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Old 11-19-2023, 03:38 AM   #1
hazel
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Am I unusual?


Yes, of course I am! I'm unique! But I'm talking here about economics. Today I read an article by two Loughborough academics which stated that the minimum annual income for an acceptable standard of living for a single person in the UK in 2023 is 29,500.

Here are some quotes:
Quote:
This minimum is about having what you need in order to have the opportunities and choices necessary to participate in society. As a participant early in our research said: “Food, clothes and shelter keep you alive, but that’s not living”.

Living with dignity is about more than just survival, it’s about being able to participate in the world around you. MIS [Minimum Income Standard] describes in detail what households require to meet material and non-material needs, establishing baskets of goods and services that combine to provide an adequate living standard.

My two pensions add up to about 2000 per month, of which I usually put away ca.500. So I'm actually living on ca.18,000 p.a. I should be in dire straits and utterly miserable, yet in fact I live very comfortably. I have everything I need and never have to worry about paying bills.

One or two caveats:
1) I own my house outright, so I pay neither rent nor mortgage. Accommodation costs for younger people are insane in the UK at the moment. But I'm not unusual in being a fully paid-up homeowner. That's actually common for people of my generation in their pension years.
2) I don't run a car. Here in the UK, you can't survive without a car if you live in the country, but you don't really need one in London because we have excellent public transport here. I never owned a car (I can't drive) and I never had any difficulty in getting to work.

I know there are some other oldies here. How are they doing?

Last edited by hazel; 11-19-2023 at 03:46 AM.
 
Old 11-19-2023, 04:47 AM   #2
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Never had/earned enough money to be able to go on holidays, or buy a house, nor could I afford to have a car, & at 73, I am living with my sister in her house, on a basic state pension...

I'd probably feel like a millionaire if I got 29,500.

This Government, & others that we've had, just have no clue!!!

Last edited by fatmac; 11-19-2023 at 04:49 AM.
 
Old 11-19-2023, 05:24 AM   #3
yancek
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Seems right to me. The authors don't seem to be referring to existing at a starvation level. The two big factors being home ownership and no automobile. Mortgage/rental payments are often up to 25% of gross monthly income. In addition to the initial cost of an automobile, you have fuel, maintenance and insurance all of which have gone up astronomically in recent years as have home ownership, rental and related costs.
 
Old 11-19-2023, 09:10 AM   #4
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First, you did one or more of the right things. Saved money, bought and paid for a residence, didn't accrue debt. You own your own home. To me (a) since you own it, it means it's not debt (b) a house to me is saving money if you buy one, pay it off, and live in it. You also do not have much, or any debt.

Are you unusual? Maybe yes, maybe no. Yes, I feel there's a lot of society persons who do the exact opposite of the traits I listed above to help their selves live and retire comfortably. No, I feel there are people who do think like you and who do put effort forth towards their future.
 
Old 11-19-2023, 11:17 AM   #5
hitest
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Smile

Quote:
Originally Posted by hazel View Post
I know there are some other oldies here. How are they doing?
I'm doing very well, thank you. Like you my house is paid off and I have no debts. This is due in large part to my Father passing in 2015 and leaving my wife and I an inheritance. We live quite comfortably on our pension income. My wife gets her old age security pension in February, she's turning 65.
The only difficulty that we're presently experiencing is that both of our children are in university and they depend on the Bank of Dad. Thankfully my 29 year old is graduating in September of 2024.
 
Old 11-19-2023, 11:22 AM   #6
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I'm not an oldie, so I can't give you an oldie's point of view. However, perhaps I can raise a few points for your consideration. I shall mostly consider things from the point of view of someone who is single without children (as I think we both fit into this category).

The Minimum Income Standard is produced by the Centre for Research in Social Policy at Lloughborough University. Its recommendations are gross household incomes for a handful of different household profiles (e.g., a single female pensioner; a couple with three children aged 2-4, primary and secondary; etc.). The CSRP updates these profiles every four years with half the profiles updated every two years. In between profile updates, the corresponding household budgets are adjusted annually by CPI inflation. Whilst the budget profiles are constructed through in-depth conversations with members of the public matching the characteristics of one of the profiles, the profiles do not account for potential extra costs caused by things like disabilities or living rurally.

I suspect that the figure for a "person who is living alone" is an adjustment for inflation of the average of the 2022 budgets for the single working-age male and female profiles. Remember, this figure is a gross income. You do not say whether your household income figures are gross or net of applicable taxes (excluding Council Tax and hidden taxes like the TV Licence fee which are budgeted for), but the fact that you say you save 500 of that 2000 per month makes me think that you are talking about the total that appears in your bank account. For a single, childless, working-age person who pays both Income Tax and National Insurance PAYE and also pays a mere 4% towards his pension, to see 2,000 per month in his bank account, he would need to be earning around 30,900 gross per annum (i.e., around 1,400 more than the equivalent Minimum Income Standard budget and some 71% more than your supposed 18,000 annual income).

