"Emergency Fund" in Retirement - How much?

Sea_Shell

westv said:

Is the "gifting" a separate question??

No, not really, it's integral to the question.

It's about potentially leaving yourself "short", because you've gifted.

So a "hard deck" below which you say No, sorry.   

westv

Sea_Shell said:

westv said:

Is the "gifting" a separate question??

No, not really, it's integral to the question.

It's about potentially leaving yourself "short", because you've gifted.

So a "hard deck" below which you say No, sorry.   

Ah I see. I don't have any children but, if I did, I wouldn't be gifting anything. They would have to wait until I was dead. 
Nobody should feel obliged to gift if it would leave them short.

DullGreyGuy

You say it's not a DB pension but don't state what it is... nor do you say how generous it is. 

If you are on an indexed annuity which comfortably covers all your basic living costs and leaves plenty of cash for fun things then the cushion needs to be much less than if your pension is only just covering the basics and your on a drawdown that could easily run out before your breaths do. 

I've known some who've planned til their 75 and then expect to be "too old" to do much more than sit at home and watch TV on state pension... my gran was going on 2-3 international holidays a year until her stroke when she was 88 (mainly funded by family who she was accompanying). 

What "emergencies" there maybe also depends on your arrangements... live in a 1 bed rented council flat or own a large house with outbuildings? 

The only really thing that changes is you remove the "loss of job" from the risk of how much you needed whilst working. But if you have a non-guaranteed and/or non-indexed income you replace it with a long term risk around longevity or inflation. 

marycanary

I am in a similar position to Jim. I have a DB pension that more than covers my needs and I will receive the full state pension in 7 years. I have funds (more than Jim) in a small SIPP, S&S ISA, cash ISA and cash on instant assess and fixed rates. 

I won't give any money to my children. I've helped them in the past and they are all established now with jobs and homes of their own. I intend to assist my grandchildren and have money earmarked for that purpose. Due to their ages, some is in cash and some in equities. 

I won't be happy going below £60k as a minimum because I want to be able to fund support and care as I age. Jim might be able to do the garden, decorate and do other DIY now but not in the future. Later, he may need carers to assist with tasks of daily living. It's not "emergency" money more money intended for use in very old age when income that was more than sufficient to cover costs might no longer be enough. If, like DullGreyGuy's gran I'm still travelling in my late 80s I'll be more than happy to spend the money on more holidays or 1st class travel.

Albermarle

GazzaBloom said:

Sea_Shell said:

NoMore said:

Good point by Qyburn, what is Jim's 'emergency fund' for ? As can be seen by this thread already, I don't think people have the same ideas on what exactly a emergency fund is for. Nobody is right or wrong of course. The whole point, I think, of an emergency fund is to allow you to sleep at night without having to worry about if something goes wrong leading to a financial cost that you can't deal with. If that require' s 400k for one person and 20k for another, then that is the right amount for each of them.

This ...

I think I've muddied the waters by using the term "emergency".   (I didn't know what else to call it)

It's just a pot of money that gives you warm and fuzzies and let's you sleep soundly.

Without which you may have to resort to credit, finance or equity release !!

That makes sense.

For me it is £20K "emergency fund" which is to cover genuine unexpected household emergencies that insurance may not cover. 

Plus 1 years worth of retirement expenses as wrapped cash which is sleep at night money

Maybe even keep it under the mattress for extra security feeling !

theoretica

25k living costs - does that include saving for a new car?  New boiler? What about his children having emergencies - do they have decent emergency savings themselves?

His living costs may be 25k a year now, but at some point his cost of comfortable living is likely to increase faster than his pension, with wanting more help cleaning, no longer DIYing things, eating more meals out/not cooking so much...

Might he want to move in future?  Perhaps to somewhere without stairs, or needing less maintenance. 

barnstar2077

My plan is to retire with £30k invested, or at least in high interest accounts.  Hopefully then, when I need a new boiler, etc, I should be able to buy one while not reducing my £30k too much.  Which will then start growing again until I need something else.  It will only be used for larger items, never for month to month expenses.  I don't see the point in keeping the money in cash, or something "safe" that won't be keeping up with inflation, nevermind generating free boiler replacements personally. 

Sea_Shell

barnstar2077 said:

My plan is to retire with £30k invested, or at least in high interest accounts.  Hopefully then, when I need a new boiler, etc, I should be able to buy one while not reducing my £30k too much.  Which will then start growing again until I need something else.  It will only be used for larger items, never for month to month expenses.  I don't see the point in keeping the money in cash, or something "safe" that won't be keeping up with inflation, nevermind generating free boiler replacements personally. 

So you wouldn't gift to leave yourself below that level?

How serious would family's need be, for you to give them some (all) of your £30k ? 

Sea_Shell

theoretica said:

25k living costs - does that include saving for a new car?  New boiler? What about his children having emergencies - do they have decent emergency savings themselves?

His living costs may be 25k a year now, but at some point his cost of comfortable living is likely to increase faster than his pension, with wanting more help cleaning, no longer DIYing things, eating more meals out/not cooking so much...

Might he want to move in future?  Perhaps to somewhere without stairs, or needing less maintenance. 

For the purposes of this scenario...

No, the £25k doesn't include savings towards capital items.   These would have to be financed if no savings remained.
 
I agree that costs (needs) likely to increase with age and frailty.   That's why I think a decent level of remaining savings is prudent.   What were discussing here is at what level would be "prudent" and what would be "foolish"*?

So far it seems that most people think that somewhere between £30k and £60k is "about right", but that letting (giving away) savings dwindle down towards £10-£20k starts to creep into foolish territory.



* Foolish, in that you had it and gave it away.   Not that you are foolish if you don't already have decent savings.   Just to be clear.

Sea_Shell

marycanary said:

I am in a similar position to Jim. I have a DB pension that more than covers my needs and I will receive the full state pension in 7 years. I have funds (more than Jim) in a small SIPP, S&S ISA, cash ISA and cash on instant assess and fixed rates. 

I won't give any money to my children. I've helped them in the past and they are all established now with jobs and homes of their own. I intend to assist my grandchildren and have money earmarked for that purpose. Due to their ages, some is in cash and some in equities. 

I won't be happy going below £60k as a minimum because I want to be able to fund support and care as I age. Jim might be able to do the garden, decorate and do other DIY now but not in the future. Later, he may need carers to assist with tasks of daily living. It's not "emergency" money more money intended for use in very old age when income that was more than sufficient to cover costs might no longer be enough. If, like DullGreyGuy's gran I'm still travelling in my late 80s I'll be more than happy to spend the money on more holidays or 1st class travel.

So, your "hard deck" is £60k.    You wouldn't give to your grandchildren to take you below that amount, as you already have OTHER savings that their gifting is for?   

What if £60k is all you had, completely, in total, other than your monthly pensions?