How does this financial situation look long term…
Discussion
DonkeyApple said:
The issue is that you cannot easily set the date for your death however, you can set the style of your life before you die. The downside is that you need to put more away to cover off the risk of not dying early doors.
So you can guess that you might, worse case scenario, live another 20 years. Even worse, your partner may not die on the same day as you and if she persists with living will need money after you are brown bread but let's stick with 20 years or 240 months. If you need £3k/month then you're going to need about £750k. So if you only plan to work for another 3 years you need to be saving about £20k/ month going forward.
All very over simplified but gives a roughy starting point from which to tinker with the various numbers. Starting with leaving the funds as cash, in theory 4% with no capital risk isn't shocking but it's not likely to stay that high so looking to start migrating some of that cash over to equities is probably sensible. Spending less from now and putting more in the pension and claiming back all your higher rate income tax also seems sensible. Extending your retirement point is also a big win as it not only delays the spending of the pension pot but allows for a lot of money to be added to it. Rent is going to be one of your largest endless costs so you probably need to plan how you will reduce that once free of the need to be close to work etc.
Because you have a high household income you don't have the emergency others have but you arguably need to start changing a few things now. And if you achieve your personal goal of dying young and manage to defeat the NHS's amazing ability of preventing that then you at least leave your partner in a good position as well as your children.
This ^^So you can guess that you might, worse case scenario, live another 20 years. Even worse, your partner may not die on the same day as you and if she persists with living will need money after you are brown bread but let's stick with 20 years or 240 months. If you need £3k/month then you're going to need about £750k. So if you only plan to work for another 3 years you need to be saving about £20k/ month going forward.
All very over simplified but gives a roughy starting point from which to tinker with the various numbers. Starting with leaving the funds as cash, in theory 4% with no capital risk isn't shocking but it's not likely to stay that high so looking to start migrating some of that cash over to equities is probably sensible. Spending less from now and putting more in the pension and claiming back all your higher rate income tax also seems sensible. Extending your retirement point is also a big win as it not only delays the spending of the pension pot but allows for a lot of money to be added to it. Rent is going to be one of your largest endless costs so you probably need to plan how you will reduce that once free of the need to be close to work etc.
Because you have a high household income you don't have the emergency others have but you arguably need to start changing a few things now. And if you achieve your personal goal of dying young and manage to defeat the NHS's amazing ability of preventing that then you at least leave your partner in a good position as well as your children.
I'd be looking at increasing your savings (investing) rate as much as you can whilst you still can.
Not sure I'd rise to the bait of someone with 11 posts....and I agree with you completely. No investment banker but my rule of thumb has always been 'take what you want in retirement and multiply by 25' i.e. the 4% rule.
Wouldn't admit to 25 years success as an investment banker - people like me may take offence at bailing you lot out for a few years 2008-2010. And getting none of it back.
Wouldn't admit to 25 years success as an investment banker - people like me may take offence at bailing you lot out for a few years 2008-2010. And getting none of it back.
Steve H said:
As others have commented I am at a loss as to how someone earns so much and has accumulated so little.
OP, if you can manage on £40k as you suggest and would like any chance of doing so I would suggest you start right now living at that income level and put all the rest into investments
Sorry if this sounds negative but you are asking the right question and this is the answer.
It’s only in the last few years that I’ve enjoyed this level of income. If I’d been earning like this for a decade or more I’m sure the situation would be different. I honestly don’t think we’re extravagant. We actually save far more than we spend apart from housing costs. OP, if you can manage on £40k as you suggest and would like any chance of doing so I would suggest you start right now living at that income level and put all the rest into investments
Sorry if this sounds negative but you are asking the right question and this is the answer.
Steve H said:
Not for now while the OP has nothing in equities……..
Certainly it is a bit of a b*gger we're having this conversation after a boring world equity tracker has done ~26% in the past year 
.Suppose another thing for the OP to check is if additional contributions to the work scheme can be/are salary sacrifice to save him the NI payments.
brickwall said:
This was sort of my point earlier in the thread…
Clearly I’ve upset him, so he’s not likely to take this on board but at his age, with so little saved and most of it in cash there’s no route to a particularly comfortable retirement for the two of them.Well, not at anything like the level of spending they seem to have at the moment. They’re netting £90,000+ and only saving £17,000 per year, so spending over £70,000 per year.
Ken_Code said:
Well, not at anything like the level of spending they seem to have at the moment. They’re netting £90,000+ and only saving £17,000 per year, so spending over £70,000 per year.
