Enjoying Retirement

[plenty]

£5k/month is pretty close to our current outgoings, excluding provisions for children. We're mortgage-free, but council tax and energy alone in our current pad comes to £800/month. £4k per month would be more than adequate to sustain our standard of living once we move to a smaller place.

In terms of luxuries, the Mrs has a very busy social life involving lots of restaurant dates and we like to travel (4-5 short hauls and 1-2 long-hauls per year, but always via discount airlines and inexpensive accommodation). We have three cars (including two toys) but don't spend much on fuel as we don't need to commute by car, and my toys are fairly cheap to run. I'm quite frugal by nature but if I want something I buy it without needing to worry too much. We don't drink or go to pubs much.

[GT3Manthey]

plenty said:

£5k/month is pretty close to our current outgoings, excluding provisions for children. We're mortgage-free, but council tax and energy alone in our current pad comes to £800/month. £4k per month would be more than adequate to sustain our standard of living once we move to a smaller place.

In terms of luxuries, the Mrs has a very busy social life involving lots of restaurant dates and we like to travel (4-5 short hauls and 1-2 long-hauls per year, but always via discount airlines and inexpensive accommodation). We have three cars (including two toys) but don't spend much on fuel as we don't need to commute by car, and my toys are fairly cheap to run. I'm quite frugal by nature but if I want something I buy it without needing to worry too much. We don't drink or go to pubs much.

Great post .

What monthly extra provisions so you allow for your children ?

My wife is quite a socialiser too!

We don’t often eat out but tend to drink to together indoors together .
I’ve spent many years out with clients and really hate that now

Edited by GT3Manthey on Thursday 20th January 12:20

[plenty]

GT3Manthey said:

What monthly extra provisions so you allow for your children ?

My kids are privately educated. Plus university fees, accommodation and living costs if your kids go down that route (unless you expect them to be self-funded).

Obviously dining out or travelling as a family bumps up the cost. Grocery bills will reduce with fewer mouths to feed. Then there's transport costs (we're in London so it's Oyster fares for us), clothes and pocket money.

I'm expecting energy bills to go down once kids leave the house! My eldest has a water-cooled PC (always on due to crypto-mining) which is probably costing me more to run than my cars.

[Jon39]

Shnozz said:

I remember chatting to my Dad when he retired and he said he had a change of mindset one of caution (or fear, depending on how you view it) when he stopped work. It was quite the psychological thing for him when he realised he wouldn't have any income from employment ever again and was then seeing out his life using that pot of money he had accrued. I am sure you would reduce spending in exercising caution rather than living day today spending in the knowledge that the next month a pay cheque comes in.

I don't know whether I have been lucky, or just prudent from a young age.

Retired on a DB pension at just over 50. Think that rule/opportunity has changed now, to a higher age.
Anyway the point I want to make, is about shareholding. We sometimes read comments such as, it is too risky to hold shares after retirement. Perhaps they might be made by annuity salesmen, or simply to emphasise there is risk involved.
Pensions in payment usually have a laid down basis of annual increases, often unlikely to exceed inflation.
Dividend increases are only limited by business performance.

Upon retirement my annual cash dividend income, was just a little more than the pension.
Quite a number of years later, it is became nearly three times the DB.
Risk of variation of course, as was very evident with some businesses in 2020 (hospitality sector in particuar and banking by regulation).

Something for you 30 year olds to think about perhaps. Better to start early.

Here is a famous proverb - The older you get, the faster time passes.
Explanation. At 60, one year of your life is only one sixtieth. At 20, it is a twentieth.

Edited by Jon39 on Thursday 20th January 12:30

[Darlo74]

Interesting topic, I'm 8 years away from wanting the option to retire full-time... although I expect I'll not step away fully and find something to keep me occupied part-time and to provide additional income (even though I hope that's not needed). I'll be 55 in 8 years.

My plan is to have a minimum of £3k per month to cover essentials and anywhere between £1k - £2k per month on-top for holidays, cars, travel, unexpected expenses, kids, etc. This is to cover a joint income for me and my wife. Both kids will be out of full time education by then.

