Can we retire please? How much money do you really need need?

[Captain Yoghurtpot]

Help. We are looking for some real world advice on if we are near or have already reached the point of retirement.
I have 8 years to pension age the better half has 2 years and both of us have had enough of being beholden to work. The better half has a few issues we feel its time to enjoy life.

Being very lucky to have paid the mortgage and the motorhome and the bills are just everyday stuff from having a property. We don't really want to full time so having done the maths I think we can do it

Ive broken everything down that we can think of insurances, services to car and motorhome, gas electric etc multiplied and divided and computer says yes it can be done. Just.
Happy days.
But the question is? Is there an amount, a real world figure people have found they require. A couple we saw a few weeks back said friends of them had set a target of £15000 per year to live off and only spent £13000. This seems to match our figures. So is this figure realistic? Do you already live on a smaller budget?
New decade new life Any advice is helpful

Very interesting thread and a similar area Mrs.Yoghurtpot and myself are currently seriously considering due to similar circumstances.
Will watch with interest as I have a ball park income figure in mind, and not too dissimilar to your 15k.

 

[Captain Pants]

I agree with those who feel £20k net income is the minimum to secure a half-decent standard of combined house/MH living in retirement (assuming retirement before state pension age). I also think you need a lump sum of about £60k-£80k to provide peace-of-mind for unexpected events (they will happen). For example, oil tank split this week, £2.5k bill I wasn’t expecting, but returning that amount to savings would be difficult without a big economy drive, and who wants to do that!

 

[TheMachMan]

worth looking up Mr Money Moustache who advocates FIRE. Financial Independence Retire Early.
he reckons a pot 25 times your annual outgoings is sufficient. You then live off the earnings of the pot Indefinitely.
We reckon needing £24k a year for decent lifestyle. Interesting exercise to list out all expenditure and decide what is essential and what is discretionary.

 

[robnchris]

why Not consider paying into a persona/ drawdown pension plan up to the £3600 gross limit each per year to reduce your tax bill and generate another lump of tax free cash which you could use later?

Thanks to Deneb and Otter Spotter, yes all taken care of.

 

[The Wino]

worth looking up Mr Money Moustache who advocates FIRE. Financial Independence Retire Early.
he reckons a pot 25 times your annual outgoings is sufficient. You then live off the earnings of the pot Indefinitely.
We reckon needing £24k a year for decent lifestyle. Interesting exercise to list out all expenditure and decide what is essential and what is discretionary.

As a matter of interest is the 24k plus the state pension and is that for a couple?. That suggests a top up of about 7k a year so a savings pot of £175k plus 24k each year until state retirement age.

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[The Wino]

worth looking up Mr Money Moustache who advocates FIRE. Financial Independence Retire Early.
he reckons a pot 25 times your annual outgoings is sufficient. You then live off the earnings of the pot Indefinitely.
We reckon needing £24k a year for decent lifestyle. Interesting exercise to list out all expenditure and decide what is essential and what is discretionary.

I looked at mr money mustache but his figures seem based on a constant spend of 40k dollars a year even though his spreadsheet suggests 3%inflation!!!!. That means in real terms 3%less a year to spend compounded which means a pretty poor retirement after a few years. In the UK if the state pension continues to be index linked it won't be that drastic as its the 7k a year top up on your suggestion that will be reduced but I think any advice needs to be looked at carefully.

 

[Nostrovia]

As a matter of interest is the 24k plus the state pension and is that for a couple?. That suggests a top up of about 7k a year so a savings pot of £175k plus 24k each year until state retirement age.

It's a really interesting website, well researched and makes sense.

Yes, I think your assumptions are correct. But, I'd say that £24k for a couple (including your state pensions) is not really enough.

But your thinking is along the same lines as my own. The size of the pot at state retirement age, plus money to get you there.

He assumes a 7% growth, drawing off 4%, and the other 3% accounting for inflation and compound growth.

But also, the 25x figure is for a fully sustainable income, retiring at any age. If you only retired at (eg) 60, and including your state pension, what you'd need is very much reduced.

 

[Ivory55]

Personally I am not in the big pension bracket so I guess I will be in the home that stinks of boiled cabbage and piss. On the plus side if I have dementia I won’t know.

 

[froli's]

Has anyone checked out ourtour.co.uk ?
These guys retired in their 40's a few years back. They've got detailed spread sheets on their website of all their expenses. They aim to live on around £15k per year.

We retired mid 50's, mortgage paid etc and do ok on £18k that covers home and vehicle expenses and about 3 month touring a year. Good idea to have an emergency fund though.

