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I guess we’ve all got used to prices going up again by now. But a £2,100 jump in just 12 months in the income needed to fund a comfortable retirement is still a little shocking.
That figure comes from the latest Pensions UK Retirement Living Standards survey:
Source: Retirement Living Standards
Most people are not on track to enjoy the right-hand side of that reality. Yet if you talk to them about their imagined retirements, they hardly describe a basic Pot Noodles and the telly lifestyle.
As Which reports:
Pensions UK says that around 82% of the working population are expected to reach the minimum standard of living in retirement, with just 23% and 9% expected to reach the moderate and comfortable standards respectively.
Last week, the Pension Commission warned that 15 million people are undersaving for retirement.
Of course Monevator readers are a different breed: mostly numbers run, plans in place or crystallised. But if you want a quick sanity check, wealth manager Quilter calculates you now need a £691,000 pot to retire comfortably.
Its figure is based on a single person retiring at 66 on a 6.1% escalating annuity, and with no housing costs:
Source: Trustnet / Quilter
We’ve looked at the Retirement Living Standards numbers before. They always generate disbelief disgust disquiet a lively discussion.
The Accumulator has called dibs on diving deeply into them again in the near future, so don’t go retiring* until you’ve read his take.
Have a great weekend!
*Not investment advice. Retire when you’re ready to. But be prepared to do so with fewer of TA’s puns and 1970s children’s TV references at your back.
From Monevator
UK tax brackets and personal allowances – Monevator
Laissez-FIRE – Monevator
From the archive-ator: Comparing the cost of electric car ownership – Monevator
News
Half of London flats are selling at a loss, and the crash is spreading… – This Is Money
…with house prices in most regions mostly softening, too – Which
Cash ISA rush sees savers pour £83.2bn into accounts – This Is Money
UK assets face underestimated risk event [Andy Burnham], analysts warn – CNBC
Britain to suffer biggest G7 jump in unemployment, says OECD – This Is Money
Tenant unions mobilise to oppose any rent increases – This Is Money
Third of Britons say university not worth it, as student loan inquiry begins – BBC
Alphabet’s $80 billion stock sale in ‘unprecedented territory,’ says Goldman – CNBC
Puffin and bumblebee among 18 creatures shortlisted to feature on banknotes – BBC
CAPE ratios haven’t been indicating like they used to – Piper Sandler
Products and services
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Barclays scraps monthly customer fee for self-directed investors – Yahoo Finance
Monzo is launching a mobile network with a loyalty bonus – Be Clever With Your Cash
Seven mistakes to avoid with your mortgage application – Which
Get up to £1,500 cashback when you transfer your cash and/or investments to Charles Stanley Direct through this affiliate link. Terms apply – Charles Stanley
Cheapest buy-to-let deals for landlords – Which
How to keep your Amex points when you cancel – Be Clever With Your Cash
Get up to £200 cashback when you open an Interactive Investor SIPP. Terms and fees apply, affiliate link – Interactive Investor
How to save money on cinema tickets – Which
Landlords rush to protect income over Renters’ Rights Act fears – City AM
Homes for sale with water views, in pictures – Guardian
Comment and opinion
The dangerous allure of Die With Zero – Jordan Grumet
Being useful is more attractive than being rich – Of Dollars and Data
How much should retirees worry about inflation [US but relevant] – Morningstar
MSCI: the global equity tollbooth – Fiscal.AI
“Am I lower-value human capital?” [Paywall] – FT
William Bernstein: the many utilities of retirement – Advisor Perspectives
Please, stop chasing fund performance – Behavioural Investment
The triumph of capital – Slow Boring
Selling abstraction [Deeeeep…] – Asterix
Investors don’t allocate rationally shocker [Research] – Alpha Architect
SpaceX IPO mini-special
How will these IPOs change the face of the stock market? – Morningstar
UK investors have just a few days to sign-up for IPO shares – This Is Money
By catering to SpaceX, index companies have destroyed their credibility – Phil Bak
What is SpaceX really worth? – Morningstar
SpaceX needs to get to $5 quadrillion to rival Mag 7 magic – Bloomberg via A.P.
