Retirement income
Discussion
Tit For Tat said:
drainbrain said:
And, in your opinion, is this because they are deliberately choosing an impoverished retirement, or because they are too stupid to realise its inevitability?
To be frank, most are too stupid.OK that sounds harsh. Perhaps better phrased as they are putting their heads in the sand, and hoping/assuming the state will look after them.
James_B said:
drainbrain said:
And, in your opinion, is this because they are deliberately choosing an impoverished retirement, or because they are too stupid to realise its inevitability?
That's what's called a false dichotomy, posed by people trying to score a point.To give an answer, no.
For instance, is it the old social psychology of a 'working class' attitude that always puts instant over future gratification?
drainbrain said:
You don't think there's quite a lot of publicity and TV programming these days relating to retirement income and the pitfalls of failing to assure it? And assuming they actually watch these big plasma TVs they're all spending their money on they must be so stupid they don't understand what's being discussed.
Actually, an awful lot of people do not understand pensions, or have any concept of how much they should be saving. That's not necessarily because they are stupid (although some are). More to do with the fact that pensions are a boring subject, and there is always something more exciting to spend the money on, and always plenty of time to start saving before they retire. So they put it off. And put it off. And then they reach 50, and don't have a pot to piss in.
Tit For Tat said:
drainbrain said:
You don't think there's quite a lot of publicity and TV programming these days relating to retirement income and the pitfalls of failing to assure it? And assuming they actually watch these big plasma TVs they're all spending their money on they must be so stupid they don't understand what's being discussed.
Actually, an awful lot of people do not understand pensions, or have any concept of how much they should be saving. That's not necessarily because they are stupid (although some are). More to do with the fact that pensions are a boring subject, and there is always something more exciting to spend the money on, and always plenty of time to start saving before they retire. So they put it off. And put it off. And then they reach 50, and don't have a pot to piss in.
And it isn't necessarily about having 'something more exciting' to spend on. Oftentimes it's about contingencies and emergencies as well. Think double glazing; central heating; new white goods; roof repairs etc ad infinitum - just like you and me. Then required non-essentials, like Xmas, birthdays, school trips etc etc. Then 'horrors' like having to get the kid an expensive games computer, tablet, designer trainers etc etc etc. It's easy to say you just don't get kids these things but they actually get psycho-bullied by each other if they don't, and it's no fun being the weirdo odd one out when you're a teenager. Weddings, funerals, bar mitzvahs. And even a very basic holiday for a family of 4 costs a FORTUNE these days.
It's about having all these things (and many many more) to get as well the basics and still be able to save MEANINGFULLY. And the depressing performance of underfunded investments is, in my opinion, what more than most things makes the folk who could afford at least SOMEthing for the future pot think it's not worthwhile.
drainbrain said:
Fair enough, but pensions are only one route to retirement income. One might not understand the intricacies of the pension system, but understanding why there is a need to make provision or even a plan for financial survival in retirement is within the intellectual capacity of almost everybody.
And it isn't necessarily about having 'something more exciting' to spend on. Oftentimes it's about contingencies and emergencies as well. Think double glazing; central heating; new white goods; roof repairs etc ad infinitum - just like you and me. Then required non-essentials, like Xmas, birthdays, school trips etc etc. Then 'horrors' like having to get the kid an expensive games computer, tablet, designer trainers etc etc etc. It's easy to say you just don't get kids these things but they actually get psycho-bullied by each other if they don't, and it's no fun being the weirdo odd one out when you're a teenager. Weddings, funerals, bar mitzvahs. And even a very basic holiday for a family of 4 costs a FORTUNE these days.
It's about having all these things (and many many more) to get as well the basics and still be able to save MEANINGFULLY. And the depressing performance of underfunded investments is, in my opinion, what more than most things makes the folk who could afford at least SOMEthing for the future pot think it's not worthwhile.
Yes, they are always calls on the finances. But a bit of discipline can make a lot of difference. Bear in mind that all pension contributions will attract tax relief at highest marginal rate, so at least 20%. What other investment gives you an immediate 20% return ?! Plus even investing in a basic low cost FTSE tracker would have given you a circa 25% return over the last 12 months. Start early, increase contributions with every pay rise.And it isn't necessarily about having 'something more exciting' to spend on. Oftentimes it's about contingencies and emergencies as well. Think double glazing; central heating; new white goods; roof repairs etc ad infinitum - just like you and me. Then required non-essentials, like Xmas, birthdays, school trips etc etc. Then 'horrors' like having to get the kid an expensive games computer, tablet, designer trainers etc etc etc. It's easy to say you just don't get kids these things but they actually get psycho-bullied by each other if they don't, and it's no fun being the weirdo odd one out when you're a teenager. Weddings, funerals, bar mitzvahs. And even a very basic holiday for a family of 4 costs a FORTUNE these days.
