Piece of string question about retirement

[Cokehead]

What would you say was a comfortable retirement income for a couple who own their house outright?

Trying to work out what I should be saving but I'm finding it very hard- my life in retirement is going to be so different from my life now (kids, mortgage, etc etc).

We’re on track for around 45k a year as a couple and I’m happy with that. It depends what king of retirement you want though. Are you happy to live frugally with limited holidays & treats etc or do you want lots of travel, eating out & expensive hobbies?

I’m retired, dh works part time. Our income is around £35k net. No mortgage, small house, 2 lease cars, money is no object. When I get my state pension we will be better off, until dh gets his when he retires, at which point we’ll be around £6K net worse off. But at that point we’ll go down to 1 car, saving us around £4K a year.
I’ll be 74 by the time he retires.

Of course it depends on your circumstances but there is some very helpful research you can look at on what people actually spend in different categories:

www.retirementlivingstandards.org.uk
www.which.co.uk/money/pensions-and-retirement/starting-to-plan-your-retirement/how-much-will-you-need-to-retire-atu0z9k0lw3p

Those might be helpful as a starting point and then you can adjust for your circumstances. Presumably keeping up with inflation is going to be a major headache for pensioners for a while.

Oh and one important point about those links. They are both about spending not income so you need to make sure that you allow for any tax that would be payable on your pension or other income.

Like you say, it really is a “piece of string” question.

We have a figure of £100k post-tax between us, but with absolutely no idea if that’s sensible, reasonable, or even achievable, given we haven’t decided yet when we plan to retire.

That’s assuming that the mortgages have gone, that we aren’t sending the children to private school, and that we still very much like the idea of flying to nice places, or driving there in shiny red sports cars, and of going out to nice restaurants and the like.

If what we end up fancying is a nice sit down, a cup of tea, and a leisurely drive to Whitby twice a year then we’ve got our numbers very wrong.

Do you mean £100k post tax income every year between the two of you? That's very high. You will have to be very careful with the LTA.

We’re on target for a joint income of about £45k pre-tax at 60, with another 7.5k each ish for state pension at 67.

we will have savings and investments on top of that.

Yes, post tax, between us.

We earn too much to be able to find out pensions, so the lifetime allowance isn’t an issue unless the rules change.

Wow those are some large amounts, is that the norm?
Mines nothing like that 😥

ah well, nice problem to have!

I suppose lots of threads on mumsnet tend to attract outliers rather than the average (try starting one on reception reading levels!). The average is lower www.unbiased.co.uk/life/pensions-retirement/what-is-the-average-uk-retirement-income . It's worth looking at the links I put above to get a rough idea of how you are doing against what you might need.

As a very basic sum, what do you spend now a month? Take off the mortgage, and any big child related things (music lessons, school fees and childcare spring to mind), and what's left would be a slight overestimate of what the two if you would need to maintain current lifestyle.
Obviously, you wont be going to work, so costs will change but it might give you a starting point. We are currently quite comfortable on significantly less than 100k, so cant see that being needed as a retirement income. Others spend very differently to us, so will have different expectations of requirements.

@KarrotKake I find that hard as so much of my current income goes on dds or expenses that won’t be there in retirement. I know what op means - my life will be so different in retirement it’s hard to know what I will need financially.

We earn too much to be able to find out pensions, so the lifetime allowance isn’t an issue unless the rules change.

What does this mean exactly?

Look at your normal monthly budget as it is now and go through it line by line with particular references to things like holidays, mortgage, travel costs, clothes... as they are the things that will change with your lifestyle.
Pension isn't the only vehicle for retirement income, don't forget LISA, ISA, investment property...

I'm planning on having a reasonable income plus a pot for spending and to be able to spend from the pot without impacting the regular income.

Just mailed out on final salary defined benefit pensions, sigh so who knows what will be necessary. Not going to retire until my pension pot is 'full' at the £1.4M

Few years to go, yet.

I meant to say fund, not find.

Higher earners lose the option to fund pensions tax- free, so it makes no sense at all to do so. You’re still tying it up for years, but get no tax advantage.

@FinallyHere won’t you breach the lifetime limit at £1.4m?

Goodness @GreyGreyGrey

The standard Lifetime Allowance is currently £1,073,100 (2022-2023).

I should just have said the lifetime limit rather than guess what that was. Thank you.

Final salary schemes used to be designed to, broadly, target a retirement income of 2/3 salary (either including state pension or not). That’s probably a reasonable starting point, but will be unachievable for many.

I'm working towards as far over £30k toward £40k per annum ideally for my own single pension.

Wow. I live on a state pension of about £1k a month. I own my flat and pay £100 a month service charge, council tax and all utilities. I have BT broadband and TV with Netflix, run a car and save £1000 a year towards Christmas. Basically, I cover everything but if I want a holiday then it's down to savings. Put what you can into a pension but don't leave yourselves short - nobody knows, in the great lottery of life, who'll still be here to claim it.

What do you mean? Higher earners get 40% tax relief, how do they lose the option to fund pensions tax free?

It’s 45%, but higher earners lose the tax relief as their wages rise, it’s tapered, down to £4,000 per year for the highest earners.

I imagine I'll be happy to live frugally with limited holidays & treats, so £1k/month sounds manageable. Might depend what energy prices do, of course.