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Retirement Living Standards Report (Oct 2021)

Including Financial Independence and Retiring Early (FIRE)
TahiPanasDua
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Re: Retirement Living Standards Report (Oct 2021)

#450090

Postby TahiPanasDua » October 14th, 2021, 12:36 pm

The retirement spending ranges are obviously very useful but we found that we had to wait until we actually retired to know how much we were likely to spend. Our prior estimates were not inaccurate. We were also surprised to find that we could happily live on about half of our pre-pandemic retirement expenditure.

Estimating a basic survival minimum is the easy bit. Beyond that, we all have different needs and priorities but are mostly quite adaptable.

This observation doesn't help much, does it?

TP2.

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Re: Retirement Living Standards Report (Oct 2021)

#457145

Postby bots33 » November 10th, 2021, 6:58 pm

I'd be interested in others views of spend. We have no kids, mortgage, and spend around 4k on house related costs (£2.1k council tax, 1.2k energy, £0.7k insurances, broadband). Monthly spend on food around £350, eating out £150, so about £6k p.a. (Two) cars cost around £2k each to insure, service fuel. The main large expenses are house (average £20k over past 5 years), and holidays (around £6k p.a.) So all in all - around £40k for a couple (although the house spend should drop to around £10k next and in future years). So expect our current retirement spend will be c£30k plus inflation - this seems very comfortable, although it doesn't factor (future) health / care costs.

GeoffF100
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Re: Retirement Living Standards Report (Oct 2021)

#457155

Postby GeoffF100 » November 10th, 2021, 7:41 pm

As a wealthy pensioner who does not spend much, I think the numbers are bonkers. The numbers were obtained by interviewing people. I think they tell us more about psychology than finance.

£10,900 p.a. + tax + rent + care costs (for one retired person)? Try telling that to the government. No car? Yes, of course you can afford to run a car on that. (You will need savings for the capital outlay, but can subsequently save to cover the depreciation each year.) My food costs about £40 per week, and I am certain that I eat more healthily than most.

£33,600 + tax + rent + care costs (for one retired person) to be comfortable? These people clearly have no concept of managing money.

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Re: Retirement Living Standards Report (Oct 2021)

#458591

Postby Gilgongo » November 16th, 2021, 7:33 pm

GeoffF100 wrote:As a wealthy pensioner who does not spend much, I think the numbers are bonkers. The numbers were obtained by interviewing people. I think they tell us more about psychology than finance.


You are astute in this, Geoff.

The website says the standards were based at least in part on focus groups. I had a look at the detail to see how they used the groups. As expected, they say "MIS is rooted in socially constructed definitions of living standards" (a red flag perhaps?), but also that "MIS identifies the needs of an ‘imagined other’, so does not ask groups of individuals to identify what they need for a particular standard of living, but rather groups focus on the needs of an imagined, hypothetical individual. This may have been an attempt to defuse the known tensions that exist in focus groups around participants talking about themselves in front of strangers and on sensitive topics. But I think there would still have been a significant biasing effects nonetheless (eg if you think old people just play bingo all day, but suspect that's a bit of a stereotype, then best say they go on holiday to the US occasionally too).

In short I think the methodology is perhaps questionable. An alternative would have been a blind study to help counterbalance bias in the groups. Present the questions about expenditure in a different context, one on one, and see how that came out. I would suspect comparing the thoughts of people talking about their own expenditure without peer pressure would have been valuable. But that would have cost a lot more to do of course...

Gilgongo
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Re: Retirement Living Standards Report (Oct 2021)

#469895

Postby Gilgongo » January 3rd, 2022, 12:02 pm

Footnote on this thread. The 2021 Which? survey came up spending figures about 15-20% lower.

https://www.which.co.uk/money/pensions- ... u0z9k0lw3p

swill453
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Re: Retirement Living Standards Report (Oct 2021)

#469899

Postby swill453 » January 3rd, 2022, 12:11 pm

Gilgongo wrote:Footnote on this thread. The 2021 Which? survey came up spending figures about 15-20% lower.

https://www.which.co.uk/money/pensions- ... u0z9k0lw3p

Interesting. I'm not entirely clear how they calculate income drawdown:

£442,020 - How much you need in your pension to get £41,000 a year from income drawdown


Not sure I'd be happy drawing down that much.

