Retirement

[elder]

Think this sort of stuff has come up before but surely if you are in a position where you are getting a pension of around 40k a year you have probably paid your house off. So why do you need say 2500 a month for a moderate living.

A couple I know here in Oz did a forecast with some financial planner who said that they could live into their 90’s ‘comfortably’, but I’m not so sure…

Neither have had well paying careers to have a substantial private pension and crucially they don’t own a home and rent here is extortionate and still heading up.
He’s recovering from a stroke anarl so only allowed to work one day a week at the moment.

As an example a 2 bed flat costs on average $700 per week to rent and a couple on the state pension here would get around $800 per week.

Obviously there could be something I don’t know and they have a right to keep their finances private but I’m highly sceptical

 

[LondonMackem]

Think this sort of stuff has come up before but surely if you are in a position where you are getting a pension of around 40k a year you have probably paid your house off. So why do you need say 2500 a month for a moderate living.

I’m 33 so haven’t looked in to it massively as it’s such a distance away, so this is news to me too. I get a 10% non contributory amount each month for a 62k a year salary from my employer and was unsure whether I needed to add more to take it to say 15%. Judging by the replies probably not!

 

[halfpast3]

A couple I know here in Oz did a forecast with some financial planner who said that they could live into their 90’s ‘comfortably’, but I’m not so sure…

Neither have had well paying careers to have a substantial private pension and crucially they don’t own a home and rent here is extortionate and still heading up.
He’s recovering from a stroke anarl so only allowed to work one day a week at the moment.

As an example a 2 bed flat costs on average $700 per week to rent and a couple on the state pension here would get around $800 per week.

Obviously there could be something I don’t know and they have a right to keep their finances private but I’m highly sceptical

I think having a paid off home is the real difference maker

I’m 33 so haven’t looked in to it massively as it’s such a distance away, so this is news to me too. I get a 10% non contributory amount each month for a 62k a year salary from my employer and was unsure whether I needed to add more to take it to say 15%. Judging by the replies probably not!

Not a financial adviser but I would, that 5% will be miles less in real money due to your tax rate.

 

[The Great Soprendo]

Not me chief but whoever it is they are wise beyond their years

Could also say that money is wasted on the old too... you can enjoy it a lot more as a young 'un I reckon. Which is also why some financial balance through life is important.

 

[Wicksy]

Me and the Mrs are living comfortably on 35k a year income - we run a car each and have holidays etc without worry. Horses for courses I suppose

 

[Pop]

I’m 33 so haven’t looked in to it massively as it’s such a distance away, so this is news to me too. I get a 10% non contributory amount each month for a 62k a year salary from my employer and was unsure whether I needed to add more to take it to say 15%. Judging by the replies probably not!

Key factor you haven’t mentioned is do you really want to be working until state pension age which could be 68 or 69 for you?

If you want to go earlier you might need a little bit more.

I follow the rule of total contribution percentage of half my age. So for you that would be 16.5%.

If all you are putting in is the 10% non contributory amount you could but 6.5% in. Given you are a higher rate tax payer you wouldn’t feel it too much with the tax relief.

 

[LondonMackem]

Key factor you haven’t mentioned is do you really want to be working until state pension age which could be 68 or 69 for you?

If you want to go earlier you might need a little bit more.

I follow the rule of total contribution percentage of half my age. So for you that would be 16.5%.

If all you are putting in is the 10% non contributory amount you could but 6.5% in. Given you are a higher rate tax payer you wouldn’t feel it too much with the tax relief.

yeah probably not tbh.. thanks for the advice.

 

[Darlo1973]

Not a financial adviser but I would, that 5% will be miles less in real money due to your tax rate.

Depends on how the scheme works but if it is by salary sacrifice they I'd do the extra 5% contribution in an instant.

 

[LondonMackem]

Depends on how the scheme works but if it is by salary sacrifice they I'd do the extra 5% contribution in an instant.

Yes it is. I’ve had a look and it’s worth a lot more in the pension than in my wages.

 

[Darlo1973]

Yes it is. I’ve had a look and it’s worth a lot more in the pension than in my wages.

Especially given your relatively young age, healthy salary and the miracle of compound growth. That extra 5% now is going to be very beneficial in 30 years time.

 

[stapler]

yeah probably not tbh.. thanks for the advice.

It's good advice.

Also, because of compounding, the earlier contributions will be worth far more than the later ones come retirement.

£1K invested over 30 years (i.e. invested in your 30s, retiring in your 60s) with a 7% return would be worth c.£7,600.

To get that £7,600 by investing in your 50s (i.e over about 10 years), you would need to invest c.£3,870. Taking 3% inflation into inflation, this is c.£2,880 in "30s money".

