Does this seem sensible average income planning.
Discussion
Ok guys, I know we have people on here from all areas of the UK and hence average income means alot of variation on what your definition.
But in my case, im pretty average for the UK.
So background.
Im a field service engineer, im 39, im on £35k a year, I have no intention of moving companies, moving jobs or trying to go up the ladder, im happy where I am until I retire.
I live in the midlands
I bought my house(3 bed semi, separate double garage for my racecar, garden front/rear, quiet cul-de-sac) for £157,000 in late 2021, I mention the details of the house to show thats its a house im happy to live in till I die as alot would assume its a 1bed flat at that price.
Anyway I worked very hard and put down a £40,000 deposit(im a FTB) after renting with my family(wife and 2 small children) for along time.
Knowing that rates wouldnt stay low forever I chose a 14yr mortgage instead of 25yr to ensure I maximise the money going to the capital, also if i did it at 25yrs the temptation to just pay the minimum so i could buy more race car parts would be to great.
Fixed for 5years till November 2026 at 1.24% at which point I will owe about £78,000, currently saving a bit of money each month so that I will also have £10k for when im due for renewal to reduce the capital to £68,000 to try an offset the interest rate rises and potentially shorten the term even more(I hate paying interest on anything).
So my long term goal is to retire at 60, my mortgage will be paid at 50, I do not want to work until im 68 and find I drop down dead at 73, while alot of people will say everyone is living to 80+, for everyone who lives to 90, there has to be someone who dies at 70 and to just assume its not going to be you isnt in my mind the best tactic, plus after 75 I dont believe I will be doing much as I have had a hard paper round(worked from 16)
With all this in mind my plan is when i turn 50 is to pay the £1000 a month into a savings account, which should give me £120,000+interest build up to then live on at 60 when I stop work.
Now this number may vary somewhat, but it will be effectively 3rd of my take home pay at that time, as that way I wont feel i will miss that money as I had always been paying that 3rd to a mortgage provider anyway.
I feel that I could live now on a 1/3rd of my wages perfectly fine, I wouldnt be rich but I would be able to food and cloth myself, go on short breaks, visit places, im not looking for a jet set lifestyle, going abroad, I dont drink at all or smoke etc, im a pretty simple bloke tinkering in my garage.
The wife is a Teaching Assistant, is 2yrs older than me and will likely work till normal retirement age, so I would get 6-8yrs retirement before she joins me.
As they keep raising the retirement age its likely to be 70-72 by the time I get there so im not prepared to wait until then.
Has anyone ever thought like this before, I know for alot their numbers are alot larger than mine, but would the concept hold up to scrutiny?
But in my case, im pretty average for the UK.
So background.
Im a field service engineer, im 39, im on £35k a year, I have no intention of moving companies, moving jobs or trying to go up the ladder, im happy where I am until I retire.
I live in the midlands
I bought my house(3 bed semi, separate double garage for my racecar, garden front/rear, quiet cul-de-sac) for £157,000 in late 2021, I mention the details of the house to show thats its a house im happy to live in till I die as alot would assume its a 1bed flat at that price.
Anyway I worked very hard and put down a £40,000 deposit(im a FTB) after renting with my family(wife and 2 small children) for along time.
Knowing that rates wouldnt stay low forever I chose a 14yr mortgage instead of 25yr to ensure I maximise the money going to the capital, also if i did it at 25yrs the temptation to just pay the minimum so i could buy more race car parts would be to great.
Fixed for 5years till November 2026 at 1.24% at which point I will owe about £78,000, currently saving a bit of money each month so that I will also have £10k for when im due for renewal to reduce the capital to £68,000 to try an offset the interest rate rises and potentially shorten the term even more(I hate paying interest on anything).
