Enjoying Retirement

[PF62]

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 tod ay spending in the knowledge that the next month a pay cheque comes in.

Which is why I am so glad to have a DB pension, because otherwise I am sure I would have the same mindset as your Dad.

As it is I just get a ‘pay cheque’ every month to spend, just one that doesn’t involve doing any work to earn it.

[GT3Manthey]

Just been reminded of why I stated this thread.

Currently jammed into a train heading home from Liverpool St station on a reduced service .
Standing room only , 40% no masks, fat bloke opposite has nearly fallen over me 3 times & some 19yr old female chav wearing a green tracksuit insistent of talking into her mobile using an earpiece so we can all hear the conversation throwing out a load of F bombs.

Anyone got a gun ? !!!!!

[Jim on the hill]

GT3Manthey said:

Just been reminded of why I stated this thread.

Currently jammed into a train heading home from Liverpool St station on a reduced service .
Standing room only , 40% no masks, fat bloke opposite has nearly fallen over me 3 times & some 19yr old female chav wearing a green tracksuit insistent of talking into her mobile using an earpiece so we can all hear the conversation throwing out a load of F bombs.

Anyone got a gun ? !!!!!

What about a bit of a lifestyle shift instead of counting down till retirement? I have a slightly different view then most as I don't see making it to retirement as guaranteed.

[MrHappy]

Whilst I have no regrets at retiring early, with hindsight I should’ve taken into account my ‘winter blues’ and done it in March rather than September. The first four months were pretty tough.

[rfisher]

MrHappy said:

Whilst I have no regrets at retiring early, with hindsight I should’ve taken into account my ‘winter blues’ and done it in March rather than September. The first four months were pretty tough.

Username checks out.

Oh wait ......

[timberman]

Interesting to see what other people consider a necessary amount to live on once retired,

for us I like to keep everything as simple as possible,

as I stated earlier both my wife and I are now retired and before doing so calculated that we'd need approx £2.5k a month or £30k per year for a comfortable life,

we kind of calculated that using the 50% - 70% rule that seems to get mentioned plus looking at our outgoings and what we expect to spend once retired,

that's based on us having no debt, running one car, having a couple of cheap holidays a year and affording a few luxuries like meals out, days at the beach etc.

at the moment we're still getting used to things so spending more than we'd normally expect to,
plus, we're still gifting money to our daughter and covering some her costs while she gets on her feet after a big move and starting a new job,

as far as pensions go,

we both have private pensions, each with a different provider and both opted for flexi access drawdown,

we also both took our "tax free" lump sums in full,

to try and safeguard our remaining pots we gave ourselves a base level we want to keep invested,

this means that if the pots have a bad year and don't grow or perhaps shrink then we won't touch them and live on the savings we have stored,

and if the pension pots have a really good year like last year

we have decided the maximum we're willing to drawdown is £50k each to avoid paying any high rate tax and rather than taking a monthly salary we intend to take payment as a lump sum once or perhaps twice per year,

keeping a base level of savings in the bank and then taking an annual lump sum means we should be able to budget what we have to live on and adjust our expenditure accordingly to avoid leaving ourselves short,

plus having a level of savings in the bank we're comfortable with means we can vary the lump sum we take each year to keep it at that level, and hopefully enable the pots to grow and keep up with inflation in the future.

[James6112]

We would only need around 2k a month net to live on quite well.
No debts etc.
A few final salary pensions just started @60
Some drawdown pots
State pension in 6 years
“Your forecast is
£189.90 a week
£825.73 a month, £9,908.71 a year”
Wife’s just a little less

I could have retired a few years ago & get far more than that until I die.
If I have to go back to the office, more than 1 day a week, i’ll call it a day!

[croyde]

Tried to search but came up with too much chaff.

Can anyone explain in simple terms what a drawdown involves?

Currently 59. I have about £160k in my private pension pot. Maybe £10k in old company pension plots (Been self employed for most of my life)

So how would I use that if I were to retire tomorrow?

[LooneyTunes]

gotoPzero said:

Compounding is your friend and don't look at the big number because it will put you off. Look at the big number as what you will have - not what you need to save.

