What is the average amount to retire on?
Discussion
Claudia Skies said:
£3m is an interesting figure.
Retire at 60. Live 'til 90. That's 30 years.
£3,000,000 / 30 = £100,000 p.a. to spend before even getting into the question of investment return which should boost that annual pension considerably. Nice retirement if you can get it!
Problem being that after 30 years £100k probably won't buy a bag of chips. Retire at 60. Live 'til 90. That's 30 years.
£3,000,000 / 30 = £100,000 p.a. to spend before even getting into the question of investment return which should boost that annual pension considerably. Nice retirement if you can get it!
But also, as this discussion was based around 'middle class' it isn't the norm to spend capital down but live off interest traditionally.
Claudia Skies said:
Hmmmm. You won't like the idea of buying an annuity very much then. Mind you, that's not something on my agenda either.
Agreed, they offer a level of security but I wouldn't swap a whole pot for one. My view is that an appropriate rental property can form a good part of a retirement income plan as the yield is arguably income linked. Plus, with the right initial deposit it can self fund the debt repayment over the 20 years prior to retirement. Again not a risk free investment but seems sensible as part of a blended portfolio. You certainly want to be making full use of the tax savings a pension wrapper affords as it accelerates the saving pot rapidly.
I saw a new client this morning, we chatted for a couple of hours. He and his partner are nearing their middle 50s and have saved a substantial amount held in the local bank. With their two occupational final salary pensions, they wanted to know if they were on path to retire comfortably in a couple of years.
For them both, it wasn't the amount of money that they had; rather, the way it was held. They had no need for capital lump sums and because their notional annual contributions into their occupational schemes were small (despite the size of their salaries), they are able to draw on three years previous unused annual allowances to make hefty (and I mean hefty) contributions into a personal pension, thereby using tax relief as a substantial 40% (for each of them) force multiplier.
They re also inclined to use other wrappers (investment bond, VCT etc) to further enhance what they have. The point of this rambling post is simple. It isn't what you have, it's how you use it and it isn't how much you have, it's how much you keep. It also depends on your objectives and cash flow requirements etc.
So, don't ask how much do you need - ask your adviser to get his head around it in a different way - fight smart. Don't forget, all the above isn't suitable or appropriate for everyone.
For them both, it wasn't the amount of money that they had; rather, the way it was held. They had no need for capital lump sums and because their notional annual contributions into their occupational schemes were small (despite the size of their salaries), they are able to draw on three years previous unused annual allowances to make hefty (and I mean hefty) contributions into a personal pension, thereby using tax relief as a substantial 40% (for each of them) force multiplier.
They re also inclined to use other wrappers (investment bond, VCT etc) to further enhance what they have. The point of this rambling post is simple. It isn't what you have, it's how you use it and it isn't how much you have, it's how much you keep. It also depends on your objectives and cash flow requirements etc.
So, don't ask how much do you need - ask your adviser to get his head around it in a different way - fight smart. Don't forget, all the above isn't suitable or appropriate for everyone.
'middle class', SE bubble and powerfully built PH directors are skewing this somewhat!
What is middle class? A teacher on £30k? I certainly wouldn't call them working class. What's a middle earner -probably someone on £25k.
I guess it all depends on where you live and lifestyle. My aunt lives in a very comfortably £500k house in the SE with a similar amount sat in the bank, but I would be surprised if her outgoing are more than £800 a month. She teaches adults and volunteers and my unce watches cricket all summer long. They do always fly 1st class though!
What is middle class? A teacher on £30k? I certainly wouldn't call them working class. What's a middle earner -probably someone on £25k.
I guess it all depends on where you live and lifestyle. My aunt lives in a very comfortably £500k house in the SE with a similar amount sat in the bank, but I would be surprised if her outgoing are more than £800 a month. She teaches adults and volunteers and my unce watches cricket all summer long. They do always fly 1st class though!
covmutley said:
'middle class', SE bubble and powerfully built PH directors are skewing this somewhat!
What is middle class? A teacher on £30k? I certainly wouldn't call them working class. What's a middle earner -probably someone on £25k.
I guess it all depends on where you live and lifestyle. My aunt lives in a very comfortably £500k house in the SE with a similar amount sat in the bank, but I would be surprised if her outgoing are more than £800 a month. She teaches adults and volunteers and my unce watches cricket all summer long. They do always fly 1st class though!
Not really skewing it at all. The question was what was needed for a comfortable middle class retirement, not what was the minimum someone could scrape by on and time it so that they died with £1 in their pocket. What is middle class? A teacher on £30k? I certainly wouldn't call them working class. What's a middle earner -probably someone on £25k.
I guess it all depends on where you live and lifestyle. My aunt lives in a very comfortably £500k house in the SE with a similar amount sat in the bank, but I would be surprised if her outgoing are more than £800 a month. She teaches adults and volunteers and my unce watches cricket all summer long. They do always fly 1st class though!
