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^^^ yeah, significantly more than that, though current spend puts loads into salary sacrifice pension, ISAs etc, plus running 2 cars, supporting teenage/early 20s offspring, so outgoings would reduce a lot.
The size of pot vs projected annual payout is depressing though, £12500 well below minimum wage etc, so would suggest that a pot of 1M is required to get to 25k or so, which feels a more comfortable income. How many folk will get to a 1M pot though !
£500k equates to give or take £12500 pa.
Is that based on taking an annuity? If they're early 60s and expecting to live c. 30 years then basic drawdown gives 16.6K (without growth). If you tweak the phasing of that to eg 10 years active retirement, 15 years passive, 5 years care, the spend during the active phase can be higher, easily 20K plus. And that's without including state pension.
Remember to add on state pension (when available) to total income.
£500k equates to give or take £12500 pa.
more like £20k pa (before tax) based on taking 4% on the pot per year, whoch is the amount most financial advisors seem to think you can safely take without depleting the capital amount
Annuity rates have also gone through the roof in recent years. At 65 a basic male annuity (no increases etc) is now pretty close to £7500, meaning a half mill pot would give you 37k/year income (so 50k when you add in the state pension). Even an rpi linked annuity would pay out over £20k
£500k equates to give or take £12500 pa.
Agree with the other posters who say this is incorrect.
these numbers look more encouraging ! A good prompt to book in an appointment with my IFA later in the summer.
more like £20k pa (before tax) based on taking 4% on the pot per year, whoch is the amount most financial advisors seem to think you can safely take without depleting the capital amount
You'd have struggled to do that over the last 10 or so years. The 4% rule pre-dates the period of near zero interest rates.
Possibly with interest rates higher you can, but then your capital is still deflating...
You’d have struggled to do that over the last 10 or so years. The 4% rule pre-dates the period of near zero interest rates.
you shouldnt be relying solely on interest rates to generate all the growth in your pension, it should be invested across lots of different sectors, so that you achieve a decent growth. I track mine over the last 20 years and it has averaged 7% growth - some years it goes up by 18%-20%, other years it shrinks by 5-10%, other years its flat, but the average growth has been ~7% after fees across the last 20 years. over the last 10 years, growth has been 7.28%
"Possibly with interest rates higher you can, but then your capital is still deflating…"
I dont intent to die with my capital being fully intact. Ideally it will be zero.
similarly, i would be expecting to deflate the capital over the retirement years. The kids will still have a house and various other inheritance elements so not fussed about much of a leftover pot !
Agree with the other posters who say this is incorrect.
It's a 'forecast', therefore neither correct nor incorrect, and remember, you can't buy 'history'.
It’s a ‘forecast’, therefore neither correct nor incorrect, and remember, you can’t buy ‘history’.
You can with an annuity, which pays out way more than the £2,500 per £100k suggested in that post
I dont intent to die with my capital being fully intact. Ideally it will be zero.
Given you don't know if you'll live 1, 5, 20 or 50 years, I'd say planning for that is impossible.
Unless you buy an annuity which just vanishes the day you die.
I’m 58, currently working part-time at just below the tax threshold and drawing down on the proceeds from my house sale for another 7 years before my pensions kick-in. Zero mortgage on a newly built house that shouldn’t need any major costs for the foreseeable.
For the prior 30 years was earning reasonable money and spending it on ‘stuff’, but the priority now is health, happiness and feeling like you’re a part of a community rather than another faceless drone.
Given you don’t know if you’ll live 1, 5, 20 or 50 years, I’d say planning for that is impossible.
Unless you buy an annuity which just vanishes the day you die.
Few folk want to live active lives in their mid 80s onwards - so aim to have it all spent by then
The "4% rule" is designed so that you can sustainably withdraw 4% of the total pot each year, after inflation, without depleting the capital.
THere are a few assumptions.
- you remain invested - back testing has shown that a 60:40 equity-bond portfolio generates the right sort of risk-return model, and upping the portion of equity invested doesn't change the outcome by much.