£3k will come from my SIPP and my wife's SIPP with on-tops from my ISAs, PBs and GIAs.

Once I reach 68 the state pension will be a nice on-top and provides a contingency if my savings have deteriorated more than expected!

[Shnozz]

Darlo74 said:

Interesting topic, I'm 8 years away from wanting the option to retire full-time... although I expect I'll not step away fully and find something to keep me occupied part-time and to provide additional income (even though I hope that's not needed). I'll be 55 in 8 years.

My plan is to have a minimum of £3k per month to cover essentials and anywhere between £1k - £2k per month on-top for holidays, cars, travel, unexpected expenses, kids, etc. This is to cover a joint income for me and my wife. Both kids will be out of full time education by then.

£3k will come from my SIPP and my wife's SIPP with on-tops from my ISAs, PBs and GIAs.

Once I reach 68 the state pension will be a nice on-top and provides a contingency if my savings have deteriorated more than expected!

Your plan is similar to my own but I thought I couldn't access my SIPP until 57 at the earliest?

[tjl]

Always an interesting topic and it always strikes me that there is a huge difference to those who are fortunate enough to be on DB schemes vs. those poor souls like me who have been on DC schemes for the last 40 years. You need an awfully big pot to get to 3 or 4 k a month net from a DC pot. Fortunately for me, the Mrs has been in an NHS DB scheme for almost as long so I can spend her money instead

[Shnozz]

GT3Manthey said:

We don’t often eat out but tend to drink to together indoors together .

Clearly

[GT3Manthey]

Darlo74 said:

Interesting topic, I'm 8 years away from wanting the option to retire full-time... although I expect I'll not step away fully and find something to keep me occupied part-time and to provide additional income (even though I hope that's not needed). I'll be 55 in 8 years.

My plan is to have a minimum of £3k per month to cover essentials and anywhere between £1k - £2k per month on-top for holidays, cars, travel, unexpected expenses, kids, etc. This is to cover a joint income for me and my wife. Both kids will be out of full time education by then.

£3k will come from my SIPP and my wife's SIPP with on-tops from my ISAs, PBs and GIAs.

Once I reach 68 the state pension will be a nice on-top and provides a contingency if my savings have deteriorated more than expected!

My plan too and same numbers which is encouraging

[Welshbeef]

Shnozz said:

Welshbeef said:

Shnozz said:

GT3Manthey said:

Shnozz said:

Remember that PH isn't representative of society as a whole. There are many out there living off state pension alone and certainly over here in Spain, many pensioners living extremely well off that pension alone. Add in a private pension and you can live like a King (of a less wealthy nation).

Cheaper to live in Spain than in the UK do you think ?

Oh without a doubt. However, I do see a few living in the UK off a state pension that do ok - albeit have to count every penny. The point I was making is that you can elect to live somewhere else, whether cheaper parts of the UK or elsewhere, where your money goes further.

To live somewhere outside of the UK you need a visa/citizenship.

And?

And why do you think you would qualify ?

[Shnozz]

Welshbeef said:

Shnozz said:

Welshbeef said:

Shnozz said:

GT3Manthey said:

Shnozz said:

Remember that PH isn't representative of society as a whole. There are many out there living off state pension alone and certainly over here in Spain, many pensioners living extremely well off that pension alone. Add in a private pension and you can live like a King (of a less wealthy nation).

Cheaper to live in Spain than in the UK do you think ?

Oh without a doubt. However, I do see a few living in the UK off a state pension that do ok - albeit have to count every penny. The point I was making is that you can elect to live somewhere else, whether cheaper parts of the UK or elsewhere, where your money goes further.

To live somewhere outside of the UK you need a visa/citizenship.

And?

And why do you think you would qualify ?

It's another post Brexit ballache, granted, but the qualification threshold is low, even for those with little by way of savings.

