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No bad thing per se but the problem of not having a job is it gives you a lot of time to think about the meaning of your life.
Yep and that can be positive and you could spend your time doing something more worthwhile to society (without needing to be paid for it) or it could be negative and you just slump in front the the TV all day.
Difficult to know which way you would go until a couple of years into it I guess.
Wrong properties in the wrong places.
Wirral where you claimed 8%
My property investment brings in about 1/3 of my income
Do you own it outright?
But you need alot less money to live on when you’re 80+ than when you’re 55 – 70 or so. You want 80% or so of your pension pot before 70.
That depends, how nice a care home would you like to be in when you've lost your mind?
Pensioners all vote tho!
They do, but it's a good job that
Changes to things like retirment ages should be phased in with plenty of notice.
Meaning today's retirees vote for the parties that enact the legislation that screws over the next generation, slamming the door behind them.
I am thinking, a little probably won’t do too much harm. However, my experience is that friends who inherited a lot at a young age ended up a bit ****less, work shy and generally miserable until they had frittered a good proportion away. No bad thing per se but the problem of not having a job is it gives you a lot of time to think about the meaning of your life.
Is that not more to do with losing their parents at a young age?
We inherited from my OH's Dad, while in our 50's and I reckon we maybe retired before inheriting anything from our Mum's.
Is that not more to do with losing their parents at a young age?
In the cases I mentioned, they inherited from grandparents in their 20s. I think back to the jobs I was doing then - I am not sure I would have stuck with them if I knew I could afford not to. I probably would jacked it in and become a full-time shit cyclist rather than a part-time shit cyclist.
I inherited £25k when I was 19. It paid for a succession of cheap cars, a 6 month RTW holiday, a Rocklobster 853 (still ride it) and a £25k deposit on a house when I was about 33.
I inherited £25k when I was 19. It paid for a succession of cheap cars, a 6 month RTW holiday, a Rocklobster 853 (still ride it) and a £25k deposit on a house when I was about 33.
That's an impressive return on capital and admirable avoidance of coke and hookers.
I inherited £25k when I was 19. It paid for a succession of cheap cars, a 6 month RTW holiday, a Rocklobster 853 (still ride it) and a £25k deposit on a house when I was about 33
Nice work. That was my thinking, £25K is a lovely amount of money to inherit at an age when you can put it to bloody good use (I guess that would be around £50k in today's money). However, more often than not, people inherit too much too late, when the cards are already dealt.
So I am thinking if I can give the kids a life enhancing (rather than life changing) sum in their 20s. They can sort themselves out from then on in.
That’s an impressive return on capital
I know and the funny thing is I got 3k in compensation for bad advice!!!
Getting that money and investing it was the best thing I did.
TBH I did save up some money for the RTW trip also but it paid the majority.
Property yields between 3 and 8%? Passive investment yields 5...
Do you own it outright?
Yes. All paid for. I can't afford more with some kind of leveraging though and I'm less keen on that
Property yields between 3 and 8%? Passive investment yields 5
Where are you getting a 5% yield on passive investment? Or do you mean capital growth? Property has a yield AND a capital growth. It's not unusual to get 10% - 20% on property if you combine yield and growth. It is more work, though
Wirral where you claimed 8%
Depends where really. I wouldn’t touch most of Birkenhead, most of mine are in Higher Tranmere. £100k total investment in house, £675/month rent.
I do them nicely, totally gut them, rewire, replumb, good flooring, good kitchens & bathrooms. I do all of the work myself.
I know they are done right and I won’t need to go back to fix things.
Did my first one around 10 years ago, bought for £85k, spent £15k doing it up. It’s been empty 1 week since with only 2 tenants (the first moved out to buy around the corner).
It’s worth around £145k to 150k now.
So as above having hammered the mortgage and got to the magic 75% LTV where the rates are lower than low, and as a 40% tax payer I should be changing what I do now to throw money at my pension avoiding the 40% tax and then hopefully watching that grow rather than giving it to the mortgage company now to save the 1.something % interest right?
the normal percent to default to is to invest the age you are when you start making contributions as a percentage. ie : if you're 20, put 20% in, if you're 30, start thinking about putting 30% of your salary in, if your're 40, start thinking about putting 40% of your salary in.
so yes, pension saving is probably a better long term investment than chucking it at your mortgage, especially due to the tax breaks (don't forget that if you have kids you keep your child allowance if you keep your salary below something like 50k) but the amount you need to put in might be a bit of a shock.