Scott.

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Re: Retirement Living Standards Report (Oct 2021)

#469916

Postby CryptoPlankton » January 3rd, 2022, 1:01 pm

swill453 wrote:
Gilgongo wrote:Footnote on this thread. The 2021 Which? survey came up spending figures about 15-20% lower.

https://www.which.co.uk/money/pensions- ... u0z9k0lw3p

Interesting. I'm not entirely clear how they calculate income drawdown:

£442,020 - How much you need in your pension to get £41,000 a year from income drawdown


Not sure I'd be happy drawing down that much.

Scott.

I agree. I think they are again assuming £16k in annual state pensions (as with the annuity calculations). So the actual drawdown is £25k p.a. with an assumed pot growth of 3% p.a. That does seem an uncomfortable starting withdrawal rate (about 5.6%). Personally, I'd be looking at a pot in excess of £600k (nearer to 4%) to contemplate committing to that level of withdrawal.

Unless I'm missing something?

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Re: Retirement Living Standards Report (Oct 2021)

#469984

Postby Gilgongo » January 3rd, 2022, 5:19 pm

CryptoPlankton wrote:Unless I'm missing something?


I agree it's a bit weird, although I've noticed it seems pretty common in these kinds of "how much?" estimates you read. There was another one I saw on some other consumer finance site a while ago where they gave a surprisingly small total pot for the income they said it would yield. I guess if you retired at 67 and died at 87?

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Re: Retirement Living Standards Report (Oct 2021)

#469987

Postby Alaric » January 3rd, 2022, 5:32 pm

Gilgongo wrote:
I agree it's a bit weird, although I've noticed it seems pretty common in these kinds of "how much?" estimates you read.


THere's a missing assumption, being how much of the pension value is left to the estate. Would it be the starting value at retirement revalued with an inflation measure, or perhaps just the monetry value, lower in real terms, or perhaps zero or negative? Negative would imply some form of borrowing or use of non-pension waalth such as housing. Care costs could blow away remaining funds anyway.
Last edited by tjh290633 on January 3rd, 2022, 10:50 pm, edited 1 time in total.
Reason: Tag corrected - TJH

swill453
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Re: Retirement Living Standards Report (Oct 2021)

#469992

Postby swill453 » January 3rd, 2022, 5:41 pm

Looking at the Which income drawdown calculator https://www.which.co.uk/money/pensions- ... pj57u5134k, it all seems to be based on an assumption that the aim is to have the pension pot reduce to zero after 20 years of drawdown.

I suppose at that point you're either dead, or expected to live on the state pension alone.

Scott.

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Re: Retirement Living Standards Report (Oct 2021)

#469997

Postby Alaric » January 3rd, 2022, 5:57 pm

swill453 wrote:Looking at the Which income drawdown calculator


I dug this out from their website

That’s assuming that once you retire, your cash investment grows at an average of 0.50% a year, fixed interest at 4.75% a year and equities at 7.25% a year.


Cannot fault the cash assumption, but isn't the fixed interest assumption a bit on the high side? Arguably so is the equity assumption. Thsse are money values, you can roll whatever inflation assumption you want on the withdrawal anount.

swill453
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Re: Retirement Living Standards Report (Oct 2021)

#470000

Postby swill453 » January 3rd, 2022, 6:00 pm

Alaric wrote:I dug this out from their website

That’s assuming that once you retire, your cash investment grows at an average of 0.50% a year, fixed interest at 4.75% a year and equities at 7.25% a year.

That's their "Middling" rates. Pessimistic is 0%/4%/6.5%, Optimistic is 1%/5.5%/8%.

Scott.


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