Retirement - Actual vs Expectation

gorgeousme

When I was young, my dream was to retire at 50. Then I became a mum at 32, so I moved the goal post to 55. My child decided to go to university at 18 and I ended up partly funding her for those years and my new goal is to retire at 60.

I have read a lot of posts in this forum and everyone seems to have such high numbers in their pension saving pots whilst mine seems very low despite a frugal life. My actual spend ( household , food, holidays etc) is £1600pm for us as a couple. Assuming we will live to 80, we will need £384k. We will have 2 full state pensions from 67 so is it safe to assume that if our pensions/savings total to say £400k, then we should be able to retire at 60? If we retire at 60, what is the chance that we find it will cost more than expected?

Anyone want to share your Actual life  vs Expectation life with me? Have you been surprised about your spend during retirement? Has that differed much to your expectations?

Flugelhorn

I found we had much more spare cash in retirement than when I was working - household income didn't really change much but expenses did - working cost a lot one way or another (didn't realise at the time) 

Sunnylifeover50plan

One key divergence from estimate v's actual has been the uptick in inflation and it's impact on spend. Whilst our spending habits haven't really changed the cost to service them has increased by a greater margin than we estimated. Also make sure you plan around the lumpy big ticket items; car, white goods, tv, wine fridge etc.

arthurdick

Sunnylifeover50plan said:

One key divergence from estimate v's actual has been the uptick in inflation and it's impact on spend. Whilst our spending habits haven't really changed the cost to service them has increased by a greater margin than we estimated. Also make sure you plan around the lumpy big ticket items; car, white goods, tv, wine fridge etc.

Ha ha, I do like your thinking, but in our case you can swop the wine for pubs and beer.  I didn't realise how much beer has gone up, ranges from the cheapest, £4-£5, up to over £8 for a pint, I am including some Wetherspoons in that even though the Wetherspoons range from around £4 up to over £7, but we do live in London.

As for the actual to expectation, the goalposts were moved as to dates of early retirement, went 5 years later than I wanted, but still 5 years earlier than actual state pension date. I have a small DB pension of just over 5k  per year,  which I am quite happy with, and some money from our house sale.  By the time we both get to spa, we will have more than we did while working, always low earners, so quite used to budgeting.

Triumph13

On those numbers you should be laughing.  The only question is whether the survivor will have enough income after the first of you passes.  Your current spend is £19.2k pa.  On you numbers you should  be able to sustain spending of £30k pa from age 60 until the first of you dies.

I'm assuming that all the £400k is in pensions and is fairly evenly split between you.  Roughly £250k is used to provide drawdown income at a very conservative 3% pa, the other £150k to bridge the 7 year gap until state pensions start.

That would suggest an income for the survivor of around £18k pa, but the odds are that the drawdown fund would have grown in the meantime and that, being older, they could use a more aggressive withdrawal rate and bump that up to £20k pa.

Albermarle

From age 67 your two state pensions will be sufficient to fund your £1600 p month expenditure ( assuming that pension and spending increase with inflation).
So your fund only needs to pay for your expenditure for 7 years. ( from 60 to 67) and some back up in case one of you dies and only one state pension coming in. You need though to plan beyond age 80 as there is a 25% chance of one of you living past 90.
So without knowing all the details, you seem to have easily sufficient funds to retire at 60.

I have real a lot of posts in this forum and everyone seems to have such high numbers in their pension saving pots whilst mine seems very low despite a frugal life

Be reassured that the amounts you have are way above average, and are not 'very low' by any yardstick.
Many people are unable to stop work until 66/67 and beyond. The average retirement age is around 63 I think.

Linton

gorgeousme said:

When I was young, my dream was to retire at 50. Then I became a mum at 32, so I moved the goal post to 55. My child decided to go to university at 18 and I ended up partly funding her for those years and my new goal is to retire at 60.

I have real a lot of posts in this forum and everyone seems to have such high numbers in their pension saving pots whilst mine seems very low despite a frugal life. My actual spend ( household , food, holidays etc) is £1600pm for us as a couple. Assuming we will live to 80, we will need £384k. We will have 2 full state pensions from 67 so is it safe to assume that if our pensions/savings total to say £400k, then we should be able to retire at 60? If we retire at 60, what is the chance that we find it will cost more than expected?

Anyone want to share your Actual life  vs Expectation life with me? Have you been surprised about your spend during retirement? Has that differed much to your expectations?

1) Two SPs coming in after retirement would amount to around £22K a year so you would be able to easily afford your 12X£1600=  £19.2K expenditure/year  after SP age. So how do you calculate that you will need £384K savings?

Your current expenditure of £1600/month seems very low. Are you sure you have counted everything?  Full time winimum wage for one person is about £22K/year.  which about matches your expenditure. If you are both working  are you and your spouse  both really living  on about half or less than your income?

2)  Basing your calculations on death at age 80 is extremely unrealistic unless you are in bad health.  Assuming you reach State Pension Age then you have a 45% chace of living into your 90s.  So for planning purposes it would be prudent to assume death at 95-100.


 My experience....

We retired (very early) nearly 20 year ago on the assumption that net income would remain remain the same as whilst working with inflation at 3% and investment returns at 4%.  Since then inflation has been lower, and investment returns much higher with the result that our savings are now much the same in £ terms as when we retired, if not higher.

There is a very important non-financial lesson to be learnt:

When we were planning  retirement the internet was just emerging from being a nerd's playground based on slow dial-up connectivity .  Facebook had just been launched in the US, etc etc.

SIpps were new but were irrelevent since most people only had employers pensions and the only real option for DC pensions was to buy an annuity. Drawdown was irrelevent  for most people since restrictions limited it to much the same income as was available from an annuity.  And you had to switch to an annuity by age 75.  So our retirement plan was based on buying annuities though we in the event only used up about half our retiement savings.


10 years later everything had changed.  Who knows what the world will be like 10 years after you retire.

MX5huggy

The £384k has come from £1600 per month x12 months x 20 years. It’s a sensible starting point then as the OP started to do and others have added to a meaningless figure. 

Linton

MX5huggy said:

The £384k has come from £1600 per month x12 months x 20 years. It’s a sensible starting point then as the OP started to do and others have added to a meaningless figure. 

So ignoring SP?

squirrelpie

The OP talks about her spending, but doesn't mention that of her partner. Are we sure that £1600 per month is the total outgoings?

Linton

squirrelpie said:

The OP talks about her spending, but doesn't mention that of her partner. Are we sure that £1600 per month is the total outgoings?

Yes.  At first I thought the OP may not have a partner and perhaps the £1600 referred to herself + child but she then says "we" will have 2X SPs.

I think we need a lot more info and clarity before providing any opinions.