A Couple of Questions for the Forum Retiree's ...

Pat38493

scobie said:

The notion that keeping working increases the pot is a powerful one - and so too is the implied other point: that it decreases the length of time your pot needs to support you. 

... and also decreases the period of uncertainty that you need to model in your plan (if you are assuming a particular longevity).

Albermarle

Pat38493 said:

scobie said:

The notion that keeping working increases the pot is a powerful one - and so too is the implied other point: that it decreases the length of time your pot needs to support you. 

... and also decreases the period of uncertainty that you need to model in your plan (if you are assuming a particular longevity).

Yes, I found doing OMY ( or two or three) has made me much more relaxed about money in retirement than I thought I would be.
Although lots of devotees on this forum for leaving work asap, there is not much point retiring and then lying awake at night worrying about stock markets, or that the car is on its way out etc ( if you are that way inclined) 
I did not mind my job too much ( just had been doing it too long) so that made OMY easier of course.

Pat38493

Albermarle said:

Pat38493 said:

scobie said:

The notion that keeping working increases the pot is a powerful one - and so too is the implied other point: that it decreases the length of time your pot needs to support you. 

... and also decreases the period of uncertainty that you need to model in your plan (if you are assuming a particular longevity).

Yes, I found doing OMY ( or two or three) has made me much more relaxed about money in retirement than I thought I would be.
Although lots of devotees on this forum for leaving work asap, there is not much point retiring and then lying awake at night worrying about stock markets, or that the car is on its way out etc ( if you are that way inclined) 
I did not mind my job too much ( just had been doing it too long) so that made OMY easier of course.

The problem for me is trying to balance the desire to stop working earlier, with the risk of having to reduce my spending during retirement, which is a highly subjective issue and very difficult to judge.  We are lucky enough to be a pretty high income household and we are not really used to having to economize or look for cost savings in our budget.  

I recently did a spreadsheet for my spending which started with the historical spend for the last year, and I then altered it based on various assumptions.  This gives a pretty huge range for my part of the joint spending.  If I literally cancelled everything and never left the house and we just ate food and went for walks, I reckon I could cut my spend to about £12k from the current £41K net spend (excluding mortgage and university support but taking them into account as temporary costs).  

I have various other scenarios with different levels of belt tightening.  The question is, would I resent reducing my spending and having to spend time getting the best deals for everything all the time, or take cheaper holidays etc,  when I didn't need to do that before?   If not, I could pretty much retire on my 55th Birthday as we could already support joint income that is above the famous £54500 amount quoted for a luxury retirement by "Retirement Living Standards".

The other thing is that I have no idea how my tastes and activities will change if I stop working - will I want more holidays or less.  Will I drink more alcohol or less?  Will I want a fancy car or be happy to make do with a cheap banger?  Will I take up expensive hobbies or take up free activities like walking and so on?  I really don't know so a lot of my modelling is based on something not that far from my current spending which I suspect is pretty high.  

Anyway I guess I shouldn't be posting here as I'm not retired yet....  

Albermarle

The question is, would I resent reducing my spending and having to spend time getting the best deals for everything all the time, or take cheaper holidays etc,  when I didn't need to do that before?

I think most of the regular posters on this forum, tend to be bargain hunters to a greater or lesser extent as a matter of habit anyway, regardless of how big their pot is, and regardless of whether they are retired or not.

MrDidz

sgx2000 said:

As I am very near to retirement...
I find myself questioning everything, and doubting my conclusions... lol

1.  Would you still retire when you did?
2.  Did you make any major mistakes?
3.  What would you do differently?

1. I stopped working in 2013, which was early as I did not reach retirement age until 2921.  But I was freelancing and it was high pressure and there just wasn't the work.  It meant I had to live off my savings for eight years but was probably for the best.
2. Yes! I didn't take all my pension in cash and now I have problems with a shrinking pension fund and no way of getting my hands on it without losing a fortune.
3. Take everything out in cash and look after my own money.  That way at least if I lose it I've only got myself to blame.

Linton

Pat38493 said:

Albermarle said:

Pat38493 said:

scobie said:

The notion that keeping working increases the pot is a powerful one - and so too is the implied other point: that it decreases the length of time your pot needs to support you. 

... and also decreases the period of uncertainty that you need to model in your plan (if you are assuming a particular longevity).

Yes, I found doing OMY ( or two or three) has made me much more relaxed about money in retirement than I thought I would be.
Although lots of devotees on this forum for leaving work asap, there is not much point retiring and then lying awake at night worrying about stock markets, or that the car is on its way out etc ( if you are that way inclined) 
I did not mind my job too much ( just had been doing it too long) so that made OMY easier of course.

The problem for me is trying to balance the desire to stop working earlier, with the risk of having to reduce my spending during retirement, which is a highly subjective issue and very difficult to judge.  We are lucky enough to be a pretty high income household and we are not really used to having to economize or look for cost savings in our budget.  

I recently did a spreadsheet for my spending which started with the historical spend for the last year, and I then altered it based on various assumptions.  This gives a pretty huge range for my part of the joint spending.  If I literally cancelled everything and never left the house and we just ate food and went for walks, I reckon I could cut my spend to about £12k from the current £41K net spend (excluding mortgage and university support but taking them into account as temporary costs).  

