Does my savings milestones make sense?
I am a big fan of trying to come up with a clear narrative of savings goals. Not just for me, but for my partner - without getting too bogged down in details.
My current thinking is the following
We have broke down our retirement needs into two numbers (rounded them a bit for convienience)
£26k Bare minimum figure. Pays the bills, food etc, but not much else
£47k "Luxury" retirement figure. We tried to brainstorm all the sort of things we'd like to do in retirement (spa days, budget for our hobbies, holidays, etc). I don't think we'd in practice spend that much per year, but it's good to be ambitious here.
We also have £155k left on mortgage
We are both 41
Then, break down the milestone as follows
4% rule. Absolute bare minimum pot required, very risky though, likely need to find more money somehow
(£26k*25)+£155k =£805·K
3% rule, safer, but still a miserly retirement
(£26k*33.33)+£155k =£1,021.58·K
4% rule on luxury spending, still risky, but as its luxury, we have some flexibility, could cut back on spending if required
(£47k*25)+£155k =£1,330·K
3% rule on luxury spending, our real goal. Should be comfortable with this pot. Saving significantly beyond this starts to trade amassing tons of money against years of life
(£46k*33.33)+£155k =£1,688.18·K
Other info
- No dependants
- Leaving an inheritance to some family is nice, but not a priority. If we have to use home equity for care later in life, that's fine
Essentially I have this modelled in a spreadsheet, where it has columns deducting our total savings/investments vs the milestones so we know how much more to save (and have a slight endorphin hit when our savings go past a milestone), and I update the mortgage number every month.