Inspired by the thread with the chap talking about mortgage overpayments v investing, im interested in what others think they need for retirement.
Personally im sick to death of work & bored senseless. I own my own home, not married, no children or dependencies, early 50's. I have about 400k in savings, pensions & investments.
Lately ive been trying to decide if this is enough to jack it all in? Although 1/2 of me thinks whilst its possible to earn good money then I should continue to do so, but at what point do you decide enough is enough.
I appreciate there will be those who have considerably more & those who have considerably less.
And before anyone asks, I don't like to talk about my charity work.
How much is your home worth, and is it the one you would retire to/die in?
If not, how much extra/less would that differential provide?
I reckon you can live comfortably on £10,000 per year, so you've got what, like 40 years saved up? Do it, you're here once 😎 Work less, play more.
The first rule of Charity work is no one talks about Charity work
or something
Your pot would be big enough for me to give up work. Unless you absolutely love your job. Time is the one thing you can't buy.
Edit myself actually. I'd give up work once current situation changes.
What's the split between pensions vs. everything else?
Why on earth would you stay at work when you have no dependents? You’ve only got 20 years of active life left if you’re lucky. Make the most of it.
Its an interesting question. I often ponder it when watching Grand Designs. It seems a lot of them have the choice to live in an ordinary house and never have to work again or spend stupid amounts of money on taps and windows and have another 10 years of working all hours.
My very rough figures. £1 million - High life doing lots of nice things, £500k - pretty decent life if the mortgage is paid off, £250k - comfortable if the mortgage is paid off and you aren't extravagant. A lot depends on how long you live and whether you can get a return on the money.
£400k is a good wedge, why not go part time or do something you enjoy for a living but less money? the problem with retiring is - you'll need to do something with all that free time - or if you've got a good plan for retirement and the numbers stack up then what are you waiting for? I know of a few people who worked hard all their lives, built a up a nice pension and a list of what they wanted to do when they retire, to keel over at 65 and become the richest corpse in the cemetery.
thegeneralist - I may sell & buy a similar value property in another part of the country. I would then anticipate staying there.
kayla1 - indeed. i wouldnt be buying a new bike every year but have lived quite comfortably over the past year on around 6k. This would be a bit more if times were more normal though, holidays etc.
Aidy - 300k pension, 75k s&s isa, the rest cash.
nickjb - yes I would like a bigger house with wonderful views but this would mean about 100k & therefore about 5 more years of work. I can live without a bigger house. Your figures, are they for retiring in your 50's?
There will able so a reasonable inheritance at some point, although of course that isnt guaranteed due to various factors, so I haven't included that.
Jesus I’d not spend more than a few seconds considering it if I was in your position let alone ask others, I’d be retired. I’m looking at going in 7 years time with probably still 3 dependants, a pension but nothing like in savings.
If money gets tight you could always do seasonal work on zero hour contracts or bank so you please yourself when you work.
Don't forget that if all the basics are covered, then a couple of part time shifts in the local Co Op or whatever can make a big difference to spare income and gives a bit of structure.
Or go part time at your current job. I went down to 4 days many years ago; 3 day weekends are great. I'll look at going down to 2 or 3 days soonish I think rather than stopping completely.
Ultimately only you know how frugal you can be - 40 years of retirement with no nice holidays or new bikes is a long time. Work less, play more is a great mantra, but play usually costs money.
Have a look on the which pension drawdown calculator.
Ive just plugged in your figures and sensible investment would support an income of @£22k per year. If you took a 25% tax free lump sum that would drop to £17k.
£400K !!?? Have you just posted this to show off?
As above more than enough to stop working right now and enjoy it.
Yes, I am envious, mid 50's and desperately chasing a 300k pension pot to retire when 60.
I'm 42 and do IT contract work. I have pretty good savings, although not 400k. I also have a house with another 450k on the mortgage (haha don't ask).
I have no kids or dependents.
I've just had 11 months out of work. I spent 2 months in Vietnam and 6 months in Poland.
I rent my place on Open Rent (covered all bills).
I'm now back in work, probably for 6 months or a year. I certainly don't feel tied down, I'm quite enyoing working at the moment.
Do what you want to do, take some risks. (I think it's more a mind-set, I see so many people making execuses and not living their lives).
Sit down and write a couple of plans.