I have various other scenarios with different levels of belt tightening.  The question is, would I resent reducing my spending and having to spend time getting the best deals for everything all the time, or take cheaper holidays etc,  when I didn't need to do that before?   If not, I could pretty much retire on my 55th Birthday as we could already support joint income that is above the famous £54500 amount quoted for a luxury retirement by "Retirement Living Standards".

The other thing is that I have no idea how my tastes and activities will change if I stop working - will I want more holidays or less.  Will I drink more alcohol or less?  Will I want a fancy car or be happy to make do with a cheap banger?  Will I take up expensive hobbies or take up free activities like walking and so on?  I really don't know so a lot of my modelling is based on something not that far from my current spending which I suspect is pretty high.  

Anyway I guess I shouldn't be posting here as I'm not retired yet....  

You dont really know what will happen but in my view the best estimate of future spending is what you are spending now minus any major items that wont apply in retirement.  That was what our retirement plan was based on.  The rationale being that if you were financially happy prior to retirement you would also be so afterwards with the same expenditure.  One gets used to a particular standard of living.  The details of what you spend your money on dont matter.

I think if you want particular expensive one-off items it is best to plan for them specifically rather than merge it in with the every day expenditure.

Like you we have sufficient income to meet all our wants and dont go to any great effort to economise or chase special deals.   The things we can't afford we don't want anyway. Oddly the effort taken to minimise expenditure is inversely proportional to the amount of money involved. We spend more time discussing whether to spend + or - 50p on some household item than + or - £100 on say a weekend away.

Pat38493

Linton said:

You dont really know what will happen but in my view the best estimate of future spending is what you are spending now minus any major items that wont apply in retirement.  That was what our retirement plan was based on.  The rationale being that if you were financially happy prior to retirement you would also be so afterwards with the same expenditure.  One gets used to a particular standard of living.  The details of what you spend your money on dont matter.

I think if you want particular expensive one-off items it is best to plan for them specifically rather than merge it in with the every day expenditure.

Like you we have sufficient income to meet all our wants and dont go to any great effort to economise or chase special deals.   The things we can't afford we don't want anyway. Oddly the effort taken to minimise expenditure is inversely proportional to the amount of money involved. We spend more time discussing whether to spend + or - 50p on some household item than + or - £100 on say a weekend away.

This is certainly the safest approach but even this is somewhat dependent on the current situation, and if you really dislike your job it might alter the equation.

As an example, my household currently pays for an all in Sky package that currently costs about £190 per month, plus several other TV subscriptions.  If I was no longer working there is no way I would be paying that amount, especially given that about 80% of what we watch is available for free on freeview.  Is it stupid to have not fixed that already?  Yes, but I guess it's not a priority (also partly because they are supposed to be fitting full fibre cables to my house shortly so I will have different options available again). 

This is just one example but I am pretty sure that if I had all day, I could cut a lot of my budget items by a significant %.  Same with holidays - my current historical holiday spending includes bringing the kids with us at our cost, which we probably won't do once they are working.

Albermarle

 Same with holidays - my current historical holiday spending includes bringing the kids with us at our cost, which we probably won't do once they are working.

I wouldn't bank on that .....

Pat38493

MrDidz said:

1. Yes! I didn't take all my pension in cash and now I have problems with a shrinking pension fund and no way of getting my hands on it without losing a fortune.
2. Take everything out in cash and look after my own money.  That way at least if I lose it I've only got myself to blame.

You would have to give some details to understand, but if you had taken your pension out all in cash, you might have paid a huge tax bill and it would have further shrunk by 10% in the last year due to inflation, which is not that far off what a well invested pension situation would be, but the cash would not start growing again.  I doubt you will find anyone on here who would advise taking your entire pension in cash unless it's a very small pot.

Linton

Pat38493 said:

Linton said:

You dont really know what will happen but in my view the best estimate of future spending is what you are spending now minus any major items that wont apply in retirement.  That was what our retirement plan was based on.  The rationale being that if you were financially happy prior to retirement you would also be so afterwards with the same expenditure.  One gets used to a particular standard of living.  The details of what you spend your money on dont matter.

I think if you want particular expensive one-off items it is best to plan for them specifically rather than merge it in with the every day expenditure.

Like you we have sufficient income to meet all our wants and dont go to any great effort to economise or chase special deals.   The things we can't afford we don't want anyway. Oddly the effort taken to minimise expenditure is inversely proportional to the amount of money involved. We spend more time discussing whether to spend + or - 50p on some household item than + or - £100 on say a weekend away.

This is certainly the safest approach but even this is somewhat dependent on the current situation, and if you really dislike your job it might alter the equation.

As an example, my household currently pays for an all in Sky package that currently costs about £190 per month, plus several other TV subscriptions.  If I was no longer working there is no way I would be paying that amount, especially given that about 80% of what we watch is available for free on freeview.  Is it stupid to have not fixed that already?  Yes, but I guess it's not a priority (also partly because they are supposed to be fitting full fibre cables to my house shortly so I will have different options available again). 

This is just one example but I am pretty sure that if I had all day, I could cut a lot of my budget items by a significant %.  Same with holidays - my current historical holiday spending includes bringing the kids with us at our cost, which we probably won't do once they are working.

Yes, you will cut some items. But you could then use the money for something more usefully.  Perhaps you will use the saved kids holiday costs to spend the same money on more frequent or more expensive holidays for yourself.  That is not a decision you can sensibly make now.   Your priorities may well change in retirement.