Anyone else find budgeting for retirement overwhelming?
Discussion
Morning all!
I've had pensions accruing nicely for the past 3 decades or so, but as I head into my mid-fifties, I've decided it's time to get a bit more proactive about figuring out translating this into a retirement strategy to figure out when I can afford to retire and on how much.
I've taken on a Financial Advisor whom I trust and am in the process of trying to figure out the figures they need to get started on the calculations, but this is making my head explode on a number of levels, so I was wondering how other people cope?
1. The real biggy first... How much do we earn?? You'd think that would be simple, wouldn't you, but we're both on base + variable, and looking back over recent years, that variable has floated between 30% and 110% of basic.
2. How much of that do we actually keep? Between a Salary Sacrifice car lease, pension contributions and the evil withdrawal of personal allowance over £100k, my tax calculations are a complete nightmare! HMRC changed my tax code last month because they don't think I've paid enough, yet by my best guess, they're going to owe me just under £5k when I submit my self assessment!
3. Them there's outgoings... Kids, who'd 'ave 'em??? Well, me and my wife, obviously, but whilst I can estimate the costs whilst they're still at Uni fairly reliably, I've got no clue what'll happen afterwards! We're not going to leave then out on the streets, but how am I supposed to estimate when they might move out? This doesn't just impact direct costs like their rent at Uni, it's also things like figuring out how much things like utility and food bills might change, since only a proportion of those are directly variable in line with the number of people in the house.
4. Then there's all the other stuff they're asking for... Monthly food, entertainment, clothing and everything else expenditure... Apart from things with consistent monthly direct debits, I honestly have not got a bloody clue?!? They're all wildly variable depending on which of the kids are home or away, and again likely to change dramatically in the next few years. Can anyone really say they honestly know how much they spend on clothing, for example??? My youngest still hasn't quite stopped bloody growing, but even for me, who remains pretty much the same size and doesn't give a monkeys about fashion, I can't estimate that. I only tend to buy clothes or shoes to replace something that has worn out, but how long that's going to be is a complete mystery!
I'm assuming I can't be the only person to have struggled with this, so was hoping to find out how others have handled this in the past?
I've had pensions accruing nicely for the past 3 decades or so, but as I head into my mid-fifties, I've decided it's time to get a bit more proactive about figuring out translating this into a retirement strategy to figure out when I can afford to retire and on how much.
I've taken on a Financial Advisor whom I trust and am in the process of trying to figure out the figures they need to get started on the calculations, but this is making my head explode on a number of levels, so I was wondering how other people cope?
1. The real biggy first... How much do we earn?? You'd think that would be simple, wouldn't you, but we're both on base + variable, and looking back over recent years, that variable has floated between 30% and 110% of basic.
2. How much of that do we actually keep? Between a Salary Sacrifice car lease, pension contributions and the evil withdrawal of personal allowance over £100k, my tax calculations are a complete nightmare! HMRC changed my tax code last month because they don't think I've paid enough, yet by my best guess, they're going to owe me just under £5k when I submit my self assessment!
3. Them there's outgoings... Kids, who'd 'ave 'em??? Well, me and my wife, obviously, but whilst I can estimate the costs whilst they're still at Uni fairly reliably, I've got no clue what'll happen afterwards! We're not going to leave then out on the streets, but how am I supposed to estimate when they might move out? This doesn't just impact direct costs like their rent at Uni, it's also things like figuring out how much things like utility and food bills might change, since only a proportion of those are directly variable in line with the number of people in the house.
4. Then there's all the other stuff they're asking for... Monthly food, entertainment, clothing and everything else expenditure... Apart from things with consistent monthly direct debits, I honestly have not got a bloody clue?!? They're all wildly variable depending on which of the kids are home or away, and again likely to change dramatically in the next few years. Can anyone really say they honestly know how much they spend on clothing, for example??? My youngest still hasn't quite stopped bloody growing, but even for me, who remains pretty much the same size and doesn't give a monkeys about fashion, I can't estimate that. I only tend to buy clothes or shoes to replace something that has worn out, but how long that's going to be is a complete mystery!
I'm assuming I can't be the only person to have struggled with this, so was hoping to find out how others have handled this in the past?
Think you are overthinking this.
Just get your bank statement/s and work out your monthly outgoings, determine what costs are work related, then what are essential versus not essential. Factor in what’s your kids uni costs and for what period of time. That’ll give you a baseline idea.
