Retiring on a lottery win

https://www.theguardian.com/money/shortcuts/2017/oct/17/the-big-money-question-would-you-quit-work-for-1m

 

How much do you need to retire on?

 

I don't think there's a single answer to this question, but the guy in the article who suggested you'd need 30 to 50 million is clearly off his head!

 

With a win of just 1 million though, I don't think anyone under the age of 40 should consider retiring, simply because of the effects of inflation on the capital and the income it would provide over the next 40 - 60 years.

How much do you need to retire on?

 

I don't think there's a single answer to this question

Answered your own question, in a way: it's a highly subjective question, because contingent on how people picture their retired life in so many years' time. Which is hard-bounded at the other end, by the reality of what lifestyle whatever pot you've managed to accrue by that time, actually buys you.

 

Personally, I'm a realist: I know my notional retirement time comes in 20 years, and that, given the various trends of the past couple of decades at least (economical upheavals, short-termism, nationalist errances, stagnant interest rates, <etc.>) -regardless of multifarious debates to be had about the rights and wrongs of those beliefs- I'll never be able to afford to retire.

 

At the very least, short of a world war and/or a pandemic (assuming I survive them at all), not on the sort of retirement which my baby boomer parents and their generation have been, and still are, enjoying. Not that I mind, mind you: retirement seems to kill the vast majority of people who try it

 

Given £5m, though...I might consider part-timing it

I don’t bother thinking about retirement - by the time I get to that age it is going to be pretty awful around.

It is not unreasonable to expect 4%pa from an investment fund.

Higher returns are likely, but let's stay at 4%.

With £1million, that will allow you to draw £30,000 aged 40 and then increase that drawing by 10,000 every ten years and you will still have £500,000 at age 95 and drawing £80,000 pa.

 

If growth is down at 3%, you'll run out just after 80 years old.

At 2%, around 75.

Edited October 18, 2017 by cgksheff

It's an interesting topic of speculation in our household. I will explain the reasoning for needing a substantial amount (like tonight's 25 million).

 

Factors if we'd win-

 

1) We'd want to substantially change up our lifestyle

2) We'd be bored stiff doing nothing

3) We'd want to live in multiple countries

4) We'd want family and close friends to potentially benefit

 

Taking that into account, what would we want?

 

a) A hotel in the Highlands - with access to open water. The hotel is to be run as a commercial enterprise 48 weeks a year, minus 2 weeks in spring and 2 weeks in autumn when it would be a private retreat for us and family. It would be run by some family members who are already in the trade - they'd live off the profits. It would cost around 8 million in investment - it should be profitable but we don't expect the profit to come back to us.

 

b) A 'grachtenpand' in our old city of Groningen. It would cost around 1 million to buy, 50K a year to run. It would be our main place of living and be on open water.

 

c) an old farm in my native Fryslan (near Groningen) with open access to water. It would cost similar to the 'grachtenpand'. It would serve as a summer-base and a place where we can gather with family and friends and malark about in the lakes and canals. It is also where we'd run a professional dog-kennel with live-in/on site staff (again family).

 

d) the open water theme is crucial - we'd want a substantial yacht to sail the blue seas. It would be permanently moored in a sea-harbour whilst we'd use a motor-cruiser to get to and from it when we are in the Netherlands. The yacht would cost around 2 million plus 100K a year to run (with skipper), the motor-cruiser (or tender, although it wouldn't really be one) would cost around 250K plus 20K a year to run.

 

That means: 12,25 million investment, plus another 2,75 million for interiors, cars, art etc. That leaves 10 million in cash which will be invested so that it generates around 400K per year. Of that a whopping 220K goes to running costs, 80K to the kennel, that leaves us with a nice but not huge 100K a year for living costs.

It is not unreasonable to expect 4%pa from an investment fund.

Higher returns are likely, but let's stay at 4%.

with £1million that will allow you to draw £30,000 aged 40 and then increase that drawing by 10,000 every ten years and you will still have £500,000 at age 95 and drawing £80,000 pa.

 

If growth is down at 2%, you'll run out aged 75.

 

What you gonna do with that when your 95? It’s likely you’ll die before that anyway?

What you gonna do with that when your 95? It’s likely you’ll die before that anyway?

 

It is just an illustration to show that you can live quite comfortably off £1m.

In 50 years time, you may well need £80k pa to survive.

 

All pension annuities that are offered these days are equivalent to a drawdown until the age of 95.

If you die sooner, your provider wins.

It is just an illustration to show, that you can live quite comfortably off £1m.

In 50 years time, you may well need £80k pa to survive.

 

All pension annuities that are offered these days are equivalent to a drawdown until the age of 95.

If you die sooner, your provider wins.

 

Sorry I misread your post - I understand.

I don’t bother thinking about retirement - by the time I get to that age it is going to be pretty awful around.

 

Missing the point though, how much would you have to win today to enable you to retire tomorrow?

 

---------- Post added 18-10-2017 at 12:47 ----------

 

It is not unreasonable to expect 4%pa from an investment fund.

Higher returns are likely, but let's stay at 4%.

