Key Post How much savings do you need to feel safe

moneybox

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715
I'm thinking of aiming for the trillion myself :)

I don't want a trillion or a million. I want enough so I can pay my private health insurance, that is a must for me, I would go without my cornflakes so I could pay for that. I have a great fear of the public health care system.

Also I want to ensure I have enough money to heat my home, ( old people feel the cold much more than younger ones) pay for good nutrition, continue to travel and enjoy some of the good things in life with my other half. Most of all I pray I will continue to be blessed with my good health and be able to keep my faculties until I am well into my nineties. My granny always used to tell me my health is my wealth!

So long life and good health to all at AAM! and I hope you all will live long enough to enjoy your pensions no matter how meager or lucrative they may be.
 
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The Ghoul

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336
My financial situation is good. I feel safe but not safe enough to seriously think about retirement for a number of years.

In 2015 I will spend less than 10k and save about 30k (not including investment income) and I don't think I'm very tight.

The other main points about me are:
I inherited a house a few years ago so have no mortgage
Single with no children
Steady job in the public service (post 95 pre 04 entrant)
38 years old
Currently have 705k (some inherited) in deposit accounts/state savings

I am a natural and possibly compulsive saver. I agree with Fella's post earlier about reaching milestones. I keep telling myself that I'll splurge when I reach a milestone but it almost never happens. Instead, I immediately start looking towards the next milestone.

In terms of expenditure, mine is clearly low. I can't see myself needing to spend more than 15k (in 2015 euros) a year unless I need a nursing home or health insurance rises dramatically. Like other posters, I regard health insurance as very important.

The 1% rule, 2% rule, 4% rule - yes, I have thought about all of those.

With regard to nursing homes, were I to retire on an income of 15k a year that won't fund nursing home care for long so I would be eating into capital, selling my house or relying on something like the Fair Deal.

The issue of social protection then arises. There are people who will earn far more than me in their lifetimes who will be far less able to fund nursing home care because they splurged while I saved. So are people who save for retirement and heathcare the fools when there is the expectation that "the taxpayer" pays for other people. There is a lot of doom and gloom about the coming pensions crisis and the healthcare crisis (eg in relation to v. expensive cancer drugs) and how people will be screwed - but who exactly will be screwed? The person with savings or the person without savings?
 

Gordon Gekko

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I agree with others that the most vulnerable could be those in the middle...people with too much to get full State support and too little to pay for everything themselves.
 

Agent 47

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90
The person with savings or the person without savings?
Very much feel it will be the former that will be screwed. I see alot of people with far less in terms of household wage doing a lot better than myself and getting a lot of the benefits currently being handed out.

However, if as I have, 2 rentals with hefty mortgages, investments and no savings (cash) due to my investment for later years policy, I do seriously question my rationale for doing this. The reason I question it, is that I fear we are being scare mongered into saving even though I have a pension, in my case a DB pension because even I do not feel that is secure*. Therefore I am investing in rentals and securities but fear on the other hand that everything will be means tested and benefits I am entitled to now, I will not be entitled to on retirement or age 70.
* I cite Waterford glass, Team Aerlingus and a number of other DB schemes running into difficulty along with the fact my employer forced voluntary redundancy schemes every 3 years onto workers just turned 50 who are eating into the remaining workers pensions.
 

Fella

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428
What's the best way to hide your wealth seen as this country rewards people more that waste cash , buy Rolex watches or just put cash in safety deposit boxes or start transferring money to your kids each year ?

I have already started to keep cash in safety box I might start buying a few luxury watches and other stuff like that .
 

KOW

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Messages
331
My financial situation is good. I feel safe but not safe enough to seriously think about retirement for a number of years.

In 2015 I will spend less than 10k and save about 30k (not including investment income) and I don't think I'm very tight.

The other main points about me are:
I inherited a house a few years ago so have no mortgage
Single with no children
Steady job in the public service (post 95 pre 04 entrant)
38 years old
Currently have 705k (some inherited) in deposit accounts/state savings

I am a natural and possibly compulsive saver. I agree with Fella's post earlier about reaching milestones. I keep telling myself that I'll splurge when I reach a milestone but it almost never happens. Instead, I immediately start looking towards the next milestone.

In terms of expenditure, mine is clearly low. I can't see myself needing to spend more than 15k (in 2015 euros) a year unless I need a nursing home or health insurance rises dramatically. Like other posters, I regard health insurance as very important.

