How much you need to retire
Discussion
Saw this online and thought it was quite interesting, gives you an idea of the withdrawal rate and pot of assets you need to provide whatever type of income you might wish to have in later life. Needless to say that Telegraph and Times both ran articles today on the dire state of pensions in the UK today and that many are heading for disaster.
Doesn't include state pension, all figures seem to be gross, assume this is taking ‘market returns’ as the headline and based on the FIRE calculation which I think is that 4% withdrawal should last a 30 year retirement 95% of the time - the fire language is obviously optional
Lots of work to do it would seem - bit blurry, can't work out how to make it clearer
Doesn't include state pension, all figures seem to be gross, assume this is taking ‘market returns’ as the headline and based on the FIRE calculation which I think is that 4% withdrawal should last a 30 year retirement 95% of the time - the fire language is obviously optional
Lots of work to do it would seem - bit blurry, can't work out how to make it clearer
Edited by okgo on Thursday 20th April 17:05
Go to https://forums.moneysavingexpert.com/discussion/co... if you fancy seeing lots of examples.
Everyone is different!
Everyone is different!
BoRED S2upid said:
The key is to make retirement as affordable as possible get the mortgage, cars, finance all cleared before you take the leap. When you get really old you can live off buttons.
Absolutely. I have no idea where they get these figures from but they certainly don’t get it from me or my experience,So at 4% drawdown you need £1,000,000 in the pot at age 50 if you want to retire and make it to 80 and withdraw £40k per year? I guess you could downsize the house at 80 and live off the proceeds and the state pension after that.
Just need to work out how to get a £1,000,000 pot in the next 10 years…..
Just need to work out how to get a £1,000,000 pot in the next 10 years…..
Yeah, this is b
ks. The RE in FIRE stands for retire early, the F must stand for f**cking, the I I’m not sure. Funding 30 years retirement at these rates (average UK male life expectancy being 82) means working for 30 years then having this amazing annual income at 4% growth for a further 30 years. Try that with student loans, housing costs and realistic income levels
The table is also mathematically dodgy, it seems to be overestimating capital required by around 25%. Also doesn’t take account of state pension, inflation or tax-free lump sums and the assumptions behind it are not stated
There is a sensible thread on retirement going, look for Enjoying Retirement, which looks at how many PH’ers are doing just that with much more realistic levels of savings
ks. The RE in FIRE stands for retire early, the F must stand for f**cking, the I I’m not sure. Funding 30 years retirement at these rates (average UK male life expectancy being 82) means working for 30 years then having this amazing annual income at 4% growth for a further 30 years. Try that with student loans, housing costs and realistic income levelsThe table is also mathematically dodgy, it seems to be overestimating capital required by around 25%. Also doesn’t take account of state pension, inflation or tax-free lump sums and the assumptions behind it are not stated
There is a sensible thread on retirement going, look for Enjoying Retirement, which looks at how many PH’ers are doing just that with much more realistic levels of savings
It appears the 4% drawdown rate is still valid, I use 3.5%.
So after your state and any other pension you will need to bolster your Monthly money to whatever you think you will need.
A good way to start retirement is mortgage free and no car loans, house in good shape with no major repairs..
You will need almost the same income as when you worked, you will have more spare time, which equals more spending time.
A lot of small jobs that you once did yourself will now need to be subbed out. A 70 year old cannot paint or paper a ceiling, or might not want to.
Another consideration is: What will be the financial position of the surviving spouse beon first death. Outgoings will be almost the same. Possible loss of one or two pensions. I have accounted for this by switching from 3.5% to 5% drawdown. I've run the numbers, it seems OK. I've managed a ten year average of 7.5% growth after taking my current drawdown.
So after your state and any other pension you will need to bolster your Monthly money to whatever you think you will need.
A good way to start retirement is mortgage free and no car loans, house in good shape with no major repairs..
You will need almost the same income as when you worked, you will have more spare time, which equals more spending time.
A lot of small jobs that you once did yourself will now need to be subbed out. A 70 year old cannot paint or paper a ceiling, or might not want to.