Even a £25k comfortable income is going to need a pot near £1m to be safe.
The real problem is that the people in this country are in total denial over their impending cost of retirement and trying to reconcile it to a current over spending, under saving retirement.
Most 40 year olds today won't have paid off their mortgages by 65, let alone have any depth of savings in a pension to live off because they are either choosing to spend tomorrow's income today or because the cost of living, ie housing leaves nothing spare. And those under 30 are in an even worse dilemma.
Such are the joys of a debt driven asset bubble and a consumer society.
But there is no denying the basic maths of what total amount is required to ensure a carefree retirement with a typical middle class lifestyle. Well, in fact, clearly most are in total denial.
I'm not saying you should ant to scrape by. My point is that a teacher could be considered middle class, on a middle income, presumably with a mortgage still to pay off.
But you said (correct me if wrong) that for retirement they should have a 500k in savings and 50k income. I agree with you that people should save more, but the retiree you describe sounds very wealthy (comparatively), not middle.
But you said (correct me if wrong) that for retirement they should have a 500k in savings and 50k income. I agree with you that people should save more, but the retiree you describe sounds very wealthy (comparatively), not middle.
Note that the current Lifetime Allowance for pension savings applies a cap of £1.25m. At current annuity rates for a 60-year old that's equivalent to a pension of about £42,000 p.a. Maybe >£50,000 if you fancy keeping the risk yourself.
And if you want more? ISA is your new best friend!
I've got 50p says they'll start capping ISAs sooner or later...
And if you want more? ISA is your new best friend!
I've got 50p says they'll start capping ISAs sooner or later...
covmutley said:
I'm not saying you should ant to scrape by. My point is that a teacher could be considered middle class, on a middle income, presumably with a mortgage still to pay off.
But you said (correct me if wrong) that for retirement they should have a 500k in savings and 50k income. I agree with you that people should save more, but the retiree you describe sounds very wealthy (comparatively), not middle.
But I'm not sure you are seeing the difference between a Middle class person and a comfortable middle class lifestyle. But you said (correct me if wrong) that for retirement they should have a 500k in savings and 50k income. I agree with you that people should save more, but the retiree you describe sounds very wealthy (comparatively), not middle.
You can be middle class and earn bugger all or be broke but a 'comfortable middle class lifestyle' is something entirely different. It is the nice detached family home, it is the healthy savings, it is the choice of private schooling, it is dining out not eating out, it is higher end holidays, club memberships etc.
Ginge R said:
I saw a new client this morning, we chatted for a couple of hours. He and his partner are nearing their middle 50s and have saved a substantial amount held in the local bank. With their two occupational final salary pensions, they wanted to know if they were on path to retire comfortably in a couple of years.
For them both, it wasn't the amount of money that they had; rather, the way it was held. They had no need for capital lump sums and because their notional annual contributions into their occupational schemes were small (despite the size of their salaries), they are able to draw on three years previous unused annual allowances to make hefty (and I mean hefty) contributions into a personal pension, thereby using tax relief as a substantial 40% (for each of them) force multiplier.
They re also inclined to use other wrappers (investment bond, VCT etc) to further enhance what they have. The point of this rambling post is simple. It isn't what you have, it's how you use it and it isn't how much you have, it's how much you keep. It also depends on your objectives and cash flow requirements etc.
So, don't ask how much do you need - ask your adviser to get his head around it in a different way - fight smart. Don't forget, all the above isn't suitable or appropriate for everyone.
Can you offer any advice on how to find a good IFA to have these conversations with? I'm loath to effectively pull a name out of the phone book when so much is at stake.For them both, it wasn't the amount of money that they had; rather, the way it was held. They had no need for capital lump sums and because their notional annual contributions into their occupational schemes were small (despite the size of their salaries), they are able to draw on three years previous unused annual allowances to make hefty (and I mean hefty) contributions into a personal pension, thereby using tax relief as a substantial 40% (for each of them) force multiplier.
They re also inclined to use other wrappers (investment bond, VCT etc) to further enhance what they have. The point of this rambling post is simple. It isn't what you have, it's how you use it and it isn't how much you have, it's how much you keep. It also depends on your objectives and cash flow requirements etc.
So, don't ask how much do you need - ask your adviser to get his head around it in a different way - fight smart. Don't forget, all the above isn't suitable or appropriate for everyone.
Cheers!
Some advisers choose to advertise on www.unbiased.com (or co.uk, I forget). I don't. That can give you a response for your local area, but it's a bit like Google I guess, which is what you seem not to want.
On the other hand, if you want to message me with your general area, I might be able to give you a steer. I'm with clients for the most of the rest of this week, so if you want to drop a number in to have a chat as well, please feel free to do so.
That's far less stressful to me than writing e-mails and breaks up the journey!
