how much do you think you will need to retire on?

[SingSam]

I am spending the last few days before going back to work looking at how much I think I will need when I retire.

I have read all the advice about how much you are likely to need (a lot say 2/3 of current income which for me is not going to happen), some say work out what your bills are likely to be and go from there...

I am in London so I assume for now I will stay where I am and potentially be mortgage free (v small property). There is the potential to sell up and buy somewhere cheaper but I don't want to consider that option yet (without doing some more research).

I just make a spreadsheet of what my bills are likely to be - excluding food, excluding mortgage - and I was quite surprised by how high they are. This would be assuming I stay in London. I am also sure some bills might go up (like electricity) as I'm in the house all day but then I assume my travel costs would go down (not commuting to work, getting a bus pass eventually!).

has anyone else done this sort of exercise and thought what sort of monthly amount they are likely to need when they retire?

Everyone over the age of 48 should be doing this every year.
For us, we had to accept that because recessions in the 90s and of course 2007 on, our private pensions were not going to be as generous as we hoped when we started them....in 1988(!). Luckily I have a smallish civil service pension, and we have both checked recently that our NI contributions are on track to receive full state pension.
The biggest decision we made for the future was that as soon as we were mortgage free, we downsized out of London and bought a future-proof house (in terms of restricted mobility etc) and a smaller house to rent out. This is providing an income which we can now reinvest in the hope of bumping up our private pensions, when the youngest goes to uni it will then divert to help support her, and then when D-day comes and we retire of course we will still have the income each month.
Or we can sell it, blow the lot on vodka, fags and a beach hut in Goa. I wish. (We're teetotal and don't smoke.)

i know which option sounds more appealing

I checked my state pension and am on course to getting it (can't recall off the top of my head how many more years I have to go but I know I've contributed all I'd expect at this point)

yes the moving out of London is a decision I need to think about

I'm also single at the moment - which does make retirement seem a lot more worrying, mainly because my bills are really the same now as they were when I was with exh (only things like food would be different) except then we had 2 incomes!

As a barometer in order to retire at 65 on an income of approx 30k per annum, you would need a pension pot of around £1 million, that is for 40-50 yr old atm.

madbengal, if you take out the state pension and say that you would need £22k per year, what would the pot need to be?

I think you are well placed to keep your overheads low, tbh. If you are mortgage free in London, with a bus pass and a whole load of free entertainment on your doorstep, cheap flights from main airports for the occasional holiday, more markets than you can shake a stick at, among the least expensive council tax in the country and, if all else fails, by then you can probably rent out your sofa for a King's ransom.

Just call me Pollyanna

I think all depends on your income how much you need to retire on, if your on average wage has different requirements to a couple used to, say 80000 a year, I was talking to a lovely couple over Xmas, retiring this year; both will get state pension, plus they both have small company pensions, told me it works out £400 a week between them, they have no mortgage, raised two kids, only ever had occasionally hoiladays, roughly £50000 in savings, they were more than happy with their lot, as they went on to say both sets of parents never reached 84, and suffered ill health in there later life’s It just depends on your regiments and if you got good health,

More than I'll have.
I worry about this massively, particularly since DH died.

I can't see my outgoings will decrease significantly as my mortgage is already paid off and I have no childcare costs.

When the kids hit 18 I'll obviously lose child benefit and child maintenance from ExH. I'll only have to feed, clothe etc myself and not 3 of us.

I already pay around 30% of my income into pension provisions and although I could increase this it would be at the expense of other savings and I think a spread is sensible.

Working into my 70's probably ...

I don’t think many people get anywhere near 1 million pension pot, I read somewhere that the average UK pension pot was £75000, so I think we can dream on about a million

squeegle it works out to about £733k (she's assuming a 3% annuity rate)

chasingsquirrels yes this is what worries me too. A single person's bills are not that much lower than a couple (though obvs you get single person's council tax etc. but it's not much of a discount) but you've only got one pension to put towards them

One of ours with Legal & General, started in 1988 when we were 21, contributions increase by 10% a year, still only has a pension pot of £40,000 with 10 years till the projected retirement date. That date was set in 1988 when one of us felt that an early retirement at 60 might be a possibility.
Oh, the optimism of youth!