So my long term goal is to retire at 60, my mortgage will be paid at 50, I do not want to work until im 68 and find I drop down dead at 73, while alot of people will say everyone is living to 80+, for everyone who lives to 90, there has to be someone who dies at 70 and to just assume its not going to be you isnt in my mind the best tactic, plus after 75 I dont believe I will be doing much as I have had a hard paper round(worked from 16)
With all this in mind my plan is when i turn 50 is to pay the £1000 a month into a savings account, which should give me £120,000+interest build up to then live on at 60 when I stop work.
Now this number may vary somewhat, but it will be effectively 3rd of my take home pay at that time, as that way I wont feel i will miss that money as I had always been paying that 3rd to a mortgage provider anyway.
I feel that I could live now on a 1/3rd of my wages perfectly fine, I wouldnt be rich but I would be able to food and cloth myself, go on short breaks, visit places, im not looking for a jet set lifestyle, going abroad, I dont drink at all or smoke etc, im a pretty simple bloke tinkering in my garage.
The wife is a Teaching Assistant, is 2yrs older than me and will likely work till normal retirement age, so I would get 6-8yrs retirement before she joins me.
As they keep raising the retirement age its likely to be 70-72 by the time I get there so im not prepared to wait until then.
Has anyone ever thought like this before, I know for alot their numbers are alot larger than mine, but would the concept hold up to scrutiny?
Everybody's plan differs according to their wants and needs. You appear to know exactly what you want, you have a plan and you clearly have discipline, so well done sir!
I have an addiction with monitoring my retirement planning and maintain a spreadsheet which gets updated and tweaked every week. I've seen how actual spending, earnings, savings, and growth differ from previous expectation so suggest you monitor progress and tweak your plan as you go along - if you do that with the same discipline then I'm sure you'll reach your goals. Good luck!
I have an addiction with monitoring my retirement planning and maintain a spreadsheet which gets updated and tweaked every week. I've seen how actual spending, earnings, savings, and growth differ from previous expectation so suggest you monitor progress and tweak your plan as you go along - if you do that with the same discipline then I'm sure you'll reach your goals. Good luck!
If you put that 120k into a SIPP with basic rate tax relief it would be 150k.
You can take out 15k a year tax free instead of your 12k from savings for 10 years.
All above is simplified excluding growth and inflation obviously but I think it illustrates the benefits of a SIPP as opposed to savings.
You can take out 15k a year tax free instead of your 12k from savings for 10 years.
All above is simplified excluding growth and inflation obviously but I think it illustrates the benefits of a SIPP as opposed to savings.
Don't worry about the mortgage too much. It's reasonable.
Pension Pension Pension.
Also worth setting up a LISA. I failed to credit mine until 42 so missed out on a few years free money but important bit, get one opened before 40.
ps I rarely notice forum names but certain ones stick in my mind forever
Pension Pension Pension.
Also worth setting up a LISA. I failed to credit mine until 42 so missed out on a few years free money but important bit, get one opened before 40.
ps I rarely notice forum names but certain ones stick in my mind forever
Edited by Rick101 on Tuesday 20th June 20:20
I'd agree with everyone else - It's the pension contributions, the tax savings, and the compound growth that is going to get you to your goal.
You will be able to access it before you are 60 and every pound that goes in gets an instant 20% growth before the 20 year compounding takes hold.
First job is to understand your current pension (and the wife's) in terms of where it is, how much you have in there, what the annual management charges are and where it's invested. Understand this, and you'll be way ahead of most people your age!
You will be able to access it before you are 60 and every pound that goes in gets an instant 20% growth before the 20 year compounding takes hold.
First job is to understand your current pension (and the wife's) in terms of where it is, how much you have in there, what the annual management charges are and where it's invested. Understand this, and you'll be way ahead of most people your age!
My view on this is scarred by watching a number of my great uncles and aunts struggling in gentil poverty in the 1970s and 80s because, when they retired in the mid late 1960s, £5k pa felt like a very good pension.
It has always driven me to really focus on investing my capital earmarked for retirement in appreciating assets.
