Retirement planning

cfw1994

MK62 said:

Audaxer said:

MK62 said:

The Which website estimates £41k for a luxury retirement lifestyle for a couple, and I'm sure I saw a link from this forum to another site recently which had £47k for a luxury retirement lifestyle for a couple.

In the end this is going to come down to personal opinion on the meaning of luxury.......personally I don't see £41k for a couple as luxury....perhaps not even £47k either........on the sunny side of comfortable, sure, but luxury???

I agree, but the point I was making is that these figures are much more realistic than the quoted figure of £20,978 for a 5* retirement lifestyle.

Totally agree.....for us £20978 would be in the breadline/penury category.....perhaps they mean this sum in addition to state pensions......that would make more sense (but still short of "luxury" imho)...

Oh jeez.....maybe I should have left our numbers in, everyone seems to be taking that example as an actual 🤣

I wasn't implying those numbers are 5* - which I have explained a couple of times now.   Just examples of how to document and build YOUR numbers.  
Example: just a sample of something taken to show what the whole is like

I'll give up now 🤣

BritishInvestor

Albermarle said:

MK62 said:

Audaxer said:

MK62 said:

The Which website estimates £41k for a luxury retirement lifestyle for a couple, and I'm sure I saw a link from this forum to another site recently which had £47k for a luxury retirement lifestyle for a couple.

In the end this is going to come down to personal opinion on the meaning of luxury.......personally I don't see £41k for a couple as luxury....perhaps not even £47k either........on the sunny side of comfortable, sure, but luxury???

I agree, but the point I was making is that these figures are much more realistic than the quoted figure of £20,978 for a 5* retirement lifestyle.

Totally agree.....for us £20978 would be in the breadline/penury category.....perhaps they mean this sum in addition to state pensions......that would make more sense (but still short of "luxury" imho)...

As said previously , I do not think you could even live a proper 5*/luxury lifestyle on the figures often quoted ( about £45K for a couple after tax ) If you are going to drive around in top of the range Range Rovers, send kids to private school, First class cruises, long haul holidays in Business class, expensive sports/hobbies , big house with regular top end refurbishments , busy social whirl etc etc , you would need at least double that .

If you tot it up I think it would be multiples of that.

flopsy1973

What are people doing in retirement to need over 40k ?  
To get back on topic is my idea make sense or do I need to go back to my old job ? 

cfw1994

flopsy1973 said:

What are people doing in retirement to need over 40k ?  
To get back on topic is my idea make sense or do I need to go back to my old job ? 

Well, the point I tried (& clearly failed to make!) was that YOU need to figure out the numbers for you & your OH - not rely on strangers like me, this forum, Which? and University studies!

For our lifestyle (kids flown, mortgage paid, decent vehicles owned), we feel somewhere around your number is reasonable....yet there are MANY here who will be targeting 2k pcm (some less!) and be perfectly happy.   

Have you followed The Number thread, & more importantly, figured out yours?

Thrugelmir

BritishInvestor said:

jamesd said:

BritishInvestor said:

"The UK one for 30 years is 0.3 lower, so 3.7% before costs"

Some studies show ~3.4%

https://finalytiq.co.uk/withdrawal-rates-in-retirement-portfolios-is-the-4-rule-safe-for-uk-clients/

"The effect of costs is a reduction by a third of them, so say take another 0.2 off for 0.6% total costs"

I see it as closer to 0.5%

https://finalytiq.co.uk/impact-of-adviser-fees-on-withdrawal-rates-in-retirement-portfolio/

You've then got to bear in mind typical investor underperformance

https://www.morningstar.com/articles/1056151/why-fund-returns-are-lower-than-you-might-think

I'll ponder that 3.4% result because what I already use is the result of several different sources. You linked to Araham Okuyana's Feb 2015 post and his Nov 2015 post says "More than 100 years of market data for a 60/40 portfolio puts the SWR for the UK at 3.7%" with a 60:40 portfolio. For the moment, given the inherent uncertainties, I remain comfortable with 0.3 lower in the UK for a range of 50-75% equities and 30 years as a decently reasonable one to use. However, I do read what you and others write and ponder whether I should adjust that or whether it's no longer sufficiently good to use just one number. I've been wondering also whether it's worth tying to put together a range of studies of this in one topic to try to consolidate them and provide a handy reference.

