Midlife Crisis Pension/Investment Worries..long post warning
Discussion
(I was going to reply to an existing thread about bothering with pension planning, but I don't want to derail the argument going on in there)
I worry about my long term financial future, firstly because I didn't start thinking about it until what I consider was too late, and secondly because Im having midlife crisis.
The dream is that my wife and I will have a combined early-retirement income of around £30k PA...but Ive no idea how to achieve that, or when it might be possible. But that would certainly be enough for us to live on, and the sooner the better of course.
For those more in the know than me I'd like to share the numbers, if only to see if Im headed in the right direction. FYI, Im not taking any potential state pension into account here, but Ive contributed a lot to the system since I was 17 so I may get something out of it...but whenever that may be I don't want to wait for it.
BUT HERES THE KICKER....I don't want to be doing my job in 4 years from now (thats the midlife crisis bit). Ive done it for 23 years and can't bear the thought of doing beyond 2022, Ive just not got it in me. In all likelihood I'll try to get a job at B&Q that just pays the bills, so all of the savings and pension contributions will have to stop then. So Ive got 4 years in which I'll aim to get another circa £150k into my workplace pension (or half into that, and half in the ISA Fund?).
Am I doing this right? Is my plan flawed? I don't have a planned death date. I have no BTL's or Puggy Machines. When can I sensibly start taking £20k PA out of the ISA fund and consider stopping the B&Q job Ive not even started yet?
(Ive kept my wife out of these figures though she earns about £10k a year, no real pension, but will likely continue to work longer than me).
Thanks for getting this far down the page
I worry about my long term financial future, firstly because I didn't start thinking about it until what I consider was too late, and secondly because Im having midlife crisis.
The dream is that my wife and I will have a combined early-retirement income of around £30k PA...but Ive no idea how to achieve that, or when it might be possible. But that would certainly be enough for us to live on, and the sooner the better of course.
For those more in the know than me I'd like to share the numbers, if only to see if Im headed in the right direction. FYI, Im not taking any potential state pension into account here, but Ive contributed a lot to the system since I was 17 so I may get something out of it...but whenever that may be I don't want to wait for it.
- We're planning to downsize this year to a house worth circa £400k which would leave us mortgage free, and release around £70k in cash whilst saving us £1k a month mortgage payment. This will give us all the house we need for the foreseeable future, along with the ability to downsize again (think £200k for a 3-bed semi round here...its cheap). So, we can benefit from any potential(!) capital growth on the £400k property in the meantime, whilst being able to release a further 50% of its value when we need to, and still have a free roof over our heads.
- I started a private pension years ago, with the idea that it may get me a year travelling, or a nice weekend car further down the line...it was never to provide for a future (I still pay £50 a month into it...no laughing at the back please!). Its only worth about £32k with a 'retirement age' of 2031 when I'll be 55yrs old.
- I have a workplace pension worth £45k that I started more recently, and currently pay £600 a month into (I'll add a further £1000 a month to this when we downsize as I will put what was the mortgage payment into this too). The 'retirement age' for this one is 2042 when I'll be 66yrs old.
- Ive £171k in an ISA fund gaining circa 5% PA (12% last year, but thats not to be expected of course). The plan is to add the spare £70k from the house sale into this pot when our current place is sold.
- Ive the ability currently to save around £20k a year over my existing/increased pension contributions. Up to now, Ive been using these annual savings to overpay the mortgage...but once we downsize I guess it makes sense to benefit from the tax savings of getting it into my workplace pension (along with the £1600 I'll already be contributing). Maybe I should have done this before now instead of overpaying the mortgage...
BUT HERES THE KICKER....I don't want to be doing my job in 4 years from now (thats the midlife crisis bit). Ive done it for 23 years and can't bear the thought of doing beyond 2022, Ive just not got it in me. In all likelihood I'll try to get a job at B&Q that just pays the bills, so all of the savings and pension contributions will have to stop then. So Ive got 4 years in which I'll aim to get another circa £150k into my workplace pension (or half into that, and half in the ISA Fund?).
