How much over and above our pensions do we need?

CharlesLincs

I hope that's the right forum for this question. Wife and myself have various pensions (company and state) whose current values amount to a little above £30,000 (ie in today's money). We also have ~200K in various S&S ISAs and savings accounts, are home owners (£400K+, no mortgage) and no debt. No kids either.

We had planned to retire within the next two/three years (so we'll be loooking at slightly more, perhaps £32,000, for the pensions) but with the current price shocks/cost of living crisis we're beginning to have second thoughts. Our outgoings for 2021 have been around ~£25,000 and for this year we'll hit just a little more (less than £1000, belt already tightened somewhat). The plan also was to travel more, so I assume our outgoings, once retired, will climb to something starting in the region of £35,000, plus yearly inflation.

It's not hard to create a spreadsheet with current values for pensions/savings income/savings release and projected outgoings plus inflation... but the problem there is that like everybody else we have no idea how long we'll be around. Would it be wise to assume we can do 30 years (that'll bring me to 95/6) with our current setup and then, savings eaten but still having a mortgage-free home, switch to equity release for part of the house value? In that case, I think we could retire as planned. OTOH, we could (reluctantly) work a couple years longer to shorten the time spent in retirement and consequently the money needed to finance that.

Put differently, how would I best approach this sort of question? Any words of wisdom (also websites, books with hints etc) or "example numbers" are very welcome.

dunstonh

 but the problem there is that like everybody else we have no idea how long we'll be around. 

About half make 94 but it falls closer to 10% by 100.

We also have ~200K in various S&S ISAs and savings accounts

Think about using the pension wrapper as well. It beats S&S ISAs unless lifetime allowance is coming into play.

Albermarle

Presume the non state pensions you have are Defined Benefit/Final Salary ones from what you say.
If so you need to carefully read the rules of the schemes involved, especially regarding inflation increases.
Usually there are inflation linked increases after you start taking the pension but they are normally capped at 2.5% to 5% ( unless an uncapped public sector scheme) .
The state pension is expected to increase fully with inflation ( and maybe more some years if the Triple Lock stays in place)
So you have some significant protection against inflation.

On the other hand your S&S ISA's should beat inflation in the long run, but obviously somewhat of a setback for investments this year. Also cash savings have been hit by inflation as well.

 About half make 94 but it falls closer to 10% by 100.

I think this means that there is a nearly 50% chance of one of you reaching 94 ( not both ) 

Nebulous2

How much you need is very individual. There's a lengthy thread on here, called the number, with people calculating what they need. It's lengthy, but worth a skim at least: -  Pensions Planning: The NUMBER — MoneySavingExpert Forum

You've said you will have £30k including company and state. What's the breakdown of that? 2 full state pensions will be around £10k each by next year, which means around £10k for company pensions. Are your state pensions both full? You might be able to increase them. Will you be at state pension age by the time you stop? The gap between early retirement and getting state pension can be costly. 

With no desire to leave an inheritance, a valuable property (any thoughts to downsize rather than go for equity release?) and a decent cash cushion I'd say you will be fine, but you need to reassure yourself. 

You may find your expenditure doesn't rise as much as you think. I haven't spent as much as I expected in my first year post-retirement, but travel / holidays has been more difficult due to the pandemic, than we would have expected. 

Stubod

..a spreadsheet is a good starting point. You can set up your known/projected income and planned expenditure for each year, and add in whatever interest you think you might get. In theory the state pensions should keep pace with inflation, your private pensions may or may not? Run the spreadsheet up to (say) 95 and see what happens? In theory I would guess that 2 full state pensions "should" just about cover the average persons "essential" spends, so anyhthing on top could be a bonus. On top of that if you have nobody to leave anything to, you can factor in equity release of your property at around 85?

barnstar2077

Personally, if you have a reasonable amount to live on and large savings then I would retire and live a little when you originally planned.  Your savings are good enough to take care of quite a few bumps in the road and you aren't getting any younger.

My mum waited to retire until she was 68 and barely lived another year.  Even if you did live to be 90, by then I would think you would be happy with a day without rain and a nice cuppa!

