Retirement....is it all it's cracked up to be ?

denislawsbackheel said:
Just a note that if your lump sum is bringing you more than £1000 a year and is just in a savings account paying interest the interest over £1000 will be taxed so you won’t be getting 4% nett. If you are a basic rate tax payer it would be equivalent to getting 3.2% interest.
Stick £20K a year of it in an easy access ISA and any interest is tax free and you can draw that any time you want.
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Already done that, me and the wife maxed out our stocks and shares isas this year and will do it again come the new financial year.
 
anyone who is lucky enough to afford to retire should do. But i think you should calculate how much you genuinely “live off” now and work out if you can continue on that post retirement. That’s not “can i live off what i earn” but what i actually spend after savings. so if (simple maths) you earn 100k and save 30k (pensions ISA etc) and then what’s left you are taxed that may leave 50k net. if you have enough money to retire and have 50k a year (or whatever your maths is -30k 80k is tc etc) clearly you should question why continue. you won’t get time to get bored. for those trying to work out try firecalc.com - useful way of working out (if you are still working ) how much longer you need to
 
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edinburgh123 said:
anyone who is lucky enough to afford to retire should do. But i think you should calculate how much you genuinely “live off” now and work out if you can continue on that post retirement. That’s not “can i live off what i earn” but what i actually spend after savings. so if (simple maths) you earn 100k and save 30k (pensions ISA etc) and then what’s left you are taxed that may leave 50k net. if you have enough money to retire and have 50k a year (or whatever your maths is -30k 80k is tc etc) clearly you should question why continue. you won’t get time to get bored. for those trying to work out try firecalc.com - useful way of working out (if you are still working ) how much longer you need to
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Just a personal opinion but sensible approaches is what cost people their lives as they put off retirement and die very shortly after they finally do or they don't make the perfect time to retire
Just wing it ,the nursing homes going to get what you don't spend anyway .
 
denislawsbackheel said:
100K
LOL!
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i was to be fair just using an easy starting number (hence i said or 30k or 80k)!! the point is most people save money (for their pension etc) so calculate whatever you genuinely spend - it’s less than you earn often - and fathom out how close you are to being able to retire on that. if you can - you can afford to do things and not watch Lorraine as a result. Retire before you can afford it - and it’s day time tv
 
edinburgh123 said:
i was to be fair just using an easy starting number (hence i said or 30k or 80k)!! the point is most people save money (for their pension etc) so calculate whatever you genuinely spend - it’s less than you earn often - and fathom out how close you are to being able to retire on that. if you can - you can afford to do things and not watch Lorraine as a result. Retire before you can afford it - and it’s day time tv
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I've been tracking our real spending for last few years and it's not that hard to do. Take home pay minus anything you won't need to pay for in retirement e.g. mortgage, pension savings, paying into an ISA for long-term savings, work travel etc. The number you're left with is what you need to live on each month and, if you do it monthly over a year, it smooths out Xmas etc.

If you're not planning on retiring until true state pension, you can take that off your monthly spend, as it's not money you'll need to find.

Once you know you're monthly spending, multiply it by 12 and then 28 and you'll find out the scary number you need across pensions and ISAs to withdraw at a relatively safe 3.5%. Get to that number and work becomes optional.
 
Blue Since 76 said:
I've been tracking our real spending for last few years and it's not that hard to do. Take home pay minus anything you won't need to pay for in retirement e.g. mortgage, pension savings, paying into an ISA for long-term savings, work travel etc. The number you're left with is what you need to live on each month and, if you do it monthly over a year, it smooths out Xmas etc.

If you're not planning on retiring until true state pension, you can take that off your monthly spend, as it's not money you'll need to find.

Once you know you're monthly spending, multiply it by 12 and then 28 and you'll find out the scary number you need across pensions and ISAs to withdraw at a relatively safe 3.5%. Get to that number and work becomes optional.
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The x28 and 3.5% figures are very safe numbers, it's those that put early retirement out of reach for many people. For context, I retired 2.5 years ago at 58, my total wealth excluding fixed assets is slightly higher than it was when I retired.

This is largely because the stock market has performed very well in that time, but there are other factors in play. Your spend as calculated will drop when you give up work, less travelling, less shop-bought lunches etc. Those figures also assume you'll be paying tax at the basic rate, you may well be if you're drawing on a pension, but if you've arranged your retirement finances differently, you won't.

Will you downsize? As well as potentially releasing cash, its probable that your bills will reduce.

The main thing though is a different mind-set makes a big difference. Recognise you don't need to buy "stuff" all the time, make your retirement about enjoying the time rather than material things, and your annual living cost will drop. I'm not suggesting you never buy anything, rather you buy what you need not whats new and shiny

What I'm trying to say is there is no reliable numbers which work for everyone. If you're capable of calculating your own path, then do that, it's likely to give you a smaller figure than the standard numbers you've quoted whilst still being relatively safe.
 
flook said:
The x28 and 3.5% figures are very safe numbers, it's those that put early retirement out of reach for many people. For context, I retired 2.5 years ago at 58, my total wealth excluding fixed assets is slightly higher than it was when I retired.