[anonymous-user]

okgo said:

It is scary to read this as I think I said on the last thread the OP started on a similar sort of topic. I've just seen that the LTA is around 1m and would only buy you an annuity of about 3k net a month? So those that are talking about far greater sums (adding on the 1k from state I suppose) - is this all coming from private investments separate to that?

Worth considering also that we are often talking to one half of a professional couple so they get a LTA each.

[usn90]

Regarding my situation, thanks for the general advice, it’s something for me to look at, although the only thing I’ll say is, when your the breadwinner for a young family with kids and a mortgage,food, bills, clothes and debt to take car of first, it’s not so simple to simply remove extra money from the pot to benefit just me 30 years into the future, I appreciate everyone’s situation is different.

I have one pension provider from my previous employer, and two for my current employer as they have just changed the pension company , am I best transferring all funds into the current provider, or keeping them separate?

[okgo]

Lots of smallprint I should think.

I was a bit lazy/stupid and just stuck all of my various pots into the current one without really bothering to read much about it (small pots really so meh on charges I thought) and then changed where it is invested as in many cases I was stuck in pretty conservative funds (lots of bonds, I'm only 33 so equities made more sense) and in some cases on a fairly weighty on-going fee.

@hang-on - yes good point.

[duckson]

usn90 said:

Regarding my situation, thanks for the general advice, it’s something for me to look at, although the only thing I’ll say is, when your the breadwinner for a young family with kids and a mortgage,food, bills, clothes and debt to take car of first, it’s not so simple to simply remove extra money from the pot to benefit just me 30 years into the future, I appreciate everyone’s situation is different.

I have one pension provider from my previous employer, and two for my current employer as they have just changed the pension company , am I best transferring all funds into the current provider, or keeping them separate?

Depends on what pensions they are for starters, Defined Benefit or Defined Contribution.
The former are paid for life but the latter are effectively a pot of cash only.

[GT3Manthey]

Shnozz said:

Clearly

Rude not to ;-)

[Darlo74]

Shnozz said:

Darlo74 said:

Interesting topic, I'm 8 years away from wanting the option to retire full-time... although I expect I'll not step away fully and find something to keep me occupied part-time and to provide additional income (even though I hope that's not needed). I'll be 55 in 8 years.

My plan is to have a minimum of £3k per month to cover essentials and anywhere between £1k - £2k per month on-top for holidays, cars, travel, unexpected expenses, kids, etc. This is to cover a joint income for me and my wife. Both kids will be out of full time education by then.

£3k will come from my SIPP and my wife's SIPP with on-tops from my ISAs, PBs and GIAs.

Once I reach 68 the state pension will be a nice on-top and provides a contingency if my savings have deteriorated more than expected!

Your plan is similar to my own but I thought I couldn't access my SIPP until 57 at the earliest?

Yes that is a very good point - income from 55 would be from the ISAs I've accumulated...

[Jon39]

usn90 said:

Regarding my situation, thanks for the general advice, it’s something for me to look at, although the only thing I’ll say is, when your the breadwinner for a young family with kids and a mortgage,food, bills, clothes and debt to take care of first, it’s not so simple to simply remove extra money from the pot to benefit just me 30 years into the future, I appreciate everyone’s situation is different.

A simple system which is and has been used by generations of my family, particularly up to age say 50ish, is to regard 90% of salary as the total employment income.
Always long-term save the remaining 10%.

Most people might still have taken their present job, if the pay offered happened to be 10% less, if so, then the system is not a hardship.
As the savings investments gradually produce an independent growing income, it all becomes worthwhile.

A disciplined approach, which just becomes normality after a while, with little hardship and enormous benefits ahead for the whole family.

Depending how the investment is done, you don't have to wait until retirement age before using the income.

[UnclePat]

usn90 said:

Regarding my situation, thanks for the general advice, it’s something for me to look at, although the only thing I’ll say is, when your the breadwinner for a young family with kids and a mortgage,food, bills, clothes and debt to take car of first, it’s not so simple to simply remove extra money from the pot to benefit just me 30 years into the future, I appreciate everyone’s situation is different.