Compounding, where inflation is involved, is also your enemy.

Its easy to say “I need £x k per month” but forget to project things sufficiently far into the future, to the extent that if your investments are not keeping up with inflation or take a knock, you find your standard of living eroded in a similar way to those who retired when interest rates were higher (and assumed they’d stay at 5%+).

I see that BT have announced phone/broadband going in by 9.3% https://www.bbc.co.uk/news/business-60057282 , CPI at its highest for 30 years and upward pressure continuing to be reported on starting salaries in some industries.

There are some predicting that it’ll settle down but it would make me very nervous if I was retiring without a plan to generate income or build in some inflation protection.

[Welshbeef]

LooneyTunes said:

Compounding, where inflation is involved, is also your enemy.

Its easy to say “I need £x k per month” but forget to project things sufficiently far into the future, to the extent that if your investments are not keeping up with inflation or take a knock, you find your standard of living eroded in a similar way to those who retired when interest rates were higher (and assumed they’d stay at 5%+).

I see that BT have announced phone/broadband going in by 9.3% https://www.bbc.co.uk/news/business-60057282 , CPI at its highest for 30 years and upward pressure continuing to be reported on starting salaries in some industries.

There are some predicting that it’ll settle down but it would make me very nervous if I was retiring without a plan to generate income or build in some inflation protection.

When NLW jumps by the % it does and Employers NI up and their utility costs ramping up consumer has to pay.

[timberman]

croyde said:

Tried to search but came up with too much chaff.

Can anyone explain in simple terms what a drawdown involves?

Currently 59. I have about £160k in my private pension pot. Maybe £10k in old company pension plots (Been self employed for most of my life)

So how would I use that if I were to retire tomorrow?

without going into too much detail,

if you decided now to drawdown your pension you're entitled to take 25% tax free and the remainder is taxed as income

as long as your pension provider allows it you could take this in different ways

flexi access, i.e. you could take the entire 25% tax free lump sum in one go then set up a monthly drawdown on the remainder which will be taxed just like your wages minus the national insurance bit,

or instead of taking a set monthly amount you can usually take up to 12 lump sums a year of varying amounts as required

you could also instead of taking the full 25% tax free in one go, keep taking smaller amounts and have the 1st 25% of each lump sum tax free and the rest taxed as wages (UFPLS)

in this instance I believe you can currently take up to £16760 each year from your pot and not pay any tax at all

£16760 - 25% (£4190.) leaves £12570 covered by personal annual tax allowance.

if desired you could carry on doing this until your pot runs out.

there are implications when taking the full 25% tax free if you decided to carry on working but I've hopefully provided a fairly basic explanation.

HTH

[mikeiow]

LooneyTunes said:

Compounding, where inflation is involved, is also your enemy.

Its easy to say “I need £x k per month” but forget to project things sufficiently far into the future, to the extent that if your investments are not keeping up with inflation or take a knock, you find your standard of living eroded in a similar way to those who retired when interest rates were higher (and assumed they’d stay at 5%+).

I see that BT have announced phone/broadband going in by 9.3% https://www.bbc.co.uk/news/business-60057282 , CPI at its highest for 30 years and upward pressure continuing to be reported on starting salaries in some industries.

There are some predicting that it’ll settle down but it would make me very nervous if I was retiring without a plan to generate income or build in some inflation protection.

Don’t start me on TV/Broadband!
Virgin’s latest proposed rise would have taken us over 100 a month…that irked me, especially as we often now use a Firestick (with Prime/Netflix/Disney+).
Took time last week to ‘negotiate’ with them.
Okay, we dropped a second old TV box we rarely used (saved a tenner a month), but then they agreed to go down to £64pcm for 18 months. Over 35% reduction. With the rest of the TV channels (incl BT sport) and 200meg broadband left alone.
This is one area you can sometimes make your own savings: very satisfying

[croyde]

timberman said:

croyde said:

Tried to search but came up with too much chaff.

Can anyone explain in simple terms what a drawdown involves?