Bear in mind that if you intend to retire before 57, you'll need something in not-a-pension too.
We need to be careful for those who are to turn 55 before 2028. As usual the government are yet to define if the transition from 55 to 57 in 2028 is a cliff edge or a taper.
If it is a cliff edge if we turn 55 before Jan 1st 2028 (iirc)then we can access our pots as expected, if it's a taper we need to account for 1 or perhaps 2 extra years.
the normal percent to default to is to invest the age you are when you start making contributions as a percentage. ie : if you’re 20, put 20% in, if you’re 30, start thinking about putting 30% of your salary in, if your’re 40, start thinking about putting 40% of your salary in.
Pretty certain that the rule of thumb is half your age as a percentage at the age you start at (for what it's worth).
We need to be careful for those who are to turn 55 before 2028. As usual the government are yet to define if the transition from 55 to 57 in 2028 is a cliff edge or a taper.
Ah balls wasn't aware of that one. I was planning on aiming to jack it in at 55, but that's not until 2036. Doubtless it'll be 60 by then - better put more in my ISA vs pension then I guess.
Re pension:
If your employer offers matching, contribute at least enough to get all the matching
If you're paying 40%, pay enough pension to, er, not
If they offer salary sacrifice, even contributing stuff you wouldn't have paid the higher rate on makes sense as you don't pay NI on the contribs either
which means...
If you get a windfall (e.g. inheritance) it may be an idea to funnel it into the work pension by just whacking up the contribs -
Watch out for the annual allowance / min wage constraints tho
Then fill up the isa
Anything left (if you get lucky) remember there are allowances for CGT, dividends, interest, so you may not need to pay much if any tax on investment outside the wrappers (up to a certain amount).
Pretty certain that the rule of thumb is half your age as a percentage at the age you start at (for what it’s worth).
I thought I remembered that but using a calculator it seems to come up way short so I figured I was wrong..
https://www.vanguardinvestor.co.uk/what-we-offer/personal-pension/pension-calculator
whacking 50k current income into it, and wanting 30k income after you retire, including the state pension, with a retirement age of 67 you would need
start at 20: 11k/year (22%)
start at 30: 15.6k/year (31%)
start at 40: 22.8k/year (45%)
start at 50: 38.4k/year (79%)
It might be that calculator is way off, but it seems that to achieve 60% of your income in retirement, with the state pension, from a reasonable salary, the amount you have to put in is quite a lot. Obviously if you're a lower earner, the state pension takes up more of the slack so the numbers are a bit better
start at 20: 11k/year (22%)
start at 30: 15.6k/year (31%)
start at 40: 22.8k/year (45%)
start at 50: 38.4k/year (79%)It might be that calculator is way off
Seems off when you'd expect some growth of the pension fund.
(67-50)*38.4/(30-9) = 31.1 (Years of saving * Amount saved / Required annual amount).
We have assumed a tax free cash amount of 25% of the estimated pension pot value. The pension income figure quoted is after the deduction of that lump sum payment.
That explains it a certain amount.
it recons that leads to a pot of just over 700k - but then has a line for tax free lump sum - it might be that they are either subtracting the tax free lump sum, or choosing the most defensive annuity rates (700k-> 21k is about what you get at 67 if you want 3% escalation and 50% to your partner when you die)
edit - ah as per above its including tax free sum. I guess you can knock 25% off the percentages you need to put in - its still closer to your age than half your age though!
start at 20: 8.3k/year (17%)
start at 30: 11.7k/year (23%)
start at 40: 17.1k/year (34%)
start at 50: 28.8k/year (57%)
Just to demonstrate the power of growth & compound interest:
I’m 46, planning on retiring at 60.
My spreadsheet has lots of different forecasts, from zero growth through to what was achieved in the last 12 months.
Last year was nuts, even accounting for the pandemic I had 25% growth.
The prediction at last years rates gives a pot 10x the size of zero growth.
Even allowing for modest growth, the pot will be twice the zero growth pot.
My plan is to take Max tax free lump sum. Then with my RAF pension kicking in at 60 too, set my retirement income at the higher rate tax level. When the state pension kicks in at 68, I can re-evaluate how my pot is doing.
