Retirement fund

[trickywoo]

I know this is PH and I risk the 'anything less than £1m isn't worth worrying about' answer but if you were in the position of not being able to top up a retirement fund with a retirement date 12 to 15 years from now what would you say is a reasonable sum to have now?

Happy with a 100% equity managed style home for the money until then.

Not looking to live the high life in retirement BTW.

[Fast and Spurious]

Depends what your age is, tell us that and you'll get some answers.

[trickywoo]

Looking to take it around 60 +/- a few years.

[Fast and Spurious]

Thanks. So many factors - what state pension will you be entitled to? That can make a big difference to the answer. Married? Kids etc...

I'll say £300k as an opening gambit, finger in the air, to be refined no doubt....

[cavey76]

Here's some thought's that might help your calculation.

Rule of 72 is the rule that 72 divided by expected return tells you how long it takes you to double your money. So lets say you have 15 years to go therefore 72/5 = 14.4 years. So if you get 5% avg return then the pot you have today will double by the time you pull the retirement trigger.

I am unlikely to EVER consider an annuity but if you assume something like 3-4% return then your pot should outlast you.

Assuming your housing, childcare,rearing, fun time etc is greatly reduced then what do you think you could live on...I'll pluck a figure out the air of £18,000/yr.

IIRC i think the state pension works out about £7K/yr so i need 11K from that fund to keep me warm and in Werthers originals.

Doing some backward calcs i think i would need a fund come retirement of circa £370K then and if i have approx 15 years to go and think i can secure 5%/yr above inflation then i would assume i am starting today around £170K.

Lots of assumptions there. It might not be perfect for you but i work on some simplified rules of thumb for myself.

[12TS]

I can't just find the govt advice on this, but it's quite useful

Which looks to be saying similar things

https://www.which.co.uk/money/pensions-and-retirem...

[LeoSayer]

trickywoo said:

Not looking to live the high life in retirement BTW.

What are you looking for in retirement based in the link below:

https://www.retirementlivingstandards.org.uk/

[cavey76]

Which site is interesting. £41K/yr from a £757K annuity. Maybe i am out of date but that sounds generous.

Either way my intent is to dodge annuities like i would dodge a syphilitic we.

[Carbon Sasquatch]

cavey76 said:

Which site is interesting. £41K/yr from a £757K annuity. Maybe i am out of date but that sounds generous.

Either way my intent is to dodge annuities like i would dodge a syphilitic we.

Their numbers are misleading, the £41k seems to include state pension - but not clear whether that's 1 or 2 as the £41k target is for a couple. So that could be 18k leaving a 23k requirement from the fund, which looks closer to their numbers.

[xeny]

trickywoo said:

I know this is PH and I risk the 'anything less than £1m isn't worth worrying about' answer but if you were in the position of not being able to top up a retirement fund with a retirement date 12 to 15 years from now what would you say is a reasonable sum to have now?

Happy with a 100% equity managed style home for the money until then.

Not looking to live the high life in retirement BTW.

There are two questions there. What return rate do you expect, and how much do you want.

If you want to play with numbers, put this into a web browser:

400000 * (1.08^12)

in this example I've assumed a £400000 initial sum, 8% return and a 12 year term. It's trivial to feed in numbers hit return and see what you get. Up to you what assumptions you want to make about return and the pension LTA's treatment by government over time.

[BlackG7R]

trickywoo said:

I know this is PH and I risk the 'anything less than £1m isn't worth worrying about' answer but if you were in the position of not being able to top up a retirement fund with a retirement date 12 to 15 years from now what would you say is a reasonable sum to have now?

Happy with a 100% equity managed style home for the money until then.

Not looking to live the high life in retirement BTW.

How much do you ideally want / need to live on a year, and how much are you putting in a month ??

[cavey76]

xeny said:

trickywoo said:

I know this is PH and I risk the 'anything less than £1m isn't worth worrying about' answer but if you were in the position of not being able to top up a retirement fund with a retirement date 12 to 15 years from now what would you say is a reasonable sum to have now?

Happy with a 100% equity managed style home for the money until then.

Not looking to live the high life in retirement BTW.

There are two questions there. What return rate do you expect, and how much do you want.

If you want to play with numbers, put this into a web browser:

400000 * (1.08^12)

in this example I've assumed a £400000 initial sum, 8% return and a 12 year term. It's trivial to feed in numbers hit return and see what you get. Up to you what assumptions you want to make about return and the pension LTA's treatment by government over time.