Another consideration is: What will be the financial position of the surviving spouse beon first death. Outgoings will be almost the same. Possible loss of one or two pensions. I have accounted for this by switching from 3.5% to 5% drawdown. I've run the numbers, it seems OK. I've managed a ten year average of 7.5% growth after taking my current drawdown.
Looks about right to me £50k is 5% of 1 million.
I am not sure how the 25% comes into it. You can only have it once.
Where it fails, is that it doesn’t take into account income tax, that you would likely spend less as you get more dribbley and the state pension.
But it is a starting point to think about. It does give you a hint of the kind of pot you are likely to need. A 3% annual contribution isn’t likely to get you there,
I am not sure how the 25% comes into it. You can only have it once.
Where it fails, is that it doesn’t take into account income tax, that you would likely spend less as you get more dribbley and the state pension.
But it is a starting point to think about. It does give you a hint of the kind of pot you are likely to need. A 3% annual contribution isn’t likely to get you there,
mikef said:
Yeah, this is bks. The RE in FIRE stands for retire early, the F must stand for f**cking, the I I’m not sure. Funding 30 years retirement at these rates (average UK male life expectancy being 82) means working for 30 years then having this amazing annual income at 4% growth for a further 30 years. Try that with student loans, housing costs and realistic income levels
The table is also mathematically dodgy, it seems to be overestimating capital required by around 25%. Also doesn’t take account of state pension, inflation or tax-free lump sums and the assumptions behind it are not stated
There is a sensible thread on retirement going, look for Enjoying Retirement, which looks at how many PH’ers are doing just that with much more realistic levels of savings
You specifically call out student loans there…I’m curious: any reason why?ks. The RE in FIRE stands for retire early, the F must stand for f**cking, the I I’m not sure. Funding 30 years retirement at these rates (average UK male life expectancy being 82) means working for 30 years then having this amazing annual income at 4% growth for a further 30 years. Try that with student loans, housing costs and realistic income levelsThe table is also mathematically dodgy, it seems to be overestimating capital required by around 25%. Also doesn’t take account of state pension, inflation or tax-free lump sums and the assumptions behind it are not stated
There is a sensible thread on retirement going, look for Enjoying Retirement, which looks at how many PH’ers are doing just that with much more realistic levels of savings
I thought they are more of a tax, which stop at 50, and if you have no income (eg, retired super early!), then you don’t pay any back. A quick google suggests it is more complicated than I though, mind you: https://www.gov.uk/repaying-your-student-loan/when...
MMM is a useful site, as mentioned above.
Figuring out how you want to spend your time is almost as important as figuring out when you are financially independent enough to be able to do it without a regular wage.
mikeiow said:
You specifically call out student loans there…I’m curious: any reason why?
I thought they are more of a tax, which stop at 50, and if you have no income (eg, retired super early!), then you don’t pay any back. A quick google suggests it is more complicated than I though, mind you: https://www.gov.uk/repaying-your-student-loan/when...
MMM is a useful site, as mentioned above.
Figuring out how you want to spend your time is almost as important as figuring out when you are financially independent enough to be able to do it without a regular wage.
They act as a drag on savings, and are now a substantial debt for many graduates. Anyone starting their course from this year will only have the debt written off after 40 years. I thought they are more of a tax, which stop at 50, and if you have no income (eg, retired super early!), then you don’t pay any back. A quick google suggests it is more complicated than I though, mind you: https://www.gov.uk/repaying-your-student-loan/when...
MMM is a useful site, as mentioned above.
Figuring out how you want to spend your time is almost as important as figuring out when you are financially independent enough to be able to do it without a regular wage.
That doesn’t really make any odds to the sheet though.
And his post actually indicates why there will be a pension crisis, it’s hard to save up lots of money. We have a decent income as a household but have zero chance of getting near it in retirement unless something drastic happens. If 90% of people are paying in less than 10% of their salaries then most people won’t even get onto the bottom of that grid.