This is largely because the stock market has performed very well in that time, but there are other factors in play. Your spend as calculated will drop when you give up work, less travelling, less shop-bought lunches etc. Those figures also assume you'll be paying tax at the basic rate, you may well be if you're drawing on a pension, but if you've arranged your retirement finances differently, you won't.

Will you downsize? As well as potentially releasing cash, its probable that your bills will reduce.

The main thing though is a different mind-set makes a big difference. Recognise you don't need to buy "stuff" all the time, make your retirement about enjoying the time rather than material things, and your annual living cost will drop. I'm not suggesting you never buy anything, rather you buy what you need not whats new and shiny

What I'm trying to say is there is no reliable numbers which work for everyone. If you're capable of calculating your own path, then do that, it's likely to give you a smaller figure than the standard numbers you've quoted whilst still being relatively safe.
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I think that building up 28 times the income you need in retirement so that you can retire early means too much sacrifice in important years. For me, at least.

We made it a priority to spend whilst the kids were growing up so that we have amazing memories of holidays and special occasions. We've also done a lot of travelling whilst I'm still working full time so that (a) we have the money to enjoy and pay for it, and (b) we are fit enough to do it.

I'm 57 and I'm in the process of applying to drop down to 4 days a week, and I suspect that I'll be working 3 or 4 days a week until I'm 64/65. This will mean less holidays than we've been having but still enough to enjoy life whilst working part-time. If this means I can't retire until 64 or later, I'm OK with that, especially as we are still covered by my job's private medical insurance.

Everybody is different - if you do a physically demanding job or are under severe pressure then it makes sense to get out ASAP, but as a counterpoint to what some are saying, don't retire just so that you can say "I've retired!"
 
RobMCFC said:
I think that building up 28 times the income you need in retirement so that you can retire early means too much sacrifice in important years. For me, at least.

We made it a priority to spend whilst the kids were growing up so that we have amazing memories of holidays and special occasions. We've also done a lot of travelling whilst I'm still working full time so that (a) we have the money to enjoy and pay for it, and (b) we are fit enough to do it.

I'm 57 and I'm in the process of applying to drop down to 4 days a week, and I suspect that I'll be working 3 or 4 days a week until I'm 64/65. This will mean less holidays than we've been having but still enough to enjoy life whilst working part-time. If this means I can't retire until 64 or later, I'm OK with that, especially as we are still covered by my job's private medical insurance.

Everybody is different - if you do a physically demanding job or are under severe pressure then it makes sense to get out ASAP, but as a counterpoint to what some are saying, don't retire just so that you can say "I've retired!"
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We did similar, holidays to disneyland when daughter was at the right age, cruises and caribbean when it was just the two of us. Neither of us have the urge to travel at the moment, for us it's more hassle than benefit so I accept that's a decent saving I've made in terms of annual spend.

You're correct in what you say, the worst reason to retire is just so you can say "I've retired". But if you can't find the things to do in retirement that you really enjoy, then what's the point of carrying on anyway? Retirement, like any big undertaking in life, requires good planning and a modicum of good fortune to be a happy and successful one
 
flook said:
The x28 and 3.5% figures are very safe numbers, it's those that put early retirement out of reach for many people. For context, I retired 2.5 years ago at 58, my total wealth excluding fixed assets is slightly higher than it was when I retired.

This is largely because the stock market has performed very well in that time, but there are other factors in play. Your spend as calculated will drop when you give up work, less travelling, less shop-bought lunches etc. Those figures also assume you'll be paying tax at the basic rate, you may well be if you're drawing on a pension, but if you've arranged your retirement finances differently, you won't.

Will you downsize? As well as potentially releasing cash, its probable that your bills will reduce.

The main thing though is a different mind-set makes a big difference. Recognise you don't need to buy "stuff" all the time, make your retirement about enjoying the time rather than material things, and your annual living cost will drop. I'm not suggesting you never buy anything, rather you buy what you need not whats new and shiny

What I'm trying to say is there is no reliable numbers which work for everyone. If you're capable of calculating your own path, then do that, it's likely to give you a smaller figure than the standard numbers you've quoted whilst still being relatively safe.
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Your wealth has gone up because the stock market has done ok the last couple of years. It will go down. And then back up again. That's where the original 4% rule came from, but that can look both a bit optimistic and pessimistic, depending on where people invest, amount of stocks Vs bonds etc.

Those figures don't assume any tax - they just suggest how big a pot you would need and how much you can withdraw from it.

