Actual Spending in Retirement against expectations

bostonerimus

cfw1994 said:

bostonerimus said:

I plan to die with a large pot left that will benefit my heirs.

bostonerimus said:

Children are definitely expensive, but they are worth it...or so I've been told as I don't have any myself. 

If you have no children.....who are the heirs that you want to benefit?   Maybe nephews & nieces?   
I'd be more inclined to try to help them whilst you are around, so you can see what they do with the money, maybe even pass some wisdom on to them.

Have to admit our goal is to help our children (now early- to mid-20s!) with money now.   We have helped them set up (& helped fund ) small pension/ISA/LISA, as well as helping them understand the difference.  Financial education is pretty dismal broadly speaking).  Prefer to do this than dangle a distant gold carrot of inheritance when we might be in our 80-90s & they in their 40-50s.

Yes it's nieces that will get the money along with a couple of charities. All my nieces have children and as part of my long term tax planning I give my grand nieces and nephews money at Christmas. I will also help them with university fees if they need it. To lower my state tax bill I need to give away a fair amount before I die.

cfw1994

Sea_Shell said:

We only have Nieces and Nephews, most of which are still children.

Our plan, assuming everything is still looking rosy by the time DH gets his DB and SP in payment (10+ years), is to (at least) use our £6000 joint gift allowance and give them all a modest chunk each year.

There are 5 of them, 2 on one side and 3 on the other.   

So then how do you judge "fair"?   Split each side of the family 50/50 and then divvy up between them (so 2 get £1500 each and the others get £1000 each), or give £1200 to each of them as individuals?

You're gifting this to the nephews & nieces....surely equal amounts to them is the thing you would do, regardless of their parental weightings!

pensionpawn

Sea_Shell said:

Albermarle said:

 At least we did not need to dip into savings during that period.

In fact it is part of a drawdown strategy to hold some significant cash savings , so you do not have to take money from the pension whilst its value is depressed, but still live a similar lifestyle.

Not sure your alternative extreme belt tightening strategy would be the correct solution for most people, although some expenditure reduction would  probably be advisable in those circumstances. 

Our strategy in this scenario would be to continue to drawdown from pension, as we were, rather than tinker with it and keep stopping and starting it, but then reinvesting that money within our ISA in a similar (if not identical fund), whilst living off other income streams.  

That way if the pension is selling "cheap" units, you'll be buying equally "cheap" units with the money.   Especially if you are looking to maximise taking your Personal Allowance out of the pension each year.

Me and my wife also intend to draw our PAs each year and as you suggest invest any spare into a SAS style ISA. That said we also have a years worth of cash in our SIPPs just in case growth plateaus / dips for a period of time. That has the added advantage of not having to sell cheap though allowing to buy cheap! 

pensionpawn

This just arrived in an email from Hargreaves Lansdown: "£47,500 is thought to be how much annual income a couple needs to live a comfortable retirement". Net or gross? Does it matter? If it's net that's probably more than most are actually earning (after tax & NI) let alone retire on! Do you really need almost £4k a month after the kids have moved out, paying off the mortgage (?), no work related costs etc.... That's some retirement in my books however my concern is that some will actually sacrifice moderate luxuries during the mid to late working life and most probably work an extra 2, 5, 7 etc years beyond when they wanted to retire only to find that they didn't need such a large pot or that grim reaper came for them before they had an opportunity to enjoy it. 

Nebulous2

pensionpawn said:

This just arrived in an email from Hargreaves Lansdown: "£47,500 is thought to be how much annual income a couple needs to live a comfortable retirement". Net or gross? Does it matter? If it's net that's probably more than most are actually earning (after tax & NI) let alone retire on! Do you really need almost £4k a month after the kids have moved out, paying off the mortgage (?), no work related costs etc.... That's some retirement in my books however my concern is that some will actually sacrifice moderate luxuries during the mid to late working life and most probably work an extra 2, 5, 7 etc years beyond when they wanted to retire only to find that they didn't need such a large pot or that grim reaper came for them before they had an opportunity to enjoy it. 

There have been a lot of discussions on here from the viewpoint of people who have been high earners and are expecting a lot in retirement, and also some from people who are very frugal and need much less. In other words it is very individual. People set their own targets and get there in their own way. 

However been frugal becomes a mindset, and if you forego 'moderate luxuries' in your peak earning years then opening up again in retirement is a psychological issue as much as an affordability one. 

I've never been a high earner, having spent my career in care,  have been fortunate enough to have a DB pension for most of my career, retired this year and have taken a part time job for two days a week. 