- ideally invested in global trackers (eg Vanguard Life Series 60)
- long run average market return 8%, with long run average inflation 3%, giving net return 5%. This means (simplistically) that you can therefore take out 4% sustainably without running down the pot
- keep ongoing costs as low as possible. These include low platform fees (eg SIPP), low product fees (some trackers are much more expensive than others), and ideally no advisor fees (the advantage of a global tracker is you don't really need advice on where to invest! Just perhaps an occasional check in to see if things are still on track, which you can do yourself really).
- be flexible. Clearly if there are serious market challenges, then it would be sensible to take lower than 4% if you can, and equally if the market / your pot accelerates then you can perhaps take out more.
- there's one challenge - "sequence of returns risk". In spite of the above simplified approach, the wrinkle is that if the first few years you take 4% and the market experiences persistent recession, then your pot will struggle to recover from its depleted state even if subsequent years are strong growth. This risk abates if you experience recession a few years after starting, or if you are adaptable / flexible in the early few years to accommodate a downturn.
- finally - tax. You won't pay NI on money you take out of your pot as pension, but you will pay income tax at your marginal rate. This means that it might be sensible to take out an amount up to your tax band, rather than a strict % of the pot, depending on your circumstances.
Lots of information.
What's the summary?
You should (highly likely, but not certain) be able to take out 4% each year sustainably, without depleting your pot and still allowing for inflation.
When you’re old enough to stop spending money on activities, you have to spend it on paying someone to wipe your arse.
Not if you have spent all your money.
When you’re old enough to stop spending money on activities, you have to spend it on paying someone to wipe your arse.
Yep, I wouldn't want to have to rely solely on local authority care in my old age, as I expect it will be pretty poor....
Let sat in your own feces for hours whilst the underpaid staff struggle to cope with the number of patients....
We have just returned from a morning at the skate park.
With banana split for refreshments.
You don't need loads of cash to have a nice life.
Yep, I wouldn’t want to have to rely solely on local authority care in my old age, as I expect it will be pretty poor….
After seeing a close relative fade away in a care home with dementia, it is my express wishes what when I become of age to need someone to wipe my bum I will take a nice long winter hill walk with a good bottle of malt.
I will take a nice long winter hill walk with a good bottle of malt.
Unless you have a stroke etc and end up an invalid with zero warning...
Although I fully endorse your intention.
Surely the stw way is c +h, so keep aside enough funds for an absolutely 'killer' week in Vegas, one way flight.
I have dipped in here as I got my annual pension statement the other day and now I'm in my 50s pensions seem more real. On one hand I feel very lucky that compulsory civil service pension contributions have already amassed a fair pension but I won't be retiring early, or even at 60 when some of it is available. I've 3 young kids so will be working to state pension age to pay for them. Still, if I do get to retire then, my income would not drop significantly. I envy those of you talking about retirement in your 50s, well done you.
Still, if I do get to retire then, my income would not drop significantly. I envy those of you talking about retirement in your 50s, well done you.
many of us took the choice to have much less money in retirement to do so. My income dropped by 60+% I remain very fortunate to have a big lump of capital tho
So your income didn't actually drop by 60% in any real and meaningful sense then...
I have dipped in here as I got my annual pension statement the other day and now I’m in my 50s pensions seem more real. On one hand I feel very lucky that compulsory civil service pension contributions have already amassed a fair pension but I won’t be retiring early, or even at 60 when some of it is available. I’ve 3 young kids so will be working to state pension age to pay for them. Still, if I do get to retire then, my income would not drop significantly. I envy those of you talking about retirement in your 50s, well done you.
Isn't that a blindingly obvious downside of having kids later in life.
So your income didn’t actually drop by 60% in any real and meaningful sense then…
yes my income did drop by 60%. I have a safety net by having a large ( to me) lump of capital but I am living on my vastly reduced income.