First one, what do you want to do with your retirement and all that time you'll have on your hands. I was furloughed for 10 weeks over summer and realised that the days can take some filling when work suddenly stops and you need to be mindful of the finances.
Second plan depends on the first. If you decide that actually you are not quite ready to throw in the career just yet then make a plan on how long you need and what your goals are. Is reducing the hours an option, say drop to 4 days a week. I know a few people who are doing this and the only cautionary note would be make sure that you are not doing 5 days in 4!
Do remember that 22k a year now is not the same as 22k a year in 10 years time, or 20 years time...
And any pension income will be taxable.
And you'll probably be spending more money than you are now when retired as you'll have much more free time on your hands.
Your figures, are they for retiring in your 50’s?
Yes, retiring in your 50s. I think you'd still need to manage the money, either with stocks and shares or maybe property, it wouldn't be enough just to draw down, I think. I might be way off but if I had 400k and no mortgage then I'd seriously consider retiring (maybe with a little, interesting part time work to top up and keep active)
kayla1 – indeed. i wouldnt be buying a new bike every year but have lived quite comfortably over the past year on around 6k. This would be a bit more if times were more normal though, holidays etc.
Yes, I hear that the past year or so has prevented people spending money on stuff they'd normally not think twice about! If it was me (well, us actually, me and my OH that is) we'd be off like a shot. The pair of us could live very comfortably indeed thank you very much on 15k per year between us. I love my job/business but I wouldn't do it if I didn't have to ✌
When I started work about 15 years ago I worked out that I would need/ want roughly £3m to stop working:
~£1m house
~£1m private education for kids/ general cost of kids
~£1m invested at ~4% to live off (ie £40k/year)
Given that I still don't have kids (or any sign of kids in the near future), and I'm not sure that 4% is achievable at the level of risk I would be willing to take, I'm not sure these figures still stack up...
EDIT: When I say stop working I mean no longer requiring an income, giving me the freedom to invest my time and energy in something completely altruistic/ philanthropic.
The real question for the OP is how expensive is the lifestyle that you want? And what you want to do with your time/ how you plan to fill each day? Having no mortgage is a massive help.
dantsw13 - thats a really good link thank you.
Various others - yes seasonal zerohour type work for 1 or 2 days a week are certainly an option I have been considering, although being quite lazy I wouldnt want to do anything too strenuous!
Coyote - dropping to 2 or 3 days a week would be great but not an option unfortunately.
£400k is a good wedge, why not go part time or do something you enjoy for a living but less money? the problem with retiring is – you’ll need to do something with all that free time
This^^
You also need to consider that you may not need it for 40 years as very likely you won't be alive at 90 and even if you are still alive you may have developed dementia at say 75 and any money you had left will go to your care costs until it runs out.
Out of curiosity, what do you do with your lump sum in order to draw down income/interest in the most efficient way?
...why not go part time or do something you enjoy for a living but less money? the problem with retiring is – you’ll need to do something with all that free time
This +1
We are mid-way through this, I’m 56 and took redundancy in 2018. Speaking to a financial advisor and the best piece of advise was to buy the cheapest house you need to release capital. We sold a 4 bedroom house in Hampshire and having a 2 bed house built on the Isle of Mull - it’s configured to allow living on the ground floor if needed. We have a micro business and I’ll do some part-time work and won’t need to touch my pensions until retirement dates. I can’t even imagine going back to the world of work - we’re putting our welfare and health first - staying active and getting out everyday. The only sacrifice will be foreign holidays and trips - but in a post-COVID world, will that even be possible?
kerley - yes of course this could happen & that's the reason I haven't included the inheritance coming my way from my father, as this could all be used for his care.
I had anticipated on living till 80 but of course this isnt something you can plan!
dovebiker - this sounds wonderful
Aidy – 300k pension, 75k s&s isa, the rest cash.
Assuming that ~100k is enough to tide you over until you can access your pension, I'd jump at it, personally.
Source a job that is part time but nets you around £200 a week.
No tax, minimal ni payments.
3 days working, and not spending
4 days playing and spending
If you can survive, ha ha on your part time income then you will keep ypur pension and investment secure
You need to look at the tax implications once you crystalise and start draw down, lump sum payments
Holidays chew through savings, but if your semi retired it will feel like a holiday most weeks anyway
Plus factor in state pension at say 68
Plus will spend less as you age as sports become less possible
Plus you will be able to downsize and relocate to release a bundle of equity if you need to.