The 1% rule, 2% rule, 4% rule - yes, I have thought about all of those.

With regard to nursing homes, were I to retire on an income of 15k a year that won't fund nursing home care for long so I would be eating into capital, selling my house or relying on something like the Fair Deal.

The issue of social protection then arises. There are people who will earn far more than me in their lifetimes who will be far less able to fund nursing home care because they splurged while I saved. So are people who save for retirement and heathcare the fools when there is the expectation that "the taxpayer" pays for other people. There is a lot of doom and gloom about the coming pensions crisis and the healthcare crisis (eg in relation to v. expensive cancer drugs) and how people will be screwed - but who exactly will be screwed? The person with savings or the person without savings?
 

KOW

Frequent Poster
Messages
331
My financial situation is good. I feel safe but not safe enough to seriously think about retirement for a number of years.

In 2015 I will spend less than 10k and save about 30k (not including investment income) and I don't think I'm very tight.

The other main points about me are:
I inherited a house a few years ago so have no mortgage
Single with no children
Steady job in the public service (post 95 pre 04 entrant)
38 years old
Currently have 705k (some inherited) in deposit accounts/state savings

I am a natural and possibly compulsive saver. I agree with Fella's post earlier about reaching milestones. I keep telling myself that I'll splurge when I reach a milestone but it almost never happens. Instead, I immediately start looking towards the next milestone.

In terms of expenditure, mine is clearly low. I can't see myself needing to spend more than 15k (in 2015 euros) a year unless I need a nursing home or health insurance rises dramatically. Like other posters, I regard health insurance as very important.

The 1% rule, 2% rule, 4% rule - yes, I have thought about all of those.

With regard to nursing homes, were I to retire on an income of 15k a year that won't fund nursing home care for long so I would be eating into capital, selling my house or relying on something like the Fair Deal.

The issue of social protection then arises. There are people who will earn far more than me in their lifetimes who will be far less able to fund nursing home care because they splurged while I saved. So are people who save for retirement and heathcare the fools when there is the expectation that "the taxpayer" pays for other people. There is a lot of doom and gloom about the coming pensions crisis and the healthcare crisis (eg in relation to v. expensive cancer drugs) and how people will be screwed - but who exactly will be screwed? The person with savings or the person without savings?
 

KOW

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Messages
331
The Ghoul,
For your age you have done very well for yourself. Many Congrats. But I have to say this is no practice run. Life is for living/enjoying.
On 10k a year? I dont want to tell anybody how to live their life but time waits for no man. I genuinely wish you the best but think you have a golden opportunity to experience more in life than stashing cash. You can do both. Life will past you buy and yep you will have plenty of money what for?
 

mammyof2

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Messages
51
Slightly off topic but any thoughts on what the best way to save once you have achieved the 6 - 12 month salary buffer in a bank account?

I'm more than 20 years off retirement and am a middle-ranking public servant (I don't expect by the time I retire that pensions will be half of final salary - I'm sure by that point it will be half average earnings at best, but I'm making the assumption it will be enough to us to live on). Currently a one-income family and I have built up enough savings on deposit for an emergency fund (equivalent to approx. 12 months salary after tax income). It is earning just over 2% before DIRT, so basically negligible interest rate. We have another decade of the mortgage on current house before it is paid off.

Big uncertainty is whether we will remain a one-income family from here onwards or whether spouse at some stage over next two decades will earn either a full time or decent part time/consultancy wage. 2 kids, primary school age. Between them, I'd expect to be funding their third level education (incl Masters if they want) for about a decade (effectively throughout my 50s). Even if they end up as long, long, long term-students, I'd hope they'd be more or less off the books by the time I am 60!

Q1: What should my savings aim be now? Assuming a scenario where I probably don't need to accumulate significant savings for retirement but do need to build up savings for kids third level
Q2: How should I save? Obviously some sort of pension vehicle gives significant tax benefits but I'm likely to need to withdraw and use the savings well before retirement age (65 in my case). I'm happy enough with a reasonable level of risk/volatility and, barring emergencies, I am unlikely to need to access the money for another 8+ years. I don't see the point in simply continuing to save into a low-interest bank savings account. So, what is the most tax-efficient/fees efficient way for me to save? For various reasons, I'm likely to be in a position to save €500 - 700 per month for the next 2 - 3 years, and perhaps nearer to €150 a month after that for the foreseeable future, assuming we remain a one income family. I like the idea of an ETF but understand that the tax implications are a disincentive.

