Am I saving too much?

[Pensionpot123]

Hi all,
I'm always a bit concerned that I don't splash out - I am very frugal....am I too frugal?

Household income ~£100k in West Scotland. Wife and I are mid 30's.
One DC - 6 months.
Value of house - £600k, mortgage £200k with £50k savings. Plan to pay mortgage off in 10 years.

At the moment our pension is looking to be approx £76k/yr combined exc. state pension.
Long term plan would be to downsize on retirement to house maximum half the value of current home (if nothing changes, profit £300k from sale).

Should I be spending more? Am I leaving myself too much for later life?

At the moment we -
Don't eat out
Go on 2 good holidays a year (Florida, cruise, New York etc)
Don't do hotel breaks
Get a takeaway every ~3 months
Change car every 2-3 years to a new-ish budget car (Ibiza, Fabia, Clio etc)
Keep all other outgoings to a real minimum

Any opinions or serious advice about pension is welcome!
Realise there may be people who earn a huge amount more or have a much bigger pension pot.

£4??? I thought £3 was bad enough!

Teachers pensions are extremely generous (as are all public sector pensions despite the complaining that goes on). You can live well on that amount with no mortgage and no dc dependent on you. So yes I’d relax a little (but I’d agree £4 on a coffee is an expensive waste of money!)

Teachers earn £49k after being in the job for just 6 years? But I thought they were all massively underpaid? Isn’t that the usual narrative? £49k plus 13 weeks holiday seems pretty reasonable to me.

OP, I think you and your wife are in a great financial position and unlike previous posters I don’t think it is inconceivable that you used one salary for living costs and the other to pay off mortgage.

But I think you are wrong to “bank” the full 76k / year pension when you have another 30 years each of work to get there. Anything could happen, ill health for example, and you may need / want to retire in your 50s, so I would do some different scenarios on that pension calculator.

Also, is 76k today’s money or future money (eg how is the inflation treated in this calculator?). If it is nominal rather than real, it is worth about 40k in today’s money.

Also you have your child raising costs to think about, and things like providing them with a house deposit / paying for their wedding etc. if you want.

Personally I don’t think you have over-saved.

Tbh I do feel sorry for your child and any future children if you begrudge a £30 pair of trainers. You will be seen as tight arsed parents.

Teachers earn good money very quickly and the benefits (pension and holidays) are simply of a level not seen anywhere else.

I'm ok with that ... I see a huge amount of kids with phones that are probably more expensive than all the phones I've ever owned out together. Likewise, kids turn up at school with more than £1,000 worth on them (phone, airpod etc) - I might look cheap but there is no way my kid is turning up to school with that 👍

Agree with one of the other previous posts that the £76k figure is to be taken with a pinch of salt. Do you really wish to still be working until 65? Also there are options to take a lump sum and a lower annual pension figure. Add in whatever taxation on income at that point and the £76k may be a tad on the high side, try and work out a net income figure.

Maybe worth reversing your logic and working out what you think your income needs to be at different ages I.e. 58/60 and then checking your plans against those figures. You obviously have a good idea on your current standard of living so it's more a factor of extrapolating what you might be doing when retired and having more free time

I think it's reasonable...I don't feel I'm massively overpaid or massively underpaid. The benefits of holidays etc are certainly very good

There's alot of people who retire at 55ish and do supply work which seems a great option... Use savings for every day spend and supply pay for pocket money. The old thought that teachers don't work until 65/68 is sadly from my experience a thing of the past. Most people I work with plan to retire at 65/68.

@Pensionpot123 you can't compare £30 trainers to a £1000 phone.

This is the most important post. You will be fine with your pension - but are you fine now? You seem to live pretty frugally - are you happy with that or would you like to do more now? Go on holiday, go out and about and enjoy some of your money now.

Do you plan to have children? You mention that your children will get a cardboard box so I'm guessing you don't now but plan to have them. Live a bit now because you will have a lot less disposable money if and when you have children!

Planning to retire at 65/68 whilst in your 30s is a lot different to in your 40s and then your 50s. I'm not a teacher but socialise with a bunch of them closer to 50 and not one of them wants to be in the classroom any longer than they can escape.

I guess I was more just highlighting that your current plan is very "sunny day" and based on a potential maximum rather than a minimum

Ok just read that you do have a child already. You say you won't buy them expensive phones etc. fair enough but nevertheless children do cost a lot as they get older.

Thank you! Alot of people I'm mentioning are now in their 50's and feel they still have 10-15years to go. I think I'd rather have it as a choice rather than feel forced to work if I begin to not enjoy my work.

That's the part that I've yet to see I guess...I have no idea how much a 12 year old costs per month and that, I'm sure, will come as a shock to me!

pensionpot123 the thread has derailed a bit since I last commented but just came back to say we've also been doing lots of financial planning and retirement planning (see previous post re impending school fees...) and also in Scotland.
What I found helpful was to plan what retirement pots we can access when and make a staged retirement plan that way. In reality you want to retire as early as you can.
For example, I've planned that we will repay mortgage when I'm 57 with tax free lump sum from DC pension. That will also be our final year of school fees (DD in 6th year). Then plough everything we can into ISAs for tax free savings. At 62 we can retire on ISAs and a small DB pension I have from previous job (about £12k a year).
At 65 we could start drawing down on DC pots (but could earlier if we wanted). At 68 the state pension kicks in for us.
You'll want more money in earlier years.

If you're on a DB type scheme then great. Ours will mainly be DC where we need to draw down on a pot of funds.

I worked out that without mortgage, savings, pension payments and 2 DC to fund we could live well on around £45k a year. Maybe slightly more in earlier years, less in later years.

There are so many costs with a child. You can plan to be frugal with them but there will be school trips, hobbies, sports kit, uniform, friends' birthday gifts, parties to host, after school care, clothes etc.

As I said you can plan to be frugal but nobody wants their child to be the one who has cheap everything or misses out on activities if they can afford it.

I’m confused as to how you’re worried about living on £76k per year when you retire when your income isn’t a huge amount more than that now? When you’re retired you won’t have a mortgage to pay which surely brings it about level? Most people I know don’t spent equally through their whole retirement and might have a few years enjoying holidays etc until they are too old to do this so spend less.

Did your wife take maternity leave? Surely you lived on less then? If she’s able to go back to work full time with only paying childcare 2 days per week that’s a massive privilege/bonus for you

Great advice.
I'm possibly also looking at it from the wrong way - instead of going from now to retirement I maybe need to look at what I need in retirement and work back the way. 👌
I think some people might sleepwalk into retirement (that's not a dig at anyone) where as there must be value in planning what you need and budgeting now for that 👍

It's funny as I guess we judge life alot of the time from our own perspective. Because friends of ours have grandparents looking after their wee ones I presumed we were worse off by only having this a few days a week. Sometimes perspective on reality for alot of others helps - thank you! Childcare would be a huge cost if we had to pay for it full time.

I guess I plan to be careful with my money. I'd hate for my kid to be the one left out but also see a friend paying £3k for a 5 night school trip for their child and think there is absolutely no way I'd even consider this.

To be clear too (and I realise you will know this so just a general point) - although frugal, I wouldn't say I'm cheap. My aim is to get the absolute best value when I buy something. If it's a holiday then I'll make sure we get the best for the absolute cheapest price rather than get the cheapest thing if that makes sense.

Wow, I must be in the wrong country!

I didn't realise teachers got such a great deal in Scotland.

Are they being subsided by all the teachers in England who aren't on anywhere near such a good deal?

And by the way, it's a lot not alot. They are two separate words.

Thankfully I'm not an English teacher.

We pay a lot more tax by the way up here.