All depends what you want from life and retirement,
Just getting part time/seasonal/zero hours work is not so easy at present and will no doubt get even more difficult over the next few years what with pandemic and Brexit downturns to come. Hundreds of applicants for driving and supermarket jobs.
It's all relative and changes for everyone.
I know a few at work who are looking to transfer 1.8 million into SIPPs and are still worried it might not be enough.
Obviously that is utter greed and stupidity but it highlights how it is a personal decision on what is enough.
Speak to people who have retired and one thing shines through, they all say you need far less money that you imagine.
I longed for £300k so I could stop working for 10 yrs then worry about the rest later lol.
It's all changed now but I will be going at 55 as soon as I can access my SIPP.
I won't work a day longer than I have to.
and I’m not sure that 4% is achievable at the level of risk I would be willing to take,
It is. Although I wouldn't get carried away with this years results as they are a bit crazy.
My SIPP is up over 10% since last year and is invested in a relatively low risk fund mix.
What Aidy said
I think your biggest stumbling block will be when you can access your pension fund.
I retired in September 2019 @ 55. Pension pot was £397k, no mortgage, or other debts
Moved my DB company pension to Royal London, took £60k lump sum (if you ignore the withdrawals and IFA fees, the pot is around £15k more than original value).
Company pension was only going to give me £1k/month, RL gets me £1400. Which I'll reduce when the state pension kicks in
singletrackmind - yes that would work for sure. The internal battle being do I stay with my current role earning whats pretty decent money for what is to be honest very little work for as long as possible or until the inevitable redundancy that the company I work for seems to be permanently going through.
And yes I doubt, although I may be wrong, that I will still be going to morzine & whistler when Im in my 60's.
And before anyone asks, I don’t like to talk about my charity work.
For the last time Dougal, that money was just resting in my account!
Do a bit of googling around FIRE (Financial Independence, Retire Early) movement, plenty of good (and bad), advice.
I find it quite amusing that the FIRE podcasters etc all seem to be people who haven't managed it yet want you to pay them to advise you how to achieve it!
but have lived quite comfortably over the past year on around 6k
C'mon people. I call End of Thread. This is a non conversation.
JFDI
Assuming a return of 1.5% , you'd never, I repeat NEVER use that money up. Add into the equation your house, the fact that you should aim to use the money up, and the possible inheritance..... I think that should comfortably cover inflation.
Go for it.
Post piccies.
😄
Oh yes, and state pension...
If you have a comfortable amount of funds that would give you the time needed to get good enough at doing something you enjoy until you can start making regular money from it.
About 10 years ago I started being a handyman, got into assembling flat-pack furniture for people and moved into designing and building wardrobes and stuff. Now I spend about 3 days a week making good furniture that I'm proud of and which customers keep coming back for more and recommending me to their friends. It took a few years till it made much money but it's a lot better than watching daytime TV!
Edit: Having just seen the above, I'm 67. We still go windsurfing and mountain biking in Tarifa (Europe's windiest beach) every year and places like Costa Rica and Sri Lanka for the reliable waves for the surfing. Keeps ya young!
Speak to people who have retired and one thing shines through, they all say you need far less money that you imagine.
Maybe when you're older, but right now (at 50), my holidays are limited by the 5 weeks a year I get, if I didn't work I'd want to be off doing stuff all the time, which would cost a lot more.
I could spend a small fortune on B&Bs etc....
@footflaps, yes, as with everything on the internet - the bullshit accumulates at a huge rate.
But, I found some of the spreadsheets useful and the discussions on safe withdrawal rates and the like.
dantsw13
Have a look on the which pension drawdown calculator.
Following links from that, I found this which is very useful & helps validate my own conclusions (55 in ~3 months!)
the problem with retiring is – you’ll need to do something with all that free time
I've been retired four years now and haven't had the slightest problem filling my time. I also know loads of retired friends and a quite common remark amongst them is "I can't believe I ever had time to have a job".
You don't need to be spending much money either. Once the coke and hookers novelty wears off (roughly six months for most folk) you'll find loads of cheaper ways to fill your days. Lack of imagination is the only reason not to.