It's about having all these things (and many many more) to get as well the basics and still be able to save MEANINGFULLY. And the depressing performance of underfunded investments is, in my opinion, what more than most things makes the folk who could afford at least SOMEthing for the future pot think it's not worthwhile.
Tit For Tat said:
Yes, there are always calls on the finances. But a bit of discipline can make a lot of difference. Bear in mind that all pension contributions will attract tax relief at highest marginal rate, so at least 20%. What other investment gives you an immediate 20% return ?! Plus even investing in a basic low cost FTSE tracker would have given you a circa 25% return over the last 12 months. Start early, increase contributions with every pay rise.
Yes there certainly are. And yes www.mrmoneymustache.com can show you just how much of a difference a bit of discipline can make. And yes pensions offer decent tax incentives (even if it's theoretical till you're 55). But they require you to have the money to invest in the first place which, as I'm trying to explain to you, doesn't exist for many. And the paltry sum they CAN invest (and I don't mean a couple of months a year I mean EVERY month for decades, which is another story) regardless of the %age uplifts and earnings doesn't amount to anything meaningful. Which doesn't stop some people, but definitely puts off others.
In your theory 5% of wages is tucked away. So take the example of someone on £24k a year. (millions, btw, don't come anywhere near that). So £80+ a month. + uplift to £100. For 40 years. At 4%.compounding. = £118k pot. = what? £5kpa if you're lucky? Maybe considerably less if it comes with a bell or whistle or two. Not saying it's not something, because it very is. But (see op) if the average retirement income is £18k inc state pension, your theory is probably already being enacted by those hardy individuals on lower wages who're disciplining themselves to save a bit.
Now you tell me what monthly contribution it takes at 4% growth to reach £20k pa. Which with £8k state pension on top is the figure where comfy retirement begins. Then tell me if you think that's a realistic monthly ask from an average or below wage earner with the average expenditure on basics/essentials/contingencies/TINY luxuries that people have these days.
drainbrain said:
Yes there certainly are. And yes www.mrmoneymustache.com can show you just how much of a difference a bit of discipline can make. And yes pensions offer decent tax incentives (even if it's theoretical till you're 55).
But they require you to have the money to invest in the first place which, as I'm trying to explain to you, doesn't exist for many. And the paltry sum they CAN invest (and I don't mean a couple of months a year I mean EVERY month for decades, which is another story) regardless of the %age uplifts and earnings doesn't amount to anything meaningful. Which doesn't stop some people, but definitely puts off others.
In your theory 5% of wages is tucked away. So take the example of someone on £24k a year. (millions, btw, don't come anywhere near that). So £80+ a month. + uplift to £100. For 40 years. At 4%.compounding. = £118k pot. = what? £5kpa if you're lucky? Maybe considerably less if it comes with a bell or whistle or two. Not saying it's not something, because it very is. But (see op) if the average retirement income is £18k inc state pension, your theory is probably already being enacted by those hardy individuals on lower wages who're disciplining themselves to save a bit.
Now you tell me what monthly contribution it takes at 4% growth to reach £20k pa. Which with £8k state pension on top is the figure where comfy retirement begins. Then tell me if you think that's a realistic monthly ask from an average or below wage earner with the average expenditure on basics/essentials/contingencies/TINY luxuries that people have these days.
Exactly. And with that £100 a month, they could either put it away in exchange for an insignificant pension in ~25 years, or they could spend it today and have a new Fiesta rather than their rusty 1992 model. It's not hard to see why people choose the nice thing today. But they require you to have the money to invest in the first place which, as I'm trying to explain to you, doesn't exist for many. And the paltry sum they CAN invest (and I don't mean a couple of months a year I mean EVERY month for decades, which is another story) regardless of the %age uplifts and earnings doesn't amount to anything meaningful. Which doesn't stop some people, but definitely puts off others.
In your theory 5% of wages is tucked away. So take the example of someone on £24k a year. (millions, btw, don't come anywhere near that). So £80+ a month. + uplift to £100. For 40 years. At 4%.compounding. = £118k pot. = what? £5kpa if you're lucky? Maybe considerably less if it comes with a bell or whistle or two. Not saying it's not something, because it very is. But (see op) if the average retirement income is £18k inc state pension, your theory is probably already being enacted by those hardy individuals on lower wages who're disciplining themselves to save a bit.
