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Cheeky but polite question about income required when retired

Including Financial Independence and Retiring Early (FIRE)
Bminusrob
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Re: Cheeky but polite question about income required when retired

#437762

Postby Bminusrob » August 27th, 2021, 10:11 am

Hello AIY. As one Yorkshireman to another, I can say well done for planning ahead, and well done for getting into your current position. You are sort of like Joe Root on 50 not out. Great start, but you want to be looking at 100 and then a few.

I retired six years ago at the age of 60 (and a bit). I had a heart condition in my early 50's, then cancer in my late 50's, and was fully aware that my father died at 58, so I had been thinking about early retirement for a while, and had very similar worries as you have, about how much you need for a comfortable retirement.

You mention a figure of £900k. Is this premised on 13 more years of adding £40k a year? I ask because you may find in five years time that you would like to stop working, or cut back significantly; a sort of partial retirement. You mention a figure of £2200, which I assume is two state pensions, plus your wife's private pension. Have you checked your state pension with the .gov.uk website to ensure you will receive a full state pension, or how many more years contribution you need to make to get a full state pension?

I would have thought that £2200 per month should cover most, if not all of your day to day outgoings, including a car (but not necessarily car loan or lease payments). So, your other pension should give you a pretty good lifestyle. Of course, you could have an expensive castle to keep up, which could add to your outgoings.

When it comes to your private pension, you need to bear in mind that income from it is taxed. Assuming you are thinking of drawdown, there is a good drawdown calculator (https://www.hl.co.uk/retirement/drawdown/calculator) which shows how much you could expect to drawdown without risking a penniless old age. The tax-free lump sum is also worth considering. I took the maximum tax-free lump sum from my main (final salary) pension to ensure that I would not end up paying higher rate tax on my pension. You don't say if your pension is final-salary or defined contribution, but another reason for me taking the maximum tax-free lum sum from my final salary scheme is that if I pre-decease my wife (quite likely as I am nearly nine years older than her), she gets a widow's pension from the final salary scheme of 50% of my pension. This 50% is based on the pension before taking the tax-free lump sum, and remains 50% of the original pension, even after taking the lump sum.

I would definitely advise keeping your options open as to when you will retire, or partially retire. You may still have boundess energy in 13 years time, but on the other hand, in five years time, you may be knackered! There is no point in having a big pension if you can't enjoy it.

AsleepInYorkshire
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Re: Cheeky but polite question about income required when retired

#437769

Postby AsleepInYorkshire » August 27th, 2021, 11:19 am

Darka wrote:
AsleepInYorkshire wrote:
Darka wrote:Glad to hear you are making progress, and hope that you manage to resolve everything and come through ok.

best wishes,
Darka

Thank you. This is off topic but I waned to reply nonetheless. I'm sure our moderators will allow me to indulge this once please :)
My condition is congenital on my fathers side. I have one sister and eight cousins on that side.
Of which
    3 have taken their own lives
    3 have serious mental health problems
    1 had serious mental health problems and is now being treated correctly for the underlying cause (me)
    2 I have no real idea how they are but the evidence is that they have at least some mental health issues
    1 has lived a life free of mental health issues.
I have congenital obstructive sleep apnea. I don't snore or show and outward physical symptoms during sleep.

I'm the lucky one.

Its been an interesting journey over more than four decades. But it's not one I would recommend to anyone else. I am also lucky that I have some skills that the market constantly needs, unless the banks shut down :roll:

I've written this simply to raise awareness. Because I know of others outside my family who have a similar story to tell. And that saddens me greatly.

I could say life's not been particularly fair to me but that would be disingenuous and bitter. With some luck and good tail wind I've 20 years, perhaps a little longer. And that without the mental health problems, without all of the other medical problems caused by the untreated sleep apnea, is an incredible gift and I'm going to do my best to make the most of it. Or die trying :lol:

Take care

AiY

pje16
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Re: Cheeky but polite question about income required when retired

#437773

Postby pje16 » August 27th, 2021, 11:34 am

WOW AiY
all i can say is that post shocked me
I had no idea (why would I) but nevertheless please look after yourself (I'm sure you do)
Not sure what else I can, do but if you ever need a rant just PM me :D

AsleepInYorkshire
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Re: Cheeky but polite question about income required when retired

#437788

Postby AsleepInYorkshire » August 27th, 2021, 12:32 pm

Bminusrob wrote:Hello AIY. As one Yorkshireman to another, I can say well done for planning ahead, and well done for getting into your current position. You are sort of like Joe Root on 50 not out. Great start, but you want to be looking at 100 and then a few.

