I am increasingly worried about getting old. More particularly how am I going to finance my retirement. I’m almost at an age where if I tripped and fell, I would have “fallen.” I’ve even caught myself making an “ahhh” sound when I sit down in a comfortable chair and an “ooof” when I get up again.
Last weekend I left the garage door wide open with the lights on for hours after carrying some chairs to the car. I probably got distracted. I’m sure I need to change a fuse somewhere. Then, after cooking the most delicious roast lunch (I gave in and fired up the Aga for the weekend), I left the sauce simmering all afternoon.
Signs of a failing mind? I’m sure I’ve left my marbles somewhere. I hope they are in a safe place.
These incidents raise a question. How much do I need to save for a comfortable retirement?
I’m not the only one worried about this enigma. Three-quarters of savers (77 percent to be precise) don’t know how much income they’ll need and only 20 percent are confident they’re saving enough, according to research by Hargreaves Lansdown. Even though 76 percent of all statistics are made up, I’m 100 percent sure I’m not in the top 20 percent.
According to the research, 40 per cent of the UK population is on its way to “moderate” retirement. The Pensions and Life Savings Association defines £20,800 as a “moderate” income for a single person and for a “comfortable” retirement, including three weeks’ vacation in Europe, you’ll need £33,600. Or £49,700 for a couple.
I wonder if this is a new definition for the word “comfortable” that I wasn’t previously aware of. For me, a comfortable three week European vacation would involve staying at La Réserve de Beaulieu. And that’s your busted annual budget.
It’s clearly time to create a cost of living spreadsheet. For this exercise I would suggest pouring yourself a large gin and thin tonic (still defatting) to deal with the inevitable bad news. Council taxes, home and health insurance are the best part of £20,000 a year. Club memberships, overseas property service charges and the beach hut add up to another £10,000. Cars pull £15,000 and I still haven’t eaten.
There are trips abroad, gifts, going out, takeout, subscriptions, and unexpected expenses on things that wear out, need service, or replacement. Next up is the cost of energy: shudder! — home maintenance and projects such as a walk-in closet and expanded kitchen-dining room, adding to the budget for unnecessary and frivolous clothing and purchases.
The garden needs tending (I only do glory things after the beds have been dug and the grass mowed) and the house needs cleaning. Preferably not by me. And I forgot about the dogs. That’s another £6,000 a year with the vets bills included.
After all this analysis, I am distracted. I have never been that old. Worse still, I will never be that young again. It doesn’t matter how many pairs of Moncler sneakers he buys or how many times he listens to “Harry’s House” by Harry Styles. The graying hair and the new signed look are testimony to that.
The only reason we target millennials, Gen Y or Z or whatever they are now, is because we’re jealous. Jealous of a full head of hair that grows where it should, as opposed to the ears and nose. And as I get older, health problems start to murmur. Is it worth the headache to do this analysis? Will I be able to physically do all the things I want to do when I retire anyway?
The terrible economic situation accumulates more pressure on personal finances. Inflation forces you to save more to get the same result, while rising taxes and frozen allowances eat up what you can set aside. Rising interest rates have added to mortgage costs, and falling markets deplete your pension fund. He’s back at the spreadsheet, wearing a pair of reading glasses.
With pension planning, there are some general rules. First, you must save at least 12 percent of your earnings each year. Until I went freelance 15 years ago, I was pretty good in that department. Since then? Not that much. Telling yourself that you must make such sacrifices falls into the same category as cutting back on alcohol, never smoking, and eating less salt. Generally, on deaf ears, until it’s almost too late.
The big unknown is how long I will live. If I buy an annuity, turning a lump sum into annual income, how much would I get? At current rates, for a 55-year-old it’s £5,000 per year for every £100,000. At 52, I’m almost there. That’s a lot of lump sums to save.
Maybe that triple pension that everyone keeps talking about will help? I have to wait 15 years until I can collect my state pension. Although it costs about £10,000 a year, it will only fund my big fizz habit, an annual ski trip and a few pairs of underwear.
In my fantasy retirement I would go to the Caribbean for the winter months. It would save on heating bills. Antigua would be my pick, but you’d be better off budgeting £15,000-20,000 a month to rent a half-decent apartment. More if you want a house. You’ll still have to buy groceries, rent a car, and the inevitable costs of living the high life.
However, all these fantasies about retirement options are not going to work if there is no money. Perhaps the best option is to become friends with someone who has a house or a huge yacht. After all, what’s the point of having rich friends if they’re not going to invite you to stay? Surely they will get bored without you?
The simple conclusion is that I have not saved enough. Pension calculators tell me that I have about 67 percent of what I need to live the lifestyle I want to maintain.
You better face the facts. I will never be able to retire. Maybe I’ll reinvent this column so I can write forever. The problems of the old. That sounds like it.
James Max is a television and radio host and real estate expert. The opinions expressed are personal. Twitter: @jamesmax