Retirement, how much?

[ebikeerwidnes]

I retired a few years ago.
I was working in a school and a new Head took over - she didn;t like me for some reason and was incredibly disrespectful.
One day she was especially rude and when I got home that day I found a letter on the mat about the current state of the pension scheme from an old employer. It also encouraged anyone over 50 to ring up and get a quote.
So I did.
And - while I was at it I rang the Teacher's Pension Scheme to find out what I would get from them.

Now the important bit.
Turns out that some pension schemes have a 'wind down to retirement' scheme where you get a pension based on your highest salary in the last 5 years - not just your retirement salary.
AT that point I had taken a large pay drop to work part time and mainly as an IT Technician rather than as a full time teacher.
It turned out that as long as I retired in the nest few months then my pension would be based on my previous job as a full time teacher - which made a huge difference.

So - my point - work out what the details are and what the retirement options are. Then you can work this into a retirement plan.
If you create a plan first then you may find you are not taking advantage of everything that you can.

 

[ebikeerwidnes]

I love the idea of the narrow boat retirement - but I don't fancy all the hassle with doing the locks single handed.
And once you're out of the property chain - you will struggle to get back. A boat is only going to depreciate in value compared to bricks and mortar.

I'm guessing you know what you're doing though.

You also need to think about what you are going to do when you get a bit older. Fighting through locks when your knees and hips are getting a bit dodgy will not be any fun!
Then you might want to get back onshore - and now you have no house - unless you have rented it out of course.

 

[Oldhippy]

I love the idea of the narrow boat retirement - but I don't fancy all the hassle with doing the locks single handed.
And once you're out of the property chain - you will struggle to get back. A boat is only going to depreciate in value compared to bricks and mortar.

I'm guessing you know what you're doing though.

I am not very material and have no interest in property values or depreciation of things. For me life is not about how much stuff I have, bike, health, books, music and enjoying every day are my mainstays in life.

 

[Once a Wheeler]

Key considerations from my point of view:

• Annuity dies with you, so nothing to pass on.
• Drawdown reduces the pot, potentially to nothing.
• Dividends and interest make income variable but retain your capital.
• Control is worth a lot, keep hold of it.
• Every institution, broker, accountant, adviser, bank, and fund manager has got a snout in your trough. Minimize them.
• Decide when you will die, it helps planning immensely. All things being equal, age 120 is reasonable. It should ensure you die before your time which is far preferable to living beyond your sell-by date.

 

[alicat]

Control is worth a lot, keep hold of it.

The flip side of that is if you get dementia you will find it hard to manage your money.

 

[Flick of the Elbow]

I reckon just reading this that 20k would be comfortable, probably even a bit less. I have always done my own thing regarding cash so never really relied on pensions but its good to have a bit of an idea of what's required when planning to hang up the spurs.

My wife and I arrived at the same sort of figure. We’ve both been retired since July last year. Between us we spend about £25k a year, that’s including everything. Once the pandemic lifts we expect to take some short breaks and visit theatres and restaurants etc, none of which we do currently, so perhaps that would raise the figure to £30k between us.

 

[oldfatfool]

Out of interest what's the point of saving money for ill health? I have paid into the NHS all my life, despite this if I grow old and incapable if I have owt left they will take it before they provide for me, if I fall ill and go private for a quicker cure then the cure will take all my money (given the cost of private treatment this could be 10's 000) and I would have nothing left to enjoy my new lease of life so what's the point? Blow it all on retiring early and enjoyment, someone will keep me, it works for them that haven't done a days work in their lives.

 

[fossyant]

Out of interest what's the point of saving money for ill health? I have paid into the NHS all my life, despite this if I grow old and incapable if I have owt left they will take it before they provide for me, if I fall ill and go private for a quicker cure then the cure will take all my money (given the cost of private treatment this could be 10's 000) and I would have nothing left to enjoy my new lease of life so what's the point? Blow it all on retiring early and enjoyment, someone will keep me, it works for them that haven't done a days work in their lives.

None when you've retired, only save for doing good stuff. Get into real bad health and you'll get extra benefits. It's a sad fact, but MIL would be in a right pickle financially if she hadn't had various disability benefits as she had no pension (other than state). Whilst still at home she was getting more in benefits than my dad did with full final salary pension.

 

[gbb]

How did you get those figures?

The full state pension is currently £179.60/week but will rise by 3.1% to £185.17 for 2022/2023.

I paid into SERPS for years...long after everyone was told they should stop and put their money into a private pension. Only to be told decades later, errrr, you'd have done better staying in SERPS.
I assume that's why my calculated figure is higher.