I'd def try and reduce days working to start with, you might find you enjoy work more if doing less of it (and find retired life is more boring than you first thought - if having to watch the pennies). And maybe start recording your outgoings for a few months to make sure you're spending what you think you are :p
I looked at this recently and we worked out what salary we would want. We said current take home. Then worked out how much we could release by downsizing the house and other savings.
There are extra things to spend money on and spending reductions in retirement. The Mrs and I have spend most of our retirement locked down and it is very inexpensive. I think when you only have so much free time you tend to try to get the most out of it which can involve expense, when you have lots you aren't as frantic to do stuff. But for me, giving up work was more than just not doing a job, it was also letting go of the urge to be productive, which had kind of extended to my leisure time. In different circs., we would have spent more on travel (but we would have tried to get the most out of out old gits travel cards as well). But I have found space for a good bit of idleness in my life which I am enjoying at the moment (just as well really).
It does really depend on what you are going to end up wanting to do with your time, which may not be apparent at this stage.
C’mon people. I call End of Thread. This is a non conversation.
JFDI
Definitely, JFDI! Bin the job off and do a poo in the boss's top drawer if you must.
The amount of money we have as a family saved in the last year is surprising, shows how much is frittered away on inconsequential stuff. Makes you realise how you could live on a lot less.
Tilly - yes, there's lots of good pension stuff on that Which? website.
My Grandma use to say that "no one ever laid on their death bed and wished they'd spent more time at work.", but, for some folk work is everything.
My old boss, still working a full shift at 79 - worth +£10bn.
https://www.walgreensbootsalliance.com/about-us/leadership-team/stefano-pessina
Sounds like you're like me, and my Grandma 🙂
Some wild estimates on here. I think my basic living costs - bills + weekly shops is over £1k a month (excluding mortgage which i assume is paid off). So I would guess £15k is the base amount but I would add to that running a car and maintaining my house so for a car all in with depreciation say £2.5k annual and I'd want to have that as well to spend on the house. So I'm up to £20k and I haven't even left the house yet. £25 - £30k Seems a ball park figure for me as a fairly basic annual retirement budget - I'd like to have at least another £10k on top for holidays and expensive hobbies.
I guess that is me and the wife and current figures are with the kids living at home - how much the bills drop and how much less food etc is the unknown. My gut feel is they dont drop by that much.
The amount of money we have as a family saved in the last year is surprising, shows how much is frittered away on inconsequential stuff. Makes you realise how you could live on a lot less.
100% This.
I'm amazed at home much money we must have wasted on eating out/coffee shop trips/shopping for non-essentials/etc.
It has made us re-evaluate things a lot.. which is all good.
In your position you appear able to retire with some degree of comfort. However - is the pension a final salary valuation or is ti actual cold hard cash/shares in a defined contribution scheme? If the former, will you want to convert it to a lump sum (multiple of say 35x annual), and is there a penalty in taking early retirement. Normally this is 55. I imagine a 6-8% investment return is not impossible in share land.
As others have said, no dependents, no mortgage, congratulations you have made it. Do something you enjoy and find rewarding. I happen to enjoy work very much. And they pay me to do it. That is not typical and I realise that I am very fortunate.
Seek financial advice.
Threads like this are a good source of info sharing. Everybody's pay/pension savings are different. Can we please not be judgemental on others circumstances. The concepts are the same whatever the budget and making judgemental comments just stop people posting.
Not aimed at any particular poster btw.
FML. I need to stop reading these threads. 2 dependents, mid-forties, £60k left on mortgage, house worth ~£280k, mrs doesn't earn a lot, paying into both our pensions from small business with ~£25k in each. I'm screwed for probably another 20 years. Obviously I'm still lucky to even be in that position but if I were you I'd be retired or part-time, buying a camper and just riding or walking every day.
I don't think that is enough to support a comfortable level of retirement from 55 - I would wan to be able to travel, eat out as well as boring things like maintain the house and keep running a car.
With no dependents you can equity release or sell the house to fund a comfortable level of care - do ensue you have someone who can step in when needed if you become incapacitated mentally.
Can you look at reducing your time at work? 3 days a week? Buy more holiday?
I'm working to a mortgage paid of by 55 and retire at 60 plan but would love to be able to drop days from 50/55 down from 5. In fact, I would love to go down to 4 now but seems crazy when I am in my working and earning prime.
