Living on savings
Comments
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Savings are a high risk option for income provision. Exception being if you intend to draw the capital to fill a gap expecting it to run out.
Cash in itself is low risk but the provision of a regular withdrawal for income pushes the risk level up. It WILL suffer inflation risk and shortfall risk. Whilst investments will have a higher base risk, they may only suffer inflation risk and shortfall risk.
With 7 years to go, I would be inclined to use investments rather than cash.I am an Independent Financial Adviser (IFA). The comments I make are just my opinion and are for discussion purposes only. They are not financial advice and you should not treat them as such. If you feel an area discussed may be relevant to you, then please seek advice from an Independent Financial Adviser local to you.0 -
Exception being if you intend to draw the capital to fill a gap expecting it to run out.
As indicated above, this is the case.“If you trust in yourself, and believe in your dreams, and follow your star. . . you'll still get beaten by people who spent their time working hard and learning things and who weren't so lazy.”0 -
[FONT="]So to get down to zero, say £40,000 a year over 7 years, I would put £40,000 in the highest interest instant access account or combination of accounts. I would then put £80,000 into the highest interest 1 year fixed term account and £40,000 into the highest 2,3,4 & 5 year fixed term accounts that compound interest rather than distribute it each year. At the end of year 1, I’d take half of the 1 year fixed term account and place it in the best paying compounding 5 year fixed term account and transfer the remainder into your instant access account(s). For subsequent years you take the maturing fixed term accounts.
You may or may not keep pace with inflation with this approach and so I would look to make some savings out of your £40,000 a year to carry forward to the next year. You are unlikely to be liable for any income tax, unless you have other sources of taxable income. You will need to ensure that you do not exceed £85,000 with any one provider.[/FONT]0 -
Insurance companies often have a category these days of 'own means'. Makes you sound a bit like a Victorian toff but it generally has a lower risk rating and hence cost than employed, let alone unemployed.0
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6 years, £275k, easy to do.
Why not just "pay" yourself the standard Old Age Pension each week/month from that amount and see how you get on. You won't run out. For a couple this is a very generous £122/week each. I bet you'd struggle to spend all that!
At £122/week each, for 6 years, you'd have only spent £76k.
Having a set amount, that's identifiable such as the standard pension amount, makes you aware of how much you'll be living on when you get to pension age - and, once you're used to it, you can then plan when to splash out and what on... making those visible purchases and spends you're aware of and have decided upon ... as "treats" from the rest of your money.0 -
When I lost my job in 2013 one of my options was to live off my savings (>£400k) until my pensions were due in 2019., but I decided instead to put the money to work and to try to live off the interest. I could have gone for shares at about 5%, but chose instead to go into property from which I am gettting about 7%. It took about 18 months before I was earning enough to live off.
I had the advantage of having grown up in and still having contacts in an area where property yields were fairly high.0 -
Why not just "pay" yourself the standard Old Age Pension each week/month from that amount and see how you get on. You won't run out. For a couple this is a very generous £122/week each. I bet you'd struggle to spend all that
The OP ( who will be returning from Australia to the UK to his unmortgaged property in January) says that from 2024, their pensionscombined will give us an embarrassingly good income, well above what we would need.
It would not seem to be necessary to prepare to live in straitened circumstances......0 -
My challenge to OP would be this - you have saved this money, specifically to do this task. It is now nearly time to spend this money for its intended purpose which is great. The question is, can you handle the psychological adjustment from being a saver to being a spender and to stand by and watch as you burn through all that lovely capital? I know I'm expecting to find that very hard indeed!0
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and watch as you burn through all that lovely capital?
It will not last the night;
But ah, my foes, and oh, my friends—
It gives a lovely light!
:eek:
.......apologies to E.St John Millay0 -
Simply putting the lump sum in the bank and spending it down to zero is a very unsophisticated approach.....it does have the advantage of being low risk as long as you have your spending well controlled and inflation doesn't take off. So a detailed budget is the starting point. Personally, I'd want to do a bit more with the lump sum.“So we beat on, boats against the current, borne back ceaselessly into the past.”0
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