I retired six years ago at the age of 60 (and a bit). I had a heart condition in my early 50's, then cancer in my late 50's, and was fully aware that my father died at 58, so I had been thinking about early retirement for a while, and had very similar worries as you have, about how much you need for a comfortable retirement.

You mention a figure of £900k. Is this premised on 13 more years of adding £40k a year? I ask because you may find in five years time that you would like to stop working, or cut back significantly; a sort of partial retirement. You mention a figure of £2200, which I assume is two state pensions, plus your wife's private pension. Have you checked your state pension with the .gov.uk website to ensure you will receive a full state pension, or how many more years contribution you need to make to get a full state pension?

I would have thought that £2200 per month should cover most, if not all of your day to day outgoings, including a car (but not necessarily car loan or lease payments). So, your other pension should give you a pretty good lifestyle. Of course, you could have an expensive castle to keep up, which could add to your outgoings.

When it comes to your private pension, you need to bear in mind that income from it is taxed. Assuming you are thinking of drawdown, there is a good drawdown calculator (https://www.hl.co.uk/retirement/drawdown/calculator) which shows how much you could expect to drawdown without risking a penniless old age. The tax-free lump sum is also worth considering. I took the maximum tax-free lump sum from my main (final salary) pension to ensure that I would not end up paying higher rate tax on my pension. You don't say if your pension is final-salary or defined contribution, but another reason for me taking the maximum tax-free lump sum from my final salary scheme is that if I pre-decease my wife (quite likely as I am nearly nine years older than her), she gets a widow's pension from the final salary scheme of 50% of my pension. This 50% is based on the pension before taking the tax-free lump sum, and remains 50% of the original pension, even after taking the lump sum.

I would definitely advise keeping your options open as to when you will retire, or partially retire. You may still have boundless energy in 13 years time, but on the other hand, in five years time, you may be knackered! There is no point in having a big pension if you can't enjoy it.

Thank you. Yes I am a stubborn tenacious sort. I was raised by two Yorkshire parents. Need I say more. Much of what you have said does reverberate with me.

I am sorry to hear your Dad died so young. My Dad was 51 when he died. Way to early. We now know the "family" condition had a hand in his early death. In 2016 I was diagnosed with congenital obstructive sleep apnea. Untreated apnea can lead to stroke, heart attack and a few more unpleasant problems. I hope you are enjoying retirement and your health remains positive. Our castle isn't expensive. I've done all the decorating and small jobs around the house. We have always lived below our means, which ironically has helped us when I wasn't earning. I've had to fight hard to get back on my feet, financially, physically and emotionally. And even that fight took it's toll on my energy.

The additional £40K is made up of a contribution from me of £32K + the tax rebate which the pension company collect for me. Some time ago I started to develop a spreadsheet to be able to project various sums and growth rates. It also takes into account tax on withdrawn funds. The spreadsheet has been a form of comfort for me. It's allowed me to focus when I have had knocks. Part of my coping mechanisms I suppose.

After reading all the contributions to this thread, which I am eternally grateful for, I revised the spreadsheet. The first thing I did was (and no laughing please) increase the annual input to £40K. I'd entered £32K. I know ... don't go there :oops:

Then I lifted the growth to 7.5% net pa which I think compounds at 10-11% over ten years and recently the funds have performed in excess of this. Where's Gengulphus when you need him :(

It showed at my age 67 the pension fund being £862K with a net monthly income of £4.5K after tax from all sources. I think the general consensus I heard was £900K is "too much". Which is good news really. We will take the pain over the next 5 years and remain committed to the £40K contribution. I'll monitor where it is taking us. I'm loathed to reduce the pain just now as I don't know what the future holds and time as they say waits for no one.

Thank you

Take care

AiY

JohnB
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Re: Cheeky but polite question about income required when retired

#437800

Postby JohnB » August 27th, 2021, 1:28 pm

If you think you only have 20 years, but plan to work for 13 more of them, you are clearly doing it for your wife and daughter, which is laudable, but is it what they want? How much does your job define your self-esteem, could you be worrying that the mental health problems would return if you were less focussed? It does suggest motivations beyond the merely financial.

staffordian
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Re: Cheeky but polite question about income required when retired

#437804

Postby staffordian » August 27th, 2021, 1:53 pm

This might be very presumptuous of me, but I wonder if focussing so strongly on leaving your house to your daughter might be obscuring the bigger picture?

I realise much of what you are planning structurally on the house is for you and your wife's old age, but as far as the IHT issues, and leaving the property to your daughter is concerned, even if it's what she wants now (maybe you're just assuming - its not an easy conversation to have!), things might well change.

