Transition from saving to spending

Uther said:
I retired early due to circumstances. I'm blowing mine, and when it's gone, meh.
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I need to shape up and start spending. I also retired early, through luck and some opportunities taken at a young age. However, since retiring in 2022 I've continued to live frugally, which suits me fine, and all the while my investments continue growing. Considering I'm child-free, I really need to start throwing myself around the planet and seeing stuff.
Just not right now; maybe next year.
Mr Badger said:
Keep saving, show them all by being the richest man in the graveyard.
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Unless you have kids, blow it all while you still have the legs to carry you.
 
Enjoy yourself within reason and try not to go broke.

Remember that when you're old, your body may be failing you in various ways, so it may be more enjoyable to enjoy stuff now and not wait, and have fewer regrets. Live a little in ways you have wanted to now.
 
Uther said:
Don't leave it too late. I currently have two friends dying of cancer, neither of whom are anywhere near state pension age.
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Yes but if you like where you live and can keep yourself amused, i can see no need to travel widely. It is often too hot, the people too disagreeable and the travel too full of hassles.
 
Hagar said:
Yes but if you like where you live and can keep yourself amused, i can see no need to travel widely. It is often too hot, the people too disagreeable and the travel too full of hassles.
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This is me more or less. I'm always preoccupied at home and locally with mini projects and house related stuffs. I've not done a "Sun" holiday for many years but have focussed visiting a friend in Finland these last few seasons to get myself out of the country.
 
Pho said:
My plan has always been to have enough saved so that I can live off the interest alone. Treat it like a salary.

E.g., if you have £1m in your pension/ISA/savings and it's earning roughly 7% interest* a year then that's ~£70k/year, or if you have £500k that's £35k/year.

Whatever you don't spend goes back into the pot and compound interest does its work.

* the average stock market return over time, although obviously it will fluctuate
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This is quite wildly out of whack due to sequencing risk. It's more like 4-5%, and even then that's based around a ~30 year timeline to zero.
 
£1 million has a 'safe' drawdown of £40k apparantly, but as hardly anyone in this country will have anywhere near that or live anywhere near that long it's a fantasy anyway.
Problem is with sites like this one is everyone is a baller who thinks they need £100k a year to survive.
Be happy if you can afford a loaf of bread and a tin of own brand baked beans in retirement like the other 99% of the population. :p
 
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When I was younger, I spent it all. I’ve now reached a point I didn’t expect where I’m earning more than ever, but have done everything I want to and own everything I want to, and would rather now sit quietly in the garden or by the sea. I’m not even actively trying to save, but it’s obviously accumulating rapidly. It’s even more ridiculous when you consider my eventual inheritance and trust funds. As it stands now it’ll all go to charity after my days and probably a good chunk while I’m alive too. I’ll ensure the governments gets as little as possible. I can’t ever stop working either as I just don’t function without my job.
 
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Those FCA survey figures are just scary.

I was lucky enough to mostly retire at 56 (60 now) with a combination of DB and DC pensions, and the finances are going ok so far albeit with a few nervous times (covid, Truss, Ukraine, Trump). A lot of what others have said sounds very familiar - I've spreadsheeted it to death (pun intended) and also found it rather strange adjusting from saving to spending the pot.

The biggest planning difficulty is all the uncertainties, E.g. How long will we live? How long will we be in good health? What medical and care home costs will we face? What long term investment return will we get? What is inflation going to do? What changes will there be to pension and tax legislation? Etc. etc.

I don't see how most people can be that confident with their retirement plans unless they had a sizeable buffer in a pension pot and other assets. It seems to have been so much more predictable a couple of generations ago when most had DB pensions and care costs weren't as crazy.
 
Uther said:
£1 million has a 'safe' drawdown of £40k apparantly, but as hardly anyone in this country will have anywhere near that or live anywhere near that long it's a fantasy anyway.
Problem is with sites like this one is everyone is a baller who thinks they need £100k a year to survive.
Be happy if you can afford a loaf of bread and a tin of own brand baked beans in retirement like the other 99% of the population. :p
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But not indefinitely, the 4% is based on 30 year timeframe I believe. This isn't such a big deal for those starting at 65-68, but for those initiating the draw in their 50s, it starts to get a little sketchy.
 