Isn’t that a blindingly obvious downside of having kids later in life.
not so sure. Kids cost roughly the same regardless of when in life you have them (inflation I suppose aside). It doesn't really cost any different to buy a t-shirt, dinner, or a university education if you're 30 or 60. it'd be just as possible to have kids at 20 and retire at 50 as it is to have kids at 50 and retire at 50, if you plan it right.
I get that you and others chose to retire with lower incomes. The ages of my kids (7, 5 and 3) mean I will be working for a good while yet. When I finally do get to retire I'll have a pension income not far from my working income, but can't not pay in to the pension, nor afford to pay more and retire earlier. I am rather stuck with working to state pension age, where upon I'll feel a pretty comfortable pensioner....or be trying to find ways to help the kids because I'll be to old to spend my pension myself!
And yes robola, it is.
I stopped work in July 21 at 56 3/4. Didnt work for a bit but started again then worked for 3 months earlier this year. I was previously an IT director and took another job but it made me realise I had become a bit unmanageable. I got on really well with my boss (Ops Director) but it became clear we were not going to get the changes we wanted within the organisation. We left on friendly terms, he needed to keep his job and work within those constraints and I didn't.
2 lump sums from pensions has kept us going for that period and I will soon need to liquidate some of my SIPP. I have about £500k plus other pension income and my wife wants to work for another 2.5 yrs at which point our mortgage and other bills will be paid off. She has a pension as well.
I am a bit of a spreadsheet geek and have mapped out every monthly cost until we are both in receipt of our state pensions. After that theres seems no point and my main concern will offloading our assets, we have a house worth a fair amount.
One thing that people need to consider is income "shaping" I possibly stopped work a year or 2 early so our outgoings are still quite high. in just over 2 years they fall off a cliff. Around 4-5 years later they fall futher and our incomes increase. Assuming you will receive a fixed amount forever may not be helpful. It will seem very low to start with as you are very active then very high later when you are not. I would advice trying to predict your income and spreading it over (in our case around the next 20 years) then assuming you wont b spending much after that.
just catching up on these, I like the income shaping approach, rather than basing on 4% or whatever per annum. I guess retiring around 60, and with hopeful good health, the first 10 years will be the most 'expensive', then state pension kicks in, and by mid 70's activities are likely to be decreasing, along with costs, and it's only going to go one way..
70’s activities are likely to be decreasing, along with costs, and it’s only going to go one way..
Don't forget that there's always the chance of a relatively short but steep increase in spending at the end if you end up in care, but that's a risk rather than a given. You may pop off before then, you may never need one - around 4 out of 5 people over 85 will still be in their own home, but if you develop multiple health conditions (particularly dementia) the chances of needing care at some stage will go up.
Bungs in a random mention for pensionwise (probably done it before )
Pros
- free and independent
- seem to know their stuff (my advisor did)
Cons
- only 1 free hour (so do research/ homework on all monies, dreams , wants …. etc etc first)
- must be over 50 with a money pot scheme
https://www.moneyhelper.org.uk/en/pensions-and-retirement/pension-wise
And remember you can take the 25% tax free bit by bit (ie each year as part of income)
If you've no dependants the '4% Rule' is irrelevant IMO - and if you own your own house, that should also be spent too.
Don’t forget that there’s always the chance of a relatively short but steep increase in spending at the end if you end up in care, but that’s a risk rather than a given
But you only pay for that if you have the money. My mum has lived for years with dementia. Her quality of life is zero and has been for several years. She has sold her home and spent all of her savings, (minus circa £23k whereby the care home charges stop and the LA then starts to pay) to cover her care costs. Whatever money you have will be spent very quickly at several thousand per month, even for a non luxurious care home.
Whatever money you have will be spent very quickly at several thousand per month
Yup, My nan died just after chrismas, she was in care for about a month after hospital discharge... £900 per week...it's a staggaring amount of money.
Mattyfez - and suprisingly not very profitable £900 per week per patient will barely make a profit - and self funders are often used to subsidise state funded where the £500 or so a week is less than costs
Yup, My nan died just after chrismas, she was in care for about a month after hospital discharge… £900 per week…it’s a staggaring amount of money.