Pretty certain that the rule of thumb is half your age as a percentage at the age you start at (for what it’s worth).
That was the rule for 2/3 final salary pension.
But, that rule is like 30 years old (or more) and Annuities etc gave much better rates back then. In this current period of zero interest rates, it probably doesn't hold anymore.
a family member of mine is an actuary, and the figure they use for growth is 3-4% above inflation (I guess thats the important figure, isolated rate is fairly meaningless). based on the higher end of that (4% - which is probably 6-7% before inflation) it takes 17.5 years for a sum to double, at the lower end it takes 23 years to double. it is powerful (I mean, that's free money) - but it does take a LONG time to get there
obviously you can choose to model your future income on a higher return on investment if you want, but that can hold significant downsides if it doesn't work out
all these figures sadden me......
57 this year, wanting to retire at 60 and move abroad. got nothing like any of the amounts you lads and lasses have 😥
Sadex - the reality is a higher wage means a bigger house & a more expensive car. Will either of those materially affect your life? If you can achieve your goal with what you’ve got, go for it!!
57 this year, wanting to retire at 60 and move abroad. got nothing like any of the amounts you lads and lasses have 😥
Ex colleagure of mine took early retirement, sold up in the UK, bought a small place in rural France for about 1/3 price of his UK house and spend most days just walking the dogs in the countryside. They're happy and it's a very cheap lifestyle.
I do them nicely, totally gut them, rewire, replumb, good flooring, good kitchens & bathrooms. I do all of the work myself.
Yes and so did I. This is the point I am making really. The 8% really needs to take into account your effort or at least the opportunity cost of not doing other things, some of which may have made money. Its easy to absorb costs such as travel, snagging and rework etc which eat into that 8%.
I have a friend who does this and he has about 20 houses so there is some economy there and he could pack in work now but while he is working it is a real strain.
all these figures sadden me……
57 this year, wanting to retire at 60 and move abroad. got nothing like any of the amounts you lads and lasses have 😥
Same here - I'm 48, was a late starter financially (f*cked about for 10 years after leaving Uni and didn't really earn anything) and didn't start paying into a pension until i was 34.
I'm putting the max i can to get the company to match it (8% + 8%) but have very little other savings.
Only things in our favour are we'll own a high value property once we've paid it off (house currently worth £550k with £220k left on Mortgage) and we're both 40% tax payers.
I'd love to retire at around 63 (when my wife turns 60) but not sure we'll have the means without selling the house.. which i don't really want to do as it'll be the only thing we leave to the kids.
Other thing on my mind is neither of my Grandads saw 70, and whilst my Dad has made it to 76 so far he's not been particularly well over the last 10 years.. so I don't think i need to be stressing about running out of money on my late 80s.
Ex colleague of mine took early retirement, sold up in the UK, bought a small place in rural France for about 1/3 price of his UK house and spend most days just walking the dogs in the countryside. They’re happy and it’s a very cheap lifestyle.
yes but i want a place with a swimming pool in crete 🤣
whacking 50k current income into it, and wanting 30k income after you retire, including the state pension, with a retirement age of 67 you would need
If you start at say age 30 with 50k annual income, assume a 1% year on year wage increase, assuming your pot grows by 5% a year, and pay in 15% of your pay you end up with an income of 36k by 67 (4% drawdown) + the state pension if that still exists.
i think rule of thumb is you can draw 4% of savings each year and have enough money to last 30 years
'the 4% rule was developed by financial planner William Bengen in 1994. Bengen wanted to establish a safe rate of withdrawal that would give retirees confidence they wouldn’t outlive their savings.
Through his research, Bengen found that people could withdraw 4% of their investments in the first year of retirement and then withdraw the same amount, adjusted for inflation, for at least 30 years without exhausting their portfolio'
I’ve gone a totally different route, not sure whether it adds anything to this thread but thought I’d share.
I earnt a fair bit of cash early on in life so ploughed it into HMO’s which give me approx 15% return per annum. I gave up on paying into a pension early on and plan to live off the income from these in later life. At present it’s enabling me to work only 2 days a week, when the kids are grown up I’ll quit working. Went part time at 37, been doing it 5 years now.
