How Much Can I Spend in Retirement with £500k Pension?

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We look at how much income a £500k pension may provide from both flexi access drawdown and also an annuity. We cover several retirement ages to highlight the impact early retirement can have. We also explore how drawdown can go wrong and the impact retiring before a stock market crash can have.
Timestamps:
00:00 Introduction
02:54 Income from a £500k pension with drawdown at age 66
03:43 Drawdown income from a £500k pension at 60
07:23 Drawdown Income from a £500k pension at 55
08:52 A simple alternative - safe withdrawal rates
09:48 Annuity income from £500k pension at 66, 60 & 55
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I am a Chartered Wealth Manager providing independent financial planning services in the UK. I help people retire earlier, make the most of their finances, protect their families and save taxes.
Our Independent Financial Advice business - www.heritage-fp.co.uk
email - alex@heritage-fp.co.uk
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DISCLAIMER:
The content in this video is provided for information and entertainment purposes. It should not be construed as direct or indirect financial advice. You must thoroughly research any potential financial or investment decision and fully understand the risks before taking it. If in doubt, you should seek Independent advice from a professional adviser. Tax rules and legislation is subejct to change. HM Revenue and Customs practice and the law relating to taxation are complex and subject to individual circumstances and changes which cannot be foreseen. The Financial Conduct Authority does not regulate tax planning. The value of investments and any income from them can fall as well as rise, and you may not get back the original amount invested. Past performance is not a reliable indicator of future performance and should not be relied upon.

Опубликовано:

15 июн 2024

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Комментарии : 37

@AlexNorman-Jones 23 дня назад

If you would like me to model a particular scenario you would find interesting for other videos, let me know! Thanks Alex

@thepropertyflipper 12 дней назад

The PLSA set down 3 lifestyle types that I think have just been updated. I've not seen anyone link the amounts of pension savings ( SIPP, Company, ISAs etc) that would be needed to sustain these lifestyles, maybe at early retirement ( say 60) and at state pension age. To me there seems to be a massive disconnect between anticipated lifestyle and pension savings. I know of loads of people who either don't have pension ( self employed) or have a pittance saved up. Nobody seems to be talking about this pension time bomb. I'm guessing that most IFAs' and / or pension advisors on YT only work with relatively wealthy customers ( it makes more sense as a business - I get it), but there are huge parts of society that have nowhere near enough saved and will be really struggling going into later years. It would make an interesting video to look behind the numbers and see what's really happening. Been loving the videos so far - thanks.

@AlexNorman-Jones День назад

@@thepropertyflipper sorry missed this comment. ok ill have a look at a video based on the lower end of the living standards survey! Thanks for the feedback!

@BendyChoy 22 дня назад

Retirement planning is an important aspect of financial stability. It’s crucial to make informed decisions and seek expert advice.

@LSBContractingLLC 20 дней назад

Real Estate planning is an intricate process that necessitates not only strategic foresight but also expert guidance. It's paramount to align ourselves with seasoned financial advisors who can steer our investments toward optimal growth.

@BarbaraPearson55 20 дней назад

It is very crucial to know that planning to earn in today's market is an intricate process that necessitates not only strategic foresight but also expert guidance. It's paramount to align ourselves with seasoned financial advisors who can steer our investments toward optimal growth.

@ZhannaDavidova 20 дней назад

Indeed, Recessions have a way of affecting people's financial stability and investment portfolios in profound ways.

@ClayneBanks 20 дней назад

It's crucial for individuals to diversify their portfolios, seek professional financial advice, and stay informed about market trends to navigate these challenges effectively.

@sebastiaanthijn7982 20 дней назад

How did you find a good finance advisor? How do you know if they are trustworthy and competent.

@KevinOLoughlin-ys5ef 19 дней назад

The biggest problem I see for retirement planning is that it relies on you working out a lifestyle that you as an individual would like to live. That's hard enough for someone like me in my 50s to imagine let alone someone in their late 30s with a mortgage, kids, debts, etc. Add to this the bullshit lifestyles people swan around thinking they can have forever, got to have a new car every 2-3 years, update the phones, etc and it's all funded "on the knock". I saw an IFA doing a case study the other day where someone wanted to retire on £45k/yr but spend £1500 month on clothes, each!! He said that's just nuts and would obviously leave nothing for bills and food, showing that people have zero idea how to plan for retirement. I don't think I've spent £1500 on clothes in my entire life! People need to think first and foremost about the lifestyle they'd like in retirement, then they wil see how much they'll need for that and this might make then realise they don't have the money and start to rein it in a little. Sadly we're sold bullshit by the PR ad men that we must have new cars, new phonesm new gadgets all the time, people then get stuck in that mindset and it can come a shock that they never saved anything when they were flush and now their lifestyles are unsustainable.