Zefan said:
But not indefinitely, the 4% is based on 30 year timeframe I believe. This isn't such a big deal for those starting at 65-68, but for those initiating the draw in their 50s, it starts to get a little sketchy.
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retiring the 50s requires a SWR nearer 3.5%, in the 40s nearer 3%. And even then this is based on US persons that can invest more heavily in S&P500 while Europeans should definitely have a european/global bias, and secondly we have to take into account FX risks as the USD continuously devalues over time.
 
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Mr Badger said:
But now most of us with private pensions have it in the form of our own pension fund, so when you retire your pot of cash starts reducing.
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Not necessarily - for example some choose an annuity if they want the peace of mind that they'll have a regular income and while the actuaries win overall (lest their firms go bust) some of them will go on to live for longer than the actuarial life tables suggest.

I think you're outlining two positons/anecdotes teding towards extremes here though:

If you’ve worked all your life and own at least some assets - a house, pension, ISA, investments etc. then disposing of them all is quite a challenge and could easily be flagged up by local authorities and re: the other anecdote 55 seems rather young without a very generous DB pension from say the police, military etc. Though presumably he doesn't regret it that much else he'd have returned to the workforce?

Mr Badger said:
So I'm interested in how other people have either already approached this, or what you think you will do. Not so much the financial advice side, more the mindset. Do you quit working as soon as you think you can afford to retire? Do you plan how much money you need to spend to get rid of your assets before you die? Do you carry on scrimping and saving after retirement to be the richest man in the graveyard?
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None of the above - I think deliberately disposing of all assets and expecting the rest of society to fully fund your final years is a scumbag move and it's quite rightly against the rules. Likewise quitting as soon as you can afford to retire is possibly an indication that you've wasted much of your life or at least your career doing something you don't enjoy. My dad still works in his 70s, just part time on quite a flexible basis (he travels regularly too) and not because he needs to but just because he likes to keep an interest in his old field and his former employer still values him.

Without wanting to get into the financial advice part that you want to avoid - the sensible position is just the boring one IMO that doesn't involve either some crazy scheme to dispose of everything or retiring super early when you can't really afford it.
 
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This will probably trigger a lot of people but I'm saving as much as I can to be able to enjoy retirement but also give my kids support too. Sure I want to instill in them the value of work and earning your own things and not being materialistic (we're actually a very modest family in terms of "things"). But my life is dedicated to my children nothing else matters to me.
 
To answer the original question, I've done a lot of modelling and know roughly what needs to happen in order to hit my numbers for full retirement. I'm just about to drop to 3 days a week as I'm pretty much done accumulating and want to start enjoying some freedom whilst having enough coming in to pay our general living expenses to give my pots more time to grow. This number will be roughly what my safe withdrawal rate will translate to so its a decent test. Worst case if the plan doesnt work out as quickly as expected I'll just keep working a bit longer. I'm 49 if that is at all useful, ideally I can retire fully in 4-5 years.
 
Not sure whether this thread got a bit side tracked with the financial planning talk, but thought I would give it a little bump due to recent events.

Another friend of mine has passed away, who I believe had a really good civil service pension and was financially set for a long and comfortable retirement. He had been retired for certainly less than 10 years and receiving cancer treatment for about a year. Seemed to be responding well for a while, but recently went down hill quickly. I had a beer with him less than two months ago, then there was talk of him going into hospital and only having months to live, which suddenly turned to weeks, then he was gone in a few days. Makes you think...

Also, I had a random conversation with an old guy who started talking to me in a pub yesterday. He said he had been retired for so long that he couldn't remember what it was like to have to find time to go to work. He didn't mention his age, but I would say he looked closer to 80 than 70. I asked him how he had got on with the transition from saving to spending and he said that he still found it really hard and tried to just live on his pension as he didn't like to dip into his savings. He admitted that he should probably spend more as he was getting on and you can't take it with you!
 
I’m 62, I retired just over a year ago because of a cancer diagnosis. It really messed up my head and my retirement planning. At the same time it ironically left me financially in a far better position than I would have been. (Selling my business and a couple of critical illness policies that paid out)

However, I still haven’t been able to get my head round not having an income. I’ve been living off cash rather than touching my pension pot, which is a good bit over the average.

I’m starting to come to terms with the fact that I probably won’t work again unless I start another business and as such am probably going to take the tax free lump sum shortly .

My wife constantly reminds me it’s time to let go and enjoy what’s available as you don’t know how much time you have left but it’s difficult after always being reasonably careful/responsible. She’s probably right :rolleyes:
 
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