8% rate of return - your money doubles in 9 years. Do i win a prize?

The OP needs to sit and think through what he/she thinks they will reliably return with a bit of fund/stock/investment picking over the next few years.

Also if i read the OP post well they said no further contributions...therefore if it is all about the gain they can make with their investments maybe they need to get pretty aggressive.

I'm fortunate, i've an employer who contributes significantly on my behalf. In my early 40s i have a fund of over £400K thus far but that got to where it is with some massive risk taking that most wouldnt be comfortable with, ie 7 years ago i took a punt in my SIPP and whacked EVERYTHING into one stock, in quadrupled. This is not a tactic that will work for most but is an example of probably the most extreme risk taking. I guess the OP will have to take a greater degree of risk than the average bear IF they are going to make up for a lack of contributions for the next 12-15 years and yet have a fund that will result in a "decent" retirement income

[trickywoo]

BlackG7R said:

How much do you ideally want / need to live on a year, and how much are you putting in a month ??

In today’s money £1,500 a month would be plenty.

I have a reasonable fund now but may not be able to add to it significantly hence my question about what is a decent pot 12 years out.

I know it’s crystal ball stuff but am still interested in other people’s views.

I’m hopeful that around £200k isn’t too far off.

[NickCQ]

cavey76 said:

7 years ago i took a punt in my SIPP and whacked EVERYTHING into one stock, in quadrupled

[BlackG7R]

trickywoo said:

BlackG7R said:

How much do you ideally want / need to live on a year, and how much are you putting in a month ??

In today’s money £1,500 a month would be plenty.

I have a reasonable fund now but may not be able to add to it significantly hence my question about what is a decent pot 12 years out.

I know it’s crystal ball stuff but am still interested in other people’s views.

I’m hopeful that around £200k isn’t too far off.

So back of a fag packet calculations you want roughly the equivalent of a £25k p/a salary in 10 years time, so call it £30k p/a in 2031.

If you use the 4% rule (which is only a very rough guide to give you about 30 yrs with about a 95% chance of not running out of money)
you'll need somewhere in the region of £750k in your pot.

Which incidentally is exactly the kind of level I am aiming to achieve over the next 10-12 years.

I currently have around £150k in my pension pot, and I'm adding around £900 per month, and I'm not that confident I'll get anywhere near that target in time. It will all come down to how kind the markets are over the coming years, and what kind of levels of contributions I can manage to maintain.

Please feel free to correct me, if anybody thinks I have anything fundamentally wrong here, as I am no expert these are just my personal calculations.

[B9]

You'll get £9k pa (£18k if a couple) from 67, so worth factoring that in.

[trickywoo]

BlackG7R said:

So back of a fag packet calculations you want roughly the equivalent of a £25k p/a salary in 10 years time, so call it £30k p/a in 2031.

Isn’t it more like £20k now because there won’t be any NI just income tax?

That 20% less makes a big difference.

[BlackG7R]

B9 said:

You'll get £9k pa (£18k if a couple) from 67, so worth factoring that in.

Yep worth factoring in, but I'll have to wait another 7years for that from my (wildly over optimistic) planned date of retirement.

[BlackG7R]

trickywoo said:

BlackG7R said:

So back of a fag packet calculations you want roughly the equivalent of a £25k p/a salary in 10 years time, so call it £30k p/a in 2031.

Isn’t it more like £20k now because there won’t be any NI just income tax?

That 20% less makes a big difference.

OK, as I said very rough figures, as there are so many variables.

If you say £20k p/a todays money, and say £25k in 2031.

Using the same 4% rule you would need a pot some where in the region of £500k.

These figures really depressed me when I first started playing around with them, but they are only a rough guide. (and I think fairly conservative)

I am determined not to be working full time after 60, so I will have to find a way of managing on whatever I end up with at the time.

Edited by BlackG7R on Thursday 3rd June 22:18

[cavey76]

NickCQ said:

cavey76 said:

7 years ago i took a punt in my SIPP and whacked EVERYTHING into one stock, in quadrupled

I work in the telecoms, i was very aware of a company called Ringcentral around 2013/14. I went ball deep on them in 2014. Sold in 2018 and thought i was Warren Buffet. I cry myself to sleep these days over what i could have won!