Saving for retirement...
Discussion
Pensions are just wrappers in which you can invest into. You can think about them separately to assets which can be invested via a pension. You can invest via a pension (via a SIPP) and retain total control . Pensions have benefits (I.e. tax relief on contributions) but also have restrictions. One of the restrictions is the age at which you can take income from a personal pension. In the UK, for most people, this is 55. If you were to go down the pension route, you would need a other way to provide income from when you're 50 to 54.
ISAs are another type of wrapper with tax advantages, but without the age restriction. Some are specifically aimed at investing in cash (cash ISAs) and you should look into these if you haven't already.
You're concerned by inflation. Assets other than cash should produce a better return over the long term, but with more risk of poor returns. If you replace the 2.5% return in your calculations, you'll see the significant impact that higher investment returns could make for you.
ISAs are another type of wrapper with tax advantages, but without the age restriction. Some are specifically aimed at investing in cash (cash ISAs) and you should look into these if you haven't already.
You're concerned by inflation. Assets other than cash should produce a better return over the long term, but with more risk of poor returns. If you replace the 2.5% return in your calculations, you'll see the significant impact that higher investment returns could make for you.
Good luck and congrats to be in a good position and by aware enough to think of your future.
My advice would be as follows:-
Look at other forums for tips and info - moneysavingexpert.com is recommended.
Generally, over the long term, cash will lose out to investments...You will need to factor in inflation into your 'actual' returns on interest payments.
Don't neglect the benefits of ISA's and pensions for tax efficiency.
Good luck once again.
My advice would be as follows:-
Look at other forums for tips and info - moneysavingexpert.com is recommended.
Generally, over the long term, cash will lose out to investments...You will need to factor in inflation into your 'actual' returns on interest payments.
Don't neglect the benefits of ISA's and pensions for tax efficiency.
Good luck once again.
harveybobbles said:
My employer offers a pension (this one: http://www.thepensionstrust.org.uk/TPT/website/Doc...and will contribute 10% if I pay 5% of my salary.
Free money!It is probably a good idea to take advantage of it. But bear in mind currently the minimum age to take a pension is 55 and you may be restricted to an annuity which you may not want.
Given that pension situation you would be crazy IMHO not to pay into the pension simply because of the 10% employer contribution, but of course what you should be doing is a mixed approach, don't do the same thing with all your money. Put the 5% into your pension, save the rest...
Do remember though that your parents may need the money they have to pay for their own care in old age, never bank on having an inheritance.
Do remember though that your parents may need the money they have to pay for their own care in old age, never bank on having an inheritance.
Two comments:
1) Doing nothing is boring as hell. I always said I'd retire at 50 too, but when it came to it even the thought was horrible. These days 50 is still relatively young. Winding down is fine, checking out altogether more difficult than it sounds (without losing your mind).
2) However well we plan, the unexpected pops up and torpedoes those plans. Build in as much flex as you can.
1) Doing nothing is boring as hell. I always said I'd retire at 50 too, but when it came to it even the thought was horrible. These days 50 is still relatively young. Winding down is fine, checking out altogether more difficult than it sounds (without losing your mind).
2) However well we plan, the unexpected pops up and torpedoes those plans. Build in as much flex as you can.
MrGRT said:
I am 32 too, I would consider using your employer pension.
Based on your comments you will be putting (sacrificing) 2K of your gross salary and they will put 4k. All in that will be 4.4K more to your pot every year, times 18 = 79.2k, assuming no increase or loss.
Pension contributions are gross of tax, so 6k more into the pot every year, or 108k assuming no increase or loss.Based on your comments you will be putting (sacrificing) 2K of your gross salary and they will put 4k. All in that will be 4.4K more to your pot every year, times 18 = 79.2k, assuming no increase or loss.
456mgt said:
Two comments:
1) Doing nothing is boring as hell. I always said I'd retire at 50 too, but when it came to it even the thought was horrible. These days 50 is still relatively young. Winding down is fine, checking out altogether more difficult than it sounds (without losing your mind).
I agree with that, I'm 52, I could afford to retire bit it's the last thing I want to do. Work is what fills a lot of my day and I enjoy it, I'd be bored as hell without it.1) Doing nothing is boring as hell. I always said I'd retire at 50 too, but when it came to it even the thought was horrible. These days 50 is still relatively young. Winding down is fine, checking out altogether more difficult than it sounds (without losing your mind).
fandango_c said:
Pension contributions are gross of tax, so 6k more into the pot every year, or 108k assuming no increase or loss.