Dependent upon your pension pot and your own outgoings situation, I’m not sure retirement will be fully compatible with continuing to fund all of your kids expenditure as described on an ongoing basis. Once they’ve finished uni then you’d expect them to be standing on their own two feet or motivated to find work to fund going out, clothes etc and contribute at least towards their costs of food etc.
bennno said:
Think you are overthinking this.
Just get your bank statement/s and work out your monthly outgoings, determine what costs are work related, then what are essential versus not essential. Factor in what’s your kids uni costs and for what period of time. That’ll give you a baseline idea.
Dependent upon your pension pot and your own outgoings situation, I’m not sure retirement will be fully compatible with continuing to fund all of your kids expenditure as described on an ongoing basis. Once they’ve finished uni then you’d expect them to be standing on their own two feet or motivated to find work to fund going out, clothes etc and contribute at least towards their costs of food etc.
That's the next challenge! Just get your bank statement/s and work out your monthly outgoings, determine what costs are work related, then what are essential versus not essential. Factor in what’s your kids uni costs and for what period of time. That’ll give you a baseline idea.
Dependent upon your pension pot and your own outgoings situation, I’m not sure retirement will be fully compatible with continuing to fund all of your kids expenditure as described on an ongoing basis. Once they’ve finished uni then you’d expect them to be standing on their own two feet or motivated to find work to fund going out, clothes etc and contribute at least towards their costs of food etc.
Around 90% of my variable spending goes to Amazon, Sainsbury's or Waitrose, but then if I look around the house and think "what would all this cost to replace after a fire", there's thousands of pounds worth of white goods, camera gear, TVs etc built up over the years. We're on our third oven in the 15 years we've been in this house, but we've only just had to replace the washing machine we bought in 1998!
In the face of that level of uncertainty, what on earth is the point of the budgeting tool asking me about the £18 I spend at the barbers 4-5 times a year?
The approach you are taking appears to be to have to predict and model every small expenditure for the rest of your life. A model built on micro foundations, if you like
You are trying to boil the ocean.
I'd suggest that you need to work in big handfuls. What are the current big spending categories (house maintenance, transport, holidays, etc). Empirically, what are you currently spending? Will they go up or down in retirement?
Also, you don't need to plan everything now. You'll be able to make choices both about your drawdown and spending throughout retirement to balance things out and defer discretionary spending.
You are trying to boil the ocean.
I'd suggest that you need to work in big handfuls. What are the current big spending categories (house maintenance, transport, holidays, etc). Empirically, what are you currently spending? Will they go up or down in retirement?
Also, you don't need to plan everything now. You'll be able to make choices both about your drawdown and spending throughout retirement to balance things out and defer discretionary spending.
I did this exercise a few months ago as part of an exercise to convince my wife we weren't going be penniless in retirement.
I downloaded the transactions from all our bank statements and credit cards for the past 2 years. Then categorised each item into the following:
- Income we will continue to get after retirement (answer = none!)
- Income we won't get after retirement eg. salary
- Expenditures we won't have after retirement eg. commuting costs
- Expenses we will have after retirement eg. utilities, council tax, insurances, car servicing etc.
- Discretionary/luxury expenses eg. holidays, meals out
- One off expenses eg. new washing machine, roof repairs,
Divide by 2 and you have an average per year figure to work with.
You can then add any new expenses that might crop up in retirement, if any.
I downloaded the transactions from all our bank statements and credit cards for the past 2 years. Then categorised each item into the following:
- Income we will continue to get after retirement (answer = none!)
- Income we won't get after retirement eg. salary
- Expenditures we won't have after retirement eg. commuting costs
- Expenses we will have after retirement eg. utilities, council tax, insurances, car servicing etc.
- Discretionary/luxury expenses eg. holidays, meals out
- One off expenses eg. new washing machine, roof repairs,
Divide by 2 and you have an average per year figure to work with.
You can then add any new expenses that might crop up in retirement, if any.