Interestingly, the 2022 MIS budget for a single female pensioner, when excluding rental or mortgage costs, puts her weekly budget needs at 245.34 or 12,757.68 per annum. If we adjust that 2022 figure for inflation then it's around 14,000 per annum in 2023 prices. If you do earn 24,000 per annum net, how comfortable would you still feel if around 10,000 of your disposable income was stolen each year?

Of course, like all social research, the data used to form the MIS have lots of caveats and problems. There are regional variations and factors not considered which may adjust the appropriate figure up or down according to an individual's particular circumstances. And then one has to consider that this research is conducted and led by academics in social policy with their own biases (just look at the left-of-centre prejudices in that article in The Conversation). And even when one considers that members of the public are heavily involved in the construction of the basket of goods for a supposedly dignified life, this does not involve an objective standard but merely the subjective preferences of the members of the public. Am I supposed to value as objective the opinions on "social and cultural participation" of those that think half-an-hour of soap opera followed by an hour of reality television is a good way to spend the evening? For example, call me cold if you like, but I couldn't care whether granny can afford her weekly bottle of Isla Negra (yuck!) sauvignon blanc from Tesco. I don't drink at home every week (let alone a bottle of wine), so I do not think granny's life is any less dignified if she can't either. (And when granny did have a glass of wine, in valeoak's dictatorship, it would be a nice pinot noir, shiraz or chianti - just no liver to accompany it, please ).

Last edited by valeoak; 11-19-2023 at 11:27 AM. Reason: Typos
 
Old 11-19-2023, 03:42 PM   #7
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Wow, rather than worry about what somebody wrote in a story or said was the outcome of some study/statistic, it's what hazel said in the start of it, some summary where "she's doing fine". That's what matters, the burn rate you have in retirement versus the income and savings you'll have. And that being, the burn rate is comfortably lower than the incoming income, thus you can save for potential rainy days or times where the economy raises the burn rate without a better income.
 
Old 11-19-2023, 05:22 PM   #8
wpeckham
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Situations like yours are not rare or extreme, but getting more so.
In the USA
1. a single health event can generate debt that can wipe you and your savings out, and ruin your credit for a decade or more. You might never recover. A bankruptcy can zero the debt, but only once you are out of resources. And such events are becoming MORE common with time, not less.
2. an education loan cannot be eliminated by bankruptcy, and can grow with time so that you will die in debt.
Success is a matter of chance and good luck as much as it is hard work and smart habits.

Historically these factors were always somewhat true, but we were making things better form the 1930s to the 1970s, then we started a downward spiral that is decimating all but the most wealthy. There are political and social forces driving things in both directions, but nearly all of the economic forces are driving things worse rather than better. We are working on this issue.

Outside the USA is a mixed bag. The UK has, I believe, been better than the USA but there are forces working against it in recent years. (Underfunding National Health, BREXIT, etc)

I have poorly founded opinions about some other countries (Australia, Canada, Mexico...) but would rather ask for observations form those who live there and have made direct observations.

So: you have been lucky! I am very glad for you! Alas, not everyone is so lucky. There are probably more who, often through no fault of their own, have far fewer resources and are in difficulty.
 
Old 11-19-2023, 10:00 PM   #9
frankbell
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I tend to agree with Yancek that the two factors you mentioned--no house payments and no car payments--are likely significant.

I would also hazard that you are savvy enough not be sucked into the cycle of buy! buy! buy! borrow! borrow! borrow! just because you can! that's besieges us every waking minute.

Methinks wpeckham also makes good points about the economy in the U. S. in this New Gilded Age.
 
Old 11-19-2023, 10:58 PM   #10
ntubski
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Quote:
Originally Posted by valeoak View Post
Interestingly, the 2022 MIS budget for a single female pensioner, when excluding rental or mortgage costs, puts her weekly budget needs at 245.34 or 12,757.68 per annum. If we adjust that 2022 figure for inflation then it's around 14,000 per annum in 2023 prices. If you do earn 24,000 per annum net, how comfortable would you still feel if around 10,000 of your disposable income was stolen each year?

