The Lemon Fool

I've been retired for just over 9 months and love it, spending more time with my wife and not having to work is awesome, just going out for a swim in the sea shortly as we live 2 mins from the beach.

Anyway, we have decent income from our investments and a good safety margin (50%) some of which is spent on discretionary spending leaving 20% of our monthly income to either rebuild reserves, invest or spend.

A question I've been asking myself recently is how to split that 20% and in effect how much of that should we be investing for the future to help keep up with inflation, etc.

I'm 52 years old and my wife is 60 so we hopefully have many more years ahead of us, but I also want to enjoy life now whilst we are still able or wanting to travel, etc.

We have no children/dependents that we wish to leave a legacy to; I don't mind leaving some to charity when we die but my main focus is ensuring that we have enough for our needs going forwards, including potential end of life care, etc.

I also wish to offset those future needs with ensuring we don't end up dying too "rich"; and enjoy ourselves more now by spending more of the income we have as it would be terrible to save too much and do without some of the adventures we could have, then die before you can spend it.


So, I guess my questions are:

When taking into account that the portfolio will do most of the heavy lifting in terms of future growth as any monthly contributions would be tiny when compared to the size of the portfolio, especially now that we are primarily spenders and not savers.

How much of your income/safey margin (%) do you continue to invest, and why?

When do you stop saving, if at all?

regards,
Darka

Forgot to mention that our safety margin does not include my SIPP which will be accessible in just over 2 years time, providing a fairly large increase in our income, approx. 50%.

With no dependants, and a surplus of income I would let the investments do most of the 'saving' for you. You could easily have 30 or more years ahead of you and in that time barring a total disaster your investments will increase considerably. There is no need to go around spraying money at all and sundry but if at times, say for a long holiday somewhere, you use some or most of that extra 20% so what? You have your safety margin. At your ages and with no dependents you could easily cut back if you had to if say some dividends suddenly ceased.

Life is for living and whilst you have the energy, good health and resources, you must get on with it. You are still I imagine in that transition stage between no regular salary and coming to terms with living off the rather less regular dividend income. 9 months is no time in what could be a 30 year journey. I have no pension except the State pension and so am absolutely dependent on my dividend income for living expenses. I have no problem with that. Presumably you have a cash reserve somewhere in the background and with that and a cash float to cover irregular income I would just get on with life, without consciously saving. What are you saving for? Presumably you have gone through all the what if? scenarios and if you feel they are covered just relax and enjoy life.

You have since I wrote that mentioned your SIPP. What on earth are you worried about?

Dod

Not forgetting any state pensions at a later date!

Darka wrote:I've been retired for just over 9 months and love it,

I'm 52 years old
regards,
Darka

I retired at 52, now 70. We have walked in Switzerland & Austria (Matterhorn, Jungfrau), did a reasonable bit of travelling (including the now prohibited Saint Petersburg)

Developed heart issues 4 years ago. Travel insurance now prohibitive and lost some confidence in going abroad on expeditions.

I think it's best to do things when you can. Health is absolutely number one consideration.

Dod101 wrote:With no dependants, and a surplus of income I would let the investments do most of the 'saving' for you. You could easily have 30 or more years ahead of you and in that time barring a total disaster your investments will increase considerably. There is no need to go around spraying money at all and sundry but if at times, say for a long holiday somewhere, you use some or most of that extra 20% so what? You have your safety margin. At your ages and with no dependents you could easily cut back if you had to if say some dividends suddenly ceased.

Life is for living and whilst you have the energy, good health and resources, you must get on with it. You are still I imagine in that transition stage between no regular salary and coming to terms with living off the rather less regular dividend income. 9 months is no time in what could be a 30 year journey. I have no pension except the State pension and so am absolutely dependent on my dividend income for living expenses. I have no problem with that. Presumably you have a cash reserve somewhere in the background and with that and a cash float to cover irregular income I would just get on with life, without consciously saving. What are you saving for? Presumably you have gone through all the what if? scenarios and if you feel they are covered just relax and enjoy life.

You have since I wrote that mentioned your SIPP. What on earth are you worried about?

Dod

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Thanks Dod,

I think I should live more and worry less, good advice and leave the portfolio to take care of itself (with a little monitoring).

And yes, we have a cash reserve and a cash float which together equate to 2 years of spending.

monabri wrote:Not forgetting any state pensions at a later date!

Indeed, we both have full state pensions coming down the road.

scotview wrote:

Darka wrote:I've been retired for just over 9 months and love it,

I'm 52 years old
regards,
Darka

I retired at 52, now 70. We have walked in Switzerland & Austria (Matterhorn, Jungfrau), did a reasonable bit of travelling (including the now prohibited Saint Petersburg)

Developed heart issues 4 years ago. Travel insurance now prohibitive and lost some confidence in going abroad on expeditions.

I think it's best to do things when you can. Health is absolutely number one consideration.

That's a very good point and does focus one's mind on what is actually important.

The good news is, since you are relatively wealthy, you are operating in an area where the law of diminishing returns works in your favour.
For the poor, the utility of a washing machine (or not) rather than saving is huge.
The utility of a slightly higher spec of touch screen in a Merc (or not) is neither here nor there.
So you aren't really making quite as critical a decision as you think you are.
A bit more spending or a bit less here or there isn't changing the outcome that much.
It will probably be pretty nice either way.

W.

My thoughts are 2 years cash buffer is smaller than I would aim for, especially as at the earlier bit of retirement you'll perhaps be wanting to spend more, that's not a time to be caught out and have to cut back. I'm hoping I can survive a halving of income that takes 3 years to recover to former levels and perhaps 5 or 6 years to pay back any reduced income, that's when I would draw on the buffer rather than look at belt tightening and reductions.
I'm aiming to spend 100% of my early retirement income because I'll have a SIPP, then a work's DB and finally the state pensions all coming on line.
SO will be at work for several years after I try RE so that's another safety buffer.