And even given what I've posted a out worrying about it - I think I'm in a fat better financial position than the majority of people in the country.
It's going to be interesting to see what happens over the next 30 years.

I think this is a really useful exercise. At what age do you think is the ideal time to downsize? I am also single and starting to wonder if I will have enough to retire on.

the time bomb I can see is the generation who can't afford to buy their own home and rent instead. Because at least we are still talking about the possibility of not having housing costs in our retirement. What happens to the generation who still does?

I don't know newrules

I still have 2 dc at home - but in 3 years time, both could potentially be at university but they still need to come back somewhere so I can't see me being able to downsize for probably another 10 years?

I too am single, and am mortgaged until I am at least 66. My DC will be 18 by 2022. I am calculating that either they will move out and I can downsize or they will be here and will have to help me pay the mortgage. It is a worry really, I know I will get the state pension but not much more guaranteed as I have a rag bag of defined contribution schemes and my new employers put in only 1%. It feels like employers are paying less and less into pensions.

What do people reckon to the 'lifetime lease' thing? There seem to be a lot of those on offer round here, all different styles of property. You pay a percentage of the sale value, depending on how long you are likely to live. You are only eligible from the age of 60. So, I might sell my house for, say, £200k when I am 70. Buy a lifetime lease on a bungalow for £100k and use the remainder to generate income or whatever. Of course, if I die early then I may have wasted the lifetime lease money. But if I live to 103, it might be money well spent. No property for anyone to inherit though.

On the renters question, I think we will have to address this as a nation at some point. We could entertain some form of rent control for tomorrow's pensioners (70+, I do think st some point we will have to stop thinking of those on their 60s as pensioners) but that is likely to restrict the number of properties available to them as LLs choose younger renters.

Large estates of retirement properties? On reflection, small estates of retirement properties to rent, on all these small parcels of land around town centres so that there's still easy access to shops etc. There's a little gated development of 10 council bungalows just seconds from our town's high street. It's lovely and convenient, but it is 1960s built.
Maybe those of us who downsize and buy a rental property to boost our own income can form co-operatives for other pensioners to rent our properties? I would consider something like that - I didn't get the rental property to make a fortune for myself, just to provide some income in mid/late life as my financially sparkling career didn't quite pan out!

Do you know what your annual expenses are OP? Start by looking at that by looking at all your expenses for 2017. Then look and see what will potentially reduce in retirement (transport, work lunches?).

Look up the 4% rule / the trinity study.

My (zero hour contract) salary is so poor I can barely even afford to live, never mind save for retirement. I don't think about it because there's nothing I can do about my lack of spare cash to save.

It seems pointless to save anyway - the more you save, the more the government takes away from you - while people who haven't saved a single penny get everything paid for by the state. The sensible approach is to enjoy spending your money and end up at retirement with nothing for the government to take from you and full entitlement to all benefits.

I think I need £5,000 a year to live happily, based on today's prices. I own our house without a mortgage. I need £2,500 a year for bills, £1,500 a year for food, £1,000 a year for luxuries.

I'm currently a single parent on a low-income with no maintenance or benefits. I can't save anything at all for retirement until my childcare costs end, then I can start saving.

you've done well on your bills. Mine are way way too high (more than double yours) but I'm going to spend some time getting the bills reduced as I can see there are some unnecessary ones or ones that I can reduce

A quick reminder to people. If you've been in a contracted-out pension scheme you will not get the full state pension at 67, regardless of how many year's of NI contributions you made. there will be an amount deducted each week called the Contracted Out Pension Equivalent, this will not be paid by the government but is supposed to be paid by your private pension scheme. If you go on-line to check your state pension forecast, there will be link to this if it applies to you.
for me, this amounts to £63 per week, or £3,276 per year.

£5000 a year to live on all in?! Is that possible?

A lot more than I'm currently saving.

I'm hoping to work full time again in 10yrs time when the dc's are older and throw money at my pension. Mortgage should be paid off in my late 50's so I'll put that towards it. Maybe rent out a room when the dc's are at uni.

£5,000 a year is possible at today's prices, for me. I live on that now for myself, but obviously I earn a bit more than that now and pay for childcare and other expenses for DD. I'm hoping prices won't go up too much.

I know a couple who raised 4 children & travelled a lot every year, on < £14k. Many folk can live on surprisingly little.