When I was doing the exercise of working what we would need to spend during retirement, I just added up month costs (x 12), quarterly (x4), semi-annual (x2) plus annual costs, it wasn't an onerous exercise
My list, for what it's worth:
Regular
Monthly: Council Tax, Mobile phone, Broadband, Sky TV, Amazon Prime, Netflix, Window cleaner
Quarterly: Electricity, Home phone
Six-monthly: Water
Annual: Contents Insurance, Building Insurance, TV licence, National Trust, British Museum membership, AA, VPN, Cloud storage,Adobe subscription, Road tax, Tavel insurance
One offs:
Monthly: Food & drink, Eating out & takeaways, Train, Footie games
Annually: Property maintenance, Car maintenance & fuel, Holidays,Christmas and birthdays
Allowance for replacing cars, white goods and computers (every 5 to 10 years)
What I will say, is you are unlikely to need anything like as much to live off in retirement (at least if your mortgage is paid off and kids out of education). Our gross income in retirement is maybe a third of what it was before retirement and that's quite sufficient for a comfortable lifestyle. I went overnight from avoiding paying additional rate income tax to avoiding paying higher rate
My list, for what it's worth:
Regular
Monthly: Council Tax, Mobile phone, Broadband, Sky TV, Amazon Prime, Netflix, Window cleaner
Quarterly: Electricity, Home phone
Six-monthly: Water
Annual: Contents Insurance, Building Insurance, TV licence, National Trust, British Museum membership, AA, VPN, Cloud storage,Adobe subscription, Road tax, Tavel insurance
One offs:
Monthly: Food & drink, Eating out & takeaways, Train, Footie games
Annually: Property maintenance, Car maintenance & fuel, Holidays,Christmas and birthdays
Allowance for replacing cars, white goods and computers (every 5 to 10 years)
What I will say, is you are unlikely to need anything like as much to live off in retirement (at least if your mortgage is paid off and kids out of education). Our gross income in retirement is maybe a third of what it was before retirement and that's quite sufficient for a comfortable lifestyle. I went overnight from avoiding paying additional rate income tax to avoiding paying higher rate
Well, you’ve taken the right step to looking into things now….
…but you do, sadly, need to take a closer interest in what “your number” is. A decade of ideas on that thread you *could* wade through, or just knock up the broad headings and write down the broad numbers.
Everyone has a bunch of “mandatory” spend to exist - utilities, health, essential food, insurance, motoring. Get the broad numbers for those.
Then stab a guess at the discretionary ones: holidays, clothing, luxury food, entertainment activities, etc.
Without that, *no* financial advisor will be able to help you, other than keeping you working longer!
Kids? Well, that is a trickier one to guestimate. Not sure the age of yours…mine were nearing the end of Uni when I finally stepped away from the grind, & (thankfully) are now pretty self-sufficient. That said, they can be as expensive or cheap as you want. Holidays can be expensive or cheap. Get them started with managing money as early as you can, so they understand they can’t just have those Nike’s, but with their own savings paying for it, maybe they like the cheaper ones in TackyMaxx
Baby steps: try to get a handle on broad income & broad outgoings for now: it’s a start.
Ultimately, you want to get to the point of knowing you have enough in a pot to sustain the lifestyle you want to live, perhaps for 20-40 years…but that isn’t going to get answered in one thread or chat!
…but you do, sadly, need to take a closer interest in what “your number” is. A decade of ideas on that thread you *could* wade through, or just knock up the broad headings and write down the broad numbers.
Everyone has a bunch of “mandatory” spend to exist - utilities, health, essential food, insurance, motoring. Get the broad numbers for those.
Then stab a guess at the discretionary ones: holidays, clothing, luxury food, entertainment activities, etc.
Without that, *no* financial advisor will be able to help you, other than keeping you working longer!
Kids? Well, that is a trickier one to guestimate. Not sure the age of yours…mine were nearing the end of Uni when I finally stepped away from the grind, & (thankfully) are now pretty self-sufficient. That said, they can be as expensive or cheap as you want. Holidays can be expensive or cheap. Get them started with managing money as early as you can, so they understand they can’t just have those Nike’s, but with their own savings paying for it, maybe they like the cheaper ones in TackyMaxx
Baby steps: try to get a handle on broad income & broad outgoings for now: it’s a start.
Ultimately, you want to get to the point of knowing you have enough in a pot to sustain the lifestyle you want to live, perhaps for 20-40 years…but that isn’t going to get answered in one thread or chat!
Just start recording what you spend. use a spreadsheet. Categorise stuff as suggested, e.g. essential, food, health, housing motoring fuel etc. You will soon get a feel for what you spend, what will not be spent when you don't travel to work anymore. This will give a very good idea of what is needed, what is wanted will be more difficult, holidays, hobbies etc.