I had already substracted the 1.6k per annum that he would have saved if he had taken the money home. 1.6k x 18 = 28.8k
79.2k + 28.8k = 108k ;-)
So saving 79.2k more
'Retirement sounds great: no boss, do what you want, travel, etc., but does retirement hurt your health and life expectancy? That is a good question, and the answer depends (I think) on just what you mean by retirement.
Early Retirement = Earlier Death?
We all can only dream of an early retirement. It sounds wonderful: financial security and time to do whatever you want. Is early retirement a healthy idea, though? A study at Shell Oil company looked in to that very question and found that people who retired at age 55 had almost twice the risk of death compared to people who retired at age 60.'
http://longevity.about.com/od/healthyagingandlonge...
Early Retirement = Earlier Death?
We all can only dream of an early retirement. It sounds wonderful: financial security and time to do whatever you want. Is early retirement a healthy idea, though? A study at Shell Oil company looked in to that very question and found that people who retired at age 55 had almost twice the risk of death compared to people who retired at age 60.'
http://longevity.about.com/od/healthyagingandlonge...
This all sounds good practice however what happens if you or your wife are in poor health when you retire, or worse? If you have some spare cash then spend some of it whilst you can enjoy it. You say you're not going to have children, then who will benefit, long term, from your safe financial planning and thrift?
If you plan on retiring at age 50 you need to be aware that you can't access pensions (including SIPPS) until you are at least 55 years old generally speaking and even then you can only have 25% of the money out as a tax free lump sum and the remaining monies are in your pension pot forever although you can VERY roughly speaking have 6% income ish from the remainder depending on your health and other factors (Age, GAD rates etc).
You may be able to take more money out if you can go into flexible drawdown but most people don't have the chance to do this because their income is not sufficient.
Please do be aware though that i'm not a financial adviser.
You may be able to take more money out if you can go into flexible drawdown but most people don't have the chance to do this because their income is not sufficient.
Please do be aware though that i'm not a financial adviser.
The one thing I would suggest is that while saving (very sensibly) for retirement,not to plan for some golden future doing all the things you should have done while young.
I am 64 now and have no financial problems. Could have saved a lot more money had I chosen.but life is an adventure and I was aware that I wanted to see the world and have all the adventure in life as early as possible,while still making sure I could save enough for later. Retired at 60 and immediately started consulting,and also invested in a startup which is doing well.
Apart from the worst mistake (not planning for retirement at all) the two things I have seen that are the saddest are:
- successful people who realize at 50 that they have lots of money but no life experience and go through the tiresome divorce/first sports car/blonde thing. You cannot recapture youth so best to misuse it properly when you have it.
- successful people who imagine all the wonderful trips/hobbies/experiences they will have in retirement. I have,over the years,lost a number of friends to cancer and other misfortunes long before they would have expected. It can happen to anyone.
I have enough money and pensions etc to cover known events for me and my wife. None of that bucket list. Still interesting stuff to do,but no feeling that I missed out on living. The only thing I ever resisted as passive stuff like going on a cruise. Can do that when I am enfeebled (if I last that long!)
I am 64 now and have no financial problems. Could have saved a lot more money had I chosen.but life is an adventure and I was aware that I wanted to see the world and have all the adventure in life as early as possible,while still making sure I could save enough for later. Retired at 60 and immediately started consulting,and also invested in a startup which is doing well.
Apart from the worst mistake (not planning for retirement at all) the two things I have seen that are the saddest are:
- successful people who realize at 50 that they have lots of money but no life experience and go through the tiresome divorce/first sports car/blonde thing. You cannot recapture youth so best to misuse it properly when you have it.
- successful people who imagine all the wonderful trips/hobbies/experiences they will have in retirement. I have,over the years,lost a number of friends to cancer and other misfortunes long before they would have expected. It can happen to anyone.
I have enough money and pensions etc to cover known events for me and my wife. None of that bucket list. Still interesting stuff to do,but no feeling that I missed out on living. The only thing I ever resisted as passive stuff like going on a cruise. Can do that when I am enfeebled (if I last that long!)
RDMcG said:
- successful people who realize at 50 that they have lots of money but no life experience and go through the tiresome divorce/first sports car/blonde thing. You cannot recapture youth so best to misuse it properly when you have it.
Not sure what you would define as successful but the people I know who I'd class as successful have had a hell of a lot more life experiences along the way than other people I meet. Gassing Station | Finance | Top of Page | What's New | My Stuff