This is money, how much you need in retirement

Bravepants

Deleted_User said:

Bravepants said:

pip895 said:

I would find it depressing to think I had factored in reduced funds after a certain age (particularly when I was approaching that age!) so have kept my budget requirements flat.  A separate pot of money put aside for early retirement “treats” would seem a better way to go.  

Predicting requirements far into the future is virtually impossible so it’s best to keep it simple.  

I just bought a book called "Die with Zero" for Kindle: https://www.amazon.co.uk/gp/product/B07T5LSF1J

Though I take some of what the author says with a pinch of salt...for example, he seems to suggest that annuities pay better than 4% (when comparing with the "safe withdrawal rate"), but it gives a good perspective.

Annuities do pay more than 4%. Standard level annuity in Britain pays 5% for a 65 year old.  Even a 60 year old gets more than 4%.  

"Level" annuities do not increase each year with inflation.

The way annuity providers tempt people to take the "level" version is to offer an initially higher rate. My grandmother fell for that when she got her £101 per month widow's pension in 1978 when my grandad died, it was still paying out £101 per month in 2012, the year she died.

My grandmother failed the marshmallow test!

DT2001

Can you build into your plan for U shaped spending using the equity in your property rather than your retirement pot/s?

My mother is now in a care home and this is funded from having moved from a 3 bed bungalow to a 1 bed retirement home. If there are a couple and one needs to go in then it is potentially more difficult. Odds of that are low and could be mitigated by allocating say a years worth of funding to give the time to release equity.

My MIL’s spending was only reduced by the current pandemic and she is mid 80’s. So planning for a slowdown in mid 70’s wouldn’t be wise for all. She was ‘dragged’ on to an Indian tour at 79 as a party of friends needed a sub 80 to allow them to go! So she’s not the exception.

I think having a plan that allows flexibility is the key.

pensionpawn

Albermarle said:

Mortgaging all those potential early retirement years, with your nose to the grindstone, to provide for your 80's and 90's only to check out shortly after retiring would be such a waste.

Sensible statement but I do not think it is such a black and white situation for a lot of people.

For example not everybody sees work as a 'nose to the grindstone'  experience.

Also the comfort of sitting on sufficient assets that you do not need to worry about running out , or monitor expenditure too closely, can itself enhance your Golden Years  . Especially if you were the worrying type .

I agree, some are quite happy in their job and will continue to work after fiscally independent. I may do so myself in a part time capacity. However some, from reading this forum, may become convinced that they will not be fiscally secure until they are pushing LTA and continue their 9-5 much longer than they would want to incurring potential ill health. What we don't see much of in this forum is analysis of the minimum pot required that will erode to zero over a set period of time at a certain withdrawal rate. If you have secured a full SP and own your own home (a sufficiently large asset being sat on) then you have a minimum guaranteed income and a capital value (in your home) from which to cover any emergency costs later in life. Each to our own.

Thrugelmir

pensionpawn said:

Albermarle said:

Mortgaging all those potential early retirement years, with your nose to the grindstone, to provide for your 80's and 90's only to check out shortly after retiring would be such a waste.

Sensible statement but I do not think it is such a black and white situation for a lot of people.

For example not everybody sees work as a 'nose to the grindstone'  experience.

Also the comfort of sitting on sufficient assets that you do not need to worry about running out , or monitor expenditure too closely, can itself enhance your Golden Years  . Especially if you were the worrying type .

However some, from reading this forum, may become convinced that they will not be fiscally secure until they are pushing LTA and continue their 9-5 much longer than they would want to incurring potential ill health. 

Surprising how many people that keep their hand in so to speak. Maintain a more active and stimulating lifestyle. That's been my experience over the years. No reason for work to bring on ill health anymore than any other daily activity. 

pensionpawn

Thrugelmir said:

pensionpawn said:

Albermarle said:

Mortgaging all those potential early retirement years, with your nose to the grindstone, to provide for your 80's and 90's only to check out shortly after retiring would be such a waste.

Sensible statement but I do not think it is such a black and white situation for a lot of people.

For example not everybody sees work as a 'nose to the grindstone'  experience.

Also the comfort of sitting on sufficient assets that you do not need to worry about running out , or monitor expenditure too closely, can itself enhance your Golden Years  . Especially if you were the worrying type .

However some, from reading this forum, may become convinced that they will not be fiscally secure until they are pushing LTA and continue their 9-5 much longer than they would want to incurring potential ill health. 

Surprising how many people that keep their hand in so to speak. Maintain a more active and stimulating lifestyle. That's been my experience over the years. No reason for work to bring on ill health anymore than any other daily activity. 