Allow at least 5% for inflation, work out how many years you expect to continue being active, look around at relatives, neighbours and friends and see how long they were active for. Then base your calculations based on the number of years you are likely to be active for.
Remember the simple stuff, chances are the house will be paid for, the kids will (hopefully) be independent, you may no longer need to run 2 cars, you will have most big purchase stuff you want, furniture kitchens, bathrooms etc.
Then the extra costs as you will no doubt have 50+ hours extra a week. If you are the sort who needs to be doing stuff that costs money for each activity you may have a lot of extra costs to take into account, if you are the sort who is happy doing stuff around the house and garden, or going for a walk you may have very little extra costs.
Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
Allow at least 5% for inflation, work out how many years you expect to continue being active, look around at relatives, neighbours and friends and see how long they were active for. Then base your calculations based on the number of years you are likely to be active for.
Remember the simple stuff, chances are the house will be paid for, the kids will (hopefully) be independent, you may no longer need to run 2 cars, you will have most big purchase stuff you want, furniture kitchens, bathrooms etc.
Then the extra costs as you will no doubt have 50+ hours extra a week. If you are the sort who needs to be doing stuff that costs money for each activity you may have a lot of extra costs to take into account, if you are the sort who is happy doing stuff around the house and garden, or going for a walk you may have very little extra costs.
Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
ARHarh said:
<good stuff>
Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
Just on this last one.Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
I agree that if you tried to cater for all possibilities, you may never retire. The only certainty is that at some time, we all expire
Important to remember that less than 4% of over 65s go into care, & of those, the vast majority are there for less than 2 years.
Sources:
https://www.nurses.co.uk/blog/the-largest-care-hom...
https://www.bgs.org.uk/resources/end-of-life-care-...
Obviously there will be outliers (dementia can lead to longer time needed & is a nasty syndrome), & indeed the stats are probably debatable….
Our logic is that IF one of us needs that, THEN the house can ultimately be sold to help deal with it. Tough to be precise. But life isn’t an exact science.
mikeiow said:
ARHarh said:
<good stuff>
Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
Just on this last one.Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
I agree that if you tried to cater for all possibilities, you may never retire. The only certainty is that at some time, we all expire
Important to remember that less than 4% of over 65s go into care, & of those, the vast majority are there for less than 2 years.
Sources:
https://www.nurses.co.uk/blog/the-largest-care-hom...
https://www.bgs.org.uk/resources/end-of-life-care-...
Obviously there will be outliers (dementia can lead to longer time needed & is a nasty syndrome), & indeed the stats are probably debatable….
Our logic is that IF one of us needs that, THEN the house can ultimately be sold to help deal with it. Tough to be precise. But life isn’t an exact science.
Try not to over think things, and take baby steps trying to get a handle on things.
As with a lot of things financial, it's not as complicated as folks imagine. The kind of detail that a lot of these forecasting models require can be a bit off-putting, but there's a lot of good advice on the thread so far about keeping things simple.
As for your current earnings - just look back at your self assessment over the past few years. That will show gross, minus tax due/paid, equals net. Divide that figure by 12 and thats your average monthly income for that year. Do that for a few years, and you'll easily get to a reasonable monthly figure.
As for expenditure, pull together all non-discretionary expenditure (mortgage/rent, utilities, comms, insurances, council tax, commute/work costs etc). These are easy figures to calculate. Then, for the discretionary spend, literally spend a few hours going through your general expense account(s) and allocate everything to either food shopping, fuel, health, meals out, days/nights out, clothes, general property maintenance, general vehicle maintenance, and any other 'thing' that might play a biggish part in your life (hobbies, etc). Go back 6 months doing this. You'll easily build up a picture of current average monthly spend per category.
For the big ticket items that might need replacing from time to time, just budget a contingency amount - remember, any figure here should reflect your lifestyle. I'm fine with £500 tv's, etc but you might prefer £5k tv's, £10k hi-fi, etc.
The tricky thing is then deciding what would be different in retirement. Don't assume it will be lower, btw, because you will have clearly a lot of free time then. I'm retired and on a net basis my income is not that much different to when I was working. My expenses are similar too, but the composition is hugely different as we spend loads on doing stuff & holidays rather than mortgage and school/uni fees. We generally gift to the kids anything left.