Compared to what?
Works out at £5.36 per hour, all in.
I wasn't commenting on value for money or not, I was commenting that it's a vast amount of money.
Compared to what?
What a doofus question. Compare to living at home/ kids house/ wherever she was living beforehand plus shopping costs, heating and services.
Compare to living at home/ kids house/ wherever she was living beforehand plus shopping costs, heating and services.
But she's now being cared for, so not really comparable.
I was commenting that it’s a vast amount of money.
It's not really, maybe it was once (60's maybe), but not anymore.
Oh nursing home can be a huge cost. £1000+ per week is not uncommon.
Maybe I can put this in some kind of perspective as a care worker my entire annual wage just under £20000 would not pay for 5 months care for my mum at approximately £1200 per week
Thread drift alert. 15years ish ago I did a business plan for a care home - I wanted my own. Staffing at halfway decent terms and conditions to the minimum standards required would mean around £300 - 400 a week per bed. Equipment costs are ridiculous - a therapeutic bath can cost £10 000! A simple hoist £1000+
At today's cost I guesstimate the total cost per bed per week is around £700 - 800 for basic care. Add some frills and that goes up. Add in some vacancies and then any chance of a profit is gone
Getting away from care home costs, now I’m retired, and not constrained by working hours or shifts, I’ve recently taken a three day beginners course in archery, which I passed, got a signed certificate and everyfing! I’ve now joined my local club, (which wasn’t cheap), and I’ll be taking coaching lessons with a club bow and other equipment, until I can get to the nearest shop, which is Wales Archery, in Caldecot.
It was made clear that online purchases are to be avoided, due to the uncertain quality of the equipment, which can cause injuries, like a bow limb fracturing under stress!
Also, it’s really recommended that the bow be set up to fit the owner, a bit like a bike, really, so that’s an expense to look forward to.
The club has access to indoor facilities, so I can carry on through the winter, which I hadn’t thought about, which will get me out of the house. 😎
4% rule was somewhat undermined by the low interest rate environment but might just be coming back into relevance as interest rates "normalise". My financial planner friend endorses the following rule of thumb: subtract your age from 100 and divide that number into your pot of money as an approximation of what you can pretty safely draw without running out of money. ie at age 60 you can take 2.5% of your pot safely etc.
CZ - do you dislike any of your neighbours?
My financial planner friend endorses the following rule of thumb: subtract your age from 100 and divide that number into your pot of money as an approximation of what you can pretty safely draw without running out of money. ie at age 60 you can take 2.5% of your pot safely etc.
really, I can't see the logic there. This assumes you live from 60 to 100 (v unlikely) and you withdraw a 40th every year, during each those 40 years, during which there is no growth to the pot from the figure in it at age 60 (again v unlikely)
My financial planner friend endorses the following rule of thumb: subtract your age from 100 and divide that number into your pot of money as an approximation of what you can pretty safely draw without running out of money. ie at age 60 you can take 2.5% of your pot safely etc.
thats a super cautious approach, cant see me following that advice, but to each their own, everyones attitude to risk is different
really, I can’t see the logic there. This assumes you live from 60 to 100 (v unlikely) and you withdraw a 40th every year, during each those 40 years, during which there is no growth to the pot from the figure in it at age 60 (again v unlikely)
And based on watching grandparents/parents etc the money needed does reduce over time, and you ain't taking it with you.
It’s a rule of thumb - it’s to help those trying to picture how much they might realistically draw without finding themselves destitute with years of life ahead of them. It should also help mitigate the risks from sequencing issues but it isn’t a hard and fast rule. And when you think about it doesn’t imply taking 2.5% of the original pot each and every year. My financial planner friend’s client list is concentrated on finance professionals at the top end, so he gets a hearing from those who might have half an idea what’s going on. He also pointed me to a book titled “Beyond the 4% Rule”, which I would recommend. It explores a range of methods of deciding how much you want to draw each year. I need to re-read it but I got to a number of 2.75% initial draw, rising with inflation, unless my pot had had a very poor previous year.