Hour + commute each way, stress of meeting changing targets, stress of continuing to work with that colleague you'd like to put a contract on, stress of catching CV19 (hands up if you would have preferred to walk away from your job over the last 15 months). I've read plenty of comments on this forum relating to quality of life improving after retiring. All I'm suggesting is that on occasion this forum can give the impression that you have to retire later (keep working) to achieve the desired income in retirement.

jamesd

DT2001 said:

Can you build into your plan for U shaped spending using the equity in your property rather than your retirement pot/s?

You can. You can also plan to use equity release as a routine part of your spending plan to increase overall retirement spending you like.

Say you plan for constant inflation adjusted income, the 4% rule approach, and are a 64 year old female. ONS says 87 life expectancy with 25% chance of making the 30 years to 94 and 10% chance of making 98. The drawdown rule expecting more nominal capital at the end 98% of the time and the possibility of there still being equity left makes it likely that there will be substantial money left before death if care is needed. Not certain and it's down to individual preference how close you want to get to certainty.

Sea_Shell

If I end up on my own (which statistically I'm likely to), then I shall have no qualms about Equity Releasing up to my eyeballs, if the need arises (and I don't want to move or downsize, if I haven't already).

My heirs can go whistle!!!   (they are not our children)

Amateurretiree

We retired early ( me 55 DH 60) and we can pay all essential outgoings out of my NHS pension. We were using DH’s SIPP to pay for holidays, upgrades to the house etc. Since the holidays have stopped for a bit, we are just using his tax free allowance to draw from the SIPP but are just saving it really for when we can go on holiday again!

So our plan is, continue drawdown from SIPP , reduce accordingly as the SP ‘s come in( when we will probably stop drawing from the SIPP , or certainly just up to the tax free allowance).

We certainly don’t live extravagantly ( apart from our holidays!) but we aren’t scrimping either, we are somewhere in the middle I suppose. But we are both so happy we took the plunge and retired, it just feels so freeing to us to be able to drop everything if our family need us for anything or we fancy a nice day out somewhere.

There are lots of things I like about retirement, one of them is you get to spend time with the people you like all of the time! 

I hope we don’t have to consider Equity release at any point, we do help our son and his family out financially here and there, and enjoy being able to spoil our granddaughter, but like to think we will be able to leave them the house.

cfw1994

Go-go, Slow-Go & No-Go years is definitely a thing for most….google that for more examples & discussions
Another Aussie article here talks about the “retirement spending smile”.  It references research by Wade Pfau, who is reasonably well respected in the area of retirement planning.  I don’t see that as specific to down under!

I’ve seen family and friend’s family members experience a big drop in spending, particularly over 80*

Yes, healthcare is the big unknown: wife has frail mum who has carers thrice daily: still far cheaper than a care home, but those who go to a care home typically spend less than 2 years there*.   

This will impact our spending whilst she is still around, since she gets visits from one or both of us 3-4 times a week: no long haul lengthy foreign holidays for us yet (more shorter fun ones perhaps - Cambridge Comedy Festival was a fab day out yesterday!).  I guess a Covid lessens the impact of that, but I’m happy not hopping on a flight for another 12-18 months!

I expect our next 10-15 years to need (or ‘broadly benefit from’) a greater annual spend than post 70.  Then I envisage post 80 to need even less*

Always assuming we get that far: been at too many funerals of friends who have gone before reaching even 65.
In our position, the house provides the contingency for any “worst case Black Swan scenario” needing massive unforeseen funds….


* - note, I fully agree there will always be exceptions to any ‘rule’ - this is more art than science!

Nebulous2

OldScientist said:

jamesd said:

Sea_Shell said:

I'm sure I've read somewhere about the "U" shaped spending curve in retirement.

You start off with high spending needs (wants) whilst "young" and then it starts to tail off, but then can start to increase again, quite dramatically, in later life. 

You will have. In US research where medical bills are the reason for the increase, a situation that is rare in the UK with most covered by the NHS. The UK picture is decrease throughout retirement except for the moderately low percentage who have a couple of years on average in care before death.

Research links near the end of https://forums.moneysavingexpert.com/discussion/comment/70696742/#Comment_70696742 .

I had a look through the link above but couldn't find the following document (if I missed it, I apologise - edit: sorry it was linked through one of the other links)

https://ilcuk.org.uk/wp-content/uploads/2018/10/Understanding-Retirement-Journeys.pdf

which shows the decrease in spending in the UK you describe. I think many people are worried about long-term care costs contributing to the 'U' shape in spending, but stays are generally short (e.g. https://eprints.lse.ac.uk/33895/1/dp2769.pdf )

In the Bupa sample, the average length of stay was 801 days, but with a considerable tail of long-stayers. Half of residents had died by 462 days. Around 27% of people lived for more than three years, with the longest stayer living for over 20 years.

I'd definitely run out of money well before 20 years were up...

That is a cracking survey. Thanks very much.

I’m only about halfways through it and I’ve already convinced myself that I can afford to buy a titanium bike with electronic gears. Now all I have to do is decide which one!