Am I doing this right? Is my plan flawed? I don't have a planned death date. I have no BTL's or Puggy Machines. When can I sensibly start taking £20k PA out of the ISA fund and consider stopping the B&Q job Ive not even started yet?
(Ive kept my wife out of these figures though she earns about £10k a year, no real pension, but will likely continue to work longer than me).
Thanks for getting this far down the page
As someone who's recently had a similar thought process (a little younger than you, but needing to get my ducks in a row), I found the most helpful advice was to start at the end goal, and work back from there.
So, if you require 30k a year without a job, a pot of 750k ought to do if, based on a 4% withdrawal rate - in which case your pot should last you until the end of your days. Obviously, having the safety blanket of being able to downsize provides some extra security.
If your B&Q job will pay you 8k, then you need a pension pot to provide the remaining 22k - about 550k.
If you don't mind, I can run you through my situation.
I've got a retirement date planned at 55. So, I've got 20 years to sort my s
t out. I'm not eligible for any state pensions, due to working overseas.
My job is fairly well paid (but I don't know if I'll be here forever) so I need to make hay while the sun shines. I own my retirement home outright. My plan is loosely:
I have a decent company retirement scheme by modern standards. Managed funds, with company contributions currently about 23k a year, rising linearly to about 35k in a decades time. There's about 185k in there now. This will form the backbone of my retirement funds - assuming I stay where I am for at least another decade.
I plan to buy a couple of BTLs in the US with 30% down in the next 2 years, each property priced around $200k. If they're paid off in 20 years, then that's around $30k (minus costs) a year in income in today's money. The idea here is that this ought to be a hedge against inflation.
Once I'm done saving for those, the third tranche of my saving will be to divert my monthly savings into a couple of trackers.
So, in the end I'll have 3 aspects to my retirement funding: some rental property, a managed fund account, and some trackers. I'm aiming for £50k in retirement in today's money. Hopefully at 55, my company pension scheme and rental income will achieve that figure. The tracker investments will be a either a bonus for nice cars or such, or may fund a few years of retirement pre-55.
It's all a bit daunting, to be honest - as the figures required are huge.
In terms of planning, I have the 'advantage' of staying in my job for a while yet - whereas you plan on winding down in a few years. That said, I don't plan to work at all in retirement, which has a large impact on required pension pot size.
I'm sorry it doesn't answer all your questions, but I'd also appreciate feedback from those more knowledgable..
So, if you require 30k a year without a job, a pot of 750k ought to do if, based on a 4% withdrawal rate - in which case your pot should last you until the end of your days. Obviously, having the safety blanket of being able to downsize provides some extra security.
If your B&Q job will pay you 8k, then you need a pension pot to provide the remaining 22k - about 550k.
If you don't mind, I can run you through my situation.
I've got a retirement date planned at 55. So, I've got 20 years to sort my s
t out. I'm not eligible for any state pensions, due to working overseas. My job is fairly well paid (but I don't know if I'll be here forever) so I need to make hay while the sun shines. I own my retirement home outright. My plan is loosely:
I have a decent company retirement scheme by modern standards. Managed funds, with company contributions currently about 23k a year, rising linearly to about 35k in a decades time. There's about 185k in there now. This will form the backbone of my retirement funds - assuming I stay where I am for at least another decade.
I plan to buy a couple of BTLs in the US with 30% down in the next 2 years, each property priced around $200k. If they're paid off in 20 years, then that's around $30k (minus costs) a year in income in today's money. The idea here is that this ought to be a hedge against inflation.
Once I'm done saving for those, the third tranche of my saving will be to divert my monthly savings into a couple of trackers.
So, in the end I'll have 3 aspects to my retirement funding: some rental property, a managed fund account, and some trackers. I'm aiming for £50k in retirement in today's money. Hopefully at 55, my company pension scheme and rental income will achieve that figure. The tracker investments will be a either a bonus for nice cars or such, or may fund a few years of retirement pre-55.
It's all a bit daunting, to be honest - as the figures required are huge.
In terms of planning, I have the 'advantage' of staying in my job for a while yet - whereas you plan on winding down in a few years. That said, I don't plan to work at all in retirement, which has a large impact on required pension pot size.