Currently 59. I have about £160k in my private pension pot. Maybe £10k in old company pension plots (Been self employed for most of my life)

So how would I use that if I were to retire tomorrow?

without going into too much detail,

if you decided now to drawdown your pension you're entitled to take 25% tax free and the remainder is taxed as income

as long as your pension provider allows it you could take this in different ways

flexi access, i.e. you could take the entire 25% tax free lump sum in one go then set up a monthly drawdown on the remainder which will be taxed just like your wages minus the national insurance bit,

or instead of taking a set monthly amount you can usually take up to 12 lump sums a year of varying amounts as required

you could also instead of taking the full 25% tax free in one go, keep taking smaller amounts and have the 1st 25% of each lump sum tax free and the rest taxed as wages (UFPLS)

in this instance I believe you can currently take up to £16760 each year from your pot and not pay any tax at all

£16760 - 25% (£4190.) leaves £12570 covered by personal annual tax allowance.

if desired you could carry on doing this until your pot runs out.

there are implications when taking the full 25% tax free if you decided to carry on working but I've hopefully provided a fairly basic explanation.

HTH

Thanks Timberman, very useful.

So my pot would last ten years using your example.

Gets me to State pension I guess

Better carry on working.

[Rob_125]

All this speak of pensions do make me weary of what it's going to be like in 30 years when I retire (hopefully @60). I've just upped my contribution, meaning the combined contribution is 22%. Pot is currently worth ~100k. My partner and I have bought our 'forever home', but won't be having kids for a couple more years yet. The thinking is to knock as much off the mortgage and get a decent wedge in the pension. If needs be I can reduce my mortgage and pension payments to aid with cash flow. That said the talk of spending 50k-60k a year seems crazy to me, I reckon our total outgoings are currently half that!

[Wombat3]

Rob_125 said:

All this speak of pensions do make me weary of what it's going to be like in 30 years when I retire (hopefully @60). I've just upped my contribution, meaning the combined contribution is 22%. Pot is currently worth ~100k. My partner and I have bought our 'forever home', but won't be having kids for a couple more years yet. The thinking is to knock as much off the mortgage and get a decent wedge in the pension. If needs be I can reduce my mortgage and pension payments to aid with cash flow. That said the talk of spending 50k-60k a year seems crazy to me, I reckon our total outgoings are currently half that!

You've made a good start. I'd be looking at spreading some of it into an ISA as well. 22% at your pension + compounding fund growth might run you into the lifetime allowance sooner than you think.

[Rob_125]

Yeah, I'm putting £400/month aside into a Vanguard S&S ISA, and £150/month into a company shares scheme. Hopefully these may allow for early retirement if/when the criteria changes. But will have to keep an eye on the lifetime allowance, surely this will have to be increased over time?

[Wombat3]

Rob_125 said:

Yeah, I'm putting £400/month aside into a Vanguard S&S ISA, and £150/month into a company shares scheme. Hopefully these may allow for early retirement if/when the criteria changes. But will have to keep an eye on the lifetime allowance, surely this will have to be increased over time?

Currently frozen till 2026 & was significantly reduced before that.

Your ISA allowance is 20k, use it or lose it.

If you are going to have kids then access to cash in your 40s & 50s might well be helpful! Also look at Tax efficient savings vehicles for kids.

Investment property might look like a good idea...but is expensive to buy and can also cause you a huge CGT headache down the track.

Edited by Wombat3 on Friday 21st January 02:09

[dmahon]

I have spent most of my life complaining about the housing market and BTL scum, but have ended up funding retirement with property. The returns don’t set the world on fire, but I view this as better than a low risk annuity getting 5%+ return unleveraged whilst the underlying asset is also hopefully appreciating.

I think this more than covers our costs so my main concern is how and when to give away and spend other pots to avoid it going to the tax man.

I know not everyone is as fortunate, but I think having a rewarding and healthy retirement is the bigger challenge than the money side. I have personally found it a bumpy ride mentally, socially etc and wish I had put more emphasis on that side of things.

[MR2 Steve]

Is £5k a month net or gross?

[anonymous-user]

MR2 Steve said:

Is £5k a month net or gross?

Net. Talk is about spending.