How much money for a confortable retirement?

[Mindfulness99]

I will be 52 this year, DH is 8 years older; I am hoping to retire with him in 5 years time.

How much do we ned for a comfortable retirement; assuming no debts. DC19 will only be 19 so may still need help; however they are not sure they want to go to university.

Perhaps I should continue to work part time but would like some flexibility to travel. We are both from overseas/different continents each.

Yes, net figures.

They say “The figures shown are the amounts of annual expenditure required to achieve the living standard (ie they are not gross income figures).” and that a person would “need to spend …”

They wouldn’t be able to give gross amounts because individuals’ tax status would vary.

it all depends what lifestyle you want after you retire - if you want to go travelling then obviously you’ll need a significant amount - if you plan to just stay home and just go out for lunches and day trips etc not so much!

For us, we have no pensions and we invested in property (it was cheap in the 90s and early 2000s) and we had a portfolio of buy to lets that we renovated and rented it out - we sold 5 of them off already - have another 4 but they are generating a good monthly income and long term tenants that we plan to keep these 4 until the tenants decide to leave… or they want to buy…

I’m just over 12 months away from retirement now - I could have gone in 2024 but stuck it out for another 2 years and more opportunity to build my pot And also - we’ve just recently moved into our forever home that we are needing to refurbish so doing it whilst still got a salary.

The other thing I would think about is downsizing/moving area

Especially in London if you currently live in a family home with good schools, you could release a lot of capital by downsizing/or moving to an area with bad schools

Have you checked you are both on track to receive a full state pension before you stop working?

The which guide has much lower sums than this.

No way. That would generate only £20k at 4%. So with full state pension £22k each but the won't have that as OP will only be 57.

That assumes you only draw the interest as pension and no capital. In reality, most people would draw capital too and the fund would ultimately run out if they lived long enough, but also lots of people use their private pension to "bridge the gap" between early retirement and state pension age, and as you get a lot older, you don't "need" as much money for fun, i.e. holidays etc., as most people slow down when they're in their 70s and 80s.

Half a million still is not enough for a comfortable retirement unless they know they will die young.

Even without investment gains, it's £10k per person for a couple for 25 years. When you add in another £12.5k state pension per person from aged 67, it starts to look pretty reasonable to me. Such people should have paid off their mortgages, won't have child care costs, so that's two of the biggest expenses gone for a start.

Yep, and, as you say "pretty reasonable" but not comfortable. With a username such as yours I'd expect you to have a reasonable grasp of numbers. What does "comfortable" equate to here?
www.ajbell.co.uk/articles/investmentarticles/289450/does-your-pension-meet-new-retirement-savings-estimates#:~:text=A%20single%20retiree%20is%20now,lifestyle%2C%20an%20%C2%A3800%20increase.

The Which? guide states figures to purchase an annuity which is not index-linked. That would mean that the true value of the payments received per year could halve within a decade!

@InsomniacSloth I don’t know, but I’m sure you’re right. But surely sums to live in, correct today, are accurate enough. People are told that it’s 2025 figures.

They are real-term figures projected of the return that could be obtained from an annuity but it explicitly states these are fixed sum annuities so they aren’t index-linked. Index-linked ones would cost far more. Buying a non-indexed linked annuity is far riskier than using drawdown as it’s value is likely to decrease very significantly over time. The PLSA figures are updated annually so the presumption inherent in them is that you’d need that amount as a real-terms figure of income maintained throughout retirement (although spending needs may vary over the years, this would be an average throughout retirement years) so assume an income that will be index-linked to achieve that (or remain invested so continue to grow until each annual amount is withdrawn).

The Which? analysis also (bizarrely) seems to be comparing the cost of purchasing a non index-linked annuity with the gross fixed payments from that annuity, whereas the PLSA figures are a net figure after tax is deducted, so they’re not comparing like with like at all. Quite sloppy from Which?, which is unexpected as their analyses of things are usually decent quality! It seems very misleading.