Any advice very welcome!
 
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mtk

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478
hi mammy 2 suggestions
pension has tax advantages - see what options your specific civil service scheme offers re AVCs and get advice

Or pay down mortgage unless on tracker rate or interest only.
easy to do .
no fees etc.
reduces regular outgo in future (option to maintain payment for next few years )
psychologically you get to own house soooner
 

mammyof2

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Messages
51
Thanks mtk for the ideas. We are blessed with a tracker, ECB + 0.6%, so I don't think overpaying the mortgage is the best use of money. I will definitely take your advice re checking out AVC options. Still leaves the issue though of how best to save/invest for expenditure that I'm likely to need to cover well before retirement age (third level for kids). Further ideas appreciated!
 

The Ghoul

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Messages
336
I thought I'd revisit this thread as my work has been going badly and I'm not sure how much future there is in it for me. As I result, I have been doing more thinking than usual about "living off the spray", early retirement and how much money I would need to feel safe. I do take on board the comments about how life is not a dress rehearsal and in another thread I was told I should think less about my finances and more about getting my hole :) However the flip side of this is that if I was living paycheque to paycheque with a mortgage hanging over me and children to provide for and work started going badly, I would be climbing the walls with stress.

Running a few calculations and trying to predict the future I conclude that keeping spending down and limiting one's exposure to inflation if possible are key.

Assuming I have done the calculations correctly

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 3% inflation on an initial spend of 10k. I run out of money at age 88

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 2% inflation on an initial spend of 10k. I run out of money at age 99

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 3% inflation on an initial spend of 15k. I run out of money at age 77

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 2% inflation on an initial spend of 15k. I run out of money at age 83.

This may look like a relatively pessimistic outlook assuming that inflation is one or two percentage points above the net return on investment. My attitude is to expect a low ROI and remember that "the miracle of compound interest" applies to the headline inflation rate as well as to investment returns.

PS the above running out of money ages assume that I get no social welfare and that my public sector pension would not be paid at all. It also assumes that I won't have to pay for a nursing home. Who can tell the future though. Perhaps health insurance inflation will far exceed general inflation for the next 50+ years. If it does and I want to keep my health insurance my calculations are way off.
 

moneybox

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Messages
715
I

This may look like a relatively pessimistic outlook
Yes you are being pessimistic, you are only 38 years old, have a house that is mortgage free and 800K in savings. If your job is going badly I am sure you have amassed enough skills to pick up another job or else go and retrain. You certainly not going to starve in the meantime ;)
 

Cervelo

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Messages
470
I thought I'd revisit this thread as my work has been going badly and I'm not sure how much future there is in it for me. As I result, I have been doing more thinking than usual about "living off the spray", early retirement and how much money I would need to feel safe. I do take on board the comments about how life is not a dress rehearsal and in another thread I was told I should think less about my finances and more about getting my hole :) However the flip side of this is that if I was living paycheque to paycheque with a mortgage hanging over me and children to provide for and work started going badly, I would be climbing the walls with stress.

Running a few calculations and trying to predict the future I conclude that keeping spending down and limiting one's exposure to inflation if possible are key.

Assuming I have done the calculations correctly

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 3% inflation on an initial spend of 10k. I run out of money at age 88

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 2% inflation on an initial spend of 10k. I run out of money at age 99

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 3% inflation on an initial spend of 15k. I run out of money at age 77

I retire at age 40 with 800k. Assume a 1% interest rate on savings and 2% inflation on an initial spend of 15k. I run out of money at age 83.

This may look like a relatively pessimistic outlook assuming that inflation is one or two percentage points above the net return on investment. My attitude is to expect a low ROI and remember that "the miracle of compound interest" applies to the headline inflation rate as well as to investment returns.

PS the above running out of money ages assume that I get no social welfare and that my public sector pension would not be paid at all. It also assumes that I won't have to pay for a nursing home. Who can tell the future though. Perhaps health insurance inflation will far exceed general inflation for the next 50+ years. If it does and I want to keep my health insurance my calculations are way off.
I'm in a similar position to yourself but am a little older, have a +1 and a couple of Euro more. The question I asked, "was a million enough to retire at 50", most people who answered seem to think that it was possible but the reality is that it isn't. A million when you factor in all the costs of living, ROI, unforeseen events and good old inflation it will not last till your 80s more like late 60s early 70s if all goes well.
One question I always come back to is what will I need in 25 years time to live on, nobody can answer that exactly except to say more then you need now but as a rule of reference I use what I know to be true, I started fulltime work in 85 and my first weeks wages was 80 punts when I left the business in 2011 the starting wage had risen to €375. So what ever you are living on today in 25 years your going to need at least 3 to 4 times that.
 