I'm sorry it doesn't answer all your questions, but I'd also appreciate feedback from those more knowledgable..
oyster said:
Both of you - have a look at yourselves.
The figures you're throwing out appear to put you in the top 5% (maybe 2%) of households in the UK.
Good financial planning you might need, but financial worries you don't.
Indeed. They're paying more into their pension each year than my entire salary. The figures you're throwing out appear to put you in the top 5% (maybe 2%) of households in the UK.
Good financial planning you might need, but financial worries you don't.
Badda said:
oyster said:
Both of you - have a look at yourselves.
The figures you're throwing out appear to put you in the top 5% (maybe 2%) of households in the UK.
Good financial planning you might need, but financial worries you don't.
If it's worrying them, it's a worry. The figures you're throwing out appear to put you in the top 5% (maybe 2%) of households in the UK.
Good financial planning you might need, but financial worries you don't.
oyster said:
Both of you - have a look at yourselves.
The figures you're throwing out appear to put you in the top 5% (maybe 2%) of households in the UK.
Good financial planning you might need, but financial worries you don't.
I appreciate being in a fortunate position, but without being a subject matter expert on this stuff, I'm still keen to accrue advise from those more well-versed. The figures you're throwing out appear to put you in the top 5% (maybe 2%) of households in the UK.
Good financial planning you might need, but financial worries you don't.
As you say, I'm not worried about putting a roof over my wrinkly head or food in my currently expanding tummy. I am, however, trying to figure out how to generate the assets needed to have an enjoyable retirement.
Living in Hong Kong, I benefit from a low income tax rate, and zero capital gains. However, it's a very expensive place to live, and it's own little bubble. So, indulge me when I find my mindset slightly skewed when it comes to figuring out what I'm going to need in retirement back in the UK, and how to get there.
As I mentioned, there will be no state pension, nor anything else like inheritance etc. So no real security blanket if I eff this up.
Please don't take the OP or my posts out of the desired context - which I'm sure you weren't deliberately doing.
Edited by Testaburger on Friday 2nd February 10:12
For the OP, and it's really only minor in the scheme of things and you may already know this: regarding the ISA, you say about putting the £70k house proceeds into it- that will take over 3 years as the current maximum is £20k per year. You also suggest saving another £75k over the next 4 years into the ISA (splitting £150k between pension and ISA). You can't save a total of £145k into an ISA over the next 4 years.
Apologies if I've misunderstood!
Apologies if I've misunderstood!
Between a couple, you can ISA wrap 40K/year. Depending on how confident you are the house will sell, you could contemplate running loose cash down to make as much use as possible of this year's ISA allowance before April, and top up loose cash post the house sale.
Do the pension/vs ISA arithmetic based on the ISA being a bridge to the pension, simply to get as much benefit from pension tax relief as possible. I'd guess based on your age you'll be able to get at a money in a pension from 57.
Do the pension/vs ISA arithmetic based on the ISA being a bridge to the pension, simply to get as much benefit from pension tax relief as possible. I'd guess based on your age you'll be able to get at a money in a pension from 57.
It's really not hard to calculate.
You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Yipper said:
It's really not hard to calculate.
You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Until you find out that you’re still fit and healthy at 85 but living in a cardboard box because your £200k ran out years ago!You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Re OP
Workplace pension tied up to 66 - better to have something that allows funds/income to be accessed earlier as when workplace pension kicks in you'll also be getting 2 state pensions.
SIPP alternative to those extra contributions if permits earlier access?
Do some calcs as to when you can take 4% income out of ISA value and hit targets - if want more certainty then a switch into a range of income paying assets when you want to draw money from ISA (can still take income or most of it even if market swings down). (3.5% to 4% from investments trusts/funds etc or 5% from a range of income stocks, REITs etc achievable). Taking income out rather than capital - although if you more than happy with growth funds and their prospects stay with them or a mixture.
Also factor in inflation into you retirement income need - at say 2.5% its £34k in 5 years, at 3% £35k.
Workplace pension tied up to 66 - better to have something that allows funds/income to be accessed earlier as when workplace pension kicks in you'll also be getting 2 state pensions.