Marriage, a job away after uni etc. etc. I'm not sure what, if any, practical difference there might be between keeping the house as opposed to it being disposed of by executors and leaving a lump sum, but I thought it worth throwing the suggestion into the mix.

AsleepInYorkshire
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Re: Cheeky but polite question about income required when retired

#445471

Postby AsleepInYorkshire » September 26th, 2021, 8:45 pm

I'd like to say thank you to everyone who contributed to this thread. It has given me a lot to think about and I've been doing just that.

As some of you are aware my Mum has terminal cancer and the current prognosis is 2-11 weeks. We've spent the last week making her comfortable at home.

Over the last two or three days I've found it almost impossible to think about anything. I feel quite numb. I've kept myself busy and that's been a great help.

I wanted to come and talk about how this has impacted upon my opening question and along with the feedback I've received I've revisited my pension spreadsheet.

Whilst I'm doing all this my mind is focused and not allowed to ruminate.

I've looked at my last three years pension contributions including this years and will maximise the tax efficiency by taking up all the unused contribution allowances. For the following two years I will only pay in 50% of my maximum allowance, the balance will be spent on bringing our home up to a standard.

For the last 2 years of my working life I will add full allowances.

Then at age 64 in 2026 I will retire. It's entirely possible that my good lady can, if she wants to retire at the same time. She will be 59. We propose to draw down 25% tax free from our private pensions at this time. We will also draw down our maximum tax free allowances over the next 4 years.

I've used a healthy growth for the funds of 12% per annum for several reasons

  • I wanted to - I think by 64 I will have had enough and if possible it's my time to retire
  • We can delay retirement day if the funds don't achieve the required growth or we can just accept a bit less every month. We have more than sufficient head room.
  • We don't need 6.03K per month to live - somewhere around £2.5K
  • We are drawing down £25K (Tax free allowance) per year for four years after I have retired. I envisage spare income will roll over to the following 4 years
  • We can [hopefully] survive market drops and time draw downs to our advantage by having a healthy cash reserve
Year	AiY	AiYGL	Cash	C Inc	Draw	K WK	State		Month	P BAL
2026 64 59 156 3.25 2.08 0.70 0 6.03 468
2030 68 63 96 2.00 1.75 0.7 0.7 5.15 619
2034 72 67 48 1.00 2.77 0.7 1.4 5.87 843
Again my genuine and sincere thanks for all the kindness the community has shown in offering thoughts and advice. It has been useful and allowed me to think in many different directions.

Obviously I'm open to more of the same please. The plan has to be flexible and robust or "our" retirement will fall short of our expectations and I am not an armchair sports fan :)

AiY

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Re: Cheeky but polite question about income required when retired

#445485

Postby 1nvest » September 26th, 2021, 10:09 pm

AsleepInYorkshire wrote:
Darka wrote:
AsleepInYorkshire wrote:The current plan is to retire when I am 72. My good lady will be 67 that year. I am 59.

AsleepInYorkshire wrote:However, as many are aware my health hasn't been great and I suspect it's the largest variable in the plan. Hence adding the max to the pension now. Front loading to protect against future potential health issues and also catch up for when I couldn't contribute due to illness.

AiY

I mean this with the best of intentions, are you sure it's wise to wait until 72 to retire if indeed your health isn't great?
If I were in that situation then I would be wanting to retire as soon as possible.

regards,
Darka

I'm fortunate that I don't have a physically demanding job. Most of my day is sat in front of the screen or in meetings or walking around building sites. I am not quite there yet, but am reasonably confident that within the next 2 years I will be able to drop down to a four day week with no loss of income. My health issues have been protracted and debilitating. Some quite serious mental health problems along with some physical symptoms too. We got to the underlying cause in June 2016 and since I've moved forward. Slowly at first but in the last two years I've made some great progress. I still have one or two issues though and I'm hopeful that they will be sorted in the coming months.

I'm still fit for work and given that I don't have a huge pension pot can't retire currently. I'm not too sure I want too just yet. I do enjoy my work and the interaction during the day keeps me "young" :)

AiY

Seems to me that the £220K currently available/saved is near enough to see you through until your state/occupational pensions kick in and your characters seem to be that such pensions alone might be enough to sustain you. So conceptually you already have things covered and additional savings are icing on the cake or to cover care costs (for the longer surviving partner usually the house value tends to cover that or if not then often you don't actually know/care about the differences in private and social care homes/places).

I believe the average care home duration is around 4 years, and maybe a £80K/year type cost, reduced to £50K if foreign based such as Tiawan where for that all board (villa)/keep (food/entertainment)/one-on-one care is included. £200K to £300K average so continuing to work in a job you enjoy for a handful more years would seem to have you reasonably covered (excepting being in a above average situation of protracted care home years).

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