I do not agree with the 50% effect of costs in Abraham Okusanya's Feb 2015 post because it seems to be clearly wrong. It used a start date of 1973 which is not the UK  or US worst case. In the worst case the fees are lower because the amount of money on which the fees are charged is depleted faster. It's also somewhat sensitive to duration, being a higher deduction for longer periods, but not to a great enough extent to matter if adjustments of 0.1 or more are being used - which is about the precision limit for any sensible discussion given all of the uncertainties. For around a third or thirty percent I used Kitces analysis at SAFEMAX in the US for 30 years which did have the pot depletion effect. Abraham himself suggests 0.4% in a Guyton-Klinger context in his Jan 2016 comment here: "Because the SWR is the very worse case scenario, every 1% of fees tend to reduce SWR by 0.40%!"

Investors don't seem to be underperforming in that study. It seems to look at the accumulation phase and observe that the gains of early regular investing can be offset by later losses when the pot size is larger, which isn't an investor failure effect. In the decumulation phase it's interesting to consider whether an increase might be seen instead, as the pot size reduces and so will the effect of later decreases in value. However, since SWRs already take cash flows into account it doesn't seem to adjust the SWR value.

"I'll ponder that 3.4% result because what I already use is the result of several different sources. You linked to Araham Okuyana's Feb 2015 post and his Nov 2015 post says "More than 100 years of market data for a 60/40 portfolio puts the SWR for the UK at 3.7%" with a 60:40 portfolio."

I'm assuming Abraham must've refined his data sources over the years - in this article for a 50/50 he gets 3.43% - I now see this as 3.3% in his tool. 

The data will be derived from the work undertaken by Dimson, Marsh, and Staunton at the London Business School  (the DMS database) who have compiled data from 121 countries. In order to create a historical hindsight view of global equities. This data is used in the Credit Suisse Yearbook (formerly Barclays).  

BritishInvestor

Thrugelmir said:

BritishInvestor said:

jamesd said:

BritishInvestor said:

"The UK one for 30 years is 0.3 lower, so 3.7% before costs"

Some studies show ~3.4%

https://finalytiq.co.uk/withdrawal-rates-in-retirement-portfolios-is-the-4-rule-safe-for-uk-clients/

"The effect of costs is a reduction by a third of them, so say take another 0.2 off for 0.6% total costs"

I see it as closer to 0.5%

https://finalytiq.co.uk/impact-of-adviser-fees-on-withdrawal-rates-in-retirement-portfolio/

You've then got to bear in mind typical investor underperformance

https://www.morningstar.com/articles/1056151/why-fund-returns-are-lower-than-you-might-think

I'll ponder that 3.4% result because what I already use is the result of several different sources. You linked to Araham Okuyana's Feb 2015 post and his Nov 2015 post says "More than 100 years of market data for a 60/40 portfolio puts the SWR for the UK at 3.7%" with a 60:40 portfolio. For the moment, given the inherent uncertainties, I remain comfortable with 0.3 lower in the UK for a range of 50-75% equities and 30 years as a decently reasonable one to use. However, I do read what you and others write and ponder whether I should adjust that or whether it's no longer sufficiently good to use just one number. I've been wondering also whether it's worth tying to put together a range of studies of this in one topic to try to consolidate them and provide a handy reference.

I do not agree with the 50% effect of costs in Abraham Okusanya's Feb 2015 post because it seems to be clearly wrong. It used a start date of 1973 which is not the UK  or US worst case. In the worst case the fees are lower because the amount of money on which the fees are charged is depleted faster. It's also somewhat sensitive to duration, being a higher deduction for longer periods, but not to a great enough extent to matter if adjustments of 0.1 or more are being used - which is about the precision limit for any sensible discussion given all of the uncertainties. For around a third or thirty percent I used Kitces analysis at SAFEMAX in the US for 30 years which did have the pot depletion effect. Abraham himself suggests 0.4% in a Guyton-Klinger context in his Jan 2016 comment here: "Because the SWR is the very worse case scenario, every 1% of fees tend to reduce SWR by 0.40%!"

