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

Brie

bostonerimus said:

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. 

This is the thing I'm coming to terms with. 

Decent pay cheque has gone but so has the mortgage.  Tiddly pay cheque won't cover our normal spending.  I'm getting 1 of 3 pensions as only 1 is DB and the other 2 have dropped in value so much I'm waffling on about what to do.  Inheritance is covering some things and could continue to do so for a couple of years, more inheritance expected at some point that will make life easy.  State pension kicking in next year and then 2 years on for the OH.  So essentially all I need to organise a bit better is getting through the next 2-3 years.  Worse case scenario we dip back into our flexible mortgage (kinda like equity release but without the hassles).  

But there is still the struggle with guilt about sleeping in so much on non working days.  And looking at the way I've managed credit cards over the last 30 years is being revised a lot too.  Those that think all retirement planning concerns dealing with pensions are sadly mistaken.  It's a trap I fall into much too often still myself.  

JGB1955

I'm one year into receiving my State Pension.  I also have a couple of DB pensions.  I've never been so rich!  Currently able to save £600 a month.  Spending money is the issue.  £25K is about to go to landscaping the garden.  Another £4k on home improvements.  £10K on a 4 week holiday in late 2023.  How long will the other £230K last?  That's the problem!  Moving from 'saving' to 'spending' seems to be the hardest issue.  

bostonerimus

Brie said:

bostonerimus said:

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. 

This is the thing I'm coming to terms with. 

Decent pay cheque has gone but so has the mortgage.  Tiddly pay cheque won't cover our normal spending.  I'm getting 1 of 3 pensions as only 1 is DB and the other 2 have dropped in value so much I'm waffling on about what to do.  Inheritance is covering some things and could continue to do so for a couple of years, more inheritance expected at some point that will make life easy.  State pension kicking in next year and then 2 years on for the OH.  So essentially all I need to organise a bit better is getting through the next 2-3 years.  Worse case scenario we dip back into our flexible mortgage (kinda like equity release but without the hassles).  

But there is still the struggle with guilt about sleeping in so much on non working days.  And looking at the way I've managed credit cards over the last 30 years is being revised a lot too.  Those that think all retirement planning concerns dealing with pensions are sadly mistaken.  It's a trap I fall into much too often still myself.  

I had a long term plan to retire a little early and things worked out so I could do it at 53. I had paid off my mortgage on my home and a rental so I had the rental income and I was able to take my DB pension at 55. So I had to span a gap of two years. I did that in a very conservative way by just putting enough in the bank to cover two years of spending when the rental income was added in. One side effect of this was that my taxable income was low enough so that I qualified for many benefits most of which I refused. I was initially a bit worried, but quickly got into a rhythm and at the end of the two years my DB pension started and I still had a good balance in my bank account. Now my expenses are covered by the DB pension and rental income and I don't do any drawdown. When SP starts I will probably gift it to my heirs.

michaels

bostonerimus said:

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.

Not sure 'just drawing the interest is that sustainable as there is a good chance within 2 years that inflation has eroded the capital value by 20% so then the interest (if rates have fallen back) will be worth 20% less than it was originally.

bostonerimus

michaels said:

bostonerimus said:

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.

Not sure 'just drawing the interest is that sustainable as there is a good chance within 2 years that inflation has eroded the capital value by 20% so then the interest (if rates have fallen back) will be worth 20% less than it was originally.

True enough, the OP would have to cut spending and might end up in a nasty downward spiral. This is why some planning that involves desired income, inflation, investment returns and longevity is necessary.

enthusiasticsaver

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

The first step is to see what you are spending now and how that compares to your current income. That will tell you if you are over spending.

If you are regularly spending more than income and dipping into savings then maybe set a limit you are comfortable with although obviously you need to bear in mind that you don’t know how many years those savings need to last for. 

Where you spend from or draw down from is up to you. Personally I would draw from the account with the lowest interest rate. 

theoretica

Don't forget to take equity in your property into account if you own one. Do you care about leaving anything in your will? 

[Deleted User]

Look at annuities. Makes everything simpler. 

sgx2000

Wisest words I have seen is...

If you reach pension age.
You can reasonably expect 10 years of relatively good health
Followed by 10 years of declining health

So do not assume you will need the same income, each year, throughout the remainder of your life.
In you later years you physically wont be capable of,  e.g.  going on long foreign holidays etc...

Far too many people skimp on their 'good years' because they assume they will need the same income in their declining years...

But, everyone is different....... 

Mordko above is probably right..
Annuities are getting better..
Put the money in. 
Regular fixed income

Then just live your life... 

calcotti

sgx2000 said:

So do not assume you will need the same income, each year, throughout the remainder of your life.
In you later years you physically wont be capable of,  e.g.  going on long foreign holidays etc...
Far too many people skimp on their 'good years' because they assume they will need the same income in their declining years... 

On the other hand ‘declining’ can increase costs if you then need to pay people to do things you previously did yourself. Whatever we decide it’s guesswork!