Now you tell me what monthly contribution it takes at 4% growth to reach £20k pa. Which with £8k state pension on top is the figure where comfy retirement begins. Then tell me if you think that's a realistic monthly ask from an average or below wage earner with the average expenditure on basics/essentials/contingencies/TINY luxuries that people have these days.
What the thread needs is an average (or below) wage earner, maybe with a wife in part time work and a couple of young kids to tell us realistically what we are all theorising about.
Bet you if we get one the inadequate retirement saving will be far more about 'can't' than 'don't want to'.
(and Maximum Money Mustachers need not apply!
)
Bet you if we get one the inadequate retirement saving will be far more about 'can't' than 'don't want to'.
(and Maximum Money Mustachers need not apply!
)Ok then, I earn min wage for a 37.5 hour job, I have no savings and I can't even get a deposit together for a house!
By the time I'm taxed I bring home around £250 a week of which £50 is food, £100 is rent £40 for gas and electric £25 for council tax and £20 to run a car.
How do I save for a pension? ( This is also how the other 50od guys who work at my factory live)
By the time I'm taxed I bring home around £250 a week of which £50 is food, £100 is rent £40 for gas and electric £25 for council tax and £20 to run a car.
How do I save for a pension? ( This is also how the other 50od guys who work at my factory live)
Not being harsh, but poor people cant expect to be rich in retirement. I was only 23 when we had our first child and earned less than £20k back then .I still paid into a pension.
The 4% compound example above would be a poor return, not an average one. Also, if someone got a mortgage at say 30 for 25 years then they could have 10 years (55-65) bumping up their pension massively in that time
And people can afford houses. Maybe not in London or much of the south east, but people need to change their expectations or their plan. If you dont earn much, dont live in London!
I worked last year with the worst type of millenial. She probably earned 27k ish but complained she couldnt afford to buy a house (in Bristol). I found homes she could in Weston-Super-mare. Apparently, that was not good enough for her. She 'didnt want to live in a place like that'. So instead she ate out twice a week, had just come back from a month travelling when she started with us etc. She decided she couldnt make it in the UK, that the system was set against her etc and left us with plans to go to Europe.
The 4% compound example above would be a poor return, not an average one. Also, if someone got a mortgage at say 30 for 25 years then they could have 10 years (55-65) bumping up their pension massively in that time
And people can afford houses. Maybe not in London or much of the south east, but people need to change their expectations or their plan. If you dont earn much, dont live in London!
I worked last year with the worst type of millenial. She probably earned 27k ish but complained she couldnt afford to buy a house (in Bristol). I found homes she could in Weston-Super-mare. Apparently, that was not good enough for her. She 'didnt want to live in a place like that'. So instead she ate out twice a week, had just come back from a month travelling when she started with us etc. She decided she couldnt make it in the UK, that the system was set against her etc and left us with plans to go to Europe.
covmutley said:
Not being harsh, but poor people cant expect to be rich in retirement. I was only 23 when we had our first child and earned less than £20k back then .I still paid into a pension.
I don't think that's being harsh, it's being realistic. Somebody on minimum wage is not suddenly going to be on more than that in retirement. At a normal retirement age I would have contributed to pensions every year. I would be surprised to see close to 40% of my final salary as pension income including state pension. Using this albeit flawed logic somebody on minimum wage would be in the same position making no pension contributions & being dependent on state pension.
In absolute terms there is a huge difference I appreciate, but state pension & minimum wage are not out of line proportionately with what many higher earners will achieve.
I have always paid into a pension scheme since starting work. Mistake i made was not increasing the payments each year.
I used to get fed up seeing despite a 260k pot how little anniuty income i would get.
The pension reforms on last year changed all that.
I have been able to take 25% out and using that and some savings buy a place in france for less than half of a place here.
Some of my pensions have annuity rates of 10% so i have left them alone. The rest is been invested with abother company.
Plan is to live off equity from our house in london as well as savings from september.
I am 58 my wife 49 she has about £1k a month in pensions coming when she is 67. I have state only at 67.
My advice is to start early with your pension if you can.
I used to get fed up seeing despite a 260k pot how little anniuty income i would get.
The pension reforms on last year changed all that.
I have been able to take 25% out and using that and some savings buy a place in france for less than half of a place here.
Some of my pensions have annuity rates of 10% so i have left them alone. The rest is been invested with abother company.
Plan is to live off equity from our house in london as well as savings from september.
I am 58 my wife 49 she has about £1k a month in pensions coming when she is 67. I have state only at 67.
My advice is to start early with your pension if you can.
I joined the company scheme as a graduate - was 24 at the time. Total contribution was 12% (including employers contribution).
Now I did not know a lot about pensions and had significant short term debt from being a student so left it alone for a couple of years.