I would look into what happens if you or your partner dies first though.  Would one be worse off than the other depending who went first for instance?

sheslookinhot

CharlesLincs said:

I hope that's the right forum for this question. Wife and myself have various pensions (company and state) whose current values amount to a little above £30,000 (ie in today's money). We also have ~200K in various S&S ISAs and savings accounts, are home owners (£400K+, no mortgage) and no debt. No kids either.

We had planned to retire within the next two/three years (so we'll be loooking at slightly more, perhaps £32,000, for the pensions) but with the current price shocks/cost of living crisis we're beginning to have second thoughts. Our outgoings for 2021 have been around ~£25,000 and for this year we'll hit just a little more (less than £1000, belt already tightened somewhat). The plan also was to travel more, so I assume our outgoings, once retired, will climb to something starting in the region of £35,000, plus yearly inflation.

It's not hard to create a spreadsheet with current values for pensions/savings income/savings release and projected outgoings plus inflation... but the problem there is that like everybody else we have no idea how long we'll be around. Would it be wise to assume we can do 30 years (that'll bring me to 95/6) with our current setup and then, savings eaten but still having a mortgage-free home, switch to equity release for part of the house value? In that case, I think we could retire as planned. OTOH, we could (reluctantly) work a couple years longer to shorten the time spent in retirement and consequently the money needed to finance that.

Put differently, how would I best approach this sort of question? Any words of wisdom (also websites, books with hints etc) or "example numbers" are very welcome.

Quality time, free of health issues, generally will be early in your retirement. Think hard about working longer as everyday worked is a day off your valuable retirement. 

SouthCoastBoy

sheslookinhot said:

CharlesLincs said:

I hope that's the right forum for this question. Wife and myself have various pensions (company and state) whose current values amount to a little above £30,000 (ie in today's money). We also have ~200K in various S&S ISAs and savings accounts, are home owners (£400K+, no mortgage) and no debt. No kids either.

We had planned to retire within the next two/three years (so we'll be loooking at slightly more, perhaps £32,000, for the pensions) but with the current price shocks/cost of living crisis we're beginning to have second thoughts. Our outgoings for 2021 have been around ~£25,000 and for this year we'll hit just a little more (less than £1000, belt already tightened somewhat). The plan also was to travel more, so I assume our outgoings, once retired, will climb to something starting in the region of £35,000, plus yearly inflation.

It's not hard to create a spreadsheet with current values for pensions/savings income/savings release and projected outgoings plus inflation... but the problem there is that like everybody else we have no idea how long we'll be around. Would it be wise to assume we can do 30 years (that'll bring me to 95/6) with our current setup and then, savings eaten but still having a mortgage-free home, switch to equity release for part of the house value? In that case, I think we could retire as planned. OTOH, we could (reluctantly) work a couple years longer to shorten the time spent in retirement and consequently the money needed to finance that.

Put differently, how would I best approach this sort of question? Any words of wisdom (also websites, books with hints etc) or "example numbers" are very welcome.

Quality time, free of health issues, generally will be early in your retirement. Think hard about working longer as everyday worked is a day off your valuable retirement. 

Yes  that can't be emphasised enough in my opinion. I play a lot of golf with people in their 60s and 70s, as they tend towards 70 many of them appear to suffer ailments that curtail their aspirations

noitsnotme

barnstar2077 said:

Even if you did live to be 90, by then I would think you would be happy with a day without rain and a nice cuppa!

That’s such a good way of looking at it.  That will stick with me 👍

CharlesLincs

(Sorry for the delay in answering... I was locked out of the account and had some trouble resetting the password.)

@Albermarle Yes, the company pension is a Final Salary scheme and I have just looked into the T&Cs: 2.5% seems to be the cap. Thank you for highlighting this... was not on the radar!

@Nebulous Unfortunately, neither state pension is full (both together account for ~£14,000) and while we can (and will) top up for a couple of years in the past, all before 2006 (I think) is done and dusted.

The spreadsheet I have looks good for ~30 years. There's not much left from the savings by then but then again, we still have the house :-/ so I assume we'll stick with the advice re enjoying early and not being overly cautious. In fact, one of us is slightly more careful than the other (as is often the case) so this was certainly a very helpful discussion.