@mulv1976 - I would say the now is the time to read these threads and make a plan, but you might be surprised how quickly the pots can grow if you keep feeding them
Ive dropped to 50% part time now. Having been grounded through the pandemic makes the idea of spending so much time away very unappealing.Age 46, planning to retire at 60, mortgage pays off at 58. 2 Dependants & a wife.
My pension is a DC scheme, which I self manage. It is interesting that even though my company contributions are pretty generous (15%) it is the compound interest that is growing my pot much more than the contributions. Going part time has had a much smaller impact on pot size than I imagined.
Taking an active role in managing your funds, whaterver the size, is the biggest difference you can make
I am trialling retirement this year, well I never really did much anyway work wise.
Filling a day is really quite easy if you live by the sea and enjoy working out. Beach walk, kettlebell routine, sea swim that's the morning done. Lunch, gardening, diy, Pilates.
My income is rent so it's pretty passive, pensions kick in in 7 years so I can easily fund the gap.
The above post 're earning 12.5k pa is the win, no tax.
@Nick - yeah, I'm trying. Paying as much into our pensions as we can afford, plus paying off the mortgage, plus trying to pay something into the kids trust funds/ISA. It's tough going when you're pretty much the only one earning in a family of four, but I know my other half works hard with house/kids etc so can't complain. Just keep going, and hope I get to retire or semi retire with some physical ability still left 😂
uwe-r
So I would guess £15k is the base amount but I would add to that running a car and maintaining my house so for a car all in with depreciation say £2.5k annual and I’d want to have that as well to spend on the house. So I’m up to £20k and I haven’t even left the house yet. £25 – £30k Seems a ball park figure for me as a fairly basic annual retirement budget – I’d like to have at least another £10k on top for holidays and expensive hobbies.
That Which link I posted above, for a couple living together, comes up with:
£17k PA to cover the 'basics'
£25k PA for a 'comfortable' retirement
£40k PA for a 'luxurious' retirement
(Based on a survey of >6000 retirees - There's a breakdown of spending for each option on the web site.)
So roughly in line with your estimates. And mine, as it happens.
FML. I need to stop reading these threads.
They must all be public sector workers with those gold-plated pensions that I keep hearing about.
@mulv1976 I'm in a similar position to you! 40s and taking almost everything I earn just to pay food/energy/mortgage(300k left)/childcare for 2 kids and a partner out of work, nevermind saving anything up. Think i'll be working until i'm dead. In fact that might not be enough lol
Not me, I worked in the foundry at the Nissan plant in Sunderland for 28 years.
They did have a very good DB scheme until a couple of years ago (they added double my contributions). I topped their pension up with 2.5 years of pension from my previous employer. The current pension scheme they have is worth about half what mine is/was
There are a lot of people in worse of position than you. I have a mate who is a hair dresser. Earns and lives mostly cash in hand. Has no pension although he does own his flat. I asked him once what is retirement plans were and he said its basically his inheritance.
That Which article is interesting, lower figures than I was expecting.....
My pension is a DC scheme, which I self manage. It is interesting that even though my company contributions are pretty generous (15%) it is the compound interest that is growing my pot much more than the contributions. Going part time has had a much smaller impact on pot size than I imagined.
Taking an active role in managing your funds, whaterver the size, is the biggest difference you can make
I need to do this but haven’t a clue how to pick the right funds etc. Also don’t really trust IFA’s, I mean really if you’re that good at financial advice, surely you’d be a millionaire! And not giving the advice anymore.
Dan, have you not got a closed DB scheme too?
@tilydog
That Which link I posted above, for a couple living together, comes up with:£17k PA to cover the ‘basics’
£25k PA for a ‘comfortable’ retirement
£40k PA for a ‘luxurious’ retirement(Based on a survey of >6000 retirees – There’s a breakdown of spending for each option on the web site.)
So roughly in line with your estimates. And mine, as it happens.
Interesting. I guess the harder calculation is what lump sum equates to that and how and when it might reduce down. I'd like to be into coke and hookers in my 90's. I will more likely be dead.
@uwe-r "There are a lot of people in worse of position than you."
Yeah, I appreciate that which is why I said I was still lucky. Reading some of these threads makes me nervous though and realise I still have a long way to go.
