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

sparkiemalarkie

Thank you for your comments.....
I think my opening post must be confusing.

What I really want to say is - I am still being too frugal.
I'm too anxious about over spending so I am still scrimping.

I'm probably looking for a formula similar to the one michaels was suggesting, in the above post, to give me a picture of what would happen to my savings over time and guidance on how and when to withdraw / move savings

Do I withdraw regularly into a 'spending account' or as and when I want ?
Do I withdraw from 1 particular account or just from interest.
Do I withdraw from the ISAs or ordinary savings accounts.

I am interested in other forms of savings and investments mentioned above, so thanks for that

tia

sx

Stubod

..you really need to set up a spreadsheet showing income v expenditure.

For years our "target" was to save "x" amount per year, and the goal was that our overall savings "pot" should increase every year, but since retiring it is now focused on a realistic drawdown which includes spending whatever income we get whilst ensuring a reasonable drawdown "pot" is retained.

I accept it is a difficult to change your mindset from expecting to see an annual "increase in savings" compared to drawing down what you have saved, but a spreadsheet is the simplest way to demonstrate that this is actually OK.

Remember you don't live forever, and while maintaining a certain level of savings is good, dying and leaving an ever increasing "pot" is a bit of a waste of your time!

Once we retired I changed our "goal" from saving "x" per month, to one showing how much we planned to have after each year. ie if we have more than we planned, then we are free to spend it on whatever takes our fancy...

Audaxer

sparkiemalarkie said:

I am interested in other forms of savings and investments mentioned above, so thanks for that

Just to give you an example of savings v. investments over the long term. As said in an above post, savings of £100k could last 30 years if taking out £2,000 per year, increasing with inflation. With an investment portfolio of £100k, you could draw out £3,500 per year, increasing with inflation, and possibly have a higher capital balance after 30 years than you started with. Investments aren't risk free and will see volatility and loss years, but over the long-term I have read that 3.5% to 4% was a safe withdrawal rate in the vast majority of previous 30-year periods. So worth considering if you want the extra income, but you would need to firstly do your own research and/or speak to an Independent Financial Advisor.

Investments aren't for everyone, but many retirees with DC pensions and/or S&S ISAs have to rely on investments for at least some of their retirement income.  

bostonerimus

sparkiemalarkie said:

Thank you for your comments.....
I think my opening post must be confusing.

What I really want to say is - I am still being too frugal.
I'm too anxious about over spending so I am still scrimping.

I'm probably looking for a formula similar to the one michaels was suggesting, in the above post, to give me a picture of what would happen to my savings over time and guidance on how and when to withdraw / move savings

Do I withdraw regularly into a 'spending account' or as and when I want ?
Do I withdraw from 1 particular account or just from interest.
Do I withdraw from the ISAs or ordinary savings accounts.

I am interested in other forms of savings and investments mentioned above, so thanks for that

tia

sx

There is nothing wrong in being frugal. I live on a pension and some rental income and I could spend a lot more from my other savings and investments, but I don't because I don't derive pleasure from spending money on things I don't really need.

So you still need to do a budget and work out where your income will come from. If you have cash investments then inflation will be your big enemy and you should get your cash into ISAs and maybe structure your cash as a saving account ladder of durations form 1 to 5 years. How you exactly draw your money ie ISA vs ordinary saving account might have some tax implications so again we would need to know how much you would be withdrawing. If you want regular income you might look at an annuity. Another alternative would be stocks and shares ISAs, but they involve risk and some basic knowledge of investing.

Albermarle

sparkiemalarkie said:

Thank you for your comments.....
I think my opening post must be confusing.

What I really want to say is - I am still being too frugal.
I'm too anxious about over spending so I am still scrimping.

I'm probably looking for a formula similar to the one michaels was suggesting, in the above post, to give me a picture of what would happen to my savings over time and guidance on how and when to withdraw / move savings

Do I withdraw regularly into a 'spending account' or as and when I want ?
Do I withdraw from 1 particular account or just from interest.
Do I withdraw from the ISAs or ordinary savings accounts.

I am interested in other forms of savings and investments mentioned above, so thanks for that

tia

sx

I think there is still an element of confusion. How can any body here say how much savings you need to use and when, if we have no idea how your planned spending matches up with your current pension income. How about a simple plan.

1) Work out your basic spending needs, at todays prices, with the budget advice in previous posts. Energy, council tax, car costs, food etc.
2) Subtract this from your pension income and see what is (hopefully) left.
3) Is what is left enough to give you sufficient annual money to enjoy your retirement over and above your basic spending needs ( within reason)? Obviously it can only be an estimate.
4) If not then work out the shortfall per year 
5) Add up all your savings

Post your figures for 4) and 5) and you should get some helpful comments.

michaels

Albermarle said:

sparkiemalarkie said:

Thank you for your comments.....
I think my opening post must be confusing.

What I really want to say is - I am still being too frugal.
I'm too anxious about over spending so I am still scrimping.

I'm probably looking for a formula similar to the one michaels was suggesting, in the above post, to give me a picture of what would happen to my savings over time and guidance on how and when to withdraw / move savings

Do I withdraw regularly into a 'spending account' or as and when I want ?
Do I withdraw from 1 particular account or just from interest.
Do I withdraw from the ISAs or ordinary savings accounts.

I am interested in other forms of savings and investments mentioned above, so thanks for that

tia

sx

I think there is still an element of confusion. How can any body here say how much savings you need to use and when, if we have no idea how your planned spending matches up with your current pension income. How about a simple plan.