Perhaps at 52 it's time to make lifestyle choices that ensure longer healthier life so you get to enjoy all the wonga. I've considered alcohol free, 30 different servings of fruit and veg a week, yoga, callisthenics, the Wim Hoff method, cutting back on processed foods, getting the blood pressure and weight right down to the other tail of the distribution.

As you are going to rely on those investments, it would be a good idea to have them widely spread and, as you have more than enough income, not seek income for income's sake.

So I would go for something like VWRL (all world tracker) and certainly not an HYP portfolio of UK shares. Geographical spread, such as given by an all world tracker, is essential to reduce risk.

Darka wrote:I think I should live more and worry less, good advice and leave the portfolio to take care of itself (with a little monitoring).

Having been retired for 9 years (retired at 51) I'm still not completely "at ease" with the retirement phase. I still have the odd dream when I've gone back to work and (in my dream) I'm thinking what the heck made me go back? ...

monabri wrote:Having been retired for 9 years (retired at 51) I'm still not completely "at ease" with the retirement phase. I still have the odd dream when I've gone back to work and (in my dream) I'm thinking what the heck made me go back? ...

Much better than the "nightmare" of loving it

scrumpyjack wrote:As you are going to rely on those investments, it would be a good idea to have them widely spread and, as you have more than enough income, not seek income for income's sake.

So I would go for something like VWRL (all world tracker) and certainly not an HYP portfolio of UK shares. Geographical spread, such as given by an all world tracker, is essential to reduce risk.

Look at what has happened to HYP1 in terms of relying on a few shares for most of the income.....way too risky, I'd say. I'm sort of coming to the "invest in a global tracker for growth (probably HSBC's offering (link below) however, much of the growth as come from US shares (Apple, MSFT, Amazon, Google) and will it be sustained...anyway, not for discussion here!

With 30++++ (healthy) years I feel there is room for a retiree to go down the global tracker route. I would be drip feeding money in though from surpluses.


https://www.hl.co.uk/funds/fund-discoun ... cumulation

pje16 wrote:

monabri wrote:Having been retired for 9 years (retired at 51) I'm still not completely "at ease" with the retirement phase. I still have the odd dream when I've gone back to work and (in my dream) I'm thinking what the heck made me go back? ...

Much better than the "nightmare" of loving it

Yep...note to self....look up "flagellation.....self".

monabri wrote:

scrumpyjack wrote:As you are going to rely on those investments, it would be a good idea to have them widely spread and, as you have more than enough income, not seek income for income's sake.

So I would go for something like VWRL (all world tracker) and certainly not an HYP portfolio of UK shares. Geographical spread, such as given by an all world tracker, is essential to reduce risk.

Look at what has happened to HYP1 in terms of relying on a few shares for most of the income.....way too risky, I'd say. I'm sort of coming to the "invest in a global tracker for growth (probably HSBC's offering (link below) however, much of the growth as come from US shares (Apple, MSFT, Amazon, Google) and will it be sustained...anyway, not for discussion here!

With 30++++ (healthy) years I feel there is room for a retiree to go down the global tracker route. I would be drip feeding money in though from surpluses.


https://www.hl.co.uk/funds/fund-discoun ... cumulation

It is a pity to be sidetracked with where to invest. This is or has been more of a philosophical discussion about how to approach retirement but for what it is worth I some time back settled on about 30 shares as the optimum, a number of the usual UK suspects with a mixture of growth and income with some investment trusts to give me some exposure away from the UK. Works well enough for me and has done for the last 20 years or so.

I have about three years living expenses in index linked N S & I bonds. Never used them for day to day living but occasionally I have taken some capital for a new car. The index linking means that in nominal terms the balance has always been more than I initially paid for them. One of the best decisions I made but unfortunately they are no longer available.

Dod

Dod101 wrote:It is a pity to be sidetracked with where to invest.
Dod

Yes perhaps but how safe your investments are is a vital factor in deciding how long you have to go on building them up!

There's a saying "Chains of habit are too light to be felt until they're too heavy to break".

From experience it can be quite difficult to stop saving after retirement, particularly when your lifestyle doesn't require anything like the income that your investments (and pensions) produces. I tend to save something like 40% to 50% of my income, most of which goes into the stockmarket.

The good thing about having lots of surplus income is that it acts as a tremendous buffer against rising prices, for emergencies and if you ever want to spend a bit wildly without having to worry about where the money is coming from (in my case spending wildly tends to involve things like buying shares in Mulberry (free float is about 5%) and Ferrari, plus hunting down something I've seen on Antiques Road Trip (eBay is excellent for this)).

As others have said earlier in this thread, if you're going to go travelling after retiring do it earlier rather than later. Getting older means health issues may restrict your options and you find yourself with less energy. At 40 I thought nothing of walking four miles to town to see the cricket and have a few ciders. At 59 I get a taxi.

scrumpyjack wrote:

Dod101 wrote:It is a pity to be sidetracked with where to invest.
Dod

Yes perhaps but how safe your investments are is a vital factor in deciding how long you have to go on building them up!

Indeed. I am very boring with my investments but I need them! Since we are side tracked anyway, can I just say that my very boring Caledonia Investments which I have held for 30 years, has just this morning paid me their Final plus Special dividend almost equivalent to my original purchase price. It is also a twelve bagger in terms of capital. Someone was decrying ITs on another thread last evening!

Dod

Are you sure you have a full pension coming? I thought you needed 35 years for that... unless you started at 17 and never stopped until 52?