How Much Can I Spend in Retirement with a £500,000 Portfolio?

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Financial Planning

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00:00 Death of a friend
00:49 Jess & Jack’s financial situation
01:29 How much will I spend?
07:49 What everyone forgets
10:05 What about inflation & investment returns?
12:42 How long will I live?

[JamesShack]

Do you find these types of examples useful? Are there any other situations you would like me to cover?

[jeromesand]

i'm 57years old and already have $690, 000 saved and I'm about to retire in two years but I'm worried about rising inflation. Is this enough for a very good comfortable retirement, I’m looking at investing in estates and stocks maybe

[jablot]

I completed my bucket list when i was young. I paid my mortgage off by aged 40, ive never had a job that paid the average UK wage. I semi retired at 53 then fully at 59. I live a good life on £1k a month doing exactly what i want and have money left over. When the state pension kicks in at 67 im going to have £1k a month spare ! You dont need alot to have a GREAT live.

[liammullan]

James your videos are very generous spirited. You're a professional in the industry but while many hold their cards close to their chests you appear to genuinely care about helping others. Good on you.

[paulbowers]

If I could offer a single piece of advice if you have ageing parents - make sure you set up Power of Attorney over their health and wealth. My mum contracted Dementia and quickly lost her ability to make sound decisions and look after herself. We realised quite quickly that we needed to step in but without Power of Attorney the ability to do the simplest of things (like speaking to her bank) was nigh on impossible. We then realised it can take up to 6 months for POA to be set up. I recommend setting this up whilst they are well. Indeed if you are reaching into your 60s, I would recommend organising this for yourself so you dont place that burden on your children

[getreal]

Had to put my dad in a care home a few years back. Cost me £75, 000 over two years but he was very happy there and great care so wiped me out a bit but still the best decision for both of us !

[ChrisShawUK]

This is another excellent example of a financial planning service that I'd dearly love to buy.

I'm 55 and been retired for five years. I have my own home-made spreadsheets that address some of these issues, but not the stress testing with historical data.

The only thing I'm not prepared to do is hand over x% of my portfolio in fees for the next few years to get the advice today.

The amount of work in providing a plan like this looks fixed .... Yes it might vary by a few hours, but it should be possible to price up a service that i can buy with cash up front.

[sarahbarnard]

Another great video. My father is 92 and has recently gone into a care home; it costs £1000 per week (and this is actually at the lower end of the cost of care homes). His very modest Church of England pension plus his state pension covers just half of this; the rest he has to find from his savings. We are very glad he has the money to pay but it won't last long... Definitely more focused on planning for care costs in our old age now - thank you for highlighting this James.

[eddied]

James - this is one of the best videos you've made (again) and should be required viewing for everyone thinking about when to retire. The importance of giving real thought to the questions you raise is essential, as is facing a few uncomfortable truths, like 'when am I likely to die?'. Also, accepting what we cannot change and accepting the future is uncertain but having the confidence in yourself to adapt is what will help people get 'over the line' and retire before it's too late. An excellent video that addresses all these important points.

[rch]

Make sure you spend as much money and enjoy yourself instead of holding back money for care. They will strip you of all your remaining money (up to £23k) but those who have not worked or saved will get exactly the same level of care. Completely unfair but that's how the system works.

[Oppledom]

James you have to be the best finance communicator. I'm of a similar age in the UK and having a large and slightly sobering view of the importance of my pension which I had overlooked massively. I am also grateful that I went to so many festivals and travelling in my twenties though.
I work in Retrofit and I really think this couple and any couple should consider those astronomical energy costs. Payback on certain measures alone like loft insulation, cavity wall (though I suspect they live in a tradiation building with those bills) or even solid wall insulation could be just a few years. Solar PV now is an absolute no brainer if anyone has capital and wants to stay in their current home for at least 7 years. Especially effective if combined with heat pumps, EVs and battery storage . Thanks for your work !

[raulduke]

I work in care - the people who are happiest in a care home are ALWAYS the ones who planned ahead, went into a home on their own terms and aren't worrying about the burden on their kids.

And it is a burden, at least initially. Kids often feel like they aren't doing enough, worry that they haven't found the right, safe, place and that their parents are going to be wiped out financially. Imagine believing that your parent might run out of money & thinking that they could be thrown out of their home!