If you invested £744 in your 20s (which is £1,000 in "30s money", taking 3% inflation into account) it would be worth over £11K when you retired 40 years later.

The lesson is, the more you can invest early the better. Moderate contributions in your 20s and 30s will do far more heavy lifting than big contributions made in your 50s.

People who say that you should spend your money when you are young are missing a big point. A modest amount of investing in the younger years means you don't have to save anywhere near as much in the middle years.

I wish I had someone advising me on this in my 20s. I'm still playing catchup in my 40s.

 

[LondonMackem]

It's good advice.

Also, because of compounding, the earlier contributions will be worth far more than the later ones come retirement.

£1K invested over 30 years (i.e. invested in your 30s, retiring in your 60s) with a 7% return would be worth c.£7,600.

To get that £7,600 by investing in your 50s (i.e over about 10 years), you would need to invest c.£3,870. Taking 3% inflation into inflation, this is c.£2,880 in "30s money".

If you invested £744 in your 20s (which is £1,000 in "30s money", taking 3% inflation into account) it would be worth over £11K when you retired 40 years later.

The lesson is, the more you can invest early the better. Moderate contributions in your 20s and 30s will do far more heavy lifting than big contributions made in your 50s.

People who say that you should spend your money when you are young are missing a big point. A modest amount of investing in the younger years means you don't have to save anywhere near as much in the middle years.

I wish I had someone advising me on this in my 20s. I'm still playing catchup in my 40s.

Really appreciate that thanks

 

[JAZZMANB]

That is excessively high.
Depends on whether you are still having to pay a mortgage or rent.
Loans etc.
Size of home - council tax differentiation, energy bills.
Dependents.

You can't spend owt at that age , you'll be leading a simpler slower life
You can get deals on holidays
Oaps specials in shops etc

 

[Barista]

Especially given your relatively young age, healthy salary and the miracle of compound growth. That extra 5% now is going to be very beneficial in 30 years time.

@LondonMackem : I did salary sacrifice to such an extent for the last 4 years of pre-retirement that for HMRC and tax purposes I was earning little more than the minimum wage. In addition to my saving on both tax and NI, my employer was also paying in to my pension the saving that they were making on not needing to pay their employer’s NI contribution (I think this is around 13%) into my pension. So if doing salary sacrifice it’s also worth asking your employer if they will pass on all or if not, then half of their NI saving.

Obviously as you are in your 30s you wouldn’t salary sacrifice as much as someone who is nearing the age that they can access their personal pension, but certainly worth thinking about sacrificing what you can afford to not access for 25 years.

 

[Darlo1973]

@LondonMackem : I did salary sacrifice to such an extent for the last 4 years of pre-retirement that for HMRC and tax purposes I was earning little more than the minimum wage. In addition to my saving on both tax and NI, my employer was also paying in to my pension the saving that they were making on not needing to pay their employer’s NI contribution (I think this is around 13%) into my pension. So if doing salary sacrifice it’s also worth asking your employer if they will pass on all or if not, then half of their NI saving.

Obviously as you are in your 30s you wouldn’t salary sacrifice as much as someone who is nearing the age that they can access their personal pension, but certainly worth thinking about sacrificing what you can afford to not access for 25 years.

Also important to take advantage of any tax reliefs which are available now as the rules could change in the near future.

If a flat rate of tax relief is brought in then that makes final salary schemes a lot more complex

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[The Great Soprendo]

Also important to take advantage of any tax reliefs which are available now as the rules could change in the near future.

If a flat rate of tax relief is brought in then that makes final salary schemes a lot more complex

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True but I can't see that happening due to conplexities. The govt might be more likely to further limit the maximum tax relief (which would likely only affect the v wealthy).

 

[JJH]

I

Me and the Mrs are living comfortably on 35k a year income - we run a car each and have holidays etc without worry. Horses for courses I suppose

I reckon we could do the same .
Is that including you state pension ?

 

[hoolio]

I’m 33 so haven’t looked in to it massively as it’s such a distance away, so this is news to me too. I get a 10% non contributory amount each month for a 62k a year salary from my employer and was unsure whether I needed to add more to take it to say 15%. Judging by the replies probably not!

If you intend to work until state pension age probably not, if you intend to retire before state pension age you need to fund them years so probably advisable.

 

[halfpast3]

If you intend to work until state pension age probably not, if you intend to retire before state pension age you need to fund them years so probably advisable.

proper rough figures but he would be getting about 300 quid into his pension pot for the sake of coming out with 150 quid less ( that’s even if it’s not matched by the company) if he could afford it then he should do so I think

 

[Darlo1973]

True but I can't see that happening due to conplexities. The govt might be more likely to further limit the maximum tax relief (which would likely only affect the v wealthy).

Yes, the devil is always in the detail and the unintended consequences of any proposed changes.