2 Years into Early Retirement. Review and Goalposts moved ?

buyhighselllow

At 54 I went decided to retire early ( it was always my plan/wish) and I estimated a DB pension of £20K and supplementing income with a £250K pot. OH contributes about £10K per year to finances. Spending records suggested £30-35K would be comfortable drawing on the savings as and when, fully paid into SPs due at 67.

Coming up to 2 years since I took my pension at 55. Our respective DB pensions and wife's small business give us  about £30K for living and wife has some personal spending from her other earnings. I did a bit of PT work in the first 6 months of retirement which paid well, and with growth, OHs lump sum etc the pot now actually stands at 300K and will get close to 500K with inheritance due. There is potential to inherit another 200K in the next 10 years but like my recent inheritance I never factor it in unless it materializes.

Over the next 2 years I anticipate spending 50K on house upgrades/repairs and replacement cars.

Our money seems to earn an average of 4.5% overall year on year.  


So, at 57 we are still spending about £32K a year on living expenses , holidays etc. We are comfortable and content. However , we both are inclined to think we could now be a bit less mindful of our spending and enjoy more meals out, holidays, theatre breaks etc. 

So, over the next 10 years, what would be a reasonable amount to draw from our saving annually to bolster disposable income, whilst still having money for repairs and replacements and accepting the erosion from inflation. 

Marcon

buyhighselllow said:

At 54 I went decided to retire early ( it was always my plan/wish) and I estimated a DB pension of £20K and supplementing income with a £250K pot. OH contributes about £10K per year to finances. Spending records suggested £30-35K would be comfortable drawing on the savings as and when, fully paid into SPs due at 67.

Coming up to 2 years since I took my pension at 55. Our respective DB pensions and wife's small business give us  about £30K for living and wife has some personal spending from her other earnings. I did a bit of PT work in the first 6 months of retirement which paid well, and with growth, OHs lump sum etc the pot now actually stands at 300K and will get close to 500K with inheritance due. There is potential to inherit another 200K in the next 10 years but like my recent inheritance I never factor it in unless it materializes.

Over the next 2 years I anticipate spending 50K on house upgrades/repairs and replacement cars.

Our money seems to earn an average of 4.5% overall year on year.  


So, at 57 we are still spending about £32K a year on living expenses , holidays etc. We are comfortable and content. However , we both are inclined to think we could now be a bit less mindful of our spending and enjoy more meals out, holidays, theatre breaks etc. 

So, over the next 10 years, what would be a reasonable amount to draw from our saving annually to bolster disposable income, whilst still having money for repairs and replacements and accepting the erosion from inflation. 

This comes down to mindset as much as anything - hence this apparently rather glib response: what would you be (psychologically) comfortable drawing down? Changing from being a saver to a spender is often extremely difficult, and people frequently respond by husbanding too much of their savings, or going in completely the opposite direction and raiding their own war chest rather too enthusiastically!

There's no substitute for doing some detailed arithmetic, factoring in as much certainty as anyone can in an uncertain world - but to expect any sort of precise answers, based on a couple of paragraphs (and no information about the types of fund in which your non-DB savings are invested) is never going to give you the answer you're hoping for.

DT2001

Marcon is spot on so I am going to suggest £24k 

Why? Roughly 2 x SP 

What plans does your OH have for retirement?

If you work back from SPA  - what will you have then guaranteed? (2 x SP + your DB £44k in today’s money). So if you have a rainy day pot of £50k or £100k you could spend £400k in the next 10 years and still have more money than you are spending now.

buyhighselllow

DT2001 said:

Marcon is spot on so I am going to suggest £24k 

Why? Roughly 2 x SP 

What plans does your OH have for retirement?

If you work back from SPA  - what will you have then guaranteed? (2 x SP + your DB £44k in today’s money). So if you have a rainy day pot of £50k or £100k you could spend £400k in the next 10 years and still have more money than you are spending now.

Yes, I agree what Marcon said about it being a mindset, it is difficult to adjust to the idea of living on savings and I certainly don't want to leave much behind !!

My OH has a small DB pension and small business that she does from home, but now she has given up her PT work I am not asking her to contribute anything  to the general finances except as and when she wants to. 

I have thought DB plus SPs would give us an after tax income of 45K in todays terms, and run a Compound interest model allowing for inflation / annual increases etc for the next 10 years , 24K spending per year from savings would leave c150K and 16K extra would leave c280K so I think I would be comfortable with upping the annual budget to at least the latter of those figures going forwards, which would give a budget of at least 41K per year for month to month "living" and allow my wife her own income stream of 9-10K for her to play with and chip in as she does with a bit of holiday cash, petrol, the odd meal etc.

Smudgeismydog

I think this is a common theme, and it’s a tough psychological shift in mindset.

You observe that you don’t want to leave much behind, while I suspect this is a little tongue in cheek, I have also said that I would like the chance to spend the money I have saved before my kids do.

Considering the planned inclusion of DC pots inside the estate, with an estimated pot at retirement of £500,000, plus a potential further £200,000 inheritance, this is already £700,000 without adding in a house and other assets. So if you don’t qualify for the Residence Nil Rate Band, you are already exceeding your combined IHT allowances. 

It sounds like your existing guaranteed income from the DB and State pensions will cover your planned expenditure post 67, so yes, I’d agree with the other posters, it’s time to loosen the purse strings!