 

[The Wino]

It's a really interesting website, well researched and makes sense.

Yes, I think your assumptions are correct. But, I'd say that £24k for a couple (including your state pensions) is not really enough.

But your thinking is along the same lines as my own. The size of the pot at state retirement age, plus money to get you there.

He assumes a 7% growth, drawing off 4%, and the other 3% accounting for inflation and compound growth.

But also, the 25x figure is for a fully sustainable income, retiring at any age. If you only retired at (eg) 60, and including your state pension, what you'd need is very much reduced.

But as I said his drawings remain the same each year so allowing for inflation you are living off less each year! Not so well researched after all!!

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[Fragle]

Has anyone checked out ourtour.co.uk ?
These guys retired in their 40's a few years back. They've got detailed spread sheets on their website of all their expenses. They aim to live on around £15k per year.

We retired mid 50's, mortgage paid etc and do ok on £18k that covers home and vehicle expenses and about 3 month touring a year. Good idea to have an emergency fund though.

Thanks for the heads up. Just had a quick look very interesting reading. We are thinking 15k-18k should do it

 

[Nostrovia]

But as I said his drawings remain the same each year so allowing for inflation you are living off less each year! Not so well researched after all!!

You draw 4% of an increasing pot, you're drawing less from it than it has grown. That's the whole point, your pot grows quicker than the money you draw off.

If your pot were 500k, you'd draw 20k. But the start point next year would be 515k, so your 4% would be of a higher number during the next year - which would account for inflation.

Self sustaining and index linked, but with a high starting figure.

 

[The Wino]

You draw 4% of an increasing pot, you're drawing less from it than it has grown. That's the whole point, your pot grows quicker than the money you draw off.

If your pot were 500k, you'd draw 20k. But the start point next year would be 515k, so your 4% would be of a higher number during the next year - which would account for inflation.

Self sustaining and index linked, but with a high starting figure.

True but look at his spreadsheet!. The drawings to me look like flat drawings each year. If you are going to retire in your 40,s that sort of thing makes a huge difference its very easy to fool yourself into thinking things are a lot better than they are.
In his example the pot isn't big enough to fund the drawings so the interest slows down to reduction in capital.
Whether you can achieve inflation plus 4% is another tricky question.
Also after 25years at just 3%inflation your drawings are only worth half as much.
I'm afraid if it sounds too good it usually is too good. Not pessimistic enough for me!!

I agree about the being able to draw off the excess in interest above inflation whilst still keeping an indexed income but whats that difference in the real world with a low risk investment?

 

[Captain Pants]

Personally I am not in the big pension bracket so I guess I will be in the home that stinks of boiled cabbage and piss. On the plus side if I have dementia I won’t know.

Depends on house prices in Norfolk, when you’re forced to sell your home - you might be surprised!

 

[Puddleduck]

returning that amount to savings would be difficult without a big economy drive, and who wants to do that!

I have a monthly standing order to a savings account which is used only for dire emergencies ...... only £50 a month but it is surprising how much it has built up and I don't miss the £50 as it comes out the same day as the pension goes in. I have done the same since I started working - small amount into an emergency fund every month on payday and it has proven to be useful when I wanted to help the kids with deposits for houses and the like

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[The Wino]

I have a monthly standing order to a savings account which is used only for dire emergencies ...... only £50 a month but it is surprising how much it has built up and I don't miss the £50 as it comes out the same day as the pension goes in. I have done the same since I started working - small amount into an emergency fund every month on payday and it has proven to be useful when I wanted to help the kids with deposits for houses and the like

What was really good for us in the past was our flexible mortgage all our cash over a certain amount was offset against the mortgage. In effect we had interest at the mortgage rate and it just felt like we owed less rather than had money to spend as we were self employed all our tax savings went against the mortgage until we had to pay. I think we paid off a 20 year mortgage in about 5 years but left a couple of hundred owing then if we needed funds we could draw down against it with no fees or hassle and pay it back again.

 

[Puddleduck]

What was really good for us in the past was our flexible mortgage all our cash over a certain amount was offset against the mortgage. In effect we had interest at the mortgage rate and it just felt like we owed less rather than had money to spend as we were self employed all our tax savings went against the mortgage until we had to pay. I think we paid off a 20 year mortgage in about 5 years but left a couple of hundred owing then if we needed funds we could draw down against it with no fees or hassle and pay it back again.