Where are you getting £17,000 from? I make it £31,200 between pension and ISA?OP - I'd give some serious thought to taking money out of the ISA to live on so you can pay more into the pension - essentially seek to maximise your pension contributions and minimise tax paid. Alternatively (and this is probably a better option as the ISA is presumably cash?) run down the £30,000 cash buffer, so you don't waste ISA allowance.
xeny said:
Where are you getting £17,000 from? I make it £31,200 between pension and ISA?
OP - I'd give some serious thought to taking money out of the ISA to live on so you can pay more into the pension - essentially seek to maximise your pension contributions and minimise tax paid. Alternatively (and this is probably a better option as the ISA is presumably cash?) run down the £30,000 cash buffer, so you don't waste ISA allowance.
Yes, I’ve already dug into both pots to max out the pension allowance and plan to put in a good chunk to start next tax yearOP - I'd give some serious thought to taking money out of the ISA to live on so you can pay more into the pension - essentially seek to maximise your pension contributions and minimise tax paid. Alternatively (and this is probably a better option as the ISA is presumably cash?) run down the £30,000 cash buffer, so you don't waste ISA allowance.
xeny said:
Where are you getting £17,000 from? I make it £31,200 between pension and ISA?
OP - I'd give some serious thought to taking money out of the ISA to live on so you can pay more into the pension - essentially seek to maximise your pension contributions and minimise tax paid. Alternatively (and this is probably a better option as the ISA is presumably cash?) run down the £30,000 cash buffer, so you don't waste ISA allowance.
You’re right, sorry, I missed the other contributions.OP - I'd give some serious thought to taking money out of the ISA to live on so you can pay more into the pension - essentially seek to maximise your pension contributions and minimise tax paid. Alternatively (and this is probably a better option as the ISA is presumably cash?) run down the £30,000 cash buffer, so you don't waste ISA allowance.
It makes no difference at all to the conclusions. Still renting and with the current level of savings means they are going to have to make some massive cuts to their outgoings.
The best advice was offered above, work out how much they’ll have to live off and start living like that now to understand if it’s sustainable or whether they need to consider changing their plans.
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hstewie said:
hstewie said: I wouldn't automatically assume it's "bait".
Plenty of people seem to live for today and don't think about tomorrow until it's very late in the day.
I’m not trying to bait anyone. Plenty of people seem to live for today and don't think about tomorrow until it's very late in the day.
But the assumption that we piss it all up the wall is plain wrong. We save over 40k a year. It’s just that we’ve only been able to do that in the last few years.
The whole point of asking the question in the OP was to get some honest advice and it’s been a very useful set of responses.
isleofthorns said:
commercial property in a SSAS/SIPP... I've got two in mine, approx, 500k value and returning 38k..
7-8% gross yields are not too hard to come by... they may need a bit of management, but not too onerous.
Is commercial property not looking a bit dicey in these WFH times? I appreciate there’s a lot more to comm prop than office space, but how do you tend to source less risky properties with stable demand?7-8% gross yields are not too hard to come by... they may need a bit of management, but not too onerous.
Moneyquery said:
I’m not trying to bait anyone.
But the assumption that we piss it all up the wall is plain wrong. We save over 40k a year. It’s just that we’ve only been able to do that in the last few years.
The whole point of asking the question in the OP was to get some honest advice and it’s been a very useful set of responses.
Wasn't suggesting that simply that it does feel a bit late in the day to be thinking what happens when the music stops But the assumption that we piss it all up the wall is plain wrong. We save over 40k a year. It’s just that we’ve only been able to do that in the last few years.
The whole point of asking the question in the OP was to get some honest advice and it’s been a very useful set of responses.
Fully take the point that perhaps you didn't have so much disposable previously.
Honestly though I don't think there's a magic bullet here that doesn't involve either taking more risk than you might be comfortable with or that won't leave you looking over your shoulder wondering if you have enough.
It's very trite but spend less now and save and invest as much as you can.
Shnozz said:
isleofthorns said:
commercial property in a SSAS/SIPP... I've got two in mine, approx, 500k value and returning 38k..
7-8% gross yields are not too hard to come by... they may need a bit of management, but not too onerous.
Is commercial property not looking a bit dicey in these WFH times? I appreciate there’s a lot more to comm prop than office space, but how do you tend to source less risky properties with stable demand?7-8% gross yields are not too hard to come by... they may need a bit of management, but not too onerous.
small industrial units seem to have good demand and some high street is OK.
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