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 -> https://www.fca.org.uk/publication/research/rates-return-fca-prescribed-projections.pdf

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.

It’s half your age at the age you started at.

Ah ok. Errrm. God knows.

Looking at the figures from the calculator I won’t be rich, won’t be poor,but I’ll do ok.

on the rate of return that is good to use, p76 here -> https://www.fca.org.uk/publication/research/rates-return-fca-prescribed-projections.pdf

they have real equity returns at 4%, property at 3% and both bonds and money markets are negative real rates.

Not read the full report but;
our analysis suggests that expected real returns have declined from a
range of 4% to 5.5% in 2012, to a range of 3% to 5% at present

that implies to me to be real returns ie after inflation of 3-5% or 5-7% total That is inline with previous posts and so the 4% safe withdrawal rate remains broadly applicable, no?

that implies to me to be real returns ie after inflation of 3-5% or 5-7% total That is inline with previous posts and so the 4% safe withdrawal rate remains broadly applicable, no?

sorry I wasn’t questioning the drawdown rate, more the rate of growth whilst you’re acquiring the pot

Ok ish? What exactly would you spend it all on each month if not having a mortgage?

It’s kinda interesting how people are really… cautious… about how big a pension they’ll need, but don’t know what they’ll spend it on.

Personally, I plan for the worse and hope for the best. With pensions doubly so!

Yeah, but – unless you have some idea of how much you’ll need, it’s not planning – it’s just chucking money in a pot and hoping it’ll be enough.

It’s kinda interesting how people are really… cautious… about how big a pension they’ll need, but don’t know what they’ll spend it on.

I plan a lot of holidays overseas, skiing, MTBing / walking in various mountain ranges etc….

Personally, I plan for the worse

What worst though? You’ve been on the planet for 60 years, you must know what monthly outgoings you’ll have.

I know a few pensioners here in Spain who admit they would have a fairly sad existence in their home country, Holland and uk for e.g. here they live fairly well, run a car, modest house, eat out a few times a week (normally).

If you lived frugally I reckon you could live on 12k GBP here, assuming no mortgage and a buffer of cash if things go wrong. 12k pa would run a house with pool, couple of meals out a week, few coffees a week, car, gym in winter then the beach in summer.

What worst though? You’ve been on the planet for 60 years, you must know what monthly outgoings you’ll have.

Well I probably will at aged 60, but at age 39, and 6.5 weeks into being dad my monthly outgoings are in somewhat in a stage of flux! My main point of reference is knowing the life style my dad has had in retirement and knowing his pension.

Intrigued by this:

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.

I’m not in either of those brackets, but close enough. Approximately 20% of my earning goes on tax and another 20% on pension. Approx 20 % of my gross goes on mortgage. Given that my percentage tax will drop hugely then assuming I’ve paid off my house by then only need to earn 50% as much to have the same disposable. That’s before take Ng into account that the kids have left home and I don’t need to spend a grand a month on food.

I can’t see where you’re coming from saying you need to earn 60-70% as much in retirement.

Given that my percentage tax will drop hugely then assuming I’ve paid off my house by then only need to earn 50% as much to have the same disposable.

And also no National Insurance to pay which is another 11% of earned income (my understanding is that if you’ve paid enough NI years you would not need to make any more contributions until state pension age if you retired early on other income)

I can’t see where you’re coming from saying you need to earn 60-70% as much in retirement.

Particularly when people are apparently living on 60-70% of their salary already in order to fund their pensions…

@wobbliscott ‘s post has given me a lot of food for thought. In 52 at the moment.

In fact, it’s kind of got me fired up to do a bit of living in the next decade or so!👍

I’m used to living on not a lot of money which helps. Bikes being my only real costly luxury but I’ve got my couple of bikes pretty much how I want them now.