It's an unfounded worry, any home worth its salt will work with families in advance to find solutions that work for everyone. You'll worry about it too though when it happens. We all will, because we care about our parents and want the best for them.

[tomwestcott]

James, please do a video talking about DB pensions, their pros and cons etc. I love your videos but as I work for the nhs I don't know how to apply them to my retirement plans. there are millions of us in the uk with DB pensions, i cant be the only one who would find this very helpful.

[gregarmstrong]

Any chance of a video on partial retirement/flexible retirement? It seems like the ability to "retire", but still have the option to pick up part time work here and there would make a big difference to mitigating a lot of the risk.

I'm 33. Talking with friends, it seems like many people my age aren't looking at a traditional "work until x, then retire" plan. Especially as we see the state pension age increasing over our lifetimes (if we even get a state pension). Many people my age are looking at building their own financial independence and having to do a lot of the sort of calculations and risk analysis that you talk about. We often look at best/worst case scenarios in terms of portfolio returns and inflation rates, but we don't often talk about active measures people can take to mitigate those scenarios at the time. Personally, I'd be happy for many of those years to jump in and out of contract/part-time/self employed work to help balance the books while still having many of the benefits of retirement. For example, if I'm looking at a 3% drawdown rate, could I maybe push that to a 3.5% if I was happy to take a work a couple of days a week when the markets were bad/inflation rates were high? Maybe I don't mind working a few days a week over winter while the weather's bad, but I want to spend my summers with lots of free time enjoying the outdoors, etc? I'd be interested to know how we might assess/analyse these sorts of options.

Sorry, I know there's a lot of variables in there. It just seems like all the content I find on retirement is based on an all-or-nothing scenario, which I'm worried many of us won't have the luxury of unless we want to retire at 80.

[Mikey_NoCap]

James, 3 years ago I had to help mum put my dad into a nursing home. Poor old boy had and still has vascular dementia. The 12 months leading to that was so hard and thinking about finance was the last thing we could do. Dad’s share of the family nest egg was soon eaten away by fees, luckily in the uk once below a level the local authorities kick in, but we are still contributing over £1700 a month to his care. He has been in there for 3 years now. Mum is now starting to falter as well so potentially she could need more care soon. It is never too early to think about the care challenges, but what I would add is seeing my dad deteriorate so quickly was a smack of mortality for me, meaning I have taken the plunge and retired just last week age 54. Unless you have been through it I would suggest people can go blind into the challenges so I would recommend have the difficult discussions early and often, rather than be forced into action.

[gadagaz]

I honestly dont understand how someone earns £4k a month and spends £3.8k of it having paid a mortgage off. I mean, surely thats the issue more than anything?

[nintendokings]

I work in Income Max (basically doing the finances of putting people in care homes) and it’s shockingly expensive. A few years in a care home will wipe out a 6-figure sum

[tlangdon]

Going down to one car is certainly feasible and was a change that we made when we retired. As retired persons, we have so much flexibility that there is rarely ever a time we both want the car at the same time. I'm also happy doing basic car maintenance, which is why we've only spent about £1, 000 on maintenance over the last four years. Our car insurance also went down because no longer needed cover for commuting.

[craftypam]

I can't imagine what they are spending all that money on! My partner and I have been retired for some years. We don't travel much, having been there, done that in our younger years, but we have a comfortable life, own a detached house, heated to our preferred temperature, have one car, do whatever we want to do, eat well, etc ... we put £300 a month each into a joint account, from which all household and communal expenses are paid. We just took £2500 out of this account because it was getting too big. Personal expenses (clothing, individual activities and hobbies, gifts etc) are paid separately by each of us. If we spend £1000 a month between us, I'd be surprised. I'm even able to put money into my SIPP & ISA from my State Pension/investment income each year. They need to review their bills - I bet everything except council tax (the only thing of ours which was higher, but it's not something you can negotiate) could be drastically reduced, by changing supplier, or just getting a better deal with the current one.

[burnt]

Hi James, could you do a video for 18-23 year olds. How you would plan everything from the start with all the knowledge you have now. Like a step by step, best things to do financially. Great video!