Bear in mind that, if you retire at 60 you could need income for 40 years. You can hope that you live out those years in good health through an era of low inflation so that light inflation is offset by your reduced spending as you do less in your dotage.
That relies on a lot of good luck however - all you need is a chronic geriatric illness coupled to a few years old double digit inflation and your dying in a pool of your own p*ss and sh*t in a council care home
It has always driven me to really focus on investing my capital earmarked for retirement in appreciating assets.
Bear in mind that, if you retire at 60 you could need income for 40 years. You can hope that you live out those years in good health through an era of low inflation so that light inflation is offset by your reduced spending as you do less in your dotage.
That relies on a lot of good luck however - all you need is a chronic geriatric illness coupled to a few years old double digit inflation and your dying in a pool of your own p*ss and sh*t in a council care home
b
hstewie said:
hstewie said: What are you doing about pension and investments at the moment?
If you look into compound interest and savings rates having 20 years to let your money work for you can be a big advantage.
Ive got nothing.If you look into compound interest and savings rates having 20 years to let your money work for you can be a big advantage.
No investments
Ive been with my current company for nearly 3 years, so have pension with them, previous company i was there 4 years so will need to find one of those pension finders to see where the money went, before that i had nothing and jumped around jobs pretty fast(never found my niche)
I could pay money into something from 50 to 60....but at 60 I want access to all that money, not just be drip fed it until i die.
So i dont mind it going into an account that locks it in until that time but im not interested it only being able to access 25% and then getting a small amount each month, this money is there to get me from 60 till 70, not 60 till death
turbotoaster said:
bhstewie said:
hstewie said: What are you doing about pension and investments at the moment?
If you look into compound interest and savings rates having 20 years to let your money work for you can be a big advantage.
Ive got nothing.If you look into compound interest and savings rates having 20 years to let your money work for you can be a big advantage.
No investments
Ive been with my current company for nearly 3 years, so have pension with them, previous company i was there 4 years so will need to find one of those pension finders to see where the money went, before that i had nothing and jumped around jobs pretty fast(never found my niche)
I could pay money into something from 50 to 60....but at 60 I want access to all that money, not just be drip fed it until i die.
So i dont mind it going into an account that locks it in until that time but im not interested it only being able to access 25% and then getting a small amount each month, this money is there to get me from 60 till 70, not 60 till death
Your thought process is very similar to mine and I am now retired in early 50's. Although I do have final salary pension but heavily reduced due to early retirement (in fact less than the proposed Universal Basic Income). But I have savings SIPP and ISA.
My thought was to live off the ISA savings until I can access the pension at 55. This will supplement my work pension.
Like your plan, my lifestyle has not changed in retirement because I was saving about a third of my income.
The tweaks to your plan for me would be to consider splitting your savings between ISA and SIPP (personal pension) unless your work pension gives more employer contribution if you put more employee contribution in then that would be better.
If you retire early then you have the ISA savings to fall back on.
I didn't make personal pension savings until I was 40% tax payer so I got a bigger tax credit when I started.
For all the savings, I would consider investing it in equity (stocks and shares) instead of cash bank savings so that it can grow more (which should be the case since you are saving for more than a decade).
Keep the equity simple for yourself, aim for global diversified ETF (exchange trade fund) or global tracker index like with Vanguard or iShare with BlackRock. These are passive funds with relatively low annual charges.
My thought was to live off the ISA savings until I can access the pension at 55. This will supplement my work pension.
Like your plan, my lifestyle has not changed in retirement because I was saving about a third of my income.
The tweaks to your plan for me would be to consider splitting your savings between ISA and SIPP (personal pension) unless your work pension gives more employer contribution if you put more employee contribution in then that would be better.
If you retire early then you have the ISA savings to fall back on.
I didn't make personal pension savings until I was 40% tax payer so I got a bigger tax credit when I started.