Investors don't seem to be underperforming in that study. It seems to look at the accumulation phase and observe that the gains of early regular investing can be offset by later losses when the pot size is larger, which isn't an investor failure effect. In the decumulation phase it's interesting to consider whether an increase might be seen instead, as the pot size reduces and so will the effect of later decreases in value. However, since SWRs already take cash flows into account it doesn't seem to adjust the SWR value.

"I'll ponder that 3.4% result because what I already use is the result of several different sources. You linked to Araham Okuyana's Feb 2015 post and his Nov 2015 post says "More than 100 years of market data for a 60/40 portfolio puts the SWR for the UK at 3.7%" with a 60:40 portfolio."

I'm assuming Abraham must've refined his data sources over the years - in this article for a 50/50 he gets 3.43% - I now see this as 3.3% in his tool. 

The data will be derived from the work undertaken by Dimson, Marsh, and Staunton at the London Business School  (the DMS database) who have compiled data from 121 countries. In order to create a historical hindsight view of global equities. This data is used in the Credit Suisse Yearbook (formerly Barclays).  

For Timeline there is a mix of DMS, GFD, FTSE All share and BOE inflation data (for what we are discussing here). Not sure what he used previously.

MallyGirl

flopsy1973 said:

What are people doing in retirement to need over 40k ?  
To get back on topic is my idea make sense or do I need to go back to my old job ? 

Probably a fair amount of the things they did before retirement when they were earning much more.

Linton

flopsy1973 said:

What are people doing in retirement to need over 40k ?  
To get back on topic is my idea make sense or do I need to go back to my old job ? 

Own a narrow boat, annual holidays somewhere hot (pre-covid) and live very comfortably.

Your ideas outlined in your first post makes sense, that is how most people here manage things or plan to.  It is difficult to see what else would one could sensibly do.  In fact with a bit of thought and careful investing you could possibly retire now if all you need to live on for the rest of your life is £30K/year inflation adjusted assuming that figure includes full state pensions for you both and your £1M assets can all be realised (eg they dont include your home). Whether it can safely be implemented depends on the numbers and the investment strategy.  You need to do a lot more detailed work.

Parking_Trouble

flopsy1973 said:

What are people doing in retirement to need over 40k ?  
To get back on topic is my idea make sense or do I need to go back to my old job ? 

The people who need over £40k are the ones who want to maintain their pre-retirement standard of living, or those who have plans to travel extensively, or take up expensive hobbies. There's an infinite  number of combinations of aspirations and desires. Hence the need to make some plans and work out the numbers.

Looks like your idea will work fine. Retire at 60 and fund your shortfall from your sizable savings until age 68. Seems that you don't quite understand the value of what you have. Sounds like your OH needs to work on their financial security. Do they feature in your will?

To keep on topic it's usually better to provide a lot more detail and answer questions fairly swiftly, otherwise it goes down the Guystown-Klingon black hole at warp speed. Yes or No answers don't usually come easy.

No one on here knows what your old job is and how it differs from your current job but it seems pretty safe to say No you don't need to go back to it.

[Deleted User]

flopsy1973 said:

We don't have a very expensive lifestyle hence the figures quoted the only extra maybe would be travelling which I am keen to do but that would be in region of 3k a year maybe more some years. I am just worried  about the gap until state pension  and then  we will need lot less. Her parents do it living in Spain on less than figures above and possibly we will move out there one day. So could we o it ? 

The minimum amount that the Spanish authorities now ask for for proof of regular income is EUR 32k p.a. per couple (for new tax residents - 28k for the primary and 4k for each dependant), so it looks like you are okay to go to Spain later if you wish.