You Can Retire On LESS Than You Think
Because your situation is unique, how much is ‘enough to retire’ is going to be unique to you. The thing that makes it unique is your lifestyle, your spending.
There are a bunch of things we can’t control: markets, inflation, asset returns, political and geo-political events, environmental factors. But there are a few things we CAN control: our spending, our investment behaviour, like not selling when markets go down, paying attention to tax and costs.
Example 1: Couple age 60
With £750k invested, retiring at 60 and with 2x state pensions kicking in at age 67, you can spend £44,850 each year, rising by inflation, and have 90% certainty that you’ll be OK, based on history.
Example 2: Couple at State Pension age
If we take the example of having £200,000 in pensions and ISAs, a couple retiring at 60 could spend £22,500 a year every year, rising by inflation and with 90% certainty they wouldn’t run out.
Example 3: Single age 60
If you want to retire at age 60 and spend three grand a month forever, you’re going to need three-quarters of a million on hand to do that. If you only have £200k, you’ll be able to spend £1,350 a month, with 90% certainty that you won’t run out.
Example 4: Single at State Pension age
£625,000 = £37,100 pa
£400,000 = £28,000 pa
£200,000 = £20,000 pa
Remember these are spending amounts that were historically sustainable 90% of the time over that past 110 years of data and include either state pension.
When we project into the future and see if our money will run out, we know for a fact that our projection is going to be wrong – the future is unknowable because there are just too many variables.
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