As for kids, is it a reasonable assumption they will be out of uni by the time you want to retire? If so, they should then be fending for themselves or, at very least, not be dependent on you. I'd simply exclude this from my calculations.
What is for sure is that the FA's models should automatically build in inflation etc.
Overlaying all this is just to use best guesstimates. I suspect, given you seem to be a higher earner, the odd few £k's here and there will be rounding errors/balancing items.
As with a lot of things financial, it's not as complicated as folks imagine. The kind of detail that a lot of these forecasting models require can be a bit off-putting, but there's a lot of good advice on the thread so far about keeping things simple.
As for your current earnings - just look back at your self assessment over the past few years. That will show gross, minus tax due/paid, equals net. Divide that figure by 12 and thats your average monthly income for that year. Do that for a few years, and you'll easily get to a reasonable monthly figure.
As for expenditure, pull together all non-discretionary expenditure (mortgage/rent, utilities, comms, insurances, council tax, commute/work costs etc). These are easy figures to calculate. Then, for the discretionary spend, literally spend a few hours going through your general expense account(s) and allocate everything to either food shopping, fuel, health, meals out, days/nights out, clothes, general property maintenance, general vehicle maintenance, and any other 'thing' that might play a biggish part in your life (hobbies, etc). Go back 6 months doing this. You'll easily build up a picture of current average monthly spend per category.
For the big ticket items that might need replacing from time to time, just budget a contingency amount - remember, any figure here should reflect your lifestyle. I'm fine with £500 tv's, etc but you might prefer £5k tv's, £10k hi-fi, etc.
The tricky thing is then deciding what would be different in retirement. Don't assume it will be lower, btw, because you will have clearly a lot of free time then. I'm retired and on a net basis my income is not that much different to when I was working. My expenses are similar too, but the composition is hugely different as we spend loads on doing stuff & holidays rather than mortgage and school/uni fees. We generally gift to the kids anything left.
As for kids, is it a reasonable assumption they will be out of uni by the time you want to retire? If so, they should then be fending for themselves or, at very least, not be dependent on you. I'd simply exclude this from my calculations.
What is for sure is that the FA's models should automatically build in inflation etc.
Overlaying all this is just to use best guesstimates. I suspect, given you seem to be a higher earner, the odd few £k's here and there will be rounding errors/balancing items.
Points numbered are remarkably easy to ascertain in a digital world, even more so for a PAYE household. Expenditure also exportable to excel in moments.
For sustainable number - joint income minus kid s
t, mortgage, pension contributions/savings contributions, that’ll give most people I suspect a fair idea depending on other large purchases you plan to make/gifts you plan to make - suspect for many people, removing those costs probably halves or more your monthly expenditure.
Being honest I’d expect even the most basic of paid financial advice to be able to narrow your focus very quickly and know what data they need to do that vs you having to guess.
James Shack does a load of videos on this stuff and it’s easy to digest and I don’t want to punch him through the screen like most YouTubers.
For sustainable number - joint income minus kid s
t, mortgage, pension contributions/savings contributions, that’ll give most people I suspect a fair idea depending on other large purchases you plan to make/gifts you plan to make - suspect for many people, removing those costs probably halves or more your monthly expenditure. Being honest I’d expect even the most basic of paid financial advice to be able to narrow your focus very quickly and know what data they need to do that vs you having to guess.
James Shack does a load of videos on this stuff and it’s easy to digest and I don’t want to punch him through the screen like most YouTubers.
Edited by okgo on Saturday 15th March 11:55
mikeiow said:
ARHarh said:
<good stuff>
Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
Just on this last one.Then the final one if you care about the care you may need in later life and how you are going to pay for it, then you will probably need very large sums to cover those costs, and you will probably never retire.
I agree that if you tried to cater for all possibilities, you may never retire. The only certainty is that at some time, we all expire
Important to remember that less than 4% of over 65s go into care, & of those, the vast majority are there for less than 2 years.
Sources:
https://www.nurses.co.uk/blog/the-largest-care-hom...
https://www.bgs.org.uk/resources/end-of-life-care-...
Obviously there will be outliers (dementia can lead to longer time needed & is a nasty syndrome), & indeed the stats are probably debatable….
Our logic is that IF one of us needs that, THEN the house can ultimately be sold to help deal with it. Tough to be precise. But life isn’t an exact science.