 

[ebikeerwidnes]

I think you also need to bear in mind that pensions and stuff do not always rise as fast as wages may.

You need to factor in the fact that your income may not rise as fast as you are used to and your ability to increase it will drop a lot, especially as your fitness reduces as you get older
Hence - I would advise leaving yourself some headroom just in case

 

[marzjennings]

Out of interest what's the point of saving money for ill health? I have paid into the NHS all my life, despite this if I grow old and incapable if I have owt left they will take it before they provide for me, if I fall ill and go private for a quicker cure then the cure will take all my money (given the cost of private treatment this could be 10's 000) and I would have nothing left to enjoy my new lease of life so what's the point? Blow it all on retiring early and enjoyment, someone will keep me, it works for them that haven't done a days work in their lives.

Saving for health is a huge necessity if I stay here in the USA to retire as we're looking at about $20k pa just for health costs at 65. I have a separate pension account through work just to save for ill health during retirement. Plus given property taxes of over $10K pa I seriously thinking of retiring back home in Cornwall. It'll be a lot cheaper to retire in the UK and I'll still be eligible to receive my US social security cheques each month.

 

[ColinJ]

I love the idea of the narrow boat retirement - but I don't fancy all the hassle with doing the locks single handed.

What could possibly go wrong!!!

 

[Drago]

Significant levels on the waterways. Criminal damage, burglary and filthy perverts with children are the big 3. It looks idyllic, but...

 

[SpokeyDokey]

The flip side of that is if you get dementia you will find it hard to manage your money.

LPA's are the answer.

 

[SpokeyDokey]

Some other points have occured to me after reading all the latest posts on this old thread:

One contingency that really does need thinking about is what happens (assuming you are in a partnership) should one party die first - this being the most probable scenario unless you do a Thelma and Louise.

One of the priorities for us when planning was to make sure that Mrs SD would be ok financially if I pop off first - more likely tbh as I am male and 7 years older. I have a much larger personal pension than she will ever have so this would have some impact - although she would get 50% until her death. As an aside she will be fine.

Re planning: depending on your level of competence Excel is a great tool to model your future income and expenditure over the long-term. Our own cashflow & assets projection runs 2 decades ahead of my age. It is an immense comfort blanket especially if part of your long-term planning includes any major income downshifts. It certainly helped us back in the early 2000's when our downshift was massive and somewhat scary.

Don't necessarily plan for the same lifestyle when you are old - whilst some younger folk may see retirement as a non-stop splurge of exciting holidays, fancy restaurants and other exciting things you may find, as we have, that whilst being able to afford more or less whatever we want, that our motivation to travel the globe etc has waned to virtually zero. Ditto purchasing fancy cars, watches, ever larger homes etc. We did all that in a past life and it is no longer 'us'. We still have nice stuff around us but it fulfills more of a need than a want - I think we defined what we had in the past as a measure of our success - we grew up somewhere along the line!

As expressed in a preceding post - don't always listen to financial advice that has a vested interest on their side of the fence. Many pension providers imo over-egg what you will need in later life as this may cause you to pay more into a pension pot than you need to - to their obvious benefit too. As a general rule we have 'pulled' as much funding over to our side of the fence as possible and we manage it ourselves.

It's also worth calculating what you consider an acceptable risk re taking a company pension pot early. I took a lump sum of 25% at age 53 (rules have moved to 55 since then) and an annual income from the remainder. The latter was obviously reduced vs the full-term figure but my calculations indicated that only if I live past the age of 93 will I have made the wrong decision. A risk outcome I am still happy to have made.

Whilst we can easily live off of our savings for the rest of our lives (excluding pension income) and certainly beyond the age of 125 (😄) as mentioned a few posts up it is worth having a punt at your likely death age, and then dividing your estimated remaining years into whatever savings you have - this can then be treated as a potential income source. Obvious caveats apply.

Be brutal in your forecasting - if it's pretty much a nailed on certainty that you will get a hefty inheritence at some stage then try to factor that in as best you can. Sadly, as we both come from a piss-poor background, this never happened for us. Cest la vie.

Track your assets etc carefully. Our Excel is very 'automated' courtesy of Mrs SD and our monthly reconciliation takes less than half an hour. It's no longer as necessary as it once was but we like doing it (sad!) and it ensures that we do stay on track. But, do involve both parties if it applies to your situation. It is easy to hog financial control and thereby potentially leave one party 'all at sea' when the other dies. Not sure how those couples who do not have merged finances manage these thorny scenarios!

All, very much a personal opinion of course. It works for us but other approaches may work as well or better.

Sorry the order of the above points is a bit 'choppy' - I typed as thoughts popped into my old bonce.