On the other hand, if you want to message me with your general area, I might be able to give you a steer. I'm with clients for the most of the rest of this week, so if you want to drop a number in to have a chat as well, please feel free to do so.
That's far less stressful to me than writing e-mails and breaks up the journey!
This thread would have gone a lot smoother if some could differentiate between middle income and middle class.
Middle class incomes are usually way above middle income, hence the need for a a tad more dosh.
Ah apols to D.A.
I did just see your effort to explain to someone re the middle class bit re lifestyle.
Middle class incomes are usually way above middle income, hence the need for a a tad more dosh.
Ah apols to D.A.
I did just see your effort to explain to someone re the middle class bit re lifestyle.
Edited by jeff m2 on Tuesday 17th March 00:48
I think that's the rub, Donkey; the separation of lifestyle from the rest.
As you pointed out, there are those earning pretty strong money (still in the 'middle class' bracket) - say 80k, but are spending tomorrows money today, and no sympathy is warranted for those.
However, for many 'middle class' workers lower down the pay scale, a middle class lifestyle in retirement is pretty much not going to happen. I mean that for those who make 25k a year after tax, earning the same amount in retirement realistically just isn't going to happen, regardless of how frugal they are.
Of course, after the kids have left home and the house is paid for, they may be able to retain somewhat of a similar lifestyle, but I doubt it's the one you described.
As you pointed out, there are those earning pretty strong money (still in the 'middle class' bracket) - say 80k, but are spending tomorrows money today, and no sympathy is warranted for those.
However, for many 'middle class' workers lower down the pay scale, a middle class lifestyle in retirement is pretty much not going to happen. I mean that for those who make 25k a year after tax, earning the same amount in retirement realistically just isn't going to happen, regardless of how frugal they are.
Of course, after the kids have left home and the house is paid for, they may be able to retain somewhat of a similar lifestyle, but I doubt it's the one you described.
DonkeyApple said:
But I'm not sure you are seeing the difference between a Middle class person and a comfortable middle class lifestyle.
You can be middle class and earn bugger all or be broke but a 'comfortable middle class lifestyle' is something entirely different. It is the nice detached family home, it is the healthy savings, it is the choice of private schooling, it is dining out not eating out, it is higher end holidays, club memberships etc.
Thats not the lifestyle of the middle class I know. it is the lifestyle of new money. Most middle class have followed their parents example & drive a 10 year old volvo/skoda estate, holiday at friends holiday homes & seceratly scrimp by to make sure their children/grand children get the best education they can away from benifit dependant socieity. You can be middle class and earn bugger all or be broke but a 'comfortable middle class lifestyle' is something entirely different. It is the nice detached family home, it is the healthy savings, it is the choice of private schooling, it is dining out not eating out, it is higher end holidays, club memberships etc.
jonny996 said:
Thats not the lifestyle of the middle class I know. it is the lifestyle of new money. Most middle class have followed their parents example & drive a 10 year old volvo/skoda estate, holiday at friends holiday homes & seceratly scrimp by to make sure their children/grand children get the best education they can away from benifit dependant socieity.
Would be inclined to agree with whoever above said middle class is a state of mind, rather than a state of wealth or income. These days, anyway.jonny996 said:
DonkeyApple said:
But I'm not sure you are seeing the difference between a Middle class person and a comfortable middle class lifestyle.
You can be middle class and earn bugger all or be broke but a 'comfortable middle class lifestyle' is something entirely different. It is the nice detached family home, it is the healthy savings, it is the choice of private schooling, it is dining out not eating out, it is higher end holidays, club memberships etc.
Thats not the lifestyle of the middle class I know. it is the lifestyle of new money. Most middle class have followed their parents example & drive a 10 year old volvo/skoda estate, holiday at friends holiday homes & seceratly scrimp by to make sure their children/grand children get the best education they can away from benifit dependant socieity. You can be middle class and earn bugger all or be broke but a 'comfortable middle class lifestyle' is something entirely different. It is the nice detached family home, it is the healthy savings, it is the choice of private schooling, it is dining out not eating out, it is higher end holidays, club memberships etc.
But, let's stress again, my responses are in reference to 'comfortable'. Comfortable is not secretly scrimping etc. Middle Class is a mind set and set of values within which there are poor and extremely wealthy people. 'Comfortable' is merely a group somewhere between the two.
The majority of middle class households are not comfortably off etc.
My arithmetic says that at £1m maximum he's effectively killed pension tax relief for higher earners.
Salary, say, £50,000 a year
Pension contributions, say, 15% a year - that's £7,500
Do that through a 45 year career and you've paid in £337,500
Compound investment returns over 45 years should blow that well through the £1m limit many, many years before you retire.
Salary, say, £50,000 a year
Pension contributions, say, 15% a year - that's £7,500
Do that through a 45 year career and you've paid in £337,500
Compound investment returns over 45 years should blow that well through the £1m limit many, many years before you retire.
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