How much is enough?

One of the regular questions asked of us by clients is, “Do I have enough money?”

The unasked part of this question is “…to last me through my retirement?”

Some Financial Planners describe this as “the number” in the context of the question, “What is your number?”

The answer for everyone is of course different. It will depend upon their individual lifestyle.

Those who want to enjoy regular exotic holidays, travel, new cars, eating out and entertainment will probably have a bigger number than those who simply wish to secure the basics in life.

This week I was with a client with exactly this question in mind.

He and his wife would shortly be stopping work. They were looking forward to a guaranteed regular income from their company and state pensions but it would not be enough to secure the lifestyle that they required.

The couple would have to put their savings and investments to work to gap-fill the difference between their pension income and their anticipated spend.

One rough and ready way to consider their position was to divide the current value of their capital by the amount of income that they needed in addition to their pension income.

The answer was 35 years! They could spend their savings and investments over the next 35 years and have the lifestyle they wanted.

This of course ignores a number of important factors such as inflation, interest earned and growth in the value of their investments.

But it was to say at least reassuring, after all they would be aged 102 before they ran out of their gap-fill money!

The answer to their question will need to be tested by some robust Financial Planning and cash flow forecasting but more than likely it was “yes, you have enough.”

Do I have enough money to last through my retirement? @nickbamford on answering this important question Share on X