This is money, how much you need in retirement

[Deleted User]

pauln said:

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?

The article in the OP says “gross”. 

Malthusian

pauln said:

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?

Does it matter, given that none of them will have any relevance to what you need to live on?

It will depend on the article. The one in the OP says "gross" but you could argue that net income would be a more sensible measure because some people will be living off already-taxed funds.

The current most common sources of pension income - State pension, private pensions and buy-to-let income - are all taxable, which explains why weekend paper articles assume that 100% of pension income is pre-tax. (25% of private pensions are tax-free but that is usually ignored in exercises like these on the assumption it will be blown on a world cruise or used to repay the mortgage.) However it would not be surprising if people increasingly rely on a mix of already taxed, pre-tax and tax-free funds in retirement.

Notepad_Phil

pauln said:

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?

Different articles will have different ways of quoting the figures - but I would expect/hope most would be post-tax although the one on page 1 seems to be gross.

Anyway it's what you decide you need to live on rather than what an article tells you that is important. Do you know what your monthly budget is likely to be? Any plans for new hobbies, long holidays, move to the ideal location, etc, etc, etc?

Madrick

Notepad_Phil said:

pauln said:

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?

Different articles will have different ways of quoting the figures - but I would expect/hope most would be post-tax although the one on page 1 seems to be gross.

Anyway it's what you decide you need to live on rather than what an article tells you that is important. Do you know what your monthly budget is likely to be? Any plans for new hobbies, long holidays, move to the ideal location, etc, etc, etc?

It's quite easy to do
You write down everything you buy, a sneaky beer in the pub, Tesco shopping, petrol etc everything

Then you look at your standing orders, if they are monthly you add them, annual bills, car tax, insurance, TV licence, home insurance, divide by 12 and add a monthly figure

Then do this for as long as you can

This gives you what you really need

I've been doing it for the last 6 months. 
It can be a bit of an eye-opener and show you where you can save a little. 

Then add a bit on to allow for extras. If you can. I've allowed £50 per week.

This is my basic number
And it's after tax

marlot

Madrick said:

Notepad_Phil said:

pauln said:

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?

Different articles will have different ways of quoting the figures - but I would expect/hope most would be post-tax although the one on page 1 seems to be gross.

Anyway it's what you decide you need to live on rather than what an article tells you that is important. Do you know what your monthly budget is likely to be? Any plans for new hobbies, long holidays, move to the ideal location, etc, etc, etc?

It's quite easy to do
You write down everything you buy, a sneaky beer in the pub, Tesco shopping, petrol etc everything

Then you look at your standing orders, if they are monthly you add them, annual bills, car tax, insurance, TV licence, home insurance, divide by 12 and add a monthly figure

Then do this for as long as you can

This gives you what you really need

I've been doing it for the last 6 months. 
It can be a bit of an eye-opener and show you where you can save a little. 

Then add a bit on to allow for extras. If you can. I've allowed £50 per week.

This is my basic number
And it's after tax

Before I retired, I downloaded the last three years of bank statements.  Added the new things I intended to do in retirement, removed the work-related costs.  I also created monthly allowances for big capital items - car, house repairs etc.

It's been within 2% of my annual spend since.  Until the pandemic hit, when the travel and eating out elements dropped dramatically.

[Deleted User]

Madrick said:

Notepad_Phil said:

pauln said:

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?

Different articles will have different ways of quoting the figures - but I would expect/hope most would be post-tax although the one on page 1 seems to be gross.

Anyway it's what you decide you need to live on rather than what an article tells you that is important. Do you know what your monthly budget is likely to be? Any plans for new hobbies, long holidays, move to the ideal location, etc, etc, etc?

It's quite easy to do
You write down everything you buy, a sneaky beer in the pub, Tesco shopping, petrol etc everything

Then you look at your standing orders, if they are monthly you add them, annual bills, car tax, insurance, TV licence, home insurance, divide by 12 and add a monthly figure

Then do this for as long as you can

This gives you what you really need

I've been doing it for the last 6 months. 
It can be a bit of an eye-opener and show you where you can save a little. 

Then add a bit on to allow for extras. If you can. I've allowed £50 per week.

This is my basic number
And it's after tax

Careful because certain things are purchased irregularly. Cars. New boilers. Holidays. 6 months during Covid isn’t long enough. And don’t forget inflation. 

segovia

You also have to consider top up fees for elderly parents, we are rapidly approaching situation where we will both be retired and have to find £100.00 per week top up funds for care home fees and that's after all the money from the sale of property has gone to the council already. Instead of helping our daughter get on the property ladder we will be funding a private care home. I am all for paying my way but the current situation sucks, my wife already diddled out of £70,000.00 in state pension because of her retirement age has gone up to 67.     

[Deleted User]

Despite of what many believe, the X and Y generations have accumulated more wealth than baby boomers did by that point of their careers. And  millennials will likely be even wealthier.  So it makes no sense for the parents to pay for kids’ houses, unless they need to get rid of extra money.  

UK government pension operates as a benefit from todays workers so one can’t be “diddled out of it” just like one cant be diddled out of a birthday present.  

Malthusian

Deleted_User said:

Despite of what many believe, the X and Y generations have accumulated more wealth than baby boomers did by that point of their careers. And  millennials will likely be even wealthier.  So it makes no sense for the parents to pay for kids’ houses, unless they need to get rid of extra money. 

Generation X already bought houses years ago if they were ever going to - they're in their 50s, rapidly approaching their 60s. They're coming up to the age where they may be helping their millennial children buy houses.

Generation Y = millennials.

The fact that your children will probably eventually be richer than you were is not particularly relevant when they are in their 30s and are probably only just starting to accumulate any assets to speak of, while you are coming up to the age where you can afford to give away capital without compromising your own security.

Every generation has been wealthier than the one before since God knows when and it will never change the fact that most people with means will leave at least some inheritance to their richer kids. The only alternatives which don't forfeit financial security are to donate it to charity (which will always be less popular than leaving it to kids or other loved ones, the biological imperative is what it is) or to buy an annuity so you can spend it all on yourself without risking poverty (which is usually perceived as letting an insurance company have your money instead of your loved ones).

If we assume that you will at some point transfer money to your children or remoter issue, it makes perfect sense to do it while you are still alive and can appreciate their gratitude.

The fact that your heirs will probably eventually be richer than you has never seriously been considered a problem. Your heirs also tend to grow up with higher expectations and spend more money. And an inheritance can always skip a generation and be left to grandkids who will be even richer than your kids but aren't yet.

[Deleted User]

The psychology behind inheritance also has to do with the desire to be looked after by your kids in your old age. And vanity. 

Regardless, someone lamenting that that they can’t afford to pay for their daughters’ assets and therefore need an even larger subsidy from the taxpayers’ is the wrong philosophy.