How much to keep in rainy day savings during retirement?

blueandgreenpoppy

DH & I will retire soon on a joint pre tax pension of about £46,000 and are looking at moving to a more expensive area to be nearer our kids.

Our income will go up again when state pensions kick in in another 6 years.

(Yes, I know, those are good amounts to be retiring on, we did both work our socks off in stressful occupations).

So, although it'll be a downsize in space, we'll need to dip into investments to buy our new home.

How much do you reckon we'll need to keep back as rainy day savings? If you're on a similar amount in retirement, what did you decide? And how did you come to that decision please?

Thanks in advance 😊

Bravepants

I would reckon exactly the same as when you were working...3, 6 or 12 months of either your monthly outgoings, or of whatever monthly "salary" you'll pay yourself.

Albermarle

It depends on the type of pensions you have . If they are Defined Benefit/Final salary pensions , then as above you just need the same emergency cash as you have always had .
However if you are drawing down from a Defined Contribution pension, you should have a larger cash pot to help fund your income through difficult market periods .

blueandgreenpoppy

Albermarle said:

It depends on the type of pensions you have . If they are Defined Benefit/Final salary pensions , then as above you just need the same emergency cash as you have always had .
However if you are drawing down from a Defined Contribution pension, you should have a larger cash pot to help fund your income through difficult market periods .

Mainly DB, although DH has a small DC one too. Thanks 👍

blueandgreenpoppy

I've been following the squirrelled nuts conversation too - identifying completely with making the shift from saving to indulging a bit more. 😉

Our kids help us out on that score, mind you...

tigerspill

Five years cash for me.  This is the cash top up between my pension income and my "NUMBER" - what I wish to spend.
This allows me a decent chance of riding out most drops/crashes in investments. 
It is actually about seven at the minute as I have been reorganising my investments since the start of the year and have some to invest.  U am wavering on this currently and thinking I might just run the cash down through spending in the next few years.

Pollycat

I think it also depends on what might need doing (as opposed to you want to do) (if anything) to your new house.

New boiler?

Replacement windows?

SouthCoastBoy

I've got about 10 years in cash at the moment. Too much I know but still have a significant amount in equities. Ideally I would like 5 years cash but moving to that model is proving quite challenging 

Stubod

..I suppose it really depends on your levels of spending compared to your retirement income? eg will you still be able to "save" some of your pension income to fund more expensive one off items going forward?

Then you just need to think about what you are most likely to need an emergency fund for, eg new boiler / house repairs, another car, (although you can fund most of that from monthly pension payments?).

I suppose you may want to factor in things like private medical / dental treatments? We use premium bonds as a home for our "emergency" fund. It provides some monthly income (currently better than most savings accounts), is readily available should we need it, and couple between them can have £100k.   

dunstonh

The answer will depend on a range of circumstances you haven't told us.  For example, is the pension income secure or investment backed?
What are your spending habits?
Have you modelled your spending over the next 30-40 years and your income with it to see where shortfalls may exist?

blueandgreenpoppy

dunstonh said:

The answer will depend on a range of circumstances you haven't told us.  For example, is the pension income secure or investment backed?
What are your spending habits?
Have you modelled your spending over the next 30-40 years and your income with it to see where shortfalls may exist?

Sure - the pensions are mainly income secure (final salary) and more than enough to cover essential spending and regular budgeted stuff - eg planning for car replacements, household maintenance, treating the kids and ourselves. They're also index linked and the death benefits sufficient.

Based on that, I'm trying to work out how much to keep in cash reserves for completely unexpected things and wondering how much other people actually save in cash if they're in similar circumstances.