@thepropertyflipper 12 дней назад

This is very true. Range of returns can be modelled, inflation assumed, death date inferred, but the lifestyle/income in retirement is really hard to calculate. Everybody wants the fantastic lifestyle, holidays, eating out, nice things etc. Nobody goes into financial planning wanting the lowest level of retirement. The figures issued by the PLSA are unrealistic for most people who have kids for example. For a moderate LS - the income from pensions needed is £31,300 for a singe person, £43,100 for a couple. Assuming state pension is c £11,000 that leaves pension income of £20k pa. Working on the 4% rule as a very blunt instrument that means that a single people would need a £500k pension pot. The actual average pension pot in the UK right now is £107k for a 55-54 year old. There's a huge disconnect.

@dtlittle8 23 дня назад

Hey Alex - do you factor in "elder care" (care home costs, etc) into your planning ? something like aged 85-88 onwards maybe ?

@AlexNorman-Jones 23 дня назад

I didnt on this occassion as I didn't want overcomplicate it. I did toy with the idea though. I have compensated for this by assuming they take the higher income for a relatively longer timeframe (right up until 80 at which point drop by 25%). Food for thought....maybe next time i'll modela spike in expenses for potential care fees.....

@markevans1947 23 дня назад

At 55 you showed he can take just over £2,200 until 80 does that include state pension from 67?

@AlexNorman-Jones 23 дня назад

Yup so the state pension is factored into that. In other words, even with the state pension kicking in at 67, this is how much income he can take from 55-80. At which point modelled his expenses dropping by 25%.

@AG-so4gl 23 дня назад

I sold up cashed in my chips , heading to SE Asia. Make your hard earned savings work even harder for you. Live a quality early retired life for 2k a month

@AlexNorman-Jones 23 дня назад

nice - where abouts went 10 years ago....crikey that does make me feel old....

@pete1996 23 дня назад

I watched lots of videos like this and not one of them details the impact of tax on pension income, especially when the state pension kicks in - Why Not?

@AlexNorman-Jones 23 дня назад

takes tax into account on the figures automatically. I can show it easily enough....will bear in mind for next time thanks

@DeeCee-nb6ev 23 дня назад

With only 12% of people having a pension pot of this size or larger it’s hardly relevant to the average person.

@Hawks1980 23 дня назад

I'd suggest that people watching pension-related content on RU-vid are likely to be taking an active interest in their pension and therefore likely to consist mainly of that 12%. The "average" person doesn't take enough interest in what will happen to them when they retire which is why most won't end up with a decent pension. If you invest small sums each month over your working life then reaching £500,000 should be achievable even on the average wage in the UK, particularly with auto-enrolment and matched contributions from an employer

@AlexNorman-Jones 23 дня назад

well said!

@lyndonrichards5279 23 дня назад

@@Hawks1980I'm average, I'm over that

@barnoluk9272 23 дня назад

Also average pension pots will rise as current retirees haven’t benefitted fully from auto enrolment. Just because you haven’t saved up that amount doesn’t mean others arent

@OneAndOnlyMe 23 дня назад

I'm an average person, have 500k in my ISA and another almost 300k in my pension, and 300k equity in home. I'm 53. It comes down to being proactive in your 30s/40s. I started my ISA in 2010 with 40k.

@OneAndOnlyMe 23 дня назад

500k for a 30k a year for a single life annuity, I'd take that option.

@AlexNorman-Jones 22 дня назад

become a lot more popular with rates rising....

@OneAndOnlyMe 22 дня назад

@@AlexNorman-Jones I always figured annuities would come back around into favor.

@KevinOLoughlin-ys5ef 19 дней назад

They were pretty naff a while back when I started looking back in 2020 as draw-down was popular but I saw a figure the a couple of days back that shows annuities are up by around 25%-30% between just 2022 and 2024! I think is said £100k would buy £6k in 2022 and today you can get £7.5k in 2024 and they're still rising. To me the key is consider inflation seriously, do you index link to cover inflation as you get older or play it by ear as you get older just cutting down your spending.

@OneAndOnlyMe 19 дней назад

@@KevinOLoughlin-ys5ef Logic would suggest the best time to buy an annuity is during an inflationary period, as inflation peaks come and go in cycles. So buying one at the peak could result in a retirement with a falling period of inflation in the beginning, then a rising one in the latter half, giving time to adjust. (Of course, there could be future black swan events.)