Help with knowing how much is 'needed' to retire?

B0bbyEwing

Thanks for the links and food for thought. 

I'm at work right now so haven't had time to check the links yet. Maybe they'll answer this one -

So say you need 30k per year in retirement. I would've said 10k but state covers that so I've just picked a bigger round figure for the sake of argument. 

If you live 1 year then you need only a 30k pot. 

And nobody knows how long they're living. 

So when/how do you decide - yeah that's enough years worth of pot that I have? 

MallyGirl

I think an earlier poster mentioned planning to live to 90.Chances are that if you do live that long then your spends may be lower in those later years so the pot will actually last longer. Have a read on the safe withdrawal rate if you haven't already - noting that it isn't actually 'safe'. Maybe 3% or 3.5% is more appropriate in the UK but it gives an indication of the size of pot.

phlebas192

B0bbyEwing said:

Currently my SPA is 68 which will be in 2051.

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Currently my pot is just over £100k. 

To put this into perspective, if we assume a 4% pa real growth over the longer term then your current £100k would about £266k in today's money by the time you are 68. This should be more or less enough to take out £10k pa. Both these figures should be considerably higher since you are continuing to add to the pot. So I would say you are in at least an OK position right now - it might not be realistic to retire many years earlier than 68 but you shouldn't have to be worrying much about finances if you do retire then.

tigerspill

B0bbyEwing said:

Thanks for the links and food for thought. 

I'm at work right now so haven't had time to check the links yet. Maybe they'll answer this one -

So say you need 30k per year in retirement. I would've said 10k but state covers that so I've just picked a bigger round figure for the sake of argument. 

If you live 1 year then you need only a 30k pot. 

And nobody knows how long they're living. 

So when/how do you decide - yeah that's enough years worth of pot that I have? 

I work off living to 90 years.  I don't include my main house and reckon if I live longer than 90, I may well be in care and can sell the house.  Plus I have some contingency in my calculations.

Cus

There is a relied upon simple calc that gives a rough comfort that you have enough.  The safe withdrawal rate as it's known, is a percentage of the total pot that you can take out yearly, increasing yearly with inflation, for 30 years and you will not run out of money (based on historic data). It assumes you are invested in equities to a significant proportion. Thumb in the air it's 4%, people will tell you it's less as you are in the UK, but state pension helps   so if you need £30k pre tax a year, a pot of £750k is required. There are a whole load of more sophisticated calls that can be more precise.

Albermarle

I'm forever told by people older than me - "there wont be a state pension when you retire". 
Again, crystal ballery there. Maybe there wont be but I'd imagine there'd be something. Unless somewhere down the line it gets totally replaced with the workplace pension.

Maybe you could reply to these people as follows;

Look at the massive fuss made when the Winter Fuel allowance was withdrawn ( worth only £100 for many pensioners) and the Govt was forced into a humiliating U turn.

The state pension is a much more politically sensitive issue than the fuel allowance !

Older people vote in much larger numbers than younger people.

So what do you think would happen to any political party that withdrew the state pension?

They would be obliterated at the next election, and probably for ever.

So its not going to happen is it ?

tigerspill

Albermarle said:

I'm forever told by people older than me - "there wont be a state pension when you retire". 
Again, crystal ballery there. Maybe there wont be but I'd imagine there'd be something. Unless somewhere down the line it gets totally replaced with the workplace pension.

Maybe you could reply to these people as follows;

Look at the massive fuss made when the Winter Fuel allowance was withdrawn ( worth only £100 for many pensioners) and the Govt was forced into a humiliating U turn.

The state pension is a much more politically sensitive issue than the fuel allowance !

Older people vote in much larger numbers than younger people.

So what do you think would happen to any political party that withdrew the state pension?

They would be obliterated at the next election, and probably for ever.

So its not going to happen is it ?

And even if something did happen, it would likely only be from that point onwards with accrued benefits protected.  But in my view, there wont be any such change in my lifetime (hopefully three more decades)

phlebas192

Albermarle said:

I'm forever told by people older than me - "there wont be a state pension when you retire". 
Again, crystal ballery there. Maybe there wont be but I'd imagine there'd be something. Unless somewhere down the line it gets totally replaced with the workplace pension.

Maybe you could reply to these people as follows;

Look at the massive fuss made when the Winter Fuel allowance was withdrawn ( worth only £100 for many pensioners) and the Govt was forced into a humiliating U turn.

The state pension is a much more politically sensitive issue than the fuel allowance !

Older people vote in much larger numbers than younger people.

So what do you think would happen to any political party that withdrew the state pension?

They would be obliterated at the next election, and probably for ever.

So its not going to happen is it ?

Indeed. Apart from the doom mongers and those deliberately trying to stoke conflict (generally the same people) there is zero interest among serious politicians in removing the SP. The only current discussion is about whether the triple lock should be kept, reformed or scrapped.

The absolute worst case scenario for those not in receipt of the SP is that increases will fall behind inflation and reduce the SP's worth in real terms. In the meantime, every increase in the SP benefits future payees more than it benefits current pensioners. This should be obvious since those yet to receive it will do so for longer on average than existing pensioners. Increases in starting age could offset this but so far all such increases have been in line with life expectancy so are neutral.

barnstar2077

I am assuming I will live to an average age for a male, so about 81 years of age.

My plan is to have two pots at retirement.  A maintenance fund, which will only be used for new boilers, washing machines etc (and should replenish itself from growth.)  The second pot will be used for drawdown to live on.

This way, if I run out of my private pension money I will still have the state pension and my maintenance fund, so I will never have to worry.

If you try and plan for every eventuality you will end up worrying and working far longer than you needed to.

I would recommend you put in more than the minimum into your works pensions, so for example, if you put in five and they match it, then put in an extra five, for a total of 15%, and then reassess how things are going every few years.

It is just as important that you pay attention to how your pensions/ISAs are invested, as this will have a massive affect on your returns.  Do you have access to your pension and ISAs online to be able to see which funds are available?

If you would like the possibility of retiring before you can access your pensions then a stocks and shares ISA may also be worth considering,

katejo

tigerspill said:

I was concerned about this as well.

A few years before i was planning to retire, I started to record every penny I spent in a spreadsheet.  I recorded every item no matter how small.  I used maybe a dozen buckets (groceries, holidays, gas.electricity, leisure, medical etc.).
This gave me a view of exactly how much I was spending.
Then there a few things that I knew would drop off; And others that I would add in (more holidays).  And then capital items (car, boiler, appliances etc).
This gave me an accurate view of my projected spend.

9 years on, I still do this every day.  Only takes a minute.

I have been doing the same for over 10 years. It helps massively.