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.

Assuming there are two of you drawing down £40K each, you’ll only pay £5.5K a year tax each, so you’ll have £69K a year net from £80K.

If I retire at 62 then DH will be 67 and we'll have £60k from defined benefit pensions and his state pension, rising to £70k once I get my state pension. We also plan to have some savings (no idea how much we'll have) for bigger expenses like new-to-us cars and home renovations.

I do worry though that we're leaving it too late as DH's health is not the best. In fact I've pursuaded him to leave work already to be a "house husband" as he was a low earner and I'm a high earner, yet his job was stressful and I was worried about him. I've gone down to 4 days a week and may go down to 3 once we've saved up for our campervan.

Like many people I want to try to balance having enough years together in retirement with having enough money to have a really nice lifestyle (of course - make plans and god laughs!). I may be erring on the side of working too long but 1). I've watched two close family members struggle with finances in retirement due to leaving work too early and 2). I feel I may need the structure of work as I'm not very self-motivated, unlike DH who has all kinds of hobbies and stays really busy.

I do want to spend winters in the apartment we've inherited in a warm country. We're very lucky to have this but it isn't cheap as there are flights to pay for, insurance and pretty high maintenance fees. We'll sell it if we have to but we love it there - swimming every morning in the outdoor pool while it's cold and grey in England just can't be beat.

We have income of around £56k, plus some interest on our savings. No mortgage and our children are independent. This is enough to give us a very comfortable lifestyle, nice holidays etc. I would say that you need to provide for the odd bits of unexpected high expenditure. This year I will need to find about £8k for dentistry, our shower room needs a refit and as we have both developed knee troubles and the NHS is not very helpful there is potentially more to pay there. Big expenses like that can decimate your savings.

There’s a spreadsheet in the Which analysis that does break it down. Picture attached, which will take a while to be approved I expect. To me, the ‘comfortable’ bracket looks very light on groceries, eating out and car/travel/holidays, but too high on broadband/TV and activities. But, we are all different!

The “car” row in two of the columns has no figure in at all, and the table says £500 per year for house maintenance?! That’s totally insufficient over a period of decades to keep a property in good order.

Like I said, it seems sloppy. Better to look at the proper analysis by Loughborough University and the PLSA that’s updated annually through detailed data analysis.

The analysis bears little resemblance to how we live our lives, so are not very helpful in our financial planning, but they may be a good starting point for others. Looking at our outgoings is far more reflective of how much we need for daily living, bills, the larger expenses and some fun/leisure.

£230 for glasses every two years (comfortable)!. I’m guessing they didn’t check the prices of frames recently. My variafocals cost just short of £1000. Admittedly, there are cheaper frames, but £600 of that was the lenses. Does the article say whether the £60.600 is before tax?

I found it interesting to see where you don't spend money already. No beauty treatments and hair cut 3 or 4 times a year. Plus, we hang on to cars until they start to cost too much to fix. Don't do AI holidays or cruises through choice.

I also think some of the big holidays retired people take come out of lump sums rather than pension income. Depends on what type of pension people have.

@StrikeForever my recently purchased varifocals were over £800

So much for £230 🤷‍♀️

My varifocals actually were bang on £230! Transition lenses, too. They're from Specsavers but they're a knockoff of a Jacques Marie Mage style.

It’s net spending so after tax. They can’t do a pre-tax comparison because due to the ridiculous UK tax system two households with the same income may be taxed vastly different percentages.

That’s what makes the Which? analysis even more silly per one of my earlier posts: they’ve taken the net spending required per annum then calculated the size of pension fund that would be required to buy an annuity to receive that amount as a gross, pre-tax income. So in reality the pension fund size required to fund the spending would be far larger than they’ve quoted.

They have also used the prices for fixed payment (i.e. non-indexed linked annuities) as it says explicitly in the footnotes to the table so within a decade someone purchasing such an annuity may see their real-terms income halved, and far worse than that later in retirement.

This comment completely contradicts itself because the index-linking makes the difference between maintaining your real-terms income or potentially having it halved in a decade, or worse. And the same the next decade, and so on.

People with DB pensions with index-linking often seem to be completely oblivious to the value of this and how much it costs to buy an annuity with your own money that is index-linked rather than one that is not so, frankly, your advice is terrible advice for people with DC pension funds who are trying to calculate what they need to save as they get FAR worse value for money and have to save a FAR higher percentage of their income to achieve the same income in retirement, while also taking all of the investment risk.

Er.. where is the council tax and heating costs in these which spreadsheets. Also how much on taxis? We never get taxis - weird ideas about how people live!

Down at the bottom, in the red text, with household bills… £6,600 for a comfortable lifestyle. And I’d hazard a guess that most people who live a comfortable lifestyle, as defined by whichever organisations number you chose to look at, do get the odd taxi, either to an airport, back from a restaurant, to a station or whatever.

All of these things can only be averages, because at an individual level everyone is obviously different. Of course that means that all sorts of criticisms can be levelled at it, but experience tells me you can spend an awfully of time analysing something in an infinite level of detail, only to be precisely wrong. I am much happier with a top level assumptions driven approach that’s approximately right personally. But I realise not everyone is comfortable with that approach, and indeed it’s not for everyone.

I will also happily admit that I did the bare minimum of planning for my retirement, but I know that’s because I’m in the fortunate position of having earned enough for long enough to know that I probably had enough saved/invested. I definitely wouldn’t recommend my approach to others. I’m also reasonably financially aware. I retired last year guesstimating that a net income of around £50k to £60k a year would cover my ‘must haves’, and knowing that I had enough buffer to weather market downturns (just as well given Trump) for a 5 year period. I allowed for a 20% margin of error in my assumption. 12 months in I did the first detailed sense check, based on Aprils bank statement and credit card bills. To my surprise, I was spending roughly what Id guesstimated…though, if I’m honest, in some quite different ways…

Yes, and many seem to be getting much more than the average wage to live on in retirement!

I think actually lots of older people do get taxis because of the cost of hospital parking etc

And sometimes difficulties with driving at night

Bless you DS going into his final year , I have just done the sums we will be giving him circa 20K out of taxed income( rent and living costs).

My older retired neighbour has taxis at least twice a week to get her to appointments at the surgery and if her family can’t take her to the hospital, she will get a taxi to take her there.

We are no where near a public transport route. We drive.
If I wasn’t able to drive anymore I would have to use a taxi to get anywhere.

I could walk locally if still fit enough, but it’s a large uphill walk from nearest small supermarket, doctors etc. So I hope I could walk it still, but definitely not with lots of heavy groceries. There’s no supermarket delivery options here yet either

Friends of our moved to a retirement village in their early 60's. The private drive was half a mile to the main road, and another half a mile to the bus stop. Shops two miles away. One minibus a week to the nearest village.

Beautiful spot until you can't drive or have other issues. One of our friends is now permanently in a care home and her DH has dementia and epilepsy so can't drive.

They should have moved five years ago whilst they were still fit enough, but didn't want to. It's a nightmare. Be careful to think ahead @Caspianberg !

@ajandjjmum - we may have to in retirement. We have a few decades to go though so no rush.
and I hope in 30+ years self drive cars, food delivery and other tech will be of assistance.

Same with cars, etc. Most of the oldies I know bought a new car/camper van etc out of their lump sums.

Gosh yes - wouldn't self drive cars solve a load of these problems! In the meantime, enjoy your peace!