30yr old no pension. What should i do?
Discussion
Hi, this has really been playing on my mind the last few month (well actually 7month when my son was born). I work for a small company so the pension contribution isn't great. I am a home owner with my wife. Basically what should i be doing for the future? I know i will be working till i'm old which i'm fine with it's how i've been brought up, many relatives are successful but still work well into their late 60s. I enjoy working, i just want in later life to take the stress out of it.
So basically what is the best way to help with my future? ISA? pension? investing? I'm been reading a lot of the finance topics on PH about pensions and investing. Should i save a lump sum to invest or be paying a monthly amount into something? Can decent savings/investments/pensions be made with a couple hundred a month or we talking £500+ Any help or even a starting point would be massively appreciated. Thank you
So basically what is the best way to help with my future? ISA? pension? investing? I'm been reading a lot of the finance topics on PH about pensions and investing. Should i save a lump sum to invest or be paying a monthly amount into something? Can decent savings/investments/pensions be made with a couple hundred a month or we talking £500+ Any help or even a starting point would be massively appreciated. Thank you
trackep said:
Hi, this has really been playing on my mind the last few month (well actually 7month when my son was born). I work for a small company so the pension contribution isn't great. I am a home owner with my wife. Basically what should i be doing for the future? I know i will be working till i'm old which i'm fine with it's how i've been brought up, many relatives are successful but still work well into their late 60s. I enjoy working, i just want in later life to take the stress out of it.
So basically what is the best way to help with my future? ISA? pension? investing? I'm been reading a lot of the finance topics on PH about pensions and investing. Should i save a lump sum to invest or be paying a monthly amount into something? Can decent savings/investments/pensions be made with a couple hundred a month or we talking £500+ Any help or even a starting point would be massively appreciated. Thank you
Providing you have sufficient contingency savings elsewhere, then tying up money in a pension is a good idea and over 30 years even a relatively small monthly saving will build up to a half-decent pot. Obviously the more you can afford the better, but getting into the habit of putting money away on a regular basis ASAP is key.So basically what is the best way to help with my future? ISA? pension? investing? I'm been reading a lot of the finance topics on PH about pensions and investing. Should i save a lump sum to invest or be paying a monthly amount into something? Can decent savings/investments/pensions be made with a couple hundred a month or we talking £500+ Any help or even a starting point would be massively appreciated. Thank you
I would recommend looking here to find out how much you need to save and compare to how much you will need in retirement.
https://www.nutmeg.com/pension-calculator
I wouldn't necessarily recommend Nutmeg for your investments though.
If you are looking to invest outside of a pension, I invest in index-tracking fund as its the lowest fee/lowest risk and tends to outperform managed funds once all the fees are taken into account. However, you would need to be looking to hold them for 10+ years ideally.
https://www.nutmeg.com/pension-calculator
I wouldn't necessarily recommend Nutmeg for your investments though.
If you are looking to invest outside of a pension, I invest in index-tracking fund as its the lowest fee/lowest risk and tends to outperform managed funds once all the fees are taken into account. However, you would need to be looking to hold them for 10+ years ideally.
Matt370Z said:
I would recommend looking here to find out how much you need to save and compare to how much you will need in retirement.
https://www.nutmeg.com/pension-calculator
I wouldn't necessarily recommend Nutmeg for your investments though.
If you are looking to invest outside of a pension, I invest in index-tracking fund as its the lowest fee/lowest risk and tends to outperform managed funds once all the fees are taken into account. However, you would need to be looking to hold them for 10+ years ideally.
Trackers are NOT necessarily low risk. It depends on the asset class.https://www.nutmeg.com/pension-calculator
I wouldn't necessarily recommend Nutmeg for your investments though.
If you are looking to invest outside of a pension, I invest in index-tracking fund as its the lowest fee/lowest risk and tends to outperform managed funds once all the fees are taken into account. However, you would need to be looking to hold them for 10+ years ideally.
I would consider using your annual isa allowance where possible to save into a stocks and shares ISA, that way you can access the funds early without complications should you ever have the need.
Then educate yourself as to what a balanced portfolio may look like for your risk profile and drip funds monthly into it to smooth out the peaks and troughs of the markets over time.
Then educate yourself as to what a balanced portfolio may look like for your risk profile and drip funds monthly into it to smooth out the peaks and troughs of the markets over time.
vindaloo79 said:
I would consider using your annual isa allowance where possible to save into a stocks and shares ISA, that way you can access the funds early without complications should you ever have the need.