That is what we used to advise our clients to do when I was working for a Chartered Accountant. Put the money saved for the tax bill into the account that off set the mortgage. People do have to be disciplined enough to put the money away and many are not - so a special account where a percentage of takings was put away was a good idea for some.

 

[Baggydave]

I hate to throw cold water on you but if you need to go into a care or nursing home later then you will not have any choices unless you have something saved or worth selling to pay the weekly costs of care minimum £500 per week after they have taken your state pension into account. big Issue coming up is if the Government do not sort the problem of social care soon many care and nursing homes will go under.

When I said I don’t do planning I did do hard graft. Worked for the same company for 27 years & now have private pension & state pension. Our house is paid for too. our Income is not huge by some standards, @2k a month, but more than enough to live on. We have no debts either.

 

[Jasz]

£15000 to £18000 should be adequate for most people, we have been managing on those sort of amounts including around £3000 for a hotel holiday each year.
We do have savings for emergencies and other one off requirements which helps our peace of mind.

 

[tick59]

When i retired I was worried how we would manage as we only had state pensions. After nine years we are doing OK we still have our old van and get out and about so if I was you stop worrying about money enjoy LIFE you can't take it with you so live for today you might not see tommorow.

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[AnnK]

I don't know if it's been mentioned already but you can also claim "marriage allowance" from the tax man if the higher earner (incl. pension payments) is still a basic rate tax payer. It is only £250 per year but "every little helps" and is very easy to claim online. Also you can back date it to prior years

 

[Garfields]

Trouble is everyone's number is different
Some helpful stuff scattered about this site

Pensions, annuities & retirement planning

For help with everything to do with pensions and retirement.

forums.moneysavingexpert.com

There are some that are asking about figures that are way above what most people could ever earn but some is more realistic

 

[Eyegeedee]

I wholeheartedly agree with one of the previous posts and recommend obtaining the advice of a financial adviser. We did this and he helped us so much to understand where our savings and pensions were best used for us.

Secondly, please do consider a worst scenario plan, and how this may affect your finances. I am so pleased we used the financial advice we were given. Now after only two years of retirement at 59, I’m left on my own. My wife sadly passed away in November. Although we were financially comfortable, the the actual cost of living on my own affects you in so many ways, not just financially.

To echo previous advice, just do it! As I have found, life is definitely too short. We had two wonderful years travelling and enjoying life together. Don’t leave it too late!

 

[Lusky]

I wholeheartedly agree with one of the previous posts and recommend obtaining the advice of a financial adviser. We did this and he helped us so much to understand where our savings and pensions were best used for us.

Secondly, please do consider a worst scenario plan, and how this may affect your finances. I am so pleased we used the financial advice we were given. Now after only two years of retirement at 59, I’m left on my own. My wife sadly passed away in November. Although we were financially comfortable, the the actual cost of living on my own affects you in so many ways, not just financially.

To echo previous advice, just do it! As I have found, life is definitely too short. We had two wonderful years travelling and enjoying life together. Don’t leave it too late!

My condolences mate.
And good advice. I must take it!

 

[Wh05apk]

I wholeheartedly agree with one of the previous posts and recommend obtaining the advice of a financial adviser. We did this and he helped us so much to understand where our savings and pensions were best used for us.

Secondly, please do consider a worst scenario plan, and how this may affect your finances. I am so pleased we used the financial advice we were given. Now after only two years of retirement at 59, I’m left on my own. My wife sadly passed away in November. Although we were financially comfortable, the the actual cost of living on my own affects you in so many ways, not just financially.

To echo previous advice, just do it! As I have found, life is definitely too short. We had two wonderful years travelling and enjoying life together. Don’t leave it too late!

So sorry to hear your news, I have a client she had suffered from breast cancer, but all clear now, sadly though her husband died unexpectedly in his sleep last week, he was only 47, so agree with you make the most of life, and don't leave too late, I am now trying to unwind my business so I can escape.

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[Bluemanc100]

Retired 6 years ago at 60 with 2 private index linked pensions yielding around £1600 a month after tax. Own home, no mortgage and around £120k in a savings pot. The biggest unavoidable bills are energy and council tax, everything else you can juggle.

So... lucky sod you might think and well set up for the rest of life except that 2 years later my wife of 43 years passed away, having been too I’ll to enjoy our retirement.

Luckily I have found new love, the pot afforded a lovely motorhome with plenty left for contingencies and the state pension that kicked in a year ago provides a useful boost every 4 weeks so no real money worries and life is good again. As others have said, you don’t know what lies ahead so just go for it.... you will find a way (but for the same reasons keep a contingency pot).