Sarenco

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5,782
It's a very interesting question, and it really shouldn't be that subjective, although I don't know the answer or even how to approach it.
Hi Brendan

I recently came accross an academic UK study that attempts to address this question that I think is worth a read:-

In short, they agree with your initial view that ~€50k pa should provide a couple with a comfortable retirement.
 

Gordon Gekko

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Thanks to Sarenco for posting that.

Very interesting.

I would challenge it on a number of grounds. To be in control of one’s own destiny in terms of choosing a nursing home, €50k isn’t enough for a couple. It is arguable that we are also at an inflection point of sorts whereby younger people won’t do better than their parents or grandparents; and the net result will be parents being leaned on in which case €50k won’t be enough.

But I accept that it depends on what one wants in retirement; one man’s walk along the seafront in Bray is another man’s stroll down the seafront in Nice.
 

Leper

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977
This thread although with some laudable posts is not going to answer the original question. People who make money, make money to make more money. They are never satisfied and fair enough that's their own business. So, some mortal wins €100M in Euromillions. Is that enough to keep him in clover for the rest of his life? Yes is the obvious and correct answer. However, how does he spend his days? This is a more difficult question to answer. OK he can have the birds, the booze, the gambling etc but enjoyment there soon runs out.

Bottom Line:- Health is Wealth. Not much point in winning Euromillions if you have advanced cancer where your only option is Lourdes.
 

Hooverfish

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Messages
28
I've been web-womble-researching this issue recently to try and get a handle on the basic assumptions, to inform a spreadsheet like Bronte's, and consider different drawdown rates/inflation/interest situations.

It's important to remember throughout the EU around half of retirements are not by choice/age, and that it can be a tough, expensive few years if you do not have any support to reach your state pension... and if you are my age/gender, you've had the state pension goalposts moved on you already by 7 years during your working life...!

In the Irish situation, enforced early retirement is a big issue for women, although employment figures have improved recently for the over 50s.
This year (2019), CSO figures show only 63% of women aged 55-59 were working compared to 80% of men. For the 60-64 agegroup, 47% of women were working compared to 63% of men. Recent coverage of care duties as a cause of the gender disparity has been poorly reported in the media - this as reported by recent ESRI research only affects 7% of the early retirees. In the main, I think the gender difference is likely good old sexism and ageism.

2001 Irish research: over one third of people over 55 would like to retire as soon as possible and 55% only work for the money. But one third of those retired would like to be doing some work http://www.ncaop.ie/publications/research/reports/67_OP_Prefs_Emp_Ret.pdf

Also bear in mind, in Ireland, less than 1 in 20 (about 3.7%) end up in a nursing home at the end of their lives. If you come from a family that's seen a lot of aged disability, maybe you are over-worrying about nursing home costs? Average time spent in care is 2 years not the 5 mentioned in some of the posts on this thread.

https://www.nerinstitute.net/blog/2013/04/23/how-much-income-do-you-need-in-retirement/ - 2013 NERI paper that looks at Ireland and points out the urban/rural divide - a lot more expensive to be out of town. Figures considerably lower than those usually seen in pension provider advertorials but some of the data is from SVDP, who probably have their own angled view on the data.

Which? UK figures based on survey for how much people really spend in retirement - add 10% for euro conversion/different costs here was my guesstimate for conversion plus - crosscheck against your own current spending?
(there is a good section on "money purchase pensions" towards the bottom of that long page in Which?)

In my view (but I'm a person who doesn't much care about foreign holidays and new clothes/cars), I think if you have your house paid off, but you are paying for private health insurance, the income you need, including state supports, is probably around €30k/yr for a couple.

But I'm also of the view that the thing to focus on is funding your healthy early retirement to be enjoyable in your own terms. I'm not sure that running out of cash in your later, less-healthy years is actually a bad thing.

What other basic assumptions have people used for their calculations?
 

Investadvice

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One thing re nursing home costs that is worth mentioning is that it is tax deductible at the higher rate. This should come into any modelling on retirement costs, it's a significant benefit.
 
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