This is money, how much you need in retirement

Albermarle

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.

Only problem is that the delivery date will be 2022 sometime !

Mick70

my workings are

ok pension -   single person £15kpa  ,  couple  £28k pa

good pension  -   single person  £22k pa ,   couple  £40k pa

Ceme3000

Mick70 said:

my workings are

ok pension -   single person £15kpa  ,  couple  £28k pa

good pension  -   single person  £22k pa ,   couple  £40k pa

Those are my numbers too for retirement (I'm single).  In fact following redundancy aged 52 I've been living quite happily on 15k a year from my savings however my mortgage is paid off and when I do need to update the car or replace the boiler it will need to come from savings. I probably could live on 12k and reserve 3k a year for the car and boiler fund, but it would be a struggle if I still had a mortgage. 

I'm 55 next month so will take £16k a year from my SIPP as a bridging pension until it is depleted at aged 60, then I have access to DB pensions of around 19K, then from 67 the state pension will top this up to 28k.

It's a nice feeling to be honest, and I'm looking forward to the future ahead of me.

hugheskevi

Mick70 said:

my workings are

ok pension -   single person £15kpa  ,  couple  £28k pa

good pension  -   single person  £22k pa ,   couple  £40k pa

I wonder how people think these and similar figures such as Which? calculate will change over time? Assuming the figures are accurate for the current time, what would you expect them to be say 10 or 20 years time?

The figures will presumably increase faster than price growth, probably by something close to earnings growth, given 'good' or 'luxury' standard of living will be strongly correlated to the resources available to the rest of society.

If retiring at say, 65, then this is of less importance than if retiring at 55. However, whilst the figure needed for a particular standard of living today is regularly discussed, I rarely see much consideration of how much will be needed in the years after retirement (other then high-level debate around U or L shaped retirement expenditure, cost of care, etc, but these are rarely quantified).

[Deleted User]

Bravepants said:

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!

Are you saying buying milk in a shop and actually getting milk rather than juice  is some kind of trick?  

Insurance companies offer different annuity products. “Level” annuities are not designed to escalate over time.  If you want something else you can always buy another product.  Personally, I prefer “level” which will work best for me when time comes.  There are good reasons for that. Firstly, expenses usually fall as people get older. Secondly, I will have other portions of my portfolio to deal with inflation (eg stocks). 

Incidentally, bonds also pay a fixed coupon.  Is that also a trick designed to “tempt”? 

lisyloo

I put my spending into an excel spreadsheet. 
It wasn't that hard to clasify bank & credit card transactions into categories such as car, holiday, houshold, gifts, entertainment etc.
Then you can come up with your own number.
The only problem is that life right now isn't normal. I've been spending a lot less on theatre, restaurants, travel and massively less on holidays.

But the method of categorising each transaction was quite simple.

Bravepants

Deleted_User said:

Bravepants said:

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!

Are you saying buying milk in a shop and actually getting milk rather than juice  is some kind of trick?  

Insurance companies offer different annuity products. “Level” annuities are not designed to escalate over time.  If you want something else you can always buy another product.  Personally, I prefer “level” which will work best for me when time comes.  There are good reasons for that. Firstly, expenses usually fall as people get older. Secondly, I will have other portions of my portfolio to deal with inflation (eg stocks). 

Incidentally, bonds also pay a fixed coupon.  Is that also a trick designed to “tempt”? 

I have no idea where milk and juice come into it! Presumably you mean to offer the distinction up as some sort of metaphor.

My grandmother was not particularly financially savvy, as many people are not. She did not understand inflation, or its effects, and was quite happy spending the interest from her savings (granted savings rates were higher at the time). I only realised this about my grandmother long after I had become a member of the work force and started to think about my own financial future.

Just because someone "chose" a financial product does not mean that they understood anything about the product other than they "get more now".

I was merely pointing that out.

Are you saying that there are no unscrupulous people in the financial services industry that would rather their organisation not have to uplift a financial product with inflation over time?

hugheskevi

Bravepants said:

I have no idea where milk and juice come into it! Presumably you mean to offer the distinction up as some sort of metaphor.

My grandmother was not particularly financially savvy, as many people are not. She did not understand inflation, or its effects, and was quite happy spending the interest from her savings (granted savings rates were higher at the time). I only realised this about my grandmother long after I had become a member of the work force and started to think about my own financial future.

Just because someone "chose" a financial product does not mean that they understood anything about the product other than they "get more now".

I was merely pointing that out.

Are you saying that there are no unscrupulous people in the financial industry that would rather their organisation not have to uplift a financial product with inflation over time?

Retirement income involves management of a variety of risks - investment risk, inflation risk and longevity risk being the main ones. Annuities enable transfer of some or all of this risk from the individual to an insurer.

Insurers don't care what type is purchased - there is a price for the different products calculated by their pricing team, and the assets backing the product (ie index-linked bonds) can be purchased accordingly.

Typically the expected return from purchasing a non-indexed annuity is about 90% of the original pot used to purchase the annuity, compared to around 75-80% for an index-linked annuity. Just like any insurance product, you pay a premium if you want someone else to bear risk.

A similar type of issue applies with single and joint-life annuities, with people choosing the higher amount and ignoring the consequences.

Sea_Shell

Bravepants said:

Deleted_User said:

Bravepants said:

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!

Are you saying buying milk in a shop and actually getting milk rather than juice  is some kind of trick?  

Insurance companies offer different annuity products. “Level” annuities are not designed to escalate over time.  If you want something else you can always buy another product.  Personally, I prefer “level” which will work best for me when time comes.  There are good reasons for that. Firstly, expenses usually fall as people get older. Secondly, I will have other portions of my portfolio to deal with inflation (eg stocks). 

Incidentally, bonds also pay a fixed coupon.  Is that also a trick designed to “tempt”? 

I have no idea where milk and juice come into it! Presumably you mean to offer the distinction up as some sort of metaphor.

My grandmother was not particularly financially savvy, as many people are not. She did not understand inflation, or its effects, and was quite happy spending the interest from her savings (granted savings rates were higher at the time). I only realised this about my grandmother long after I had become a member of the work force and started to think about my own financial future.

Just because someone "chose" a financial product does not mean that they understood anything about the product other than they "get more now".

I was merely pointing that out.

Are you saying that there are no unscrupulous people in the financial services industry that would rather their organisation not have to uplift a financial product with inflation over time?

I think for many people "a bird in the hand" is worth more than "2 in the bush", or they perceive it to be.

Not necessarily in your Nans case, but generally, people want the benefit now, not in 30+ years time.

I think that's part of the problem around retirement planning and pensions in general....it all seems so far away, that it's hard to get your head round the "long game"

pauln

I'm confused by articles which say you need £Xk to live on.  Are the figures quoted gross income pre tax or are they actual  expenditure in which case I need to consider what my net income would be in retirement?