Retirement - Actual vs Expectation

BikingBud

All with @chubsta. 

Been running money manager for over 15 years so have well established budgets and knowledge about core costs and excesses.

Spreadsheet with incomes, DB pensions, SP when they kick in, and inflation factors (currently pessimistic for the pensions) and running this with total income v total outgoings track. 

Although depending upon the model, eg if I do some occasional work and when MrsBB might finish work, the buffer line lifts and dips a little but it never goes negative. So I can see the cumulative buffer increases and we are considering how we might pass surplus from income to the kids so they can benefit now.

Either that or I save a little to buy an Aston🚙

Phossy

..buy the Aston !

gorgeousme

MallyGirl said:

I think that last paragraph is key. I am not yet retired as OH insists on seeing daughter through university but I have started tracking expenditure in much more detail. We are very lucky with our salaries but live on substantially less as we each Sal sac £50k into pensions. This is a good guide to what we actually need.

You put £50k into your pensions each? Wow, what a lovely position to be in. Neither hubby or I even earn that much, let alone put that amount through salary sacrifice. Well done for your discipline.

gorgeousme

Eldi_Dos said:

@gorgeousme
                      With the workplace being what it is being able to find work for just a couple of days or hours that suit what you want to do are available.

One of the chaps I pick the click and collect up from, late fifties, changed to present job and only doe's morning shifts so he can get on golf course mid week afternoons and very happy he is with the new arrangement.

You have done well to get where you are, work does not need to be all or nothing you can tailor it to suit your needs.

Yes. We plan to go into retirement by reducing our hours first, but ultimately, we are looking for the magic figure of £400k before full retirement.

gorgeousme

chubsta said:

When I started thinking about retiring in earnest (I was very unhappy at work so wanted to retire as soon as possible) I made a plan which basically involved the following:
Pay off all debt - mortgage, car loan etc - I didn't want to service any debt on my pension and I was stunned at how many of my colleagues were saying they would have to work until their mid-60s because they still had a mortgage.
Create a spreadsheet of income/expenditure showing in detail every last penny spent each month, including saving for holidays and stuff so there are no 'nasty surprises'.
Work out how much my pension will actually be, take home, each month (I have a DB pension so that bit was reasonably easy.

Once I had all this set up I lived on what my pension would be each month for 3 years - this allowed me to see if my spending expectations were correct, but also had the massive bonus of allowing me to save the difference between my wages and pension amount each month, this became a pretty large lump sum.

Although I have only just retired I am confident that I will have enough money for one simple reason - in the last 3 years I have never needed more money than I will be getting each month, in fact I am still able to save, although im not sure what for as all my needs are covered.

And then, as a poster has stated above, the whole thing is only an interim measure anyway as at 67 I will get the full SP and combining this with my pension I will have a greater income each month than I ever had when I was working for 40 years, so if I have survived on less this long I am sure I will be ok!

TLDR - until you have a through and detailed breakdown of spending over a longish period of time you will never know if your pension will be enough, I feel you need to trial living off a pension-wage for an extended period to put your mind at rest, if it works, great, if it doesn't well at least you know where changes need to be made.

How did you determine the amount of pension to live on in a drawdown? I can only base it on my going outgoings, so my drawdown will be whatever my outgoings are. Did you base it on an annuity income vs expenditure?

Silvertabby

Some good points, but don't be so sure that you will need much less after 85.  We expect we will be paying someone to do our cleaning, gardening, etc, by then.

Sarahspangles

gorgeousme said:

Eldi_Dos said:

@gorgeousme
                      With the workplace being what it is being able to find work for just a couple of days or hours that suit what you want to do are available.

One of the chaps I pick the click and collect up from, late fifties, changed to present job and only doe's morning shifts so he can get on golf course mid week afternoons and very happy he is with the new arrangement.

You have done well to get where you are, work does not need to be all or nothing you can tailor it to suit your needs.

Yes. We plan to go into retirement by reducing our hours first, but ultimately, we are looking for the magic figure of £400k before full retirement.

I have friends around my age (late 50s) in well paid jobs who can only retire if they bring a pension into payment early or downsize, because they don’t have much in the way of savings. It’s good to have options!

OH retired a couple of years ago and lives on his pension. I’ve gone down to four days and plan to retire soon, I have money earmarked in a SIPP to bridge until all my pensions are in payment. I’m treating that as separate from savings.

We’re open to spending savings/capital but there’s no immediate need. Our lifestyle has already shifted, it’s quite subtle but some of the assumptions we made don’t reflect reality. For example we thought we would need to replace OH’s car to take lots of weekends away, but this has shifted in favour of days out with friends, and a railcard for some longer trips. As OH can pick up something easy for tea, we eat out less than we thought. Free time for OH is less about de-stressing and more about interests and friends. I can see it working the same way for me.