In my eyes the beauty of this is that I get a regular income whilst not affecting the value of the pot and it all passes to my kids eventually so isn’t wasted. I’ve got some good tax planning in place so there will be no inheritance tax on the pot either.
Think of some of the pension pots here, say £500k at 10 - 15% per annum pre tax, that’s a comfortable pension income whilst preserving value. If I want a lump sum at retirement then I’ll simply mortgage one of the houses.
Just an alternative opinion.
‘the 4% rule was developed by financial planner William Bengen in 1994. Bengen wanted to establish a safe rate of withdrawal that would give retirees confidence they wouldn’t outlive their savings.
Since then dividend yield and interest rates have plummeted, so it's much more of a challenge now than back then....
If you start at say age 30 with 50k annual income, assume a 1% year on year wage increase, assuming your pot grows by 5% a year, and pay in 15% of your pay you end up with an income of 36k by 67 (4% drawdown) + the state pension if that still exists.
assuming your figures are ignoring inflation, then 2 flaws I can see is
1) 5% above inflation is a large amount - if you use 3.5% (which is much more likely over long term) the figures look a lot worse
2) you'd be earning 73k by the end of your career - assuming you want 60% of your salary after retirement you'll just hit that with the ambitious growth rate.
The Vanguard calculator on the previous page, is an annuity calculator right ?
It's not some kind of average draw down per year until an average death age.
I was ignoring inflation. Average global stock market tracker should have returned about 10% a year I thought for the past large number of years?
If you're on 50k at 30, earning 75 ish at 67 seems likely i'd have thought.
My only point is that putting half your age into a pension as a percentage of outcome is a reasonable starting point. It's not going to get you loads, but equally, it will give you something half way reasonable if you're sensible with outgoings. 30k ish as a pension income seems ok if you don't have a mortgage by that point.
30k ish as a pension income seems ok if you don’t have a mortgage by that point
Ok ish? What exactly would you spend it all on each month if not having a mortgage?
Let's say that's roughly £2000 a month, plus your wife at say £1500 a month, plus government at £500 a month, that's £4000 without needing to commute or pay a mortgage
Other thing on my mind is neither of my Grandads saw 70, and whilst my Dad has made it to 76
Neither of my grandads made 70 either and my Father barely cracked 40
Can you get coke and hookers online?
I was ignoring inflation. Average global stock market tracker should have returned about 10% a year I thought for the past large number of years?
If you’re on 50k at 30, earning 75 ish at 67 seems likely i’d have thought.
its significantly less than 10% - and its worth remembering that in later years its normally wise to use less volatile investments. The FCA does analysis every 5 years on the rate of return that is good to use, p76 here ->
they have real equity returns at 4%, property at 3% and both bonds and money markets are negative real rates.
for the 75k earning - I wasn't questioning this, just stating that if you earn 75k when you retire, you probably want to have a 50k pension to not have significant loss of lifestyle - whereas at 50k income you'd be 'happy' with 30k.
Ok ish? What exactly would you spend it all on each month if not having a mortgage?
I've no idea, i've never been in that position. However, it's a nice problem to have. There will still be bills, house maintenance, replacing a car every few years, bike bits, holidays etc. I do know it's less than my dad on his final salary gets tho (mid level civil servant), so I'm guessing it's not going to be the life of riley.
Plus as I said above, in 20 years time, I'm planning for the state pension to be means tested.
What is a more reasonable number of be aiming for (30k is my minimum target).
for the 75k earning – I wasn’t questioning this, just stating that if you earn 75k when you retire, you probably want to have a 50k pension to not have significant loss of lifestyle – whereas at 50k income you’d be ‘happy’ with 30k.
It's an interesting question I guess. I'm just assuming that the state of pensions and the lack of final salary ones, means that i'm going to have to drastic pay cut in retirement, which will be slightly offset by having no mortgage. In my own planning (I say planning, the excel spreadsheet that i look at to depress myself occasionally), i'm using a 4% annual real equity return, but i'm also putting away more than the half your age rule of thumb says. No idea whether what I have in my pension at the moment is good or bad really - I think it's ok ish probably.
but i’m also putting away more than the half your age rule of thumb says
It may just be me, but approaching 50 this year and the thought of putting £25,000 into my pension is incomprehensible to me, just can't happen in any world we live in.