With £1million, that will allow you to draw £30,000 aged 40 and then increase that drawing by 10,000 every ten years and you will still have £500,000 at age 95 and drawing £80,000 pa.

 

If growth is down at 3%, you'll run out just after 80 years old.

At 2%, around 75.

 

Interesting way of looking at it.

 

I was thinking more like, you could get 5%, but if you simply took all the income then by the time 50 years has passed the income will actually be below minimum wage, and the capital will be worth enough to buy a (nice) new car.

 

http://www.bankofengland.co.uk/education/Pages/resources/inflationtools/calculator/default.aspx

 

Based on the inflation from 1966 to 2016 btw.

 

---------- Post added 18-10-2017 at 12:51 ----------

 

It is just an illustration to show that you can live quite comfortably off £1m.

In 50 years time, you may well need £80k pa to survive.

 

All pension annuities that are offered these days are equivalent to a drawdown until the age of 95.

If you die sooner, your provider wins.

 

Oh, I didn't realise you were thinking that was comfortable living.

 

30k a year wouldn't be enough for most people with a career to retire on.

If your household income is 100k today then there's no way you could cut that to 30k and maintain the same lifestyle.

And there's little point in only 1 half of a couple retiring.

 

---------- Post added 18-10-2017 at 12:52 ----------

 

It's an interesting topic of speculation in our household. I will explain the reasoning for needing a substantial amount (like tonight's 25 million).

 

Factors if we'd win-

 

1) We'd want to substantially change up our lifestyle

2) We'd be bored stiff doing nothing

3) We'd want to live in multiple countries

4) We'd want family and close friends to potentially benefit

 

Taking that into account, what would we want?

 

a) A hotel in the Highlands - with access to open water. The hotel is to be run as a commercial enterprise 48 weeks a year, minus 2 weeks in spring and 2 weeks in autumn when it would be a private retreat for us and family. It would be run by some family members who are already in the trade - they'd live off the profits. It would cost around 8 million in investment - it should be profitable but we don't expect the profit to come back to us.

 

b) A 'grachtenpand' in our old city of Groningen. It would cost around 1 million to buy, 50K a year to run. It would be our main place of living and be on open water.

 

c) an old farm in my native Fryslan (near Groningen) with open access to water. It would cost similar to the 'grachtenpand'. It would serve as a summer-base and a place where we can gather with family and friends and malark about in the lakes and canals. It is also where we'd run a professional dog-kennel with live-in/on site staff (again family).

 

d) the open water theme is crucial - we'd want a substantial yacht to sail the blue seas. It would be permanently moored in a sea-harbour whilst we'd use a motor-cruiser to get to and from it when we are in the Netherlands. The yacht would cost around 2 million plus 100K a year to run (with skipper), the motor-cruiser (or tender, although it wouldn't really be one) would cost around 250K plus 20K a year to run.

 

That means: 12,25 million investment, plus another 2,75 million for interiors, cars, art etc. That leaves 10 million in cash which will be invested so that it generates around 400K per year. Of that a whopping 220K goes to running costs, 80K to the kennel, that leaves us with a nice but not huge 100K a year for living costs.

 

So if you won 10 million (for example) which wouldn't support the plans above, would you choose not to retire? Or would you just cut your cloth accordingly and not for example 'invest' 8 million in a hotel that is simply for the purposes of a two week holiday once a year?

 

Oh, I didn't realise you were thinking that was comfortable living.

 

30k a year wouldn't be enough for most people with a career to retire on.

If your household income is 100k today then there's no way you could cut that to 30k and maintain the same lifestyle.

And there's little point in only 1 half of a couple retiring .......

 

I don't disagree. It would often depend on whether you are still paying a mortgage.

But there must be plenty of people in Sheffield with a household income below £30k.

It depends on how you want to cut your cloth.

 

Personally, it would put me in the nice position of knowing that I could live on it if need be, and so be more comfortable in my work, where redundancy rears its ugly head more often than it used to.

With £1million, I would pay off the house, put the rest into growth funds and look at retiring around 55.

 

To actually retire today, I would prefer to have at least £2million.

If you were to win £1 million you could live a very comfortable life in somewhere like Thailand.

I don't disagree. It would often depend on whether you are still paying a mortgage.

But there must be plenty of people in Sheffield with a household income below £30k.

It depends on how you want to cut your cloth.

Yep, absolutely.

I suspect that households on <30k wouldn't retire at all though, or if they did it would be a temporary retirement as the money would be all gone in 10 years.

 

Personally, it would put me in the nice position of knowing that I could live on it if need be, and so be more comfortable in my work, where redundancy rears its ugly head more often than it used to.

With £1million, I would pay off the house, put the rest into growth funds and look at retiring around 55.

 

To actually retire today, I would prefer to have at least £2million.

Yeah, not dissimilar to me. We could probably retire on 2, 3 would be better.

1 would make some differences, but not retirement.

 

---------- Post added 18-10-2017 at 13:58 ----------

 

If you were to win £1 million you could live a very comfortable life in somewhere like Thailand.

 

On the income from it? Because the argument about inflation still applies, in 40 years time that income will be much reduced and the capital will be worth considerably less.