Sarahspangles

gorgeousme said:

How did you determine the amount of pension to live on in a drawdown? I can only base it on my going outgoings, so my drawdown will be whatever my outgoings are. Did you base it on an annuity income vs expenditure?

[I admit to beIng a budget nerd].

In our budget (I use YNAB) I’ve grouped categories into core, long term (savings for household repairs, car etc) and fun money. We also both have a float/reserve. Long term savings sit outside the budget. This has been running for long enough for us to be reasonably confident in the amount we need.

The point of the float money is to buffer the usual ups and downs, it acts as an indicator we may need to use savings.

OH has a ‘proper’ look at the budget every few months; as his float tends to build up, he usually has the option of moving some of it to long term savings. Although so far, he’s always opted to spend it on mountain bikes

german_keeper

Our (my!!) retirement plan was always very simple. Taking into account no mortgage payments to pay we would have similar income to when employed, at SPA even more. So the money spent raising 3 kids becomes "playing out" money. Vast majority index linked DB and State Pension with a small DC pot apiece.

What we have found is that the biggest issue between the plan and the actual is life events. Most, but not all involve our parents, my mum and both in laws. All late 70s, so in this day and age with average life expectancy as it is I suspect we are far from alone going into retirement with elderly parents, not necessarily in the best of health.

Firstly, in Feb 22 just after I had "put my papers in" Mrs GK, who wanted to carry on working, receives 3 month redundancy notice from work. She only did 20 hours on minimum wage and had been doing PT admin work for nearly 30 years. But it didn't turn out to be that easy to find something and of course because she was insistent on PT admin work, no benefit entitlement. But with about 1 month of redundancy pay left she got a job at a local GP surgery, again 20 hours at minimum wage.  

My FIL, who has been ill for some time, then deteriorates rapidly, housebound, on oxygen 24/7, and virtually immobile. In Oct 22 doctor tells him he is at "end of life". Around the same time MIL finds out she has some polyps but they appear to be benign and can be removed as a day patient. Off she goes to the hospital only to find that one is  too close to her bowel and will require surgery with about 3 months recovery time. But not life threatening so given the domestic situation the op can wait. In reality she can go in when FIL has passed away.   

Meanwhile FIL keeps battling away despite wanting to "just take a tablet and not wake up". By Feb 23 MIL's doctors are reluctant to leave the op much longer. FIL is a stubborn old devil and insists he is not going to respite care, or even have carers come in. A bit out of order to be honest. Mrs GK absolutely hates her new job. I had told her when I retired that we could make the numbers work if she wanted to finish but I don't think she really believed me. So I sit down with her and go through it all and she is happy to pull the plug. In laws only live just down the road so she can look after dad while mum has her op and recovers. 

At this point we decide that the playing out has to go on hold until FIL passes. MIL wouldn't be able to cope on her own when he passes and her brother, who lives about 50 miles away is as much use as a chocolate teapot. So we reduce drawdown to maximum we can take without paying any tax and even then we are saving a few hundred per month. FIL battles away till December and finally gives up the ghost, about 14 months after he was at end of life!   

MIL deals with things much better than expected, probably a sense of relief, and by way of a thank you takes us to Lanzarote for a week in March. And of course the war chest has built up nicely and me and Mrs GK have just returned from a wonderfully relaxing fortnight in Turkey. Too hot and too expensive for us abroad July/August so next trip will probably be Sept/Oct. A long bank holiday weekend in Penrith this week with 16 family members and a week in Tenerife with my 2 sisters and brothers in law booked for next January.

So it finally feels like retirement has begun. MIL seems fine, in good health and beginning to start living her life again. And my mum is in the advanced stages of dementia but is receiving fantastic care in a wonderful nursing home. But what we have learnt is that you just never know what is around the corner!!  
  

katejo

Sarahspangles said:

gorgeousme said:

How did you determine the amount of pension to live on in a drawdown? I can only base it on my going outgoings, so my drawdown will be whatever my outgoings are. Did you base it on an annuity income vs expenditure?

[I admit to beIng a budget nerd].

In our budget (I use YNAB) I’ve grouped categories into core, long term (savings for household repairs, car etc) and fun money. We also both have a float/reserve. Long term savings sit outside the budget. This has been running for long enough for us to be reasonably confident in the amount we need.

The point of the float money is to buffer the usual ups and downs, it acts as an indicator we may need to use savings.

OH has a ‘proper’ look at the budget every few months; as his float tends to build up, he usually has the option of moving some of it to long term savings. Although so far, he’s always opted to spend it on mountain bikes

I started using YNAB nearly 10 years ago and it made a huge difference. I allocate all my money to jobs/savings categories. My long term savings/investments are also off budget. This week a financial advisor tried to persuade me to move more off budget into unit trusts to feed my stocks and shares ISA but I am reluctant to do so. I prefer shorter term savings accounts with less risk