Then educate yourself as to what a balanced portfolio may look like for your risk profile and drip funds monthly into it to smooth out the peaks and troughs of the markets over time.
If this is designated long-term saving for retirement, why not use a pension and obtain the tax advantages.Then educate yourself as to what a balanced portfolio may look like for your risk profile and drip funds monthly into it to smooth out the peaks and troughs of the markets over time.
sidicks said:
If this is designated long-term saving for retirement, why not use a pension and obtain the tax advantages.
Can you get at the money if you need to in an absolute emergency?Genuine question, I'd assumed you could be up s
t creek and the pension is still untouchable until you reach whatever the drawdown criteria are?bhstewie said:
hstewie said: Can you get at the money if you need to in an absolute emergency?
Genuine question, I'd assumed you could be up st creek and the pension is still untouchable until you reach whatever the drawdown criteria are?
Basically untouchable (unless you want to pay a large tax charge), but that’s why I asked if they had sufficient contingency money elsewhere.Genuine question, I'd assumed you could be up s
t creek and the pension is still untouchable until you reach whatever the drawdown criteria are?Edited by sidicks on Wednesday 31st January 17:50
bhstewie said:
hstewie said: Can you get at the money if you need to in an absolute emergency?
Genuine question, I'd assumed you could be up st creek and the pension is still untouchable until you reach whatever the drawdown criteria are?
No - if you're under 40, look hard at a LISA, where there is a penalty,but it is possibleGenuine question, I'd assumed you could be up s
t creek and the pension is still untouchable until you reach whatever the drawdown criteria are?Try and appreciate that a LISA, ISA and pension are all "wrappers" that save you tax on whatever you choose to invest in. Very roughly
LISAs essentailly give you a basic rate tax bonus on up to £4000 each year (resets in April) and aren't taxed when you withdraw (at 60)
Pensions give you your paid income tax back when you pay in (40% or 20%) are 25% tax free, and the rest is taxed at your current tax rate when you withdraw in retirement.
ISAs are untaxed on the way out, no tax rebate on the way in, but you can take money out at any time. £20000/year limit.
For all of them investments are tax free on the returns inside. Roughly in order of priority do this to the extent you can afford,
Pay into your work pension up to the level the company matches.If you're a 40% tax payer, overpay until you've put all of your 40% income into a work pension or SIPP.
Put £4000/year into a LISA.
Put anything else into an ISA. If you've money you feel you may need in >5 years but before retirement, put that in an ISA.
Unless you've got a lump sum you need to invest, invest as you go along, say every 1 or 2 months.
LISAs essentailly give you a basic rate tax bonus on up to £4000 each year (resets in April) and aren't taxed when you withdraw (at 60)
Pensions give you your paid income tax back when you pay in (40% or 20%) are 25% tax free, and the rest is taxed at your current tax rate when you withdraw in retirement.
ISAs are untaxed on the way out, no tax rebate on the way in, but you can take money out at any time. £20000/year limit.
For all of them investments are tax free on the returns inside. Roughly in order of priority do this to the extent you can afford,
Pay into your work pension up to the level the company matches.If you're a 40% tax payer, overpay until you've put all of your 40% income into a work pension or SIPP.
Put £4000/year into a LISA.
Put anything else into an ISA. If you've money you feel you may need in >5 years but before retirement, put that in an ISA.
Unless you've got a lump sum you need to invest, invest as you go along, say every 1 or 2 months.
You need to fast forward to age 60 (or whatever) and make a rough guess on how much income you might need / want.
Then work back from there.
For most people that number is around £25k for a married couple in the UK so lets take that as an example.
State Pension will make up around £16k leaving a shortfall of c.£10k a year.
10k per year will need a sip of around £250k.
Assuming 5% return that will need a contribution of c.£250 pcm. If you wanted to bet on the markets you could do £200 for an assumed 7% return.
That then leaves you to decide if you want to work right up to state pension age or start saving for the shortfall years. ISAs are good for that IMHO. Some people might go BTL. Others just wing it. You will never really know what the market will return so its always a gamble so its best to go with lowest rate of return and hope that's the worst case. The other advantage for you of working till state pension age would be you get an extra 7-10 years on the pot which means you could in theory lower your contributions quite a bit. I would try not too though.