SIPP alternative to those extra contributions if permits earlier access?
Do some calcs as to when you can take 4% income out of ISA value and hit targets - if want more certainty then a switch into a range of income paying assets when you want to draw money from ISA (can still take income or most of it even if market swings down). (3.5% to 4% from investments trusts/funds etc or 5% from a range of income stocks, REITs etc achievable). Taking income out rather than capital - although if you more than happy with growth funds and their prospects stay with them or a mixture.
Also factor in inflation into you retirement income need - at say 2.5% its £34k in 5 years, at 3% £35k.
Edited by RL17 on Friday 2nd February 12:21
Yipper said:
It's really not hard to calculate.
You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Do you really think you are helping the OP with the above nonsense?You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
You have shared a lot of financial detail but the one which is most important is the fact you don't feel able to work at your current level at this point in time.
If you are in your early 40's, and you feel this way, I would suggest finding a counsellor who you can share your thoughts with and who can help you find a good way forward. You may also need help from your doctor.
I honestly don't think the answer is to be found in discussing savings, ISAs, pensions etc.
Having said that, there is point of detail. You sound as though you have sufficient 'rainy day' money available to you. Therefore my suggestion would be to maximise your pension contributions to gain maximum tax relief rather than using taxed income in which to invest in ISAs. This way you gain the compound growth of the tax relief as well in your total savings.
If you are in your early 40's, and you feel this way, I would suggest finding a counsellor who you can share your thoughts with and who can help you find a good way forward. You may also need help from your doctor.
I honestly don't think the answer is to be found in discussing savings, ISAs, pensions etc.
Having said that, there is point of detail. You sound as though you have sufficient 'rainy day' money available to you. Therefore my suggestion would be to maximise your pension contributions to gain maximum tax relief rather than using taxed income in which to invest in ISAs. This way you gain the compound growth of the tax relief as well in your total savings.
EddieSteadyGo said:
You have shared a lot of financial detail but the one which is most important is the fact you don't feel able to work at the moment.
If you are in your early 40's, and you feel this way, I would suggest finding a counsellor who you can share your thoughts with and who can help you find a good way forward. You may also need help from your doctor.
I honestly don't think the answer is to be found in discussing savings, ISAs, pensions etc.
Having said that, there is point of detail. You sound as though you have sufficient 'rainy day' money available to you. Therefore my suggestion would be to maximise your pension contributions to gain maximum tax relief rather than using taxed income in which to invest in ISAs. This way you gain the compound growth of the tax relief as well in your total savings.
Great post. If you are in your early 40's, and you feel this way, I would suggest finding a counsellor who you can share your thoughts with and who can help you find a good way forward. You may also need help from your doctor.
I honestly don't think the answer is to be found in discussing savings, ISAs, pensions etc.
Having said that, there is point of detail. You sound as though you have sufficient 'rainy day' money available to you. Therefore my suggestion would be to maximise your pension contributions to gain maximum tax relief rather than using taxed income in which to invest in ISAs. This way you gain the compound growth of the tax relief as well in your total savings.
sidicks said:
Yipper said:
It's really not hard to calculate.
You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Do you really think you are helping the OP with the above nonsense?You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Father in law just turned 70 , used to play football for Liverpool back in 20's , can just about walk 10 mins before needing an oxygen tank . Was fine a couple of years ago.
superkartracer said:
sidicks said:
Yipper said:
It's really not hard to calculate.
You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Do you really think you are helping the OP with the above nonsense?You just need £500-800k of pure cash in a private pension or savings account by 60 or whenever you wanna retire.
Very important, however, to keep in mind that health-adjusted life expectancy (HALE) for men today is only about 70 years of age. That's when most folk start talking about the war and dribbling on their shoes.
Thus, if you retire at, say, 60, then chances are you will only need ~10 years of money to go rollerblading, swinging and cruise-shipping. In reality, you could get away with saving as little as £200k and still have a decent decade of retirement.
Father in law just turned 70 , used to play football for Liverpool back in 20's , can just about walk 10 mins before needing an oxygen tank . Was fine a couple of years ago.
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