1) Work out your basic spending needs, at todays prices, with the budget advice in previous posts. Energy, council tax, car costs, food etc.
2) Subtract this from your pension income and see what is (hopefully) left.
3) Is what is left enough to give you sufficient annual money to enjoy your retirement over and above your basic spending needs ( within reason)? Obviously it can only be an estimate.
4) If not then work out the shortfall per year 
5) Add up all your savings

Post your figures for 4) and 5) and you should get some helpful comments.

I think from the OP it is more a question of getting out of the savings mindset rather than a question of meeting a desired expenditure level.  Ie they can meet their 'must spend' and just want to know what their 'could spend' is rather than perhaps currently seeing their savings pot increasing each month?

squirrelpie

sparkiemalarkie said:

Do I withdraw regularly into a 'spending account' or as and when I want ?
Do I withdraw from 1 particular account or just from interest.
Do I withdraw from the ISAs or ordinary savings accounts.

You can withdraw as and when you want, but you'll probably find it easier to keep track if you transfer it into a spending account first, so you can see everything you're spending in one place.

If you can manage happily by just withdrawing interest, then that's good, but be aware that inflation will reduce the value of your capital over time. If you need to withdraw some capital then there are calculators that will tell you how long the money will last, as others have mentioned.

ISAs and ordinary accounts are different. Interest in ISAs doesn't count against your Personal Savings Allowance. So you should withdraw from normal savings first, and indeed you should pay £20,000 from normal savings into ISAs each year to minimise future tax. As others have said, you might want to consider other investments as well as cash. It's easy to move money from one form of an investment to another whilst keeping it within an ISA.

bostonerimus

squirrelpie said:

sparkiemalarkie said:

Do I withdraw regularly into a 'spending account' or as and when I want ?
Do I withdraw from 1 particular account or just from interest.
Do I withdraw from the ISAs or ordinary savings accounts.

You can withdraw as and when you want, but you'll probably find it easier to keep track if you transfer it into a spending account first, so you can see everything you're spending in one place.

If you can manage happily by just withdrawing interest, then that's good, but be aware that inflation will reduce the value of your capital over time. If you need to withdraw some capital then there are calculators that will tell you how long the money will last, as others have mentioned.

ISAs and ordinary accounts are different. Interest in ISAs doesn't count against your Personal Savings Allowance. So you should withdraw from normal savings first, and indeed you should pay £20,000 from normal savings into ISAs each year to minimise future tax. As others have said, you might want to consider other investments as well as cash. It's easy to move money from one form of an investment to another whilst keeping it within an ISA.

If the OP can get by drawing nothing or just interest once or twice a year into a current account then that will be a sustainable plan. There is no need to take on risk if they are covering their needs. If this is a question of how much to withdraw we can only make relevant comments with more information like age, income needs above pensions, the mount in savings to generate that income and whether the OP wants to leave money to heirs. If it's more of a psychological question of transitioning from accumulation to drawdown, well then the starting point is the same ie how much can you safely withdraw.

Nebulous2

You appear to have hit the problem I have and many others may face as well. Retirement isn’t just about facts and figures, but about a mindset as well. The psychological adjustment is a challenge. That move from accumulation to decumulation catches a lot of people out. 

I’m well short of state pension age, but have a reasonable DB pension, and I’m working part-time, generally one day a week.  We split our money roughly 50/50 with half invested and half in cash, mainly premium bonds. Ive been retired around 18 months. I’ve spent some on hobbies; bikes, cameras etc. The idea was to drawdown on the cash to fund the gap until state pension age. We’ve taken out £7k to date, and I’ve grudged it - with a conversation along the lines of, ‘Do we really need to do this?’ every time we have withdrawn money. 

At the same time I’ve saved £13k in a SIPP from my part-time work, and despite the dramas in the market this year we are still up about £3k in our investments. So we are still accumulating, at what should be the tightest financial period before two state pensions kick in... 

Live dangerously - go to a decent restaurant, buy something you’ve fancied but thought you couldn’t afford - and try not to feel guilty about it! 

bostonerimus

Nebulous2 said:

You appear to have hit the problem I have and many others may face as well. Retirement isn’t just about facts and figures, but about a mindset as well. The psychological adjustment is a challenge. That move from accumulation to decumulation catches a lot of people out. 

I’m well short of state pension age, but have a reasonable DB pension, and I’m working part-time, generally one day a week.  We split our money roughly 50/50 with half invested and half in cash, mainly premium bonds. Ive been retired around 18 months. I’ve spent some on hobbies; bikes, cameras etc. The idea was to drawdown on the cash to fund the gap until state pension age. We’ve taken out £7k to date, and I’ve grudged it - with a conversation along the lines of, ‘Do we really need to do this?’ every time we have withdrawn money. 

At the same time I’ve saved £13k in a SIPP from my part-time work, and despite the dramas in the market this year we are still up about £3k in our investments. So we are still accumulating, at what should be the tightest financial period before two state pensions kick in... 

Live dangerously - go to a decent restaurant, buy something you’ve fancied but thought you couldn’t afford - and try not to feel guilty about it! 

The first year of retirement can be tricky as the wage cheques stop coming in and you have to get use to a different rhythm in your bank account and personal finances. That transition is made easier with a DB pension as that replaces the wage cheques. However, a little drawdown planning will further ease the mind so you can spend sensibly. Certainly have a good night out or that holiday you've always planned, but only if it fits into your budget. Excessive spending from a pension pot early on can be very dangerous to your retirement finances.