The other thing that has really become clear to me, having cared for my parents, is just how much retirement income requirements dramatically fall as the more advanced years approach. With no mortgage, few physical activities and few holidays its a fairly sedentary life for the majority beyond 80 - there are of course exceptions both in terms of those who are sedentary well before 80 and some that are climbing Killi on their 100th birthday between skiing holidays - but for the majority beyond about 80 life doesn't seem to involve much other than the odd meal out, some cards with friends and sat at home in front of the box. It's not the life that I aspire to, but just what I have witnessed becomes the norm.
I will await the usual PH posts saying somebody had a mate whose dog's Uncle knew a bloke who was on round the world cruises and he was 122 years old etc etc...
In all honesty, I can see the state pension alone being enough to get by living the life above. Appreciate that relies on the SP being maintained in my own advanced years..
Given the above, I have even less inclination to buy an annuity. I might look at a 10 year fixed payment plan in exchange for a lump sum, but very much see me aiming to drawdown more heavily to enjoy the earlier of my retirement years. Of course, none of us know our date of death, but if I was a betting man I cannot see me needing to draw down as heavily at late-70s/early 80s as I can enjoy life 55 - 75 (say).
I went through this about 18 months ago and discovered -
- I spent a lot of money on 'small things' that you wouldn't do as regularily when retired. Starbucks 4 times a day 5 days a week adds up to quite a chunk of money
- I haven't bought a single item of clothing in 18 months, who cares what you're wearing when retired
- Now that the kids are out of home ( although 2 still at university), we eat very well but 2 people don't need to spend a fortune on food. Les than £100 a week
- day to day living expenses are actually quite small, it's the discretionary spend (travel, bikes, cars) that make up the bulk of spend.
So in short, living expenses are nothing to really worry about ( as long as mortgage is paid), the decisions tend to be around how you choose to spend your time and what hobbies you indulge in. Then, if something goes wrong, you will have to give up a hobby, but you will have a roof over your head and food on the table.
All these comments are very personal of course, if you want to have a £50 bottle of wine every day with dinner your calculations will be very different to mine
- I spent a lot of money on 'small things' that you wouldn't do as regularily when retired. Starbucks 4 times a day 5 days a week adds up to quite a chunk of money
- I haven't bought a single item of clothing in 18 months, who cares what you're wearing when retired
- Now that the kids are out of home ( although 2 still at university), we eat very well but 2 people don't need to spend a fortune on food. Les than £100 a week
- day to day living expenses are actually quite small, it's the discretionary spend (travel, bikes, cars) that make up the bulk of spend.
So in short, living expenses are nothing to really worry about ( as long as mortgage is paid), the decisions tend to be around how you choose to spend your time and what hobbies you indulge in. Then, if something goes wrong, you will have to give up a hobby, but you will have a roof over your head and food on the table.
All these comments are very personal of course, if you want to have a £50 bottle of wine every day with dinner your calculations will be very different to mine
Ezra said:
As for expenditure, pull together all non-discretionary expenditure (mortgage/rent, utilities, comms, insurances, council tax, commute/work costs etc). These are easy figures to calculate. Then, for the discretionary spend, literally spend a few hours going through your general expense account(s) and allocate everything to either food shopping, fuel, health, meals out, days/nights out, clothes, general property maintenance, general vehicle maintenance, and any other 'thing' that might play a biggish part in your life (hobbies, etc). Go back 6 months doing this. You'll easily build up a picture of current average monthly spend per category.
For the big ticket items that might need replacing from time to time, just budget a contingency amount - remember, any figure here should reflect your lifestyle. I'm fine with £500 tv's, etc but you might prefer £5k tv's, £10k hi-fi, etc.
For calculating expenditure I did the first part, but for discretionary I worked backwards depleting the pot over time and deciding whether the discretionary amount is enough by comparing to what we spend on discretionary at the moment as a balancing figure. Although I count things like groceries and health as non-discretionary, along with taxes, utilities and car related costs. Big ticket items (apart from cards) come out of discretionary expenditure at the moment, so use the same approach for retirement planning.For the big ticket items that might need replacing from time to time, just budget a contingency amount - remember, any figure here should reflect your lifestyle. I'm fine with £500 tv's, etc but you might prefer £5k tv's, £10k hi-fi, etc.