There are too many variables without someone doing their own modelling such as how much you need, how much is subject to tax ie a pension, whether it's split between 2 etc, but it doesn't change that you need someone between 25 & 30 times your annual spending if you want to be able to drawdown for the rest of your life. How anyone wants to live is up to them - we don't smoke, drink, have fancy cars or full Sky packages, so we can live happily pretty cheaply but a footballer would starve in about a month. But the maths is still the same - have ~28x what you plan to spend and you should be ok
 
Blue Since 76 said:
Your wealth has gone up because the stock market has done ok the last couple of years. It will go down. And then back up again. That's where the original 4% rule came from, but that can look both a bit optimistic and pessimistic, depending on where people invest, amount of stocks Vs bonds etc.

Those figures don't assume any tax - they just suggest how big a pot you would need and how much you can withdraw from it.

There are too many variables without someone doing their own modelling such as how much you need, how much is subject to tax ie a pension, whether it's split between 2 etc, but it doesn't change that you need someone between 25 & 30 times your annual spending if you want to be able to drawdown for the rest of your life. How anyone wants to live is up to them - we don't smoke, drink, have fancy cars or full Sky packages, so we can live happily pretty cheaply but a footballer would starve in about a month. But the maths is still the same - have ~28x what you plan to spend and you should be ok
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The three things people dont factor in, tend to be tax, the state pension and the usual reduction in spending from your late 70s until you need care when doing the calcs.

I calculated my outgoings in retirement (not there yet but its good to know) and they are around £2400 per month in total for the two of us, assuming we dont downsize. This covers everything including running 2 cars, insurances, gas/elec, rates, a bit of social spending, season ticket etc. The state pension alone for a couple, works out at around £2100 per month from next year and is currently inflation protected due to the triple lock. So from 67 we would need to find 300 per month (adjusted for inflation), to cover the basics.

Outside that, having a big pot really only buys you an earlier retirement and/or more luxuries when it comes to holidays, eating out, gifting to family etc. So the only real question is how early do you want to go and what that looks like in terms of fun money. As you say its different for everyone, some want to be travelling the world in luxury, others are happy with walks in the pennines and lake district.

If I was happy with the minimum I could probably call it quits as soon as I hit my 35 yrs of paying in which will be in 2 yrs time, in reality I will probably be ready to give up full time work at 58/59 and maybe just do a bit of consultancy to keep my hand in for a few years, but give me flexibility to take extended breaks.

Whilst the 4% rule is OK, the chap who thought it up now says its too conservative as long as you have the stomach for a higher equities holding, remembering that the 4% rule is there to also preserve most of your original capital.

Looking at strategies I think I prefer the guardrail based rules like Guyton-Klinger which provides a bit more adaptable approach, but with a few tweaks around the edges.
 
Kompany Car said:
The three things people dont factor in, tend to be tax, the state pension and the usual reduction in spending from your late 70s until you need care when doing the calcs.

I calculated my outgoings in retirement (not there yet but its good to know) and they are around £2400 per month in total for the two of us, assuming we dont downsize. This covers everything including running 2 cars, insurances, gas/elec, rates, a bit of social spending, season ticket etc. The state pension alone for a couple, works out at around £2100 per month from next year and is currently inflation protected due to the triple lock. So from 67 we would need to find 300 per month (adjusted for inflation), to cover the basics.

Outside that, having a big pot really only buys you an earlier retirement and/or more luxuries when it comes to holidays, eating out, gifting to family etc. So the only real question is how early do you want to go and what that looks like in terms of fun money. As you say its different for everyone, some want to be travelling the world in luxury, others are happy with walks in the pennines and lake district.

If I was happy with the minimum I could probably call it quits as soon as I hit my 35 yrs of paying in which will be in 2 yrs time, in reality I will probably be ready to give up full time work at 58/59 and maybe just do a bit of consultancy to keep my hand in for a few years, but give me flexibility to take extended breaks.

Whilst the 4% rule is OK, the chap who thought it up now says its too conservative as long as you have the stomach for a higher equities holding, remembering that the 4% rule is there to also preserve most of your original capital.

Looking at strategies I think I prefer the guardrail based rules like Guyton-Klinger which provides a bit more adaptable approach, but with a few tweaks around the edges.
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I definitely wouldn't use the 4% rule for actual retirement, but it's a good starting point to see where you're aiming. I've also seen suggestions like 5% 4% 3% for each decade of a 30yr retirement, to allow for the initial blow out after retirement through to sitting in a chair watching Miss Marple. As I said, I've seen some say the 4% is too optimistic and others, including the originator, say it's too pessimistic. Problem is, as with anything, you only know in hindsight.

In my calcs, I use 3.5% withdrawal as we've got kids, so worst from underspending is they get a bigger inheritance and I will sleep easier using that than 4% or higher and knowing there's an increased risk of running out of money.

Our planned outgoings would be similar to yours, although I've planned without getting a state pension and will treat it as a bonus if it's still available, so my calcs are very conservative (although I still triple check everything as I'm convinced I'm wrong and will end up on the streets).

Based on that, we could definitely retire once we can access our pension pots (and probably before using just ISAs), so it's down to deciding what to do with the spare time and it's only that that is keeping me in work - I get paid to be bored here
 
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