Life cash planning - why so rich so late on ?

[DSLiverpool]

I’m flummoxed by so many articles and threads about making sure you have ££££ in your twilight years and ever complex plans to achieve this.

At 55 I cashed in my DB pensions, took the 25% and bought things for family and the house.

I want to enjoy life while I’m fit enough to do so - majority would surely be slowing up at 65 (my brother, uncle and dad didn’t get to 65) so will spend less but I see common advice strategising high earnings into a persons eighties. Why?

Personally I decided at 40 to buy a house with 2 downsizes in it that would give me more than enough sensible cash to last me plus my state pension. Why is this not a common strategy?

[CubanPete]

In the later years, paying for care....


Re the house, we are doing something similar. Early forties we bought a bigger house than we need, mortgage nominally runs till I am 69 3/4s, but the plan is to downsize and convert to a part time / lifestyle job in our late 50s. Should be enough money for a few toys if everything goes to plan.

[Countdown]

My guess is that either through ill-health, or retirement you won't be earning as much in your later years and therefore it's good sense to try and put as much away as possible when your income is good.

[Sheepshanks]

DSLiverpool said:

Personally I decided at 40 to buy a house with 2 downsizes in it that would give me more than enough sensible cash to last me plus my state pension. Why is this not a common strategy?

Judging by the way downsizing old couples have recently been snapping up what should be houses for young families in our village I'd say it does seem to be a common strategy.

DSLiverpool said:

Personally I decided at 40 to buy a house with 2 downsizes in it .....

Great if you can afford to do that without being mortgaged until 65 and through what may well be an expensive time with kids going to uni etc.

Edited by Sheepshanks on Monday 8th February 10:28

[carreauchompeur]

It is true, definitely a balance.

I want to have options in my retirement, so I’m trying to pay down the mortgage as much as possible whilst I’m earning well and interest rates are low.

Does feel a bit strange however that I’m not likely to have anyone to pass it on to!

[Mr Pointy]

If you're fit you can actually spend quite a lot between 65 & 75 as you have plenty of time to fil so go off on holidays, take up pricey new hobbies etc.

A pension (well, the personal DC type) is outside of IHT so it's a good way to pass on wealth to your heirs.

The main issue is you've no idea when you will die, how long it will take you or what care you will need & for how long. If you know you have children who will take you in & look after you even when you start being violent & have forgotten who they are because you have Alzheimers that great. Many people don't so a substantial fund to get them into a decent home is a great comfort. When this issue was discussed recently one poster had relatives who went through £160k in two years.

[Simpo Two]

Sheepshanks said:

Judging by the way downsizing old couples have recently been snapping up what should be houses for young families in our village I'd say it does seem to be a common strategy.

They may be downsizing because they didn't bother to or couldn't save enough for retirement/old age.

Nothing says small properties 'should' be for young families (i hope single people are allowed to buy them too), they are simply less expensive.

[BobsPigeon]

Moving down the housing market may just mean downsizing but a lot of the time it means moving to a different or less desirable location as well, which I suspect people will find more difficult at 70 or older. From what I've observed not many people move all that successfully once they're past 70 or so, it's a massive undertaking and quite daunting.

[BoRED S2upid]

I’m with you DS you need maximum retirement income between 55 and 70 if you make it that far after 70 you will be able to get by on a LOT less!

During lockdown we have been doing the weekly shop for elderly relatives I’m constantly surprised by how little they eat! And how little they spend.

[DonkeyApple]

The problem with downsizing is finding a small property in a location that is of the same standard as your larger one. The bulk of smaller properties are in lower quality areas. That's an issue that impacts some people's decisions to stay put despite wanting the ease of a smaller property.

As for saving money for old age, the biggest driver for ensuring you have reserves is that when you retire often isn't a choice made by the worker but by their industry. We will see this come home to roost over the next year or so as companies make older staff redundant and discover no one else wants to employ someone over 55. Working to 75 just won't be possible for many people however much they want to keep working.