Shnozz said:
The other thing that has really become clear to me, having cared for my parents, is just how much retirement income requirements dramatically fall as the more advanced years approach. With no mortgage, few physical activities and few holidays its a fairly sedentary life for the majority beyond 80 - there are of course exceptions both in terms of those who are sedentary well before 80 and some that are climbing Killi on their 100th birthday between skiing holidays - but for the majority beyond about 80 life doesn't seem to involve much other than the odd meal out, some cards with friends and sat at home in front of the box. It's not the life that I aspire to, but just what I have witnessed becomes the norm.
While I keep the discretionary items above flat, albeit it‘s possible that groceries will decrease, discretionary I step down 10% at 65/67 (me/her) another 10% at 70/72 and half the original at 75/77. There will be enough in the pot and in property if needed for care.MarcelM6 said:
All these comments are very personal of course, if you want to have a £50 bottle of wine every day with dinner your calculations will be very different to mine
Should have around 1000 bottles in the cellar by then, so that‘s the first three years sorted 
I didn't do any forecasting moving into retirement and just went blindly into it 7yrs ago. Perhaps different for me as I knew what my FS pension was going to be and with that number I could still pay all the bills and still have money left over to usually stick on deposit/invest. Eat out etc as and when we feel like it. I'm now 6yrs from State Pension for hopefully another wedge to drop.
Depending on your pension when you take off all the contributions that were taken from your salary you may find your pension is not far from the actual figure you received. I was paying near £1k per month pension contributions when I was working.
I've never sat down with a spreadsheet and worked everything out at what the real per month figure is to include car insurance, holidays etc as I just pay these when they come up so some months there may be very little left over. Alien to many. I've not drawn down on any savings/investments although a car purchase or holiday would normally come from this pot. I'll look to start gifting most of this when state pension kicks in as I'll have a clearer picture at what I've spent/saved and as mentioned most slow down when we get older.
My daughter has left university, is in gainful enployment and off the payroll. Once she left at 18 she was totally independent whereby she'd rent between terms and get a job. If she was at home and working there'd be an expectation she would pay toward the housekeeping, although that seems unheard of nowadays, unlike when I was her age! That said there's a wedding down the line with a bill most likely to come my way!
Annual clothing budget, that's a good question. Jogging bottoms and sweatshirt seem to be my 'go-to' clothes unless I'm going out. I've never been so 'deconstructed' but now I don't care.
Care home fees - not fo us.
As others have said, you need to decide on 'your number' to give you everything you want in retirement and to last you until say 80. I regard myself as low maintenance as plenty of stuff I end up doing costs very little, until a 5-figure holiday or another car comes along
Depending on your pension when you take off all the contributions that were taken from your salary you may find your pension is not far from the actual figure you received. I was paying near £1k per month pension contributions when I was working.
I've never sat down with a spreadsheet and worked everything out at what the real per month figure is to include car insurance, holidays etc as I just pay these when they come up so some months there may be very little left over. Alien to many. I've not drawn down on any savings/investments although a car purchase or holiday would normally come from this pot. I'll look to start gifting most of this when state pension kicks in as I'll have a clearer picture at what I've spent/saved and as mentioned most slow down when we get older.
My daughter has left university, is in gainful enployment and off the payroll. Once she left at 18 she was totally independent whereby she'd rent between terms and get a job. If she was at home and working there'd be an expectation she would pay toward the housekeeping, although that seems unheard of nowadays, unlike when I was her age! That said there's a wedding down the line with a bill most likely to come my way!
Annual clothing budget, that's a good question. Jogging bottoms and sweatshirt seem to be my 'go-to' clothes unless I'm going out. I've never been so 'deconstructed' but now I don't care.
Care home fees - not fo us.
As others have said, you need to decide on 'your number' to give you everything you want in retirement and to last you until say 80. I regard myself as low maintenance as plenty of stuff I end up doing costs very little, until a 5-figure holiday or another car comes along
I just paid in a "bit extra" for company pensions for 30 years, jobs paying the average wage. Add in the state pension, and I'm on minimum wage. Covers all the bills, no problem. 18 months "income" in the bank for emergencies. Still working self-employed (a few hours a day) for "pocket money".
I'm probably better-off now than I've ever been.
Looking back to my late forties, my first goal was being debt-free (mortgage paid off well before I was 50), then saving a grand a month so that I could quit full-time employment and buy a forever home cash (done when I was 52).
I packed in employment when I was 60.
I wouldn't consider retirement with kids still at home though, and I wouldn't stop work "cold turkey" either. Wind down in stages to avoid boredom.
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