Absolutely, it's not easy to save, and the sacrifice is always felt somewhere. It's hard.

I think the following illustration from the Money Saving Expert website is interesting as regards the cost of the government pension auto-enrollment: https://www.moneysavingexpert.com/savings/auto-enr...

'With auto-enrolment, you contribute 4% of your qualifying earnings, the Government adds 1% tax relief and your employer tops this up with 3% – so in effect your net contribution is doubled. For example, with someone earning £31,240, their contributions will be based on their qualifying earnings (£31,240 minus £6,240) which is £25,000. That means their 4% is £1,000, the Government's 1% is £250 and their employer's 3% is £750 – so that's £2,000 automatically popped into their pension pot.'

Given that £1,000 employee contribution would otherwise be subject to 20% Income Tax & 12% National Insurance if taken in salary, the 'real' hit to the pocket is less i.e. it costs the employee £680 for a £2,000 annual pension contribution. There may tax still taken on withdrawal, but much less with the 25% Tax Free element, and don't forget the compound interest earned is on the pre-tax amount too.

In addition, if an Employer will match beyond the minimum 3%, then that's also free money besides the Government's tax relief - albeit it costs the Employee the same to match it.

Another way to think about it is that your pension may not just benefit you in future - but also your wife if she doesn't have one.

A further thought is that if you should die before reaching pension age the pot will go to your dependents tax-free. Even if you die having started to take the pension but before 75, and have used Drawdown, the pot goes tax-free to them. That's nice to know if Life Insurance isn't purchased - yes, saving for your future, but also your family's future should the worst happen. That's besides any kind of 'Death In Service' benefit you may be eligible for.

Ultimately though, nothing takes precedence over the immediate needs of a mortgage that needs paying, clothes for the kids or essential car repairs, but it's helpful to know the wider benefits.

[usn90]

UnclePat said:

Absolutely, it's not easy to save, and the sacrifice is always felt somewhere. It's hard.

I think the following illustration from the Money Saving Expert website is interesting as regards the cost of the government pension auto-enrollment: https://www.moneysavingexpert.com/savings/auto-enr...

'With auto-enrolment, you contribute 4% of your qualifying earnings, the Government adds 1% tax relief and your employer tops this up with 3% – so in effect your net contribution is doubled. For example, with someone earning £31,240, their contributions will be based on their qualifying earnings (£31,240 minus £6,240) which is £25,000. That means their 4% is £1,000, the Government's 1% is £250 and their employer's 3% is £750 – so that's £2,000 automatically popped into their pension pot.'

Given that £1,000 employee contribution would otherwise be subject to 20% Income Tax & 12% National Insurance if taken in salary, the 'real' hit to the pocket is less i.e. it costs the employee £680 for a £2,000 annual pension contribution. There may tax still taken on withdrawal, but much less with the 25% Tax Free element, and don't forget the compound interest earned is on the pre-tax amount too.

In addition, if an Employer will match beyond the minimum 3%, then that's also free money besides the Government's tax relief - albeit it costs the Employee the same to match it.

Another way to think about it is that your pension may not just benefit you in future - but also your wife if she doesn't have one.

A further thought is that if you should die before reaching pension age the pot will go to your dependents tax-free. Even if you die having started to take the pension but before 75, and have used Drawdown, the pot goes tax-free to them. That's nice to know if Life Insurance isn't purchased - yes, saving for your future, but also your family's future should the worst happen. That's besides any kind of 'Death In Service' benefit you may be eligible for.

Ultimately though, nothing takes precedence over the immediate needs of a mortgage that needs paying, clothes for the kids or essential car repairs, but it's helpful to know the wider benefits.

Thanks for taking the time, I found it very useful as pensions/investments etc aren’t my strongest features.

Point taken regarding my partner too, I seem to recall a option whereby I can contribute more into the pension and my employer will up their contribution also, within limits.

I’ll take a look, however certainly for the short-medium term im unable to sacrifice a great deal