However when I started to get yearly pay rises I realised that taking 1% of that and adding it to my pension made little difference to me but has a big long term effect.
Also now I'm a higher rate tax payer it helps as it's salary sacrifice which means the amount of change in take home versus the additional amount in pension is greater
So now at 28 I have a total contribution of 17% going in which I think should be ok. My employers contribution amount rules changed and I am maxing what I can get from them.
Most articles I read say if you start at at least half your age in terms of percentage which I did and you get to 15% plus in your late twenties then it should leave a decent pot at the end.
I should probably do some calculations on a spreadsheet about it but for now I think I'm doing ok
Now I did not know a lot about pensions and had significant short term debt from being a student so left it alone for a couple of years.
However when I started to get yearly pay rises I realised that taking 1% of that and adding it to my pension made little difference to me but has a big long term effect.
Also now I'm a higher rate tax payer it helps as it's salary sacrifice which means the amount of change in take home versus the additional amount in pension is greater
So now at 28 I have a total contribution of 17% going in which I think should be ok. My employers contribution amount rules changed and I am maxing what I can get from them.
Most articles I read say if you start at at least half your age in terms of percentage which I did and you get to 15% plus in your late twenties then it should leave a decent pot at the end.
I should probably do some calculations on a spreadsheet about it but for now I think I'm doing ok
James_B said:
I don't agree. People have plenty of years to save, they are just choosing not to do so.
Bingo. Everyone has pretty much at least 30-40 years to invest in creating an income when the market place ceases to employ them. Everyone knows this event is going to happen to them, everyone knows roughly when it will happen and everyone can even make a statistical guess as to how much they will need each year and even for how many years. But people want a new car every other year, an extra holiday and lots of shiny stuff from China to pretend they are rich when in fact they are hurtling towards abject poverty and begging and whinging at the State that it doesn't give them free money.
Nothing has really changed. You still need to be putting away 20-30% of your salary today in order to create a salary in the future. All that's changed is that the people who never bothered doing this before and relied on just the State pension are now living lifestyles really rather disparate from their forebears.
CoolHands said:
If you don't have much, you want to enjoy it. That's why benefits people smoke etc If all you did was plan for tomorrow you'd have a miserable life. At least this way, they enjoy life now, and, to use pension terminology, defer 
the miserable bit!
True but if you don't have much you don't need savings or a pension as the State is there to look after you and falling back in the State doesn't have such a material change in your lifestyle at that level. the miserable bit!The problem is the people who have lived with that mindset but a career and lifestyle of more traditional middle class roots. They will be experiencing a terminal lifestyle collapse.
Equity release is a huge market to be in going forward due to the millions of people who have managed to buy a home but pissed away the money that should have been saved to generate a post employment income on consumables their incomes never justified. The only problem will be evicting them once all the equity has gone and they have no home. You can bet they will complain about being homeless at 75.
And of course, all that asset consumption then means their offspring who are also over spending won't be getting that free house or cash inheritance that they have structured their entire later life around.
mk2driver said:
I joined the company scheme as a graduate - was 24 at the time. Total contribution was 12% (including employers contribution).
Now I did not know a lot about pensions and had significant short term debt from being a student so left it alone for a couple of years.
However when I started to get yearly pay rises I realised that taking 1% of that and adding it to my pension made little difference to me but has a big long term effect.
Also now I'm a higher rate tax payer it helps as it's salary sacrifice which means the amount of change in take home versus the additional amount in pension is greater
So now at 28 I have a total contribution of 17% going in which I think should be ok. My employers contribution amount rules changed and I am maxing what I can get from them.
Most articles I read say if you start at at least half your age in terms of percentage which I did and you get to 15% plus in your late twenties then it should leave a decent pot at the end.
I should probably do some calculations on a spreadsheet about it but for now I think I'm doing ok
You have got it sussed, well done. This is exactly what I have been trying to explain is needed.Now I did not know a lot about pensions and had significant short term debt from being a student so left it alone for a couple of years.
However when I started to get yearly pay rises I realised that taking 1% of that and adding it to my pension made little difference to me but has a big long term effect.
Also now I'm a higher rate tax payer it helps as it's salary sacrifice which means the amount of change in take home versus the additional amount in pension is greater
So now at 28 I have a total contribution of 17% going in which I think should be ok. My employers contribution amount rules changed and I am maxing what I can get from them.
Most articles I read say if you start at at least half your age in terms of percentage which I did and you get to 15% plus in your late twenties then it should leave a decent pot at the end.
I should probably do some calculations on a spreadsheet about it but for now I think I'm doing ok
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