For all the savings, I would consider investing it in equity (stocks and shares) instead of cash bank savings so that it can grow more (which should be the case since you are saving for more than a decade).
Keep the equity simple for yourself, aim for global diversified ETF (exchange trade fund) or global tracker index like with Vanguard or iShare with BlackRock. These are passive funds with relatively low annual charges.
turbotoaster said:
Ive got nothing.
No investments
Ive been with my current company for nearly 3 years, so have pension with them, previous company i was there 4 years so will need to find one of those pension finders to see where the money went, before that i had nothing and jumped around jobs pretty fast(never found my niche)
I could pay money into something from 50 to 60....but at 60 I want access to all that money, not just be drip fed it until i die.
So i dont mind it going into an account that locks it in until that time but im not interested it only being able to access 25% and then getting a small amount each month, this money is there to get me from 60 till 70, not 60 till death
Personal pension (SIPP) are more flexible and you could take the whole lot out when you are 60 but might not be good idea from tax view point. However if work pension has employer contributions it would be worth considering this even though it may not be so flexible as to how you draw that money out.No investments
Ive been with my current company for nearly 3 years, so have pension with them, previous company i was there 4 years so will need to find one of those pension finders to see where the money went, before that i had nothing and jumped around jobs pretty fast(never found my niche)
I could pay money into something from 50 to 60....but at 60 I want access to all that money, not just be drip fed it until i die.
So i dont mind it going into an account that locks it in until that time but im not interested it only being able to access 25% and then getting a small amount each month, this money is there to get me from 60 till 70, not 60 till death
You could consider a mix of the two.
turbotoaster said:
Ive got nothing.
No investments
Ive been with my current company for nearly 3 years, so have pension with them, previous company i was there 4 years so will need to find one of those pension finders to see where the money went, before that i had nothing and jumped around jobs pretty fast(never found my niche)
I could pay money into something from 50 to 60....but at 60 I want access to all that money, not just be drip fed it until i die.
So i dont mind it going into an account that locks it in until that time but im not interested it only being able to access 25% and then getting a small amount each month, this money is there to get me from 60 till 70, not 60 till death
What's your employers maximum match and what do you contribute? If they match 5% and you're only paying 3% you're missing out on 2% free money.No investments
Ive been with my current company for nearly 3 years, so have pension with them, previous company i was there 4 years so will need to find one of those pension finders to see where the money went, before that i had nothing and jumped around jobs pretty fast(never found my niche)
I could pay money into something from 50 to 60....but at 60 I want access to all that money, not just be drip fed it until i die.
So i dont mind it going into an account that locks it in until that time but im not interested it only being able to access 25% and then getting a small amount each month, this money is there to get me from 60 till 70, not 60 till death
You could look at either a SIPP or an ISA if you just want somewhere you can pop spare cash into and there are pros and cons with a SIPP but no real downside of an ISA that I can think of.
Cheap global tracker or multi-asset fund like LifeStrategy covers most peoples needs if the idea is just to accumulate but with the obvious caveat that investing is very different to saving in so much as you may take a short term loss but historically you'd come out very nicely ahead over most long term views.
Basically at 39 you have 20 years to let investments compound whilst if you don't do anything until you're 50 you only have 10 years.
Investments aren't nice and linear they zig and they zag but have a play with this and you'll get an idea.
https://www.thecalculatorsite.com/finance/calculat...
As a priority, I would find out exactly how many pensions you do have (2?), what type (dB/final salary/DC etc) and if DC, how much in each and what they are invested in...it doesn't take much effort to make changes that could have a huge impact further down the line but as always do the research first before making changes.
I started digging into my pensions during my mid-late 30's and then it became an obsession, maybe I'm a saddo but I enjoyed doing the research then tweaking the investments accordingly!
I started digging into my pensions during my mid-late 30's and then it became an obsession, maybe I'm a saddo but I enjoyed doing the research then tweaking the investments accordingly!
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