Poll: Pre vs post retirement disposable income (actual or planned)

michaels

SO pre retirement our post tax, post mortgage, post retirement savings income was about 30k pa.

Now I have retired, have paid off my mortgage, no NI and less income tax it is likely to be closer to 55k.  Not that we are likely to spend it all.

Anyone else finding their planned / actual post retirement 'disposable' income is greater than pre retirement?

barnstar2077

I am planning on greatly increasing disposable income in retirement.  I learnt my lesson when I dropped a day and moved over to four days a week.  I didn't give it enough thought beforehand, but I didn't just lose x amount per month in pay, I also spent more money on my extra day off than I would have if I had continued going into work!

In fact I will go so far as to say that I really did learn a valuable lesson, and I won't pull the trigger until I feel comfortable with my amount of available spending money.

This is not to say that I will be wealthy in retirement, far from it, I just prefer to keep my expenses very low so I can spend my money where I want to spend the money instead.

hugheskevi

barnstar2077 said:

I am planning on greatly increasing disposable income in retirement.  I learnt my lesson when I dropped a day and moved over to four days a week.  I didn't give it enough thought beforehand, but I didn't just lose x amount per month in pay, I also spent more money on my extra day off than I would have if I had continued going into work!

I find work expenses can be extremely variable among workers. 

I was at a fairly extreme end of the spectrum - I chose where I would live in London so that I could cycle to work on a cheap bicycle purchased through salary sacrifice, showered at work, took my own packed lunches I made at home, and dressed in casual clothing so there was no cost of expensive attire. For me, going into the office cost next to nothing and it was also a very healthy day.

But many will face the cost of running a car or a season ticket on public transport, the need for formal clothing, perhaps dry cleaning, buy lunches out, have coffee on the way to or from work, etc. That has to be funded from post-tax income, and so can require earnings potentially over £10,000 more for those with expensive commuting costs to fund the extra costs.

I think it is an area a lot of people don't give enough consideration - those sort of differences compounded over the years add up to a lot.

Cobbler_tone

We will cut our gross income by 70% in retirement next year. Between us we pay 78% into pensions, NI, run two cars and save a bit each month. We’ve been doing any major projects to the house from capital and our future net income is broadly projected against inflation. Due to the nature of our pensions it is straight forward to map them from early retirement to the grave. 

The MOST important thing is that we won’t work. At 57 I’ll have worked for 41 years and my other half at 54 hasn’t had a career break. We’re ready but can’t answer the poll yet. After careful planning and a robust strategy, I’m 100% confident we’ll be absolutely fine and comfortable. 

Good question.

Triumph13

michaels said:

SO pre retirement our post tax, post mortgage, post retirement savings income was about 30k pa.

Now I have retired, have paid off my mortgage, no NI and less income tax it is likely to be closer to 55k.  Not that we are likely to spend it all.

Anyone else finding their planned / actual post retirement 'disposable' income is greater than pre retirement?

I think that will be pretty well baked in for most of the FIRE community.  We saved really aggressively, restricting our pre-retirement income to get to FI quicker, and were never going to RE until the spreadsheet said we had more than we currently spent.

Seven years in and we are very firmly into your last category, but not by quite as extreme a factor as you.  Bad case of OMY syndrome?

ali_bear

The earlier you retire, the more uncertainty there is going forward. It is not irreversible, but as time goes on it must be increasingly difficult to go back to work, especially with the MPAA constraints. It would be very foolish to go too early, only a lost opportunity to go too late. 

bjorn_toby_wilde

Another factor I guess is how early you retire.

At this point mine is definitely lower but the plan was always to bridge the gap with savings, etc until the second DB and SP kick in. When that happens I will definitely have more disposable income than pre-retirement 

Cus

My retirement income is approx a quarter of pre retirement income

Cobbler_tone

ali_bear said:

The earlier you retire, the more uncertainty there is going forward. It is not irreversible, but as time goes on it must be increasingly difficult to go back to work, especially with the MPAA constraints. It would be very foolish to go too early, only a lost opportunity to go too late. 

Totally depends. If you have DB linked pensions (that cover what you actually spend, plus change, today), plus some capital and your main housing costs are covered, how much do you need? Most of what some people earn goes on IC, NI and pensions. Take that away and your income will be miles less than what you actually earn.
Maybe then there are personal factors. We have lost 4 loved ones this year (family and friends) all before they reached 60. You only get one life and that 'one more year' thinking must lead to many people not enjoying the retirement they could. I look at mine and think "if I worked another year I could have another two grand a year for life" but where does that end?
Totally different of course if you are saving for a very costly dream retirement and you really enjoy your job. I appreciate that many people 'live to work'. We are all different and it is a very personal decision, based on personal circumstances. We've read on threads that people want a £500k slush fund for a potential care home, or want to leave millions to their kids.
I agree with the sentiment of going too early if you can't really afford to though, that should be common sense but I guess some do and then end up trying to find work when they didn't plan to.

MarlowMallard

Interesting. At this point (24 votes) it's totalling 80% with same-or-more after retirement, including me.   

I suspect compared to the general UK population, this is strongly biased upwards, because people who post on here are much more interested in long-term saving/investing, while the large cohort who took out interest-only mortgages to post the new PCP Evoque on their social media aren't on here, and they'll be in the "less than 2/3" category by a long way. 

FIREDreamer

Probably an outlier here. Due to paying large contributions to a pension in the 5 years leading up to retirement and then a large spike in RPI annuity rates, at 61 years old my pension income this year, gross, is about £59k.

Last working year my gross salary after pension salary sacrifice was £25k plus 2 defined benefit pensions of £13k making £38k in total.

So roughly 50% more income now.

I annuitised as I have a large ISA invested in shares so enough risk there and inheritance tax on pensions in 2027 made me want to get rid of the SIPP for beneficiary simplicity. Can add to the ISA as well.

EDIT: Am still paying in £2,880 pa into a pension to generate further PCLS as I have a transitional certificate as, despite exceeding LTA, I have some lump sum allowance left as I took no PCLS from one of my DB pensions.