Naughty corner: Active antics
Why isn’t oil more expensive? – Semafor
What if the AI boom goes into reverse? – Reuters
Disrupted or dead: AI is crushing pre-ChatGPT startups – CNBC
Are auditors good stock pickers? – Klement on Investing
Berkshire beyond Buffett – Max Anderson
Are Diageo shares a recovery play? [Affiliate link] – II
Software stocks bounce on comments from nVidia’s CEO – Sherwood
The family feeling – Investment Masterclass
Kindle book bargains
Quit Like a Millionaire by Kristy Shen – £0.99 on Kindle
The Algebra of Wealth by Scott Galloway – £0.99 on Kindle
Misbehaving: Behavioural Economics by Richard Thaler – £0.99 on Kindle
Wankernomics by James Schloeffel – £0.99 on Kindle
Environmental factors
The way Americans farm pigs is a sin – Noahpinion
UK’s green economy worth more than £100bn a year, research finds – Guardian
The Amazon’s path from crisis to durability – Mongabay
“Day and night no longer exist”: life in the hottest place in India – BBC
Dismay as Trump officials to dismantle key ocean monitoring system – Guardian
Reform council vows to call off the climate emergency – BBC
Robot overlord roundup
How do you teach a robo-taxi London? Waymo explains – City AM
Model routing is one fix for AI overspending – CNBC
Is OpenAI on its way to becoming Lyft? – Sherwood
Inside the AI boom’s arctic outpost – Time
Starbucks retired its AI agent just months after deployment – Fortune via Yahoo
Can we trust AI to build a better version of itself? [Paywall] – FT
Microsoft says new quantum chip 1,000 times more reliable – BBC
Not at the dinner table
Britain is a swamp of lies, and we got here on the Brexit bus – Guardian
Why Europe shouldn’t close its doors to immigration – Uncharted Territories
Trump’s puzzling strategic retreat from East Asia – Drezner’s World
Wealthy Americans: just stop moaning and pay your taxes [Paywall] – FT
Trump takes his cut – The Atlantic
Off our beat
Did you already win at life? – Kindness FP
Doing weights for two hours a week slashes the risk of early death – Sky
Restaurant critics on 14 ways to order the perfect meal… – Guardian
…and Feynman’s formula to find the best holiday restaurant – Guardian [& Paper]
Orcas and ourselves – Aeon
After a baby, there’s no ‘normal’ way to return to work – The Joint Account
No slave to the smartphone – Simple Living in Suffolk
Just make the coffee – The Retirement Manifesto
[Want to feel old?] Spotify’s most-streamed albums ever – Voronoi
And finally…
“If you look at a 40-year chart, the market-performance graphs are smooth and rising. But living through this period on the ground, there were many moments of terror when it seemed like the world was coming to an end.”
– Lloyd Blankfein, Streetwise
Note this article includes affiliate links, such as from Amazon and Interactive Investor.
I loved Jordan Grumet’s deconstruction of Die With Zero.
I recently had reason to apply extreme force financially to get out of an unforeseen bad situation, nobody’s fault, just shit happening. Most of what I risked to fix this will probably return to me in time, but I could take the risk without requiring that guarantee.
Before then I have given people significant amounts to clear crappy situations people I care about ended up stuck in.
As you get older it’s not about the stuff and the experiences you buy, it’s more about what you stand for, what do you know, whom do you serve. The whiff of Protestant work ethic in Jordan’ post slightly grated, I am not sure that a good Lord who valorises works is worth believing in.
But regarding what you do/did with your one wild course through life, the bits that matter aren’t on the Instagram feed. They are your character. How did you affect those around you. And I am short on this in many ways, but the greatest things I have done with money once I had some were things you can’t touch. So from a slightly different angle to Jordan, I agree. DWZ is bunk. It helps in clarifying the thought processes, but that extreme position is there to train the mind, not inform it, as a mystic once said of her magnum opus.
@ermine – you are quite close here to Luke 12:13-22 (the parable of the “rich fool”) – and indeed the latter verses are a bit of an antidote to the Protestant work ethic in my own reading (although too laisser-faire for almost any Monevator reader, I suspect).