[sociopath]

Sheepshanks said:

DSLiverpool said:

Personally I decided at 40 to buy a house with 2 downsizes in it that would give me more than enough sensible cash to last me plus my state pension. Why is this not a common strategy?

Judging by the way downsizing old couples have recently been snapping up what should be houses for young families in our village I'd say it does seem to be a common strategy.

DSLiverpool said:

Personally I decided at 40 to buy a house with 2 downsizes in it .....

Great if you can afford to do that without being mortgaged until 65 and through what may well be an expensive time with kids going to uni etc.

Edited by Sheepshanks on Monday 8th February 10:28

Why should smaller houses be for young families?

Should the oldies stay in a big house and deny that being available to a bigger family?

Or maybe they should just be put down for being an inconvenience once they stop working?

[deebs]

DSLiverpool said:

I’m flummoxed by so many articles and threads about making sure you have ££££ in your twilight years and ever complex plans to achieve this.

At 55 I cashed in my DB pensions, took the 25% and bought things for family and the house.

I want to enjoy life while I’m fit enough to do so - majority would surely be slowing up at 65 (my brother, uncle and dad didn’t get to 65) so will spend less but I see common advice strategising high earnings into a persons eighties. Why?

Personally I decided at 40 to buy a house with 2 downsizes in it that would give me more than enough sensible cash to last me plus my state pension. Why is this not a common strategy?

I dont really understand why the online calculators start the with assumption you need 60% of your current income in retirement, forever. For my situation, this is laughably high and put me off for a number of years from even bothering, I paid the minimum into a couple of DC pensions over the years only, such was the scale of what I thought would be involved. I've been self employed for a while, paying nothing in but decided last year I really needed to start looking at it seriously again, after some reading I decided to calculate it in reverse, working out what sort of monthly budget I would need when I retire (todays budget minus the mortgage minus a car [currently got 2]) x 12 x 28.5 to figure out a pot size and I'm working towards that instead, on a 3.5% SWR. For me, this makes much more sense.

It's significantly less than 60% of my current earnings, all going well it should see me through to at least 85. Beyond that it'll be a council nursing home for me if I need it and my son will get the same as I got left. Nowt.

[pb8g09]

They should invent a type of house that has no stairs so you can continue to live in it until you're old and struggle to climb upwards. Oh wait they did, the bungalow. Except every sodding developer wants to buy them and use the larger plot to build flats and 'executive' homes on....

[Ligne]

I watched an old Milton Friedman talk a while back and one of the audience members asked what would be wrong with 100% inheritance tax. His response was that people didn’t really build wealth for themselves, they built it for their immediate family and the generation following them. He also said that he thought this was pretty stupid as (at that point) the evidence was clear that the following generation would have a much greater standard of living than they themselves had anyway, even without the help.

I think he was right in a lot of cases. I find myself thinking about preparing for old age financially and it’s more about passing it on than enjoying it myself. I have simple tastes so won’t need a lot but I certainly need to reasses and make sure I get some enjoyment whilst I wait for death

[Sheepshanks]

Simpo Two said:

Sheepshanks said:

Judging by the way downsizing old couples have recently been snapping up what should be houses for young families in our village I'd say it does seem to be a common strategy.

They may be downsizing because they didn't bother to or couldn't save enough for retirement/old age.

In one case (across the road from us) they're throwing a massive wrap around extension on the house. Another couple are next door to us and we've chatted quite a bit. They say they've done it to release cash for their kids, but as best I can gather they (the kids) have pretty decent jobs.

Sheepshanks said:

Nothing says small properties 'should' be for young families (i hope single people are allowed to buy them too), they are simply less expensive.

Of course. We've been here a long time and what was once a road full of families is now mainly old people. It's the same road the village school is in, so that's starting to struggle as the youngsters get priced out by old people who don't really care what they pay.

[Sheepshanks]

DSLiverpool said:

I want to enjoy life while I’m fit enough to do so - majority would surely be slowing up at 65 (my brother, uncle and dad didn’t get to 65) so will spend less but I see common advice strategising high earnings into a persons eighties. Why?

If family history is as you say then it's tough to argue with that.