This hasn't settled down yet - with some money still to come through, being on emergency tax etc, but it looks likely we will have more spare cash than ever before. I've very few plans for it, and my wife has none. Our luxuries are few and far between, and maybe not what other people would call luxuries. Things like expensive walking boots (Meindl) and decent waterproof jackets. I'm a passionate cyclist, have two reasonable bikes, both of which I got at a discount and I am considering a new titanium one. It is a struggle as to how far to extend my budget though, as I've had quite a few cars that cost less than an expensive bike, and I've yet to convince myself that it is 'worth it.'   

Having been frugal for years hasn't negatively impacted us, we are cynical about many aspects of the consumer society, but as most of the money was tied up in our home and my pension it never felt like we were sacrificing anything for our retirement. It still feels quite self-indulgent having stopped at 59, even though we have more money than we need. The part-time job is as much about a phased retirement as about money, a halfway step rather than diving straight over the cliff edge.   

Sea_Shell

cfw1994 said:

Sea_Shell said:

We only have Nieces and Nephews, most of which are still children.

Our plan, assuming everything is still looking rosy by the time DH gets his DB and SP in payment (10+ years), is to (at least) use our £6000 joint gift allowance and give them all a modest chunk each year.

There are 5 of them, 2 on one side and 3 on the other.   

So then how do you judge "fair"?   Split each side of the family 50/50 and then divvy up between them (so 2 get £1500 each and the others get £1000 each), or give £1200 to each of them as individuals?

You're gifting this to the nephews & nieces....surely equal amounts to them is the thing you would do, regardless of their parental weightings!

Well, as they each move towards adulthood, if they choose not to maintain a relationship with their Aunt and Uncle, then they'll be getting no gifts at all!!!

But then we could also bribe them into coming and helping mow the lawn!!

My further thoughts on the split was a simple, DH has £3000 allowance to gift as he chooses, and so do I.   We each just gift to our own families.    Sorted.

OldScientist

pensionpawn said:

This just arrived in an email from Hargreaves Lansdown: "£47,500 is thought to be how much annual income a couple needs to live a comfortable retirement". Net or gross? Does it matter? If it's net that's probably more than most are actually earning (after tax & NI) let alone retire on! Do you really need almost £4k a month after the kids have moved out, paying off the mortgage (?), no work related costs etc.... That's some retirement in my books however my concern is that some will actually sacrifice moderate luxuries during the mid to late working life and most probably work an extra 2, 5, 7 etc years beyond when they wanted to retire only to find that they didn't need such a large pot or that grim reaper came for them before they had an opportunity to enjoy it. 

Just looked it up on ONS, for taxpayers in 2018/19 a household income of £47500 (before tax) is around the 85th percentile (90th percentile after tax)... presumably this then means that more than 85% of the UK population will have an 'uncomfortable' retirement. Poor us!

You have to ask just who is it 'thought by'?

hugheskevi

OldScientist said:

You have to ask just who is it 'thought by'?

Pension and Lifetime Savings Association - Retirement Living Standards

https://www.retirementlivingstandards.org.uk/

cfw1994

Sea_Shell said:

cfw1994 said:

Sea_Shell said:

We only have Nieces and Nephews, most of which are still children.

Our plan, assuming everything is still looking rosy by the time DH gets his DB and SP in payment (10+ years), is to (at least) use our £6000 joint gift allowance and give them all a modest chunk each year.

There are 5 of them, 2 on one side and 3 on the other.   

So then how do you judge "fair"?   Split each side of the family 50/50 and then divvy up between them (so 2 get £1500 each and the others get £1000 each), or give £1200 to each of them as individuals?

You're gifting this to the nephews & nieces....surely equal amounts to them is the thing you would do, regardless of their parental weightings!

Well, as they each move towards adulthood, if they choose not to maintain a relationship with their Aunt and Uncle, then they'll be getting no gifts at all!!!

But then we could also bribe them into coming and helping mow the lawn!!

My further thoughts on the split was a simple, DH has £3000 allowance to gift as he chooses, and so do I.   We each just gift to our own families.    Sorted.

Reminds me of when we married (in Mauritius)....the registrar fella sprung one on us at the ceremony: we had the choice - whether to keep our own money individually, or share it.   
We thought it was some gentle joke, looked at each other, & said "we'll share it".   
Seems it might have been a genuine option 🤣    
Still not convinced we are really married 😂

It's certainly a decision to be made: my view is that sharing it equally & trying to be a little more involved in their upbringing in some way would be the best thing to do.  Some, of course, will spend it all on alcohol, fast cars, clubs & more.   Others may waste theirs 🤪

Albermarle

hugheskevi said:

OldScientist said:

You have to ask just who is it 'thought by'?

Pension and Lifetime Savings Association - Retirement Living Standards

https://www.retirementlivingstandards.org.uk/

This is taken from research by Loughborough University. The amounts are after tax if I remember correctly
Which have published some similar figures.
Even the Comfortable figure does not include alcoholic drinks , or cleaners, gardening/tree surgeons , general redecoration etc
Although £1500 each for clothes seems excessive.