My pension is a DC scheme, which I self manage. It is interesting that even though my company contributions are pretty generous (15%) it is the compound interest that is growing my pot much more than the contributions. Going part time has had a much smaller impact on pot size than I imagined.
I don't pay into mine anymore, nothing I can afford to add will make the slightest difference. 30+ years of compound growth and it's out earning me (in a good year).
BMfs18 - no , I joined my company just after they closed the FS pension. I do have a military pension from 60 though.
Its hard and quite scary self investing. One thing that has changed is the government pension freedoms, meaning you no longer have to take an annuity when you retire. Most company schemes automatic investment strategy still work on this basis though, so in the last 5-10 years they go very defensive, trying to avoid hitting the retirement D-Day (When you had to take an annuity) in the middle of a crash, so losing money for ever.
With the pension freedoms, the date no longer matters. You can afford to stay invested, reaping growth into retirement and riding out short term blips. A basic understanding of compound interest will tell you that the later years of your working, when the pot is at its biggest, are when you will get the biggest annual return (5% of 400k is a lot more than 5% of 100k).
guess the harder calculation is what lump sum equates to that and how and when it might reduce down
It's all on the Which site (bottom of the page I linked to tells you what pot is needed, and the original link was to the draw-down calculator).
Its hard and quite scary self investing.
I manage mine and I'd say it was neither (but I appreciate we're all different).
I do nothing exciting, don't chase anything new and shiny eg Bitcoin / GameStop.
I split my money into chunks and invest them in either trackers or managed funds. I asses their performance once a year and if something is doing poorly and I don't think there's a good chance of it changing, I sell it and buy into another fund.
I make sure I have a reasonable geographic and type of industry split to mitigate risk.
If I'm paying for a managed fund it has to do well, if not it gets binned. The trackers are all low fee, so barely cost anything.
I've had some big successes (SMT) and some very poor choices (Woodford funds), but as I never had all my eggs in one basket, the duff ones were limited in damage and overall it performed OK.
Must say that 400k seems insufficient to retire on if it's a defined contribution pension. I was assuming you need to get to a million - draw down on 400k is 16k pa for 4% (which is slightly risky) or 12k pa on 3.5%. A million will get you 30-40k pa which seems more like what you need for a non-extravagant retirements (but at the same time still going on holiday etc).
Have I got my maths wrong and should be shooting lower?
FF - I'm very similar to you. Its all monitored on a spreadsheet and I'm a member of several chat groups with people far more knowledgable than I on the subject. Many people just aren't comfortable with playing with such big numbers though, so I do get that it isn't for everybody.
My RAF pension from 60 gives me a bit more leeway to take risk (within limits) and I am happy to look through all the short term noise at the long term trajectory.
Ewan - I don't see 4% as risky at all in a fully invested drawdown portfolio. Risk is personal, but I have no intention of giving up on compound interest in my retirement phase.
@ewan -
one way I've looked at it is the 16k you mention is just you. My wife will also have a decent pension (no idea what it's worth, but she's worked well for the same length of time as me, with a couple of DB pensions thrown in).
So yes, 16k for just me (or especially me and her) might be a challenge. But [say] 32k for two of us will be more than enough I'd've thought
Pension calculators never seem to take the spouse into account
That Which link I posted above, for a couple living together, comes up with:
£17k PA to cover the ‘basics’
£25k PA for a ‘comfortable’ retirement
£40k PA for a ‘luxurious’ retirement(Based on a survey of >6000 retirees – There’s a breakdown of spending for each option on the web site.)
So roughly in line with your estimates. And mine, as it happens.
This underlines my point...
Basic = 17k pa = 480k pot @ 3.5% draw down
Comfortable = 25k pa = 712k @ 3.5% draw down
Luxurious = 40k pa = 1.1m @ 3.5% draw down
Obviously, two earners put a different spin on things, as does any final salary contributions.
They have much more optimistic figures (poss inc State pension as part of the income)..
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The thing with a drawdown is you probably don't want to take it out in a linear fashion. How much you need at 55 will be different at 65 and almost certainly at 75.
They have much more optimistic figures (poss inc State pension as part of the income)..
How on earth did they get those figures?
I just looked at an annuity calculator (aviva but i guess they're all the same) for age 55. £500k gives you 16k a year.