This assumes you live from 60 to 100
Also assumes you will spend the same amount in your hundredth year as your sixtieth!
Financial planners often assume a “smile” profile on spending - higher expenditure in the first years of retirement as you do more travelling and treats while you’re fit enough, a settling down phase and then a ramp up towards the end when care needs are higher. In the end, for all the analysis and planning you do, s**t happens, so you can only think in broad brush terms.
online purchases are to be avoided
deffo- when Mrs FB got her archery instructor permit to use at scouts we went to a LAS to get her bow-probably spent close to 4hrs choosing & tweaking equipment. They had their own range so could test & try after all the set up & while the arrows were being made.
They also had ye olde yew longbows. After I was admiring them, they let me have a go with one.
The 4% rule is based on investing in US stock, so a UK or even global investment portfolio will yield different results - for a UK dominant portfolio the percentage is more like 3.1%. And it also assumes the usual 60/40 portfolio.
You can improve on this rate by employing some additional strategies, described very fully in the book "Living off your Money" : https://amzn.eu/d/5JQLJcS
Regarding seeing an IFA, they are probably using a cashflow tool, like Voyant Go.
Although this software is not normally publically accessible you can get access by joining the Meaningful Academy website, which is a significant, but one-off, fee of £695, but you get the first years access to a single user version of Voyant Go, and can then retain access at £120 p.a. You also get some training modules on how to use it and also on the way this IFA advies his clients to manage their money - basically partitioning money into buckets of risk vs time.
You can model inflation, investment returns, events like downsizing your house, taxes, etc.
You can find videos on youtube describing the software.
which is a significant, but one-off, fee of £695
Someone must have written an open source version...
Regarding seeing an IFA, they are probably using a cashflow tool, like Voyant Go.
Maybe similar concept to this, which is free 🙂
Not looked at this properly but this guy on youtube also has a spreadsheet :
The is also RetireEasy whch is cheaper : https://www.retireeasy.co.uk/
And EvolveMyRetirement, whcih can run Monte Carlo on you investment plans https://evolvemyretirement.com/
I don't think any are as flexible as Voyant.
if i had taken advice or gone into calling it a day, like some of you guys seem to want to, i would have still been working………….. lol
@lessmoneymoretime
Very much this.
Money is the replaceable, time isn't.
As such the GF and I sold everything last year and now bum around in a van. It's a nice van. Kinda semi-retired. GF has a few clients and can work remotely. I've done basic tools with me and in theory could do some odd jobs. Otherwise I get the occasional bit of corporate work building various sets around Europe which pays quite well.
Figured we would rather enjoy our time and health whilst we are still fit and young enough to do so rather than working just pay rent in a place neither of us really wanted to be.
My mum died at 68. My old man quit work at 64 with a great pension, but sadly his health (lungs) are screwed. He had three or four years of golf and social life before being more or less house bound.
GF's folks are socially active, but no longer particularly nimble on their feet.
Seems like a bit of a waste.
We figured, with the way things are going, that we'll be expected to still be working into our 70s before state pension kicks in.
I've been outside of the UK for over 15 years now and as such (as far as I understand it) am not eligible to pay capital gains tax.
I've 260k (Was over 350k pre-covid 😔) in various funds. Just over half of it is in SIPP and ISA, which I can no longer pay into due to being outside of the UK for so long. The rest is in a Hargreaves Fund&Share account. I'm 40 now.
Probably need to get some decent advice regarding the capital gains thing and whether the SIPP and ISA are tax free. We're currently officially of no fixed abode.
Both of us are likely to inherit a decent chunk once or respective folks pop their clogs.
Don't really know what I'm saying other than time is not replaceable, money is.
Do you have any assets that might be liable for capital gains? If you withdraw it slowly (as a British tax resident, not sure if it's the same for overseas), you get something like £6k per year of gains tax free, so if your money doubled you can get 12k per year out
Only assets I have is the money in HL and then the van plus tools. Never told Germany about the cash as there you pay 6% tax on any yearly gains regardless as to whether you take money out or not.
