30yr old no pension. What should i do?
Discussion
red_slr said:
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.
No, @ 5% per annum, you need to invest £305 per month to achieve a fund of £250k after 30 years.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.
If your monthly payments increase at 3% p.a. that figure would be closer to £215.
However, this is all about £10k in nominal terms rather than real terms, so is somewhat meaningless.
Assuming 5% nominal growth, to target a fund of £250k in real terms (which equates to around £610k @ 3% inflation), you need to invest a flat monthly amount of more like £740 per month. Or more like £520 per month increasing at 3% p.a.
Edited by sidicks on Thursday 1st February 11:40
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+)
This is good advice or at least a good ball park. 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+)
Providing of course there is a state pension in 30 or 40 years time when the OP needs it.
b
hstewie said:
hstewie said: I would have thought if you do nothing else open a S&S or Cash ISA asap so your money is earning something whilst you explore options.
Just remember with S&S there's risk, with cash there's no risk but check penalties for withdrawals etc.
That's a really good point that certainly I tend to forget in this kind of discussion.Just remember with S&S there's risk, with cash there's no risk but check penalties for withdrawals etc.
The state pension is likely to shrink (relatively) in the future, and private pension returns are also shrinking (in the present and future).
Thus, if you are 30, and wish to retire at 60 or 70, then calculate what you think is a decent monthly number... and double it.
If the theoretical sums say £250 a month... then it is prudent in real life to save £500 a month (increased +3% every year) from right now and for the next 30-40 years.
Always better to save too much than too little.
Of course, other folks take the view that the state will always pick up the bill for retirement, regardless of the scare stories... In which case, you're better off not saving for a pension and spanking the spare cash today on luxury holidays, fast cars and hookers.
Thus, if you are 30, and wish to retire at 60 or 70, then calculate what you think is a decent monthly number... and double it.
If the theoretical sums say £250 a month... then it is prudent in real life to save £500 a month (increased +3% every year) from right now and for the next 30-40 years.
Always better to save too much than too little.
Of course, other folks take the view that the state will always pick up the bill for retirement, regardless of the scare stories... In which case, you're better off not saving for a pension and spanking the spare cash today on luxury holidays, fast cars and hookers.
Yipper said:
The state pension is likely to shrink (relatively) in the future, and private pension returns are also shrinking (in the present and future).
Thus, if you are 30, and wish to retire at 60 or 70, then calculate what you think is a decent monthly number... and double it.
If the theoretical sums say £250 a month... then it is prudent in real life to save £500 a month (increased +3% every year) from right now and for the next 30-40 years.
Always better to save too much than too little.
Of course, other folks take the view that the state will always pick up the bill for retirement, regardless of the scare stories... In which case, you're better off not saving for a pension and spanking the spare cash today on luxury holidays, fast cars and hookers.
Given where interest rates currently are, why do you believe ‘private pension returns’ will shrink in the future?Thus, if you are 30, and wish to retire at 60 or 70, then calculate what you think is a decent monthly number... and double it.
If the theoretical sums say £250 a month... then it is prudent in real life to save £500 a month (increased +3% every year) from right now and for the next 30-40 years.
Always better to save too much than too little.
Of course, other folks take the view that the state will always pick up the bill for retirement, regardless of the scare stories... In which case, you're better off not saving for a pension and spanking the spare cash today on luxury holidays, fast cars and hookers.
I read this last night, might have been linked to on here but interesting, open to debate of course 
http://monevator.com/the-rule-of-300/
http://monevator.com/the-rule-of-300/
bhstewie said:
hstewie said: I read this last night, might have been linked to on here but interesting, open to debate of course
http://monevator.com/the-rule-of-300/
It's the 4% SWR figure that red_slr mentioned in the context of the trinity study on the previous page.http://monevator.com/the-rule-of-300/
xeny said:
bhstewie said:
hstewie said: I read this last night, might have been linked to on here but interesting, open to debate of course
http://monevator.com/the-rule-of-300/
It's the 4% SWR figure that red_slr mentioned in the context of the trinity study on the previous page.http://monevator.com/the-rule-of-300/
Or did I miss that bit?
From the wikipedia article on the Trinity study (which I can't disassociate with the atomic bomb tests)
"The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living."
The assumption (which is reasonably but not totally robust) is that returns on the portfolio will exceed CPI by enough that the portfolio isn't exhausted in 30 years. People with longer horizons argue about acceptable rates , I use 3.2%.
"The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living."
The assumption (which is reasonably but not totally robust) is that returns on the portfolio will exceed CPI by enough that the portfolio isn't exhausted in 30 years. People with longer horizons argue about acceptable rates , I use 3.2%.
xeny said:
From the wikipedia article on the Trinity study (which I can't disassociate with the atomic bomb tests)
"The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living."
The assumption (which is reasonably but not totally robust) is that returns on the portfolio will exceed CPI by enough that the portfolio isn't exhausted in 30 years. People with longer horizons argue about acceptable rates , I use 3.2%.
4% plus inflation is a pretty bold investment assumption! Maybe there is some adjustment for inflation in the drawdown phase, but there doesn’t appear to be any adjustment for inflation between now and retirement!"The 4% refers to the portion of the portfolio withdrawn during the first year; it is assumed that the portion withdrawn in subsequent years will increase with the consumer price index (CPI) to keep pace with the cost of living."
The assumption (which is reasonably but not totally robust) is that returns on the portfolio will exceed CPI by enough that the portfolio isn't exhausted in 30 years. People with longer horizons argue about acceptable rates , I use 3.2%.
sidicks said:
4% plus inflation is a pretty bold investment assumption! Maybe there is some adjustment for inflation in the drawdown phase, but there doesn’t appear to be any adjustment for inflation between now and retirement!
4% is not the assumed investment return. These calculations assume you draw down the principal over time to be left with zero. sidicks said:
But it seems to ignore inflation I.e. if you’re spending £1,000 per month today you need a pot of £300,000, but you need to recognise that £1,000 now will be broadly equivalent to c. £2k in say 25 years when you actually retire, so the pot you actually need is £600k etc.
Or did I miss that bit?
This isn't a criticism of the numbers but it's easy to see why people, when given the facts, decide that saving 600k is beyond them and decide "fOr did I miss that bit?
k it, I'll take my chances"sidicks said:
So exactly like an annuity then. But with much more risk and exposure to asset volatility and longevity!
I don't keep a close eye on annuity rates - but would you get 4% + inflation on an annuity for a healthy 45 year old?edit: a decent no of the projections from the study leave you dead with a decent (and often growing) portfolio, unlike an annuity.
Edited by xeny on Thursday 1st February 13:51
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