1yr into receiving State Pension and struggling to change my mindset

sparkiemalarkie

I have now had 1 year of receiving my state pension and can't get to grips with how much I can spend.

I paid voluntary NI contributions and receive nearly a full State Pension.
I also have a small Teachers Pension

This takes me into the basic rate tax bracket.

I also have savings, mostly in cash and cash ISAs, enough so that I will have to pay tax on the interest....

I am finding it difficult to change my mindset of needing to see the savings pot increase each month.
I have no idea how to work out how much of my savings I can afford to spend and how to organize this.

I would really appreciate some suggestions and pointers

many thanks

sx

Dazed_and_C0nfused

I paid voluntary NI contributions and receive nearly a full State Pension.

I also have a small Teachers Pension

This takes me into the basic rate tax bracket.

I also have savings, mostly in cash and cash ISAs, enough so that I will have to pay tax on the interest....

Are you aware of the savings starter rate?

sparkiemalarkie

I am, thank you.
My income, from the pensions and savings interest, uses it all up.

sx

Marcon

sparkiemalarkie said:

I have now had 1 year of receiving my state pension and can't get to grips with how much I can spend.

I paid voluntary NI contributions and receive nearly a full State Pension.
I also have a small Teachers Pension

This takes me into the basic rate tax bracket.

I also have savings, mostly in cash and cash ISAs, enough so that I will have to pay tax on the interest....

I am finding it difficult to change my mindset of needing to see the savings pot increase each month.

You are not alone! The beauty of having a DB pension, however small, is that you are guaranteed a certain level of income - ditto the state pension.

sparkiemalarkie said:

I have no idea how to work out how much of my savings I can afford to spend and how to organize this.

Ever done a budget? See https://www.moneysavingexpert.com/banking/budget-planning/

sparkiemalarkie

Thank you. It's also knowing how much of my savings I need to keep in reserve for 'later on in life'

sx

[Deleted User]

We never know how long we have. So, make sure you spend some of that money to enjoy your retirement. Of course, keep some savings in reserve for those unexpected expenses. As for 'later on in life' I think by mid to late 60s we are already there! Like myself you have the benefit of a secure retirement income that is index linked. Just being curious here but when you say a small TPS pension how much are you talking about? Obviously, the size of that will affect your spending decisions. However, reading between the lines if you are paying tax on savings interest, they must be quite healthy when compared to the average person. Take care. Best wishes.

bostonerimus

Do a budget! Then you will know how much you need to draw from your savings. Tell us the level of your savings and the amount you need to draw and we can give sensible opinions.

daveyjp

Starting point is a personal spending statement.

A list of what you spend, split between what you must spend and what you choose to spend.

From that you can make decisions on how much in savings you need.

We don't know what news is around the corner.  2.5 years ago a friend was diagnosed with a terminal illness and given 2 years, he died in August.  In 2 years he spent every penny living life with his family and setting them up for the future.  He  left just enough for a funeral and also maxed out a couple of credit cards which won't get paid!

Brie

This is from the debt board but is a great tool to get to grips about what you are spending and to see what the bigger picture might look like.

http://www.stoozing.com/soa.php

Basically - go through the last couple of bank statements and fill in what all your normal spending is on average each month.  Then add up your monthly income.  Where's the gaps?  What do you have to fill them. 

Maybe think about what all your savings would look like if you were getting a not so massive 3% a year on them.  What happens if you have no increases.  If you spending is more than your income - how much is that and how long would your savings cover it if there were no increases?

OK - so then go back to what you are spending.  Are you still buying clothes like you need to dress for work?  Maybe you're eating out more because you have the time?  Maybe you're travelling less as you don't need to commute?  All of these things need to be balanced out. 

When you get things filled in maybe post it on the debt free board just to get some general advice?

michaels

AS your non-pension money is in cash assuming you shop around for the best rates it will probably earn on average about 3% less than inflation every year.  If you assume you need it to last a minimum of 30 years then you can spend 2% of your initial holding in real terms (ie increasing by inflation) each year.

Eg if you have 100k then you can spend about £2000 per year (increasing with inflation) and expect it to last for 30 years.

(It could be worse than this - currently inflation is about 5% more than the best savings rate, if this continued then you could only spend about £1450 per year safely)

There are other places you could invest your money that might give you a higher safe return for example inflation linked government bonds.  If you were willing to take investment risk then splitting your savings between shares, bonds and cash has been shown historically to give the highest safe income.

Audaxer

sparkiemalarkie said:

I also have savings, mostly in cash and cash ISAs, enough so that I will have to pay tax on the interest....

I am finding it difficult to change my mindset of needing to see the savings pot increase each month.
I have no idea how to work out how much of my savings I can afford to spend and how to organize this.

I would really appreciate some suggestions and pointers

many thanks

sx

Have you considered transferring some of the money in your Cash ISAs into S&S ISAs and investing it? Although savings interest rates have improved a lot recently, it is worth considering investing cash that you don't plan to access for say, at least 10 years or more. Before making any decisions about what to invest in, you should of course do your own research on this forum and sites like Monevator.