There are so many variables in terms of investments, inflation, annuity rates (recently rates have become much more favourable than in a long time but it would still be madness to use the majority of retirement funds to purchase a non index-linked annuity unless you knew you had a short short life expectancy, and then, what would be the point?).

All such figures can only be a rough guide because it’s very difficult to estimate such things far into the future however, that’s kind of the point: people need some contingency built in because you do not know what will happen with inflation, living costs etc after retirement.

I am rather shocked at the sloppiness of the Which? analysis, though.

There are some good online tools for estimating retirement income within a range based on different investments, retirement ages and contribution levels so it’s a good starting point for people to have a look at those and that can help you to estimate what level of contribution you should be making and how long you’re likely to have to work before having saved a sufficient amount to fund your needs securely.

I needed a new roof in one house. Are you suggesting it doesn’t happen? 😳

Before retiring, rather than using general prediction tools, I tracked general spending for a few months, worked out what we would no longer need (surprising how much going to work can cost!), tracked household maintenance spending over the past few years, allowed a reasonable amount for new retirement hobbies & for 'luxuries' (ie holidays and meals out), took a stab in the dark at inflation and came up with a projected income. We could see we'd be ok with the combination of state and occupational pension after 67, so we then worked out what savings we wanted to tuck away for possible care in later life and what additional savings we would need to supplement occupational pensions between retirement and 67, and bring our income up to the projected income needed. Once we got to that level of savings we retired.

Obviously it wasn't an exact science. We were cautious and hung on a bit until desperation to leave work outweighed worries about income. Nearly two years after retirement, so far so good, though with cost of living increases I'm glad we were cautious.

Just to add, it was easier for us to predict actual income from pensions, as ours are final salary with index linked monthly payments. However, I'd still recommend basing your ideas on necessary income on your own spending rather than published guidelines.

We have a very comfortable life, including 2 cars and two holidays abroad per year, regular days/nights out on £40K (mortgage paid off). We both took early retirement but our DCs were well past uni age by then.

This is exactly what I did. I am also pleased that I was cautious as well as things have dramatically changed since 2020.

I totally agree that it's worth trying to go through your own expenses rather than using guides online because it really is different for everyone.

E.g we don't have a car and won't in retirement either but that's an expense many other retirees will have

Isn’t the average pension pot 164k at retirement. Most won’t have ‘enough’ for the numbers put about on here

It really is ‘how long is a piece of string’. We both retired at 60 and bridged the gap until our current ages of 68. We now have an income of about £40k pa ( net) from state and private pensions. That’s enough to live well on - we have no mortgage or loans and it’s £3500 a month. Bills are less than £1000 - we can easily live on £2500 pm.

Holiday, trips, cars, home repairs come from our pension fund/ cash savings. Thanks to the stock exchange we have more there than we did when we retired. There have been blips ( Covid) but as long as you have sufficient cash that you don’t need to sell when the market is low, you can expect to see growth.

We also have our house and we could downsize. So we’ve split our risk over property, cash and investments. Also over pension funds and pensions.

The only thing I would say is, don’t over estimate how much you need. We spend far less than we thought and you can always adjust if you need to. In the last few years we have started losing friends and more and more people are getting health conditions. If you love your job that’s one thing but don’t waste your life working for a few more thousand in retirement. You may never live to enjoy it and time passes very quickly when you’re in your 60s and 70s.

I am fairly certain that most retired people do not need to undertake 2 transcontinental trips/year (I am guessing OP meant per year). Someone who finds themselves in position that 2 transcontinental trips for 2 people per year probably has a lot of expensive tastes that others don't feel they need to be comfortable.

If travelling first class &/or taking the sea journey each time then £200k/yr might just about do as 'comfortable' enough.

We are aiming for 2m in savings: 4% return brings 80k/y. After tax that is around 50k.

So 50k/y to live on (4.2k/month) + state pension when it kicks in. And the capital remains untouched for DCs (or care home fees).

Currently at 1m in our early 40s, hoping to retire before 55.