I’m in the fortunate position of getting some inheritance early next year which will both pay off our mortgage and leave a decent lump sum to invest.
My plan is to retire at 60, in four and a half years time. I’m not into playing with risky investments and imagine the safest thing to do is to pay as much as I’m allowed in any year into my (USS) pension?
My wife has very little pension coming to her but a half-share in three properties which will come to her in due course. My basic query I guess is what reasonable monthly income should we aim at? We like a yearly Euro holiday, the occasional nice meal…the usual stuff. Kids will hopefully be largely self-sufficient too.
Any advice from those who have ‘been there and got the t-shirt’?
We aimed for and exceeded, 2/3 our final salary incomes. We didn’t get any “enhanced” salaries in our final years which I have noticed often happens in the Public Sector. So these were incomes that we had been used to living upon. We could certainly manage, but it wouldn’t be the life of luxuary !
However, since I “officially” retired, I have continued to work, albeit in a different role and at a significantly lower income. Nonetheless, it does help.
My youngest daughter and son-in-law and myself were discussing pensions only yesterday. They are both early 30’s and are associates in a small architect practice in London. They are only putting 7% of their salaries into pension funds and I told them this was hopelessly inadequate, they need to consider something like 20%. They are however, investing surpluses into houses so at present are renting out their second property. On this basis ie enhanced pension contributions plus further property, with a bit of luck, they might be OK.
Good news for you @GraemeH … well deserved
Difficult question with difficult answer, since it depends a lot on your lifestyle and if you’re still raising children. I think some 2.5K€ net should already be very sufficient
I retired a month ago. About 18 months ago I made a calculation as to what my pension level would be at retirement (about 35% of pre-retirement income) and then tested the feasibility of that. So I lived at a base level to that income, covering all bills on both houses, food and (non-high end wine) drink, all bills on the cars, travel costs and clothes. I found I could comfortably live on that income, and looking at my savings confirmed that I had enough extra money available to allow myself to still buy other items/go on holidays etc. It’s quite a practical way to test the theory of how much you need.
(In my case I decided I’d take the opportunity to treat myself with the difference between my ”pension” income and my real income during that time, which covered the ND555 and 52, some lovely wines, a set of lovely glass pieces, it would be more sensible to add to savings I suppose.)
That’s gross, net it’s closer, lower tax bill, removed NI and company and private pension contributions, I think I’m ending up at around 55% of previous net.
A good, all round target, was and probably still is, 2/3 final salary.
But it needs to be inflation indexed. Anuities can be indexed or not. They can cover both yourself and your other half or simply expire when you do. But i’m pretty sure you will have considered these and many other factors.
Thanks Don. We can get to that 2/3 figure with a little monthly top-up from savings, so that’s reassuring.
Haven’t considered the annuity route yet but will review things in the new year when I have a better idea where we stand financially. Will also have a further chat with our pensions officer at work, although the first chat left me a bit bemused!
Graeme I highly highly recommend that you work with a financial advisor. The best way to find one is via a recommendation from someone whose judgment you trust. A qualified advisor will help you with strategies for investing the inheritance, and planning for those shares in the properties, and at looking at expense planning and thus income needs for the future.
There is no one answer; but someone who can look at your assets holistically, and help you understand your appetite for risk with investments AND your lifestyle desires post-60, will be invaluable.
The most conservative of investments may or may not be right for you. If someone invested very conservatively 5 or 3 or 2 or 1 year(s) ago, they would have missed the enormous returns that the stock markets have provided. Conservative is not necessarily “better” for everyone at any one time.