And his post actually indicates why there will be a pension crisis, it’s hard to save up lots of money. We have a decent income as a household but have zero chance of getting near it in retirement unless something drastic happens. If 90% of people are paying in less than 10% of their salaries then most people won’t even get onto the bottom of that grid.
As mentioned above the ‘Enjoying Retirement’ thread is worth a look through and it’s running at over 300 pages now.
There is no ‘one size fits all’ answer and there are those ( assuming no debt) living off £1500 a month to those that need 6k a month.
There’s always the fear that you’ve under allowed what you need so you need to be very comfortable you can make it work.
As much as i agree you’ll spend less past 70 equally ( as my wealth manager points out) you might last into your 90’s and need care. So it’s a U shaped spending forecast.
Personally I don’t think I’ll have to worry about the back end of the curve so I’m happy to retire earlier once I have my ducks in a row.
That said reading the recent articles about pension forecasts for the young it’s been going through my mind to start funding my kids pensions but then I’ll never be able to quit working.
There is no ‘one size fits all’ answer and there are those ( assuming no debt) living off £1500 a month to those that need 6k a month.
There’s always the fear that you’ve under allowed what you need so you need to be very comfortable you can make it work.
As much as i agree you’ll spend less past 70 equally ( as my wealth manager points out) you might last into your 90’s and need care. So it’s a U shaped spending forecast.
Personally I don’t think I’ll have to worry about the back end of the curve so I’m happy to retire earlier once I have my ducks in a row.
That said reading the recent articles about pension forecasts for the young it’s been going through my mind to start funding my kids pensions but then I’ll never be able to quit working.
Link to Enjoying Retirement: https://www.pistonheads.com/gassing/topic.asp?h=0&...
There's an interesting discussion on there about how one could possibly need £6K a month in retirement, most PH posters clearly don't (and by extension presumably don't have the £1.75M invested for a 30-year retirement that the table indicates)
Another factor to take into account is that couples can live on less than two individuals - and that many of us have partners that also have either final salary pensions or savings/inheritances in their own right, which can mean decent income levels for a UK couple in retirement without coming close to the investment levels claimed
There's an interesting discussion on there about how one could possibly need £6K a month in retirement, most PH posters clearly don't (and by extension presumably don't have the £1.75M invested for a 30-year retirement that the table indicates)
Another factor to take into account is that couples can live on less than two individuals - and that many of us have partners that also have either final salary pensions or savings/inheritances in their own right, which can mean decent income levels for a UK couple in retirement without coming close to the investment levels claimed
nickfrog said:
It's easy enough to set up your own xls for your own situation
I've found this one useful: [url][https://www.vertex42.com/Calculators/retirement-withdrawal-calculator.html/url] although being US-based there is a an inbuilt assumption of accessing 401K savings at age 59.5. You can see the exact working-out in the monthly table, which I likeWith the greatest respect to the retirement thread, many are living very modestly and not seemingly getting up to a vast amount which obviously won’t cost much.
If you want to go on lots of great holidays, have nice cars, be able to help your kids out as and when, live somewhere nice - you’re going to need an half decent income of sorts. FAT fire is obviously geared to those that have earned a lot in their careers and wants to still enjoy a similar standard in retirement.
As someone said above it feels like the very minimum is entering without a mortgage or any significant debt with mostly self sufficient offspring.
If you want to go on lots of great holidays, have nice cars, be able to help your kids out as and when, live somewhere nice - you’re going to need an half decent income of sorts. FAT fire is obviously geared to those that have earned a lot in their careers and wants to still enjoy a similar standard in retirement.
As someone said above it feels like the very minimum is entering without a mortgage or any significant debt with mostly self sufficient offspring.
mikef said:
nickfrog said:
It's easy enough to set up your own xls for your own situation
I've found this one useful: [https://www.vertex42.com/Calculators/retirement-w... although being US-based there is a an inbuilt assumption of accessing 401K savings at age 59.5. You can see the exact working-out in the monthly table, which I likehttps://engaging-data.com/will-money-last-retire-e...
There are others but they still use US data. As far as I'm aware the ones using UK data are targeted at IFAs & the like:
https://cfiresim.com/
https://firecalc.com/
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