Funding retirement
Discussion
We just completed on a 2nd BTL property yesterday & it got me thinking about income in retirement. I currently have 23yrs accrued in a final salary scheme & a separate defined contributions fund which gets the equivalent of 12% of my salary from me & my employer. I also have a smallish ISA.
So all in all I'm quite fortunate in terms of whats sitting there. However when I translate this to an income in retirement things don't seem to look quite so rosy. I know I'm naturally cautious & a little pessamistic, but even considering this it does have me thinking.
How does everyone see retirement? A time of poverty, best years of your life or don't you care & hope the state picks up the tab. Or is it just I seriously over estimate what I would need in retirement?
So all in all I'm quite fortunate in terms of whats sitting there. However when I translate this to an income in retirement things don't seem to look quite so rosy. I know I'm naturally cautious & a little pessamistic, but even considering this it does have me thinking.
How does everyone see retirement? A time of poverty, best years of your life or don't you care & hope the state picks up the tab. Or is it just I seriously over estimate what I would need in retirement?
Most people want 2/3 of their working income - the sooner they start to focus on that objective, the more likely they are to achieve it. Look on retirement as 3 phases.
Phase one, assuming you're retiring between 55 and 60, and in good health, is expensive. You're buying that TVR, you're going away for dirty weekends and the kids are finally off the books. You want to walk across Oz in flip flops and swim with dolphins and why wouldn't you? Go for it.
Phase two for many people kicks in after 10 years. You're knackered from all that swimming and you want to enter what we look more traditionally as retirement. The TVR will go and you'll buy a potting shed and slippers. It isn't as expensive as phase one and you'll need to save for phase three..
.. which might involve care and medical fees and extra costs.
Try and reverse engineer. Visualise what each phase is going to cost and then ask yourself if not only what you're doing now is suitable, but whether the means of delivery are suitable too. If you have a partner, is he/she tax efficient and can they chip in using their annual allowance or is the burden going to be all on you, as the (typically) financial alpha male and are you going to carry a needlessly and disproportionately large tax burden?
You probably don't need or want an identical amount of income over the 30 or so you'll be in retirement. Look upon a pension as just one means of providing retirement salary - where is the other salary going to come from and how much will you need? It will ebb and flow.
You are probably looking at the second b2l as a vehicle for it as well and I'm assuming you're as tax efficient with them as you can be. Make sure the current pension is doing alright for you - make sure the funds are in keeping with where you'd like them to be.
Phase one, assuming you're retiring between 55 and 60, and in good health, is expensive. You're buying that TVR, you're going away for dirty weekends and the kids are finally off the books. You want to walk across Oz in flip flops and swim with dolphins and why wouldn't you? Go for it.
Phase two for many people kicks in after 10 years. You're knackered from all that swimming and you want to enter what we look more traditionally as retirement. The TVR will go and you'll buy a potting shed and slippers. It isn't as expensive as phase one and you'll need to save for phase three..
.. which might involve care and medical fees and extra costs.
Try and reverse engineer. Visualise what each phase is going to cost and then ask yourself if not only what you're doing now is suitable, but whether the means of delivery are suitable too. If you have a partner, is he/she tax efficient and can they chip in using their annual allowance or is the burden going to be all on you, as the (typically) financial alpha male and are you going to carry a needlessly and disproportionately large tax burden?
You probably don't need or want an identical amount of income over the 30 or so you'll be in retirement. Look upon a pension as just one means of providing retirement salary - where is the other salary going to come from and how much will you need? It will ebb and flow.
You are probably looking at the second b2l as a vehicle for it as well and I'm assuming you're as tax efficient with them as you can be. Make sure the current pension is doing alright for you - make sure the funds are in keeping with where you'd like them to be.
Ginge R said:
Most people want 2/3 of their working income.......
...... assuming you're retiring between 55 and 60, and in good health, is expensive.
....that was kind of my point just about an impossibility for the overwhelming majority of people...unless you want to live the life of a hermit from when you start work! ...... assuming you're retiring between 55 and 60, and in good health, is expensive.
It sounds like you are probably quite well covered - certainly better than the vast majority of people. But whatever it is you've got, it never quite seems enough. The estimates that most pension funds use to show what the pension would earn you as a monthly figure often look paltry, but when you add on the state pension, and any other lumps of money you acquire along the way - like your BTLs - the picture often looks a lot rosier.
GT03ROB said:
....that was kind of my point just about an impossibility for the overwhelming majority of people...unless you want to live the life of a hermit from when you start work!
Rob,I don't disagree with you. Putting off saving for retirement is easy. But putting off retirement is harder.
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