Obviously if you decide you want £40k in retirement and you want to retire at 55 you will need a whole lot more in the pot. (£1M+)
Then work back from there.
For most people that number is around £25k for a married couple in the UK so lets take that as an example.
State Pension will make up around £16k leaving a shortfall of c.£10k a year.
10k per year will need a sip of around £250k.
Assuming 5% return that will need a contribution of c.£250 pcm. If you wanted to bet on the markets you could do £200 for an assumed 7% return.
That then leaves you to decide if you want to work right up to state pension age or start saving for the shortfall years. ISAs are good for that IMHO. Some people might go BTL. Others just wing it. You will never really know what the market will return so its always a gamble so its best to go with lowest rate of return and hope that's the worst case. The other advantage for you of working till state pension age would be you get an extra 7-10 years on the pot which means you could in theory lower your contributions quite a bit. I would try not too though.
Obviously if you decide you want £40k in retirement and you want to retire at 55 you will need a whole lot more in the pot. (£1M+)
red_slr said:
You need to fast forward to age 60 (or whatever) and make a rough guess on how much income you might need / want.
Then work back from there.
For most people that number is around £25k for a married couple in the UK so lets take that as an example.
State Pension will make up around £16k leaving a shortfall of c.£10k a year.
10k per year will need a sip of around £250k.
Assuming 5% return that will need a contribution of c.£250 pcm. If you wanted to bet on the markets you could do £200 for an assumed 7% return.
That then leaves you to decide if you want to work right up to state pension age or start saving for the shortfall years. ISAs are good for that IMHO. Some people might go BTL. Others just wing it. You will never really know what the market will return so its always a gamble so its best to go with lowest rate of return and hope that's the worst case. The other advantage for you of working till state pension age would be you get an extra 7-10 years on the pot which means you could in theory lower your contributions quite a bit. I would try not too though.
Obviously if you decide you want £40k in retirement and you want to retire at 55 you will need a whole lot more in the pot. (£1M+)
I think you are optimistic - £25k in 30 years is more like £10k in today’s, which feels extremely low as a target income.Then work back from there.
For most people that number is around £25k for a married couple in the UK so lets take that as an example.
State Pension will make up around £16k leaving a shortfall of c.£10k a year.
10k per year will need a sip of around £250k.
Assuming 5% return that will need a contribution of c.£250 pcm. If you wanted to bet on the markets you could do £200 for an assumed 7% return.
That then leaves you to decide if you want to work right up to state pension age or start saving for the shortfall years. ISAs are good for that IMHO. Some people might go BTL. Others just wing it. You will never really know what the market will return so its always a gamble so its best to go with lowest rate of return and hope that's the worst case. The other advantage for you of working till state pension age would be you get an extra 7-10 years on the pot which means you could in theory lower your contributions quite a bit. I would try not too though.
Obviously if you decide you want £40k in retirement and you want to retire at 55 you will need a whole lot more in the pot. (£1M+)
Further, you’ll normally want your income in retirement to maintain value on real terms which will also significantly increase the pot required.
I’m not sure you’ve properly factored in the above?
I think most pension discussions happen in the present in terms of value. Even my pension statements project values or income in todays money and there is a big disclaimer saying that on each statement.
My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
red_slr said:
I think most pension discussions happen in the present in terms of value. Even my pension statements project values or income in todays money and there is a big disclaimer saying that on each statement.
My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
Does your projection get you to £25k nominal or £25 in real terms?My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
red_slr said:
I think most pension discussions happen in the present in terms of value. Even my pension statements project values or income in todays money and there is a big disclaimer saying that on each statement.
My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
You're presuming 5% real return then, which strikes me as possibly a little optimistic.My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
xeny said:
red_slr said:
I think most pension discussions happen in the present in terms of value. Even my pension statements project values or income in todays money and there is a big disclaimer saying that on each statement.
My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
You're presuming 5% real return then, which strikes me as possibly a little optimistic.My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
The other option is to start low and ramp up but I have never been a fan of that method, that IS risky. IMHO.
sidicks said:
red_slr said:
I think most pension discussions happen in the present in terms of value. Even my pension statements project values or income in todays money and there is a big disclaimer saying that on each statement.
My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
Does your projection get you to £25k nominal or £25 in real terms?My calcs are based on 4% SWR are per the trinity study.
If you want to be 100% safe just use 3%.
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