Not sure exactly where the numbers come from, but Minimum Income Calculator UK comes up with 20,480/year (1706.67/month) for a pensioner, and 29,541/year for a non-pensioner. This sounds like Hazel is in fact spending just a little over the "standard" minimum for a pensioner. And actually, if I adjust for having to pay 0 rent, the amount is 14,091/year (1174.25/month) which is significantly less than Hazel's budget.
 
Old 11-20-2023, 04:17 AM   #11
hazel
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Thanks @valeoak for a very good account of where these figures come from. I was not aware of the background of the paper. It does seem to agree with a recent report by the Pensions and Lifetime Savings Association which names 34,000 p.a. as needed for a "comfortable" retirement.

Not having to run a car does save a lot and I did mention that. I'm not unaware that for some people, a car is a necessity even for a pensioner.

@wpeckham: I get really angry every time someone mentions the cost of health care in the US, and what it does to people. How the heck can a country that claims to be civilised do that to its citizens? And yes, I have been lucky with my health so far, for which I thank God. If I do fall sick, I might have to wait too long to get effective treatment from our failing National Health Service but I won't go bankrupt either.
 
Old 11-20-2023, 04:41 AM   #12
valeoak
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Quote:
Originally Posted by ntubski View Post
Not sure exactly where the numbers come from, but Minimum Income Calculator UK comes up with 20,480/year (1706.67/month) for a pensioner, and 29,541/year for a non-pensioner. This sounds like Hazel is in fact spending just a little over the "standard" minimum for a pensioner. And actually, if I adjust for having to pay 0 rent, the amount is 14,091/year (1174.25/month) which is significantly less than Hazel's budget.
Please re-read my post, but to break it down:
  • The MIS / MIC UK headline annual income is a gross income whereas the budget profile is looking at expenditures and, thus, produces a net income requirement (i.e., a gross annual income of 20,480 is required for a single pensioner with rent or mortgage costs to produce a necessary weekly net income of 366.26).
  • But we know that hazel owns her house outright and doesn't have rent or mortgage payments to make, so we can strip out the rent payment of 90.01 from that weekly net income requirement, leaving us with a necessary weekly net income for hazel of 276.25 in 2023 prices.
  • "But you said 'her weekly budget need [is] 245.34'! That's wrong." I said that was her weekly budget requirement in 2022 prices. If we take annual inflation at 10.1%, then that 245.34 in 2022 prices becomes 270.12 in 2023 prices. I'm 6.13 off - either there is some additional adjustment being made or a higher inflation figure is being used.
  • "Not sure exactly where the numbers come from..." You mean the net weekly income requirement of 245.34 for 2022? That came from the CSRP's 2022 budget profile for a female pensioner. I linked to it in my post. You even included the link in your quote of my post. You did read it, right?
  • The net annual income requirement for 2022 was calculated by multiplying the corresponding weekly net income requirement by 52 = 12,757.68. How did I get the "around 14,000" figure for 2023? By doing a quick mental calculation of a 10% increase and rounding down. If you increase 12,757.68 by 10.1%, you get 14,046.21, which shouldn't surprise you because that's only ~45 less than your quoted figure of 14,091 per annum.

Hence we come to my point: if hazel's reported income is net income (which as I explained in my post it was reasonable to conclude because of her reference to monthly savings), then she is earning around 10,000 (24,000 - 14,000) net more than what is considered (by this arbitrary standard) the minimum annual net income necessary for somebody in her situation.

I hope that's cleared up any confusion?
 
Old 11-20-2023, 04:51 AM   #13
hazel
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Quote:
Originally Posted by valeoak View Post

Hence we come to my point: if hazel's reported income is net income (which as I explained in my post it was reasonable to conclude because of her reference to monthly savings), then she is earning around 10,000 (24,000 - 14,000) net more than what is considered (by this arbitrary standard) the minimum annual net income necessary for somebody in her situation.
For the avoidance of confusion, yes I am talking about net income. But the average monthly figures on which I based my post come from this year's spreadsheet, not last year's. So it's not appropriate to make any adjustment for inflation.
 
Old 11-20-2023, 05:16 AM   #14
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I scanned through the articles and it looks like the 29,500 is gross salary. I am probably wrong, but could not see a reference to net. When talking about salaries, it tends to be gross unless specified otherwise. Again, maybe I need more coffee and to re-read!
 
Old 11-20-2023, 05:17 AM   #15
valeoak
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Quote:
Originally Posted by hazel View Post
For the avoidance of confusion, yes I am talking about net income. But the average monthly figures on which I based my post come from this year's spreadsheet, not last year's. So it's not appropriate to make any adjustment for inflation.
But it is appropriate to inflate the 2022 figures like I did so that when comparing with 2023 figures, we're comparing apples and apples.
 
  


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