used it but sod's law suggests when we don't have it....!

That's something I was just going to bring up on this thread! Although we've no fixed sums in mind, we're certainly allowing for the fact that our 'capital spends' pot should include money to fast-track the treatment of medical conditions that are affecting our mobilty / will to live as we get older.

coyrls

Skibunny40 said:

Neither of us have DB pensions, OH is 50, I'm 49. If we both retire around 58, we'll have enough (assuming no major !!!!!!-ups) to have an income of around £36k a year, including full state pension from 68 until the age of 80.

How have you worked that out?  It's a bit more complicated than taking the current value of your pension pot and dividing it by the number of years you want to make it last.  Inflation and sequences of investment return need to be taken in account.

Skibunny40

Coyrls - I'm sure you're right, but my feeling was that I couldn't predict what those figures would be so I just worked on the assumption that investment returns should be equivalent to investment return ( in reality hopefully well above inflation!) I'd rather be pessimistic than optomistic. What's the more sophisticated method? 

MallyGirl

Skibunny40 said:

Sorry, one other thing!

During our discussion last night, we were thinking of large unexpected spends that might crop up and how to plan for them on the off-chance.

One of those was health problems such as hip/knee replacements and the very long NHS waiting times. What have others planned? Just suck it up, private health insurance, halfway schemes such as Benenden Health, keeping a "healthcare" pot of cash available? OH has private medical cover through his work for both of us & obviously that would come to an end when he stops working. We've never really used it but sod's law suggests when we don't have it....!

Our 'budget' includes medical insurance, at least until the cost becomes prohibitive.
I have used the company BUPA for various physio and one cataract so far. I know that there will be another cataract along at some point and my Dad has had 1 knee and 2 ankles replaced so that is a concern.

coyrls

Skibunny40 said:

Coyrls - I'm sure you're right, but my feeling was that I couldn't predict what those figures would be so I just worked on the assumption that investment returns should be equivalent to investment return ( in reality hopefully well above inflation!) I'd rather be pessimistic than optomistic. What's the more sophisticated method? 

You need to understand Safe Withdrawal Rate (SWR) studies.  Jamesd has put together a slection of references in this thread: https://forums.moneysavingexpert.com/discussion/5466114/drawdown-safe-withdrawal-rates/p1

Your assumption assumes a consistently positive investment return that will always at least match inflation.  Real returns are not like that, if you have a poor sequence of returns early in retirement when you are taking money from your pot, the length of time that your pot will last will be significantly reduced.

coastline

Skibunny40 said:

Thrugelmir - I understand now & completely agree that we'll aim to do as much as possible whilst we're still earning. Might even reduce the desire to retire early?!!

german-keeper - thanks for sharing your story & I'm sure you'll treasure the time you've been able to spend with your mum. The option of part-time /temp work is something definitely worth considering and is always handy to have up one's sleeve.

Also wondering about taking an annuity for part of our money to even out the risk?

And/ or - as a back of a fag packet calculation, if we said an annual spend of £30k, rather than £36k, that would be an extra £132k in the pot (£6k x 22 years, between 58 and 80) which would mean an extra £13k a year from age 80-90 in addition to state pension

There's a lot said about final salary pensions (DB pensions) but I reckon most will be £10K or less and when you add in the state pension that's around £18K total. To spend £30K as a couple mortgage free then that's not a bad sum for most pensioners. Many will be happy on less. 
Regarding household updating I've estimated £2K a year which might not sound a lot but it's £20K over 10 years. You can do a fair bit with that if you don't go mad. There'll be years when you buy very little so next year you'll have £4K to spend. If you think it's tight then add a bit more in. Even better when there's two incomes.
Go for it I say . I've lost a few friends and school friends in the last two years. It's frightening.

Skibunny40

Coyrls - I've done a fair bit of reading round SWR and understand the concept (I think!).

Our plan of dealing with this would be to keep a reasonable cash reserve and to use that rather than take investment funds when the markets are bad. Additionally, any years when the markets do better than expected, I might syphon those profits off to add to cash reserves or, if all else fails, reduce our spending that year. There's a lot of flexibility in our annual spend figure and we'd have no hesitation, or difficulity, in cutting back dramatically if necessary for a year or two. 

Would that cover us? Feel free to say no!  It's really good to be made to consider all these things, so thank you!