Really not sure what the deal would be if I were to buy a house somewhere in say Italy or France.
As it stands I'm not registered anywhere for tax purposes.
That guy on youtube linked to above (with the spreadsheet) has a link to an advice channel - go to his About page on YT and the link is at the bottom.
Chris Boourne provides lots of videos talking about tax concerns on pensions and investments, might be worth reviewing.
https://www.youtube.com/@chrisbourne-taxfreeinvesti9688/about
As it stands I’m not registered anywhere for tax purposes.
In Spain if you spend more than 183 day you are considered resident for taxation purposes. Whether you tell them or if they catch you is a different subject but you do become liable.
Alpin - presumably if you're not paying any tax (by virtue of not being tax resident anywhere) theb you're not 9aying any national insurance anywhere either,so will not be able to claim full state pension when you get to that point in life?
Just something to consider, I obviously don't know your full circumstances so you may have it all under control
@julians correct.... Although being self employed in Germany for 15 +years I never opted to pay into their system. Investment is high and returns a joke*. My accountant advised me to keep shuffling money into private funds (which I've done) and ignore the German system.
However, I've only paid UK NI for nine years, having left the UK aged 25. You need ten years contribution to get the basic UK pension. I've been outside the UK for too long to voluntarily make up the difference. Was planning to register myself as resident in the UK and pay one years NI, but having learnt about the CGT exemption I've decided to wait until I've drawn a decent lump sum. I've got until age 66 to re-register in the UK and pay the remaining year's NI.
*GF has 13 years contribution as is currently due 48€/month.
GSitting here musing, I can’t help thinking I’ve got this incredibly wrong and the “dream” of an early retirement is nothing but a faux passage of entitled thinking toward a false dawn of a happier life.
Visting carribean family, part of a conversation was of our Aunt who 2 years after the passing of her husband told us she’s decided to leave the family business (pottery & urns) for her siblings to manage. Shes 78. She supplemented this with how happy our uncle - and she - was to have always been involved in the business. She owns her small wooden Caribbean house and a 42inch TV and a modest car, and asks for nothing more than money from the business to pay her utilities, food and a once every two year cruise joining her sons family who live in the US.
So why aim at numbers like 60, 67 or earlier, isn’t this really about creating a more happy environment within which to live and work before deciding the time is right to drop the work bit?
Speaking for myself, I’m kinda thinking now that upon the mortgage settlement in 12 months that I should seek an exit from my stressful corporate job and really find something I enjoy turning up for daily - although I’ve no idea what that is yet - until I finally decide to quit, rather than aiming at age or financially defined exit. 🤷♂️
Speaking for myself, I’m kinda thinking now that upon the mortgage settlement in 12 months that I should seek an exit from my stressful corporate job and really find something I enjoy turning up for daily
Good luck!
A good mate of mine is a builder. He loves his work, but he's under no illusions that he could carry on in the same way to 78.
We periodically see threads on here like "I'm fed up of my fancy job in X, I want to retrain, downsize, get into something I'd enjoy, like cabinetmaking/forestry/dogwalking/etc". I often wonder how those stories panned out.
Personally I tried 'doing what I love' (being a musician/DJ/producer) in my 20's and early 30's. It was a lot of fun but the stress of self-employment and low income got pretty hard. Which is why I now think about retirement dates, so I can get back to doing music again, but with a financial safety net!
I don't really dislike my current job. But equally I've no great wish to carry it on longer than I really need to.
I don’t really dislike my current job. But equally I’ve no great wish to carry it on longer than I really need to.
This is the crux for me. I don’t dislike it so much per se and it’s well paid role with a decent pension contribution at 8%, but I think I moan / make too much of it and the politics that I drag myself down. I also think the corporate / UK expectation that you “must” work “more” than your contracted to means that sometimes it’s not always easy to find role that allows you and your employer to accept you to happily cruise along meeting an average set of expectations within your comfort zone.
If I could find a job that allowed the latter after next year I think I’d be in a better mental place for sure.