As I get older, despite being more or less atheist, I find these kinds of older wisdoms make more and more sense, and modern expressions of the same ideas less compelling.
Good to see that, unlike most others, S&P didn’t change their index rules to accommodate SpaceX
@LCD Agree – at least there’s some hope! Shame that will mean people may be considering switching funds just to avoid this blatant manipulation, and in many cases that would mean going from a simple all-world fund to country/region-specific ones, even splitting large cap vs small/mid cap for the US (since even the S&P and Dow Jones Total Market funds will include SpaceX, but the S&P 500, MidCap 400 and SmallCap 600 won’t). Adds a lot of complexity if people want to avoid SpaceX.
That Advisor Perspectives article about “retirement utilities” really struck a chord with me, and offers another reason to avoid the dying with zero approach. I think I’m someone who derives a lot of comfort (utility) from having more money than I need for my wants – what the article calls high omega – and I recognise the fear of the hedonic treadmill that they talk about. I found the article quite reassuring.
@ Invariant: I agree, a useful read. But they seemed to ignore another utility available when you die having successfully avoided poverty – your unspent money might end up with children and grandchildren who might benefit from it in various ways e.g. by enjoying a career more because they’ve got a “get stuffed!” fund up their sleeves.
That too might give you a sense of satisfaction i.e. a “utility”.
I read a lot about the NASDAQ and S&P rule changes to fast track Space X and the AI giants into the indices. Relatively little was said about the World indices, which are likely relevant for a lot of passive investor.
So MSCI has a fast track rule to allow inclusion within 10 days of IPO, while FTSE also changed its rule to fast track inclusion of mega IPOs. So it looks like World trackers are going to be impacted. Good to know no matter if you think this being a good or bad thing…
Another vote for the Advisor Perspectives Retirement Utilities article by Bernstein and McQuarrie. This is an interesting perspective on retirement spending that I have never seen articulated before. I have instantly decided that I am a high-omega type and now this article has given me permission to feel much more comfortable in my own skin!
Another +1 for the Advisor Perspectives Retirement Utilities article, thanks to all for the pointer
Some of the concerns about these huge IPOs skewing indexes to the disadvantage of passive index fund investors may be overdone. Fund managers usually have the discretion to sample their benchmark indices, and it would surprise me if, for example, Vanguard fund managers would not consider it their fiduciary duty to limit their investors’ exposure to these new entrants if in their opinion they risked undermining the underlying rationale for holding an index (e.g. broad diversification versus being instrumentalized to prop up the prices of individual components).
Some of the maths in DWZ got a mauling from Big Ern as well:
https://earlyretirementnow.com/2023/10/06/how-useful-is-the-die-with-zero-retirement-approach-swr-series-part-60/
For me personally, it wouldn’t matter what my net worth, spanking millions on a beach-party would always be vulgar. The utility would be too poor IMHO.
I read, but didn’t really like the book – I’m too anti-materialist for it to chime and I don’t like the discrepancy between success and numerical talent that Big Ern exposes.
Agree, the Bernstein utility link is a good one, like the introduction of Omega into the equation.
If £13900 really is required for a minimal living standard in retirement, then it seems faintly ridiculous that next year the government will be paying less than that in state pension then claiming some back in tax. So why not set the SP and the income tax personal allowance to 13900 and thereafter increase both in line with inflation doing away with the triple lock?
No doubt there are manifold reasons, but it would be nice if life could be so simple.
Re: retirement omega
At 47 and now comfortably FI but not RE, I feel that I am transitioning from high omega to low. I used to be mostly frugal, always searching the best deals and not spending more for luxury, but just don’t find that as enjoyable now. By time I retire I would like to be very close to omega zero, always upgrading to business class etc.
The main motivation for me is inheritance tax which I see as a voluntary tax paid by those who can’t bring themselves to spend their money and also trust the government more than their kids. Do yes, I am fearful
of RIPG!
Oh the irony of finishing a brexit summary article with a clear opinion poll showing people in favour of remain.
(Sorry @TI, I couldn’t resist)