OTOH, my father-in-law was still doing multiple cruising holidays per year until his early 90s and he never did it cheaply - if there was an option to pick, he picked it! He went on a gliding holiday when he was 88.

[red_slr]

I am convinced a lot of pension providers deliberately try and keep funds in their system to keep that 1% (or whatever) commission coming in each year.

[LeoSayer]

The average life expectancy for a 50 year-old male is 84 so many will see their 90s. The main issue is, you just don't know how long you will live or how fit you will be.

I doubt if anyone wants to rely on the state pension alone, so an amount of savings need to last 30 years plus and take into account occasional house refurbishment, adaptations and care of some kind.

It seems to be a common plan for people to downsize but how many actually follow through? My Mum lives in semi way too big for her and my mother in law took an equity release rather the downsize and lose the garden she loves. I do plan to downsize but the move won't free up any capital because it will be to a pricier area.

Personally, I don't want to be forced out of the home I love and I don't want to spend my retirement scrimping to ensure I've got enough for the next 10 or 15 years. If I die at 65 with a big pot remaining then so be it - my wife and son will inherit it.

[DonkeyApple]

Sheepshanks said:

Of course. We've been here a long time and what was once a road full of families is now mainly old people. It's the same road the village school is in, so that's starting to struggle as the youngsters get priced out by old people who don't really care what they pay.

The older members of society will always, obviously, have more wealth. The issue is when there is an imbalance and we have two big ones at the moment. About 5 years ago for the first time ever the average income of a pensioner exceeded the average income of a worker. That is quite a big thing. But arguably, it will also be a short lived thing in the grand scheme of things. The other imbalance and I believe it was reached this year is that there are now more over 65s now than under 5s.

Many of the issues that we currently have are simply a result of the post war baby boom giving a big population spike that over the subsequent 65-70 years no Government ensured it had the money to pay for in old age and persisted with the mechanism of current workers paying for past workers. This was then exacerbated by better health from fewer industrial jobs and the NHS simply keeping people alive for much longer.

No group can be blamed it is just a simple matter of demographic imbalance or deviation from the historic norm.

The positive is that the UK has a vast number of cash rich, high income non workers whose consumer spending is essential to the economy. The negative is that due to being in abnormal numbers and abnormally wealthy as well as living longer, the mechanism by which used family homes go back into the market for the next generations has slowed dramatically plus that excess wealth means fewer need to downsize.

Another issue that is not helping is equity release. Those who do need to downsize have been granted a debt product that allows them to not. That isn't necessarily a good thing although it may be a net benefit in terms of removing some demand for smaller properties?

The key point though is that over the next decade and half the cause of these issues will simply disappear so it's very hard to deliver new supply now knowing that there is an impending landslide of used supply that has built up and scheduled for rapid release. If we buildntoo many new homes now then we are guaranteeing a monumental property collapse when the natural supply that has been stalled by increased lifespans is released.

The other issue is that subdivision of property has traditionally been the solution as per all the old London houses which are now blocks of flats but local governments have halted this practice because of the saturation of local services.

In some ways, allowing pensioners to convert their family sized homes into ground floor and top floor flats would be an elegant solution. They switch to bungalow living without moving and get an income from the flat above. When I was younger this was what huge numbers of retired couples did to their London houses to monetise the excess space and stay put.

[xeny]

DSLiverpool said:

I’m flummoxed by so many articles and threads about making sure you have ££££ in your twilight years and ever complex plans to achieve this.

At 55 I cashed in my DB pensions, took the 25% and bought things for family and the house.

I want to enjoy life while I’m fit enough to do so - majority would surely be slowing up at 65 (my brother, uncle and dad didn’t get to 65) so will spend less but I see common advice strategising high earnings into a persons eighties. Why?

People make their decisions based on what they see around them. I'm sorry you lost so many people before they reached 65. I've got a relative who is in their 80s and currently cursing that their holiday to Namibia this year has been cancelled.

The average I'd guess is somewhere in the middle, but I'm certainly making allowance (I won't say planning) for having a decent amount of spare cash in my 70s.