Sorry for your loss but happy you are back in a good place

I am retiring at the end of April at 56 because SWMBO has Lymphoma and I can't carry on working while she is still fit to travel.. it's a horrible position to be in but I know I have to stop.. luckily we'll have my military pension,. Sue's NHS pension which starts paying when she is 55 in April and also the private pensions I've paid into.. something around £2k - £2.5k a month which is a lot less than I earn now but will have to do....

We are mortgage free on two properties, one of which provides rental and the MH is paid for so I hope we'll be ok

 

[mikebeaches]

Sorry for your loss but happy you are back in a good place

I am retiring at the end of April at 56 because SWMBO has Lymphoma and I can't carry on working while she is still fit to travel.. it's a horrible position to be in but I know I have to stop.. luckily we'll have my military pension,. Sue's NHS pension which starts paying when she is 55 in April and also the private pensions I've paid into.. something around £2k - £2.5k a month which is a lot less than I earn now but will have to do....

We are mortgage free on two properties, one of which provides rental and the MH is paid for so I hope we'll be ok

Sorry to hear about your wife's health. I think you'll find £2-2.5k a month will be perfectly OK, as you're mortgage free. If you are earning a lot more at the moment, you'll likely find you will be paying significantly less tax - hopefully, anyway.

Hope you can make the very best of your circumstances.

 

[nicholsong]

Sorry to hear about your wife's health. I think you'll find £2-2.5k a month will be perfectly OK, as you're mortgage free. If you are earning a lot more at the moment, you'll likely find you will be paying significantly less tax - hopefully, anyway.

Hope you can make the very best of your circumstances.

Sorry for your loss but happy you are back in a good place

I am retiring at the end of April at 56 because SWMBO has Lymphoma and I can't carry on working while she is still fit to travel.. it's a horrible position to be in but I know I have to stop.. luckily we'll have my military pension,. Sue's NHS pension which starts paying when she is 55 in April and also the private pensions I've paid into.. something around £2k - £2.5k a month which is a lot less than I earn now but will have to do....

We are mortgage free on two properties, one of which provides rental and the MH is paid for so I hope we'll be ok

I also am sorry for the reason for your decision, but you are doing it for your wife and I admire you for it and hope you can have some good trips together.

On the financial side maybe I can give some help.

Years ago I was contemplating early retirement and tried to compare my good salary with what I thought my assets would produce, so a bit like your situation now. I sat down and considered where savings could/would be made.

I started with job-related costs. I do not know what you do or how far away from home.

I came up with these savings
Tax (mike beaches posted that)
No NI contributions.
No suits to buy and have dry cleaned
No commuting costs(car or public)
No lunches to buy at work
No professional body/society fees/union fees

Do you have 2 cars, one for work? Maybe need only one.

No more holidays to pay for - I was going to live on my boat, but if you have other holidays than MH maybe with more MH use you may not need/want them.

All the above except NI are out of already taxed income, which if your income is considerably more than 2.5k maybe taxed at 40%

All the above may not apply to you and there may be other items which occur to you, but it give you a flavour of the excercise to conduct, which may make you more confident that you will not have to manage on a very big reduction.

May I just make a suggestion on the income from Private Pensions, based on my financial services knowledge. Since you do not know how much you will need, initially put the pension fund into Income Drawdown(if not already) which will give you flexibility and may leave some invested for a while.

I hope this does not seem intrusive but helps in some way.

Best Wishes

Geoff

 

[Tony50]

I genuinely think it’s time for a two tier health service. At the moment those who pay in the least get the same as those who pay the most.
I’ve got my tin hat on, as no doubt at lot won’t agree with me.
But that’s how I see it. I have private health care which I am taxed on. I theory I should be less of a burden on the NHS, but I am charged for the privilege.

we had Private health insurance with Bupa for years stopped it last year when they wanted £5000 per annum , also lots if not all Private Hospitals do not have the capacity if things go wrong, like you have a medical emergency after a Operation where NHS Hospitals do, we took the view as we get older the chances of having something go wrong are greater than when we were younger. At the moment Ipswich hospital gives very good service, , you have to wait for non emergencies where private is mostly quicker ,
I can honestly say when working I did not grudge paying NHS payments whilst paying for Private treatment.

 

[Langtoftlad]

At the end of the day it's a simple equation.

Quit as early as possible to enjoy what time you have